2018 (8) TMI 63 - HC - Income Tax

Cancellation of bid (Sole bidder) at the auction held - auction / sale of property by the Income Tax department (CBDT) - Held that - In the present facts, it cannot be said that action of the Respondent No.2 in issuing the impugned letter dated 4.5.2018 is arbitrary or in violation of Article 14 of the Constitution of India. The answer to the question to be posed as laid down by the Supreme Court in Michigan Rubber (I) Ltd 2012 (3) TMI 512 - SUPREME COURT has to be, in these facts in the negative. Thus caselaws cited on behalf of the Petitioner would not be applicable in the present facts as from perusal of the additional affidavit filed on behalf of Respondent Nos.2 and 3 we have come to view that there are sufficient reasons on record for the Respondent Nos.2 and 3 to cancel the earlier auction held on 22.9.2017 and publish notice dated 12.5.2018 in newspapers for a fresh auction of the said property. Thus, we are not dealing individually with the case laws relied upon by the Petitioner. Petitioner thereafter mentioned that bid which has been received in fresh auction which was conducted on 30.5.2018 was higher only by ₹ 90 Lakhs than that made by the Petitioner. On instructions he submits that the Petitioner is ready to match that bid. However, this option he ought to have exercised by participating in auction held on 30.5.2018 bearing in mind that on 23.5.2018 the Court had specifically permitted the Petitioner to bid at the auction which was held on 30.5.2018. In these circumstances, we see no reason to interfere with the impugned letter dated 4.8.2018 cancelling auction held on 22nd September, 2017 or in holding of the fresh auction consequent to notice dated 12.5.2018.

Summary

Issues:
Challenge to cancellation of auction sale and fresh auction of property.

Analysis:
The petitioner challenged the cancellation of the auction sale of a property and the subsequent fresh auction. The petitioner was the sole bidder at the initial auction held on 22nd September, 2017, offering a bid above the reserve price. However, the bid was not accepted by the authorities due to the petitioner's prior offer of a higher amount for the property. The Central Board of Direct Taxes directed a fresh valuation of the property, resulting in a fair market value of ?31.07 Crores. Subsequently, a fresh auction was proposed with a reserve price of ?31.10 Crores. The petitioner did not participate in this fresh auction despite being given the liberty to bid. The petitioner contended that the cancellation of the auction and the reasons provided were arbitrary and in violation of Article 14 of the Constitution of India.

The court considered the events leading to the petition and the additional affidavit filed by the respondents. The court noted that the authorities reserved the right to reject any bid without assigning a reason, as stated in the invitation to make bids. The court emphasized that the scope of judicial review in matters of awarding contracts by the state is to prevent arbitrariness, irrationality, and unfair treatment. The court cited precedents to emphasize that judicial review should not interfere if the decision is reasonable and in public interest. The court applied the test laid down by the Supreme Court to determine if the decision was arbitrary or irrational, and if public interest was affected.

The court found that the cancellation of the auction and the decision to hold a fresh auction were based on valid reasons, including the higher valuation of the property and the petitioner's failure to participate in the subsequent auction despite being given the opportunity. The court concluded that the actions of the authorities were not arbitrary and did not violate Article 14 of the Constitution. The court dismissed the petition and declined to continue the stay granted earlier. The petitioner was directed to match the highest bid made in the fresh auction if desired.