1. Public auction of sub-urban land under Punjab Package Deal Properties (Disposal) Rules, 1976 — Provisional acceptance of highest bid — Cancellation of bid by competent authority. (Para 2 , 3 , 5 , 6 )
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2022 Supreme(SC) 199
SUPREME COURT OF INDIA
(From the High Court of Punjab and Haryana at Chandigarh)
Ajay Rastogi, Abhay S. Oka, JJ.
State of Punjab and Others – Appellants
Versus
Mehar Din — Respondent
Civil Appeal No(S). 5861 of 2009
Decided On : 02-03-2022
Important Points
The highest bidder at public auctions has no vested right until the bid is confirmed by the competent authority, and the court's interference in contractual and commercial matters should be minimal.
Subject
Property Law - Auction of Urban Properties
Act Referred
CONSTITUTION OF INDIA: Art.12, Art.226, Art.227
PUNJAB PACKAGE DEAL PROPERTIES DISPOSAL ACT: S.10, S.15(1), S.18
PUNJAB PACKAGE DEAL PROPERTIES DISPOSAL RULES: R.8, R.8(1)(h)
PUNJAB PACKAGE DEAL PROPERTIES DISPOSAL ACT: S.10, S.15(1), S.18
PUNJAB PACKAGE DEAL PROPERTIES DISPOSAL RULES: R.8, R.8(1)(h)
Headnote
Auction - Urban Properties - Punjab Package Deal Properties (Disposal) Act, 1976 - Chapter III of Rules 1976 - Rule 8(1)(c), Rule 8(1)(h)
Fact of the Case:
The case involved the auction of urban properties under the Punjab Package Deal Properties (Disposal) Act, 1976. The highest bidder's provisional bid was not confirmed by the competent authority, leading to cancellation and re-auction.
Finding of the Court:
The High Court set aside the order of the Financial Commissioner, stating that the auction purchaser's bid was higher than the reserved price and there was no irregularity or illegality in the auction proceedings, directing the competent authority to confirm the sale and complete other formalities within three months.
Issues: The main issue was the validity of the auction proceedings and the authority's discretion to confirm the highest bid.
Ratio Decidendi: The highest bidder at public auctions has no vested right until the bid is confirmed by the competent authority. The court's interference in contractual and commercial matters should be minimal, and judicial review is permissible to prevent arbitrariness, irrationality, bias, malafides, or perversity.
Final Decision: The appeal was allowed, setting aside the High Court's judgment and directing the refund of the earnest money deposited by the respondent.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
For the Appellant :Ms. Ranjeeta Rohatgi, Advocate, Ms. Pragya Baghel, Advocate
For the Respondent:Mr. Abhay Kumar Advocate, Ms. Varuna Bhandari Gugnani Advocate, Mr. Kumar Milind Advocate, Mr. Shagun Ruhil Advocate, Mr. Vishal Nautiyal Advocate, Mr. R. Gopalakrishnan, Advocate
Advocate Appeared:
For the Appellant :Ms. Ranjeeta Rohatgi, Advocate, Ms. Pragya Baghel, Advocate
For the Respondent:Mr. Abhay Kumar Advocate, Ms. Varuna Bhandari Gugnani Advocate, Mr. Kumar Milind Advocate, Mr. Shagun Ruhil Advocate, Mr. Vishal Nautiyal Advocate, Mr. R. Gopalakrishnan, Advocate
Table of Contents
2. Whether the cancellation of the highest bid was based on conjectures or if the authority had discretion to reject the bid to ensure maximum price. (Para 8 , 9 , 11 )
3. The High Court improperly acted as a court of appeal; the State possesses discretion in auctions unless the decision is arbitrary, irrational, or mala fide. (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 )
4. The highest bidder in a public auction has no vested right to confirmation; judicial review of government contracts is limited to preventing arbitrariness, irrationality, or mala fides. (Para 18 , 24 , 26 )
5. Appeal allowed — High Court judgment set aside — Earnest money ordered to be refunded with interest. (Para 29 , 30 )
6. Does the highest bidder in a public auction have a vested right to have the sale confirmed in their favor?
No, the highest bidder has no vested right to confirmation. Acceptance of the highest bid is typically provisional and subject to the conditions of the auction and the satisfaction of the competent authority. (Para 17 , 18 , 26 )
