Acceptance of highest bid is subject to conditions of holding public auction and highest bidder has no vested right to have auction concluded in his favour: SC

Read Judgment: State of Punjab & Others V. Mehar Din 

Pankaj Bajpai

New Delhi, March 3, 2022: Opining that the highest bidder has no vested right to have the auction concluded in his favour, the Supreme Court has held that the it was not open for the High Court to sit like a Court of Appeal over the decision of the competent authority and particularly in the matters where the competent authority of floating the tender was the best judge of its requirements. 

A Division Bench of Justice Ajay Rastogi and Justice Abhay S.Oka observed that the High Court recorded a finding to the contrary that State of Punjab had 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.

Going by the background of the case, the State of Punjab (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 May 17, 1993. The Tehsildar Sales, Malerkotla conducted a public auction and only three bidders participated in the bidding process and the bid of Mehar Din (Respondent) was the highest bid of Rs.3,90,000/-, which was provisionally accepted by the Tehsildar. Later, the competent authority (Sales Commissioner) was of the view that the public property was not put to proper publicity and the present bid was inadequate and accordingly the bid was cancelled with a further direction for re-auction. 

On appeal, the Chief Sales Commissioner arrived at a conclusion that the Tehsildar Sales had not conducted the bidding process properly and adequate publicity was not made and therefore confirmed the order of the Sales Commissioner cancelling the bid. Later, the High Court proceeded on the premise that the reasons adopted by the Financial Commissioner were based on conjectures and surmises and once the auction purchaser’s bid was higher than the reserved price which was notified at site and more than the price of the last auction and in the absence of any irregularity or illegality being committed in the auction proceedings, there is no reason for vitiating the auction process and accordingly, directed the competent authority to confirm the sale and complete other formalities. 

After considering the submissions, the Top Court observed that the Courts being the custodian of fundamental rights are under an obligation to interfere where there is arbitrariness, irrationality, unreasonableness, malafides and bias, if any, but at the same time, the Courts should exercise the power of judicial review with a lot of restraint, particularly in contractual and commercial matters. 

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 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, added the Court. 

Speaking for the Bench, Justice Rastogi found from the Scheme of Chapter III of Punjab Package Deal Properties (Disposal) Rules, 1976, 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) had failed to confirm the bidding process and after recording its satisfaction cancelled the auction bid under its order dated July 2, 1993, added the Bench. 

The Apex Court therefore concluded that the premise on which the High Court had proceeded in recording a finding, particularly, in the matters of auction of public properties was unsustainable in law and was also not in conformity with the Scheme of auction of public properties as defined under Chapter III of Rules 1976.