2022 (3) TMI 1622 - SC - Indian Laws

Challenge to auction process conducted by the Tehsildar Sales - High Court proceeded on the premise that the reasons adopted by the Financial Commissioner were based on conjectures and surmises - HELD THAT - From the Scheme of Chapter III of Rules 1976 it is apparent and explicit that even if the public auction has been completed to the highest bidder no right is accrued till the confirmation letter is issued to him as the acceptance of the highest bid is provisional subject to its confirmation by the competent authority. Undisputedly the competent authority (Sales Commissioner) has failed to confirm the bidding process and after recording its satisfaction cancelled the auction bid under its order dated 2nd July 1993. This Court has examined right of the highest bidder at public auctions in umpteen number of cases and it was repeatedly pointed out that the State or authority which can be held to be State within the meaning of Article 12 of the Constitution is not bound to accept the highest tender of bid. The acceptance of the highest bid or highest bidder is always subject to conditions of holding public auction and the right of the highest bidder is always provisional to be examined in the context in different conditions in which the auction has been held - In the present case no right had accrued to the Respondent even on the basis of statutory provisions as being contemplated Under Rule 8(1)(h) of Chapter III of the Scheme of Rules 1976 and in terms of the conditions of auction notice notified for public auction. Undisputedly the provisional bid in the instant case was not confirmed by the competent authority (Sales Commissioner) and not being accepted after recording its due satisfaction by an order dated 2nd July 1993 and the decision of the authority in passing the order of cancellation of the auction bid was scrutinized/examined by the appellate/revisional authority and the discretion exercised by the competent authority in taking decision of cancellation was upheld at later stages. The High Court has recorded a finding to the contrary that the Appellants have failed to show any irregularity or illegality in the auction proceedings and in the absence whereof the auction proceedings could not be held to be vitiated. The premise on which the High Court has proceeded in recording a finding particularly in the matters of auction of public properties is unsustainable in law and that apart it is also not in conformity with the Scheme of auction of public properties as defined under Chapter III of Rules 1976 - the finding recorded by the High Court in the impugned judgment is unsustainable and deserves to be set aside. Conclusion - The highest bidder has no vested right to have the auction concluded in his favour. The acceptance of the highest bid is provisional subject to its confirmation by the competent authority. Appeal allowed.

2023 (12) TMI 1389 - HC

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the auction process conducted by the Tehsildar Sales was in compliance with the Punjab Package Deal Properties (Disposal) Rules, 1976.
Whether the decision of the Sales Commissioner to cancel the auction was justified.
The scope of judicial review in matters of public auction and the extent to which courts can interfere with executive decisions in such contexts.
Whether the highest bidder in a public auction has a vested right to confirmation of the bid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Compliance with Auction Rules

Relevant Legal Framework and Precedents: The auction was governed by the Punjab Package Deal Properties (Disposal) Rules, 1976, specifically Rule 8, which outlines the procedure for public auction, including the requirement for wide publicity.
Court's Interpretation and Reasoning: The Court noted that the auction notice did not receive adequate publicity as required by the rules, which compromised the integrity of the auction process.
Key Evidence and Findings: Only three bidders participated in the auction, and there was no evidence of wide publicity, which led the Sales Commissioner to doubt the adequacy of the bid.
Application of Law to Facts: The lack of sufficient publicity was a significant factor in the decision to cancel the auction, as it likely affected the competitive nature and potential revenue from the sale.
Treatment of Competing Arguments: The Respondent argued that the bid was higher than the previous auction and should be confirmed, but the Court found that procedural deficiencies warranted cancellation.
Conclusions: The auction did not comply with the procedural requirements, justifying the cancellation by the Sales Commissioner.

Issue 2: Justification for Cancellation

Relevant Legal Framework and Precedents: Rule 8(1)(h) states that acceptance of the highest bid is provisional, subject to confirmation by the Sales Commissioner.
Court's Interpretation and Reasoning: The Court emphasized that the Sales Commissioner has the discretion to confirm or cancel the auction based on compliance with procedural requirements and the adequacy of the bid.
Key Evidence and Findings: The Sales Commissioner found the bid inadequate and the auction process lacking in publicity, leading to the decision to cancel.
Application of Law to Facts: The decision to cancel was based on the Sales Commissioner's assessment that the auction did not meet the necessary standards to ensure a fair and competitive sale.
Treatment of Competing Arguments: The High Court's decision to overturn the cancellation was based on perceived conjectures by the Financial Commissioner, but the Supreme Court disagreed, emphasizing the procedural deficiencies.
Conclusions: The cancellation was justified due to procedural lapses and the provisional nature of the bid acceptance.

Issue 3: Scope of Judicial Review

Relevant Legal Framework and Precedents: The principles established in Tata Cellular v. Union of India and subsequent cases guide the judicial review of administrative actions, emphasizing restraint and deference to executive decisions unless there is clear evidence of arbitrariness or illegality.
Court's Interpretation and Reasoning: The Court reiterated that judicial review should not interfere with executive decisions unless there is a manifest error in the decision-making process.
Key Evidence and Findings: The High Court's intervention was deemed inappropriate as it did not identify any arbitrariness or illegality in the Sales Commissioner's decision.
Application of Law to Facts: The Supreme Court found that the High Court overstepped its bounds by substituting its judgment for that of the competent authority without sufficient grounds.
Treatment of Competing Arguments: The Respondent's arguments for judicial intervention were not supported by evidence of procedural impropriety or arbitrariness.
Conclusions: The High Court's decision was overturned, reaffirming the limited scope of judicial review in auction matters.

Issue 4: Rights of the Highest Bidder

Relevant Legal Framework and Precedents: The Court emphasized that the highest bidder does not have a vested right to have the auction confirmed, as the acceptance is provisional.
Court's Interpretation and Reasoning: The highest bid is subject to confirmation, and the bidder has no enforceable right until the competent authority confirms the sale.
Key Evidence and Findings: The provisional nature of the bid acceptance was a key factor in the decision to cancel the auction.
Application of Law to Facts: The Respondent's status as the highest bidder did not guarantee confirmation, particularly given the procedural issues identified.
Treatment of Competing Arguments: The Court dismissed the argument that the highest bid should automatically lead to confirmation, emphasizing the provisional nature of the process.
Conclusions: The highest bidder has no automatic right to confirmation, supporting the cancellation decision.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The Court reaffirmed that the highest bidder in a public auction does not have an automatic right to confirmation, and that judicial review of executive decisions in auction matters is limited to instances of clear arbitrariness, irrationality, or procedural impropriety.
Final Determinations on Each Issue: The Supreme Court set aside the High Court's judgment, upholding the Sales Commissioner's decision to cancel the auction due to procedural deficiencies and the provisional nature of the bid acceptance.
Verbatim Quotes of Crucial Legal Reasoning: "The highest bidder has no vested right to have the auction concluded in his favour and in the given circumstances under the limited scope of judicial review Under Article 226 of the Constitution, the High Court was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision is totally arbitrary or unreasonable."

The appeal was allowed, and the judgment of the High Court was set aside, with directions to refund the earnest money deposited by the Respondent with interest. This case underscores the importance of procedural compliance in public auctions and the limited role of judicial review in such matters.

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