7. What is the scope of judicial review regarding the award of government contracts or public auctions?
Judicial review is limited to preventing arbitrariness, irrationality, unreasonableness, bias, or mala fides. Courts should exercise restraint and not substitute their own decision for that of the administrative authority unless the decision is totally arbitrary or unreasonable. (Para 19 , 20 , 21 , 22 , 23 , 24 , 26 )
8. When can a court interfere with an administrative authority's decision to reject a tender or auction bid?
Interference is permissible only when there is substantial public interest involved, the transaction is malafide, or there is a clear infirmity in the decision-making process, such as procedural impropriety, perversity, or irrationality. (Para 21 , 22 , 23 , 27 )
JUDGMENT :
Rastogi, J.
The instant appeal arises from the judgment and order passed by the Division Bench of the High Court of Punjab and Haryana at Chandigarh dated 13th August, 2008 setting aside the order dated 24th August, 2006 passed by the Financial Commissioner Revenue, Patiala with a further direction to the competent authority to confirm the auction sale and complete all other formalities within three months.
2. The facts in brief culled out from the record and relevant for the purpose are that the sub-urban properties are to be disposed of in terms of the procedure for sale by public auction, as provided under Chapter III of the Punjab Package Deal Properties (Disposal)Rules, 1976 (hereinafter referred to as "the Rules 1976"), framed by the State Government in exercise of its power conferred under Section 18 of the Punjab Package Deal Properties(Disposal) Act, 1976. Part III of Rules 1976 provides for transfer of urban properties.
3. The appellants being the custodian of the subject property initiated the process of putting the property to public auction through the notice published in Punjabi Tribune of 17th May, 1993, the extract of auction notice is reproduced as under:-
"Punjabi Tribune, Monday, 17 May 1993
AUCTION NOTICE
General public is informed that the following Sub Urban Land of Tehsil Malerkotla will be auctioned at the time and place given below. l/5th of the bid amount shall be given at the spot in cash. The remaining conditions of the auction will be fold on the spot.
| Town | : | Malerkotla |
| Place of Auction | : | At the spot |
| Dated | : | 04.06.93 |
| Time | : | 10:00 A.M |
| Khasra No. | : | Area |
| 185//22/2 | : | 7-0 |
| 191 | : | 7-10 |
| 12/2min | : | 3-12 |
| 169//23/3/1 | : | 4-17 |
| Kitte | 4 | 22-17 |
| Total Kitte | 4 | 22-17 |
Sd/-
Tehsildar Revenue-cum-M.O. Malerkotla"
4. It has not been pleaded that the auction notice was given its wide publicity and affixed at the conspicuous place in the locality where the property is situated.
5. The Tehsildar Sales, Malerkotla conducted public auction on 4th June, 1993 and this fact is not disputed that only three bidders had participated in the bidding process and bid of the respondent, Mehar Din was the highest bid of Rs. 3,90,000/-, which was provisionally accepted by the Tehsildar. Pursuant thereto, l/5th of the bid amount, i.e., Rs. 78,000/- was deposited by the respondent at the spot subject to its confirmation by the Sales Commissioner in terms of the procedure for sale by public auction provided under Rule 8 (l)(h) of Chapter III of the Rules 1976.
6. On perusal of records, the competent authority (Sales Commissioner) was of the view that the public property has not been put to proper publicity and the present bid is inadequate and failed to record his satisfaction for confirmation of the bid and accordingly the bid was cancelled by an order dated 2nd July, 1993 with a further direction for re-auction and to be auctioned in his presence with wide publication to fetch the maximum price.
7. The order dated 2nd July, 1993 became the subject matter of challenge at the instance of the respondent in appeal before the Chief Sales Commissioner, Sangrur, who after perusal of the record, returned a finding that on the date of auction, i.e. 4th June, 1993 conducted by the Tehsildar Sales, only three persons had participated in the bidding process and arrived to a conclusion that the Tehsildar Sales had not conducted the bidding process properly and adequate publicity was not made and under its order dated 24th October 1994, confirmed the order of the Sales Commissioner cancelling the bid.
8. The order of the Chief Sales Commissioner, Sangrur dated 24th October, 1994 came to be challenged by the respondent under Section 10 of the Act 1976. The Divisional Commissioner, after recording a finding that no opportunity was afforded to the bidder before passing of the order of cancellation of the bid dated 4th June, 1993 and after l/5th of the bid towards ear
