| CITATION | 5861 OF 2009 |
| DATE OF JUDGMENT | 2 MARCH, 2022 |
| COURT | THE SUPREME COURT OF INDIA |
| APPELLANT | STATE OF PUNJAB & OTHERS |
| RESPONDENT | MEHAR DIN |
| BENCH | AJAY RASTOGI, ABHAY S. OKA |
INTRODUCTION
In the unfolding chapters of jurisprudence, a case of profound significance has emerged, encapsulating the essence of contractual obligations, fair dealings, and the delicate equilibrium of legal principles. This legal narrative revolves around the disputatious encounter between a bidder, who, having engaged in an auction with earnest intent and financial commitment, found himself grappling with the aftermath of an unexpected denial of sale. The adversarial parties in this case are the bidder, whose aspirations were buoyed by the successful attainment of the highest bid, and the auction organizer, who, in a surprising turn of events, proffered the rationale that the auction’s limited attendance and perceived lack of publicity warranted the reversal of the sale decision. As we explore the intricacies of this legal conundrum, we delve into the heart of contractual jurisprudence, dissecting the delicate balance between public representation and the fundamental right of a successful bidder to consummate the transaction. This introduction serves as a preliminary lens through which we can discern the contours of the case at hand, promising to unravel a tapestry woven with questions of fairness, transparency, and the robustness of contractual commitments.
The latest appeal arose from the judgment and order passed by the high court of Punjab and Haryana at Chandigarh dated 13th August 2008 which set aside the order of Financial Commissioner Revenue, Patiala with a further direction to the authorities responsible for completing the auction sale and all other formalities within three months.
FACTS
- The sub-urban properties were to be disposed in terms of the procedure for sale by public auction, according to the Punjab Package Deal Properties Rules 1976, framed by the state government. Part 3 of the rules 1976 provide guidelines for transfer of urban properties.
- The appellant, custodian of the subject property initiated the process of putting the property in question to public auction through the notice published in Punjabi Tribune of 17th May, 1993.
- The advertisement mentioned the following,
“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. 1/5th 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”
- On June 4, 1993, the Tehsildar Sales, Malerkotla held a public auction. It is undisputed that only three bidders entered the bidding process, with respondent Mehar Din’s bid coming in at the highest amount of Rs. 3,90,000/-, which the Tehsildar accepted provisionally. In accordance with that, the respondent deposited 1/5th of the bid amount, or Rs. 78,000/-, at the location, pending confirmation by the Sales Commissioner, in accordance with the public auction procedure outlined in Rule 8(1)(h) of Chapter III of the Rules 1976.
- After looking through the documents, the responsible authority (the Sales Commissioner) concluded that the public property had not received enough publicity and that the current bid was insufficient. He also neglected to confirm his satisfaction with the bid, so the bid was canceled by an order dated July 2, 1993, along with a further directive for a re-auction that would take place in his presence and be widely publicized in order to achieve the highest possible price.
- The Chief Sales Commissioner, Sangrur, heard an appeal from the respondent challenging the order dated July 2, 1993. After reviewing the records, the Chief Sales Commissioner concluded that only three people had participated in the bidding process on June 4, 1993, the date of the auction held by the Tehsildar Sales, and that there had been insufficient publicity. The Chief Sales Commissioner confirmed the order canceling the bid on October 24, 1994, in accordance with its order dated October 24.
- The respondent filed a challenge under Section 10 of the Act 1976 against the Chief Sales Commissioner, Sangrur’s order dated October 24, 1994. The Divisional Commissioner set aside the orders of the competent authority dated July 2, 1993, and the appellate authority dated October 24, 1994, by order dated September 17, 2003, after recording a finding that no opportunity was afforded to the bidder before passing of the order of cancellation of the bid dated June 4, 1993, and after one-fifth of the bid towards earnest money was deposited and being the highest bidder, no reasons were assigned for cancellation.
- At the request of the appellants, the order dated September 17, 2003, was challenged under Section 15(1) of the Act, 1976 before the Financial Commissioner Revenue, Punjab, Chandigarh. Following a reassessment of the record, the Financial Commissioner, Revenue noted the following in an order dated August 24, 2006:-
According to the State’s arguments in the lower courts, Mehar Din is accused of the following. First off, even though the amount raised at this auction was higher than at the previous one, which took place in 1983, a higher price could have been achieved. Mehar Din’s name appears twice in the sale agency’s attempt to obtain the best possible price for the people. There are now essentially three people left. It’s likely that the Sales Agency and the potential vendors are working together. Thirdly, the State (Tehsildar Sales) notes that this is sub-urban land, meaning it could have sold for between Rs. 8 and 10 lakhs. In essence, the Sales Commissioner is free to pursue a better price and is not required to accept the amount decided upon during the auction.
As a result, I accept the appeal and revoke the Commissioner of Patiala Division’s orders dated September 17, 2003. Reauctioning of the land is scheduled following a proper munadi.
- At the request of the respondent, who filed a writ petition before the High Court in accordance with Articles 226 and 227 of the Constitution, the order issued by the Financial Commissioner on August 24, 2006, was challenged.
- The High Court proceeded on the basis that the Financial Commissioner’s reasoning was based on assumptions and conjecture, and that once the auction purchaser’s bid exceeded the reserved price that was announced on the site and the price of the previous auction, there was no reason to invalidate the auction process. As a result, the Financial Commissioner’s order dated August 24, 2006, was set aside, and the appropriate authority was instructed to verify the sale and finish any remaining formalities under the order dated August 13, 2008. The following reproduces the relevant portion of the High Court’s August 13, 2008, order:
“A perusal of the aforesaid observations and reasons adopted by the Financial Commissioner clearly shows that the said revisional authority has acted only on conjectures, surmises and suppositions. It is not in dispute that the price as· offered by the petitioner-auction purchaser was much more than the price of last auction and there is no material produced by the State to show that there was any irregularity or illegality in the auction proceedings that might have taken place due to which it stood vitiated. Still further, nothing could be shown that the value of the land was Rs.8 to 10 lacs as noticed by the Financial Commissioner in the impugned order. Furthermore, no material has been shown which may impel to infer that there was any connivance between the three persons who had given bid and that the price as offered by the petitioner was not the real price of the land in question. The impugned order dated 24.08.2006 is thus, legally unsustainable and is accordingly set aside. The writ petition is allowed and it is directed that the competent authority shall confirm the sale and complete all formalities within a period of three months from the date of receipt of a certified copy of this order.”
JUDGMENT
Regarding the transfer of urban properties, the Scheme of Chapter III of Rules, 1976 lays out the process to be followed for sale by public auction. Rule 8(1)(c) stipulates that the auction notice must be widely publicized, with one copy being placed in a conspicuous location within the community where the property is located. Rule 8(1)(h) states that if the bid amount exceeds Rs. 500, the bidder must pay an amount equivalent to one-fifth of the bid amount as earnest money, and the highest bidder whose deposit is made will only be accepted provisionally, pending confirmation by the Sales Commissioner. It is undeniable that the respondent, who placed the highest bid, was provisionally accepted as the winner of the Tehsildar Sales auction held on June 4, 1993. In accordance with it, a deposit of one-fifth of the bid amount was made as earnest money; however, this acceptance was only tentative and needed to be verified by the Sales Commissioner. When the auction was brought before the Sales Commissioner, the appropriate authority reviewed the auction record and noted that the provisional bid was somewhat low. Given the property’s location, the authority felt that better publicity would be necessary to secure a higher price for the subject land. As a result, the auction was canceled, and the Sales Commissioner was instructed to start the re-auction process. Additionally, the Sales Commissioner noted that he should have been notified beforehand and that he intended to attend the auction. This decision was made on July 2, 1993. Apart from that, it is undeniable that only three of the fourteen applicants actually entered the bidding process. Based on the aforementioned presumption, the appellate authority verified the Sales Commissioner’s decision to cancel the auction through a thorough review of the record. This confirmation was later verified by the Financial Commissioner (the revisional authority) in accordance with an order dated August 24, 2006, to which reference has been made. The Scheme of Chapter III of Rules 1976 makes it clear and explicit that, even after the highest bidder has won the public auction, he does not have any rights until he receives the confirmation letter. This is because the acceptance of the highest bid is provisional and awaits confirmation by the appropriate authority. Without a doubt, the appropriate authority (the Sales Commissioner) canceled the auction bid after certifying that the bidding process had not been verified. The highest bidder’s right at public auctions has been examined by the court in numerous cases, and it has been consistently noted that the State or any authority that may be deemed to be a State for the purposes of Article 12 of the Constitution is not required to accept the highest bid. The right of the highest bidder to have their bid reviewed in light of the various circumstances under which the auction was held is always provisional, and acceptance of the highest bid or bidder is always contingent upon the terms of holding a public auction. In this instance, the respondent had no rights whatsoever, even in light of the statutory provisions the 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. The court has explored some cases in depth to examine the scope of judicial review in the matters of tenders and public auctions. Tata Cellular v. Union of India, Jagdish Mandal v. State of Orissa and others and Silppi Constructions Contractors v. Union Of India and another are some cases that states that as the guardians of fundamental rights, the law is clear that courts must intervene when there is arbitrariness, irrationality, unreasonableness, malfeasance, or bias, if any. However, courts must also exercise extreme caution when using their judicial review authority, especially in cases involving contracts and business dealings.
CONCLUSION
Undoubtedly, the Sales Commissioner, the competent authority in this case, did not confirm the provisional bid, and it was not accepted even after recording its due satisfaction through an order dated July 2, 1993. The appellate/revisional authority carefully considered and scrutinized the authority’s decision to cancel the auction bid, and at a later stage, the discretion of the competent authority in making that decision was upheld. Given the established legal principle that the highest bidder has no inherent right to have the auction concluded in his favor and the specific circumstances covered by the limited judicial review under Article 226 of the Constitution, the High Court was not allowed to intervene in the executive’s decision-making unless it was utterly arbitrary or unreasonable. Moreover, the High Court was not authorized to sit in appellate court over the decision of the competent authority, especially in cases where the body responsible for floating the tender is the best arbiter of the requirements. As a result, any interference must be minimal. Conversely, the respondent was never in violation of the narrow scope of judicial review for which interference could have been allowed to prevent arbitrariness, irrationality, bias, malfeasance, or perversity, if any, in the authority’s approach while handling the auction proceedings. Apart from being illegal, the premise upon which the High Court based its decision to record a finding, in this case regarding the auction of public properties, is also not compliant with the public property auction scheme as outlined in Chapter III of the 1976 Rules. The finding recorded by the High Court in the impugned judgment is unsustainable and deserves to be set aside.Prior to our conclusion, this Court has been informed that on June 5, 1993, the respondent deposited Rs. 78,000/-, which represents one-fifth of the bid amount, as earnest money. Let the respondent’s Rs. 78,000/-be reimbursed, plus interest at the rate of 12% annually from the date of deposit to the time of actual payment. The appeal is granted as a result of its success. This results in the invalidation of the High Court’s contested decision from August 13, 2008.
CASE ANALYSIS
The recent case ruling in favor of the appellant, establishing that the highest bid cannot be accepted until approved by the Sales Commissioner, marks a significant development in auction law. The decision addresses concerns about transparency and fairness, setting a precedent that may shape future legal considerations in similar contexts. As the legal landscape evolves, this ruling stands as a testament to the judiciary’s commitment to upholding ethical standards in commercial transactions. The ruling promotes transparency in auction proceedings by introducing an additional layer of oversight. With the Sales Commissioner’s explicit approval required for the highest bid acceptance, the process becomes more accountable and less susceptible to improprieties.
REFERENCES
https://indiankanoon.org/doc/10528123/
https://www.latestlaws.com/latest-caselaw/2022/march/2022-latest-caselaw-193-sc/
Diya Bhaskar, New law college, Pune
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