State not bound to accept highest bid in auction: Supreme Court

The Supreme Court on Wednesday reiterated that government authority is not bound to accept the highest bid in an auction and the acceptance of highest bid is always subject to conditions of holding public auction [State of Punjab and ors v. Mehar Din]..A Bench of Justices Ajay Rastogi and Abhay S Oka ruled that the acceptance of the highest bid is provisional, subject to its confirmation by the competent authority that is the best judge in the matter."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," the Court held.Pertinently, the Supreme Court held that courts should show restraint while interfering with the decision of the executive in such commercial and contractual matters.” ... 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, and 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 authority competent of floating the tender is the best judge of its requirements, therefore, the interference otherwise has to be very minimal.”The top court in the present case ruled that that under the Chapter III of the Punjab Package Deal Properties (Disposal) Rules, if the public auction has been completed to the highest bidder, no right is accrued till the confirmation letter is issued..The appellants, custodian of the subject property in the matter, initiated the process of putting the property to public auction through a notice dated May 17, 1993. Thereafter, in the month of June 1993, the auction was conducted by the Tehsildar in which the respondent was the highest bidder. The highest bid was provisionally accepted and 1/5th of the bid amount was deposited by the respondent which was subject to confirmation by the Sales Commissioner as per Rule 8(1)(h) of the Rules (procedure for sale by public auctions). However, when the records were examined by the Sales Commissioner, he found out that the auction was not given proper publicity and the highest bid by the respondent was inadequate. Therefore, the bid was cancelled and authorities directed re-auction with wider publicity..The respondent then appealed against the decision of the Sales Commissioner to the Chief Sales Commissioner who rejected the claim of the respondent against the cancellation of highest bid. Thereafter, the respondent appealed to the Divisional Commissioner who set aside the order of cancellation by the Sales Commissioner and allowed the appeal of the respondent. The appellants in the present case approached the Financial Commissioner, Revenue, who reversed the order of the Divisional Commissioner to hold that the land has to be re-auctioned after proper publicity..After the said order, the respondent approached the Punjab and Haryana High Court. The High Court noted that there was no irregularity or illegality in the auction proceedings and therefore, it is not liable to be cancelled and the writ petition was allowed. The High Court directed the authorities to confirm the sale and complete all formalities within a period of three months..The State of Punjab then moved the apex court against the High Court decision.After perusal of records and hearing arguments, the apex court noted that competent authority (in this case the Sales Commissioner) had observed that the provisional bid was on the lower side and needs good publicity to fetch a better price. This discretion was upheld at later stages, the top court stated. .The Supreme Court emphasised how in several decisions it has held that the authorities, being ‘State’ under Article 12 of the Constitution, are not bound to accept the highest bid. .The Bench in the present appeal thus ordered that the amount deposited by the respondent in 1993 as an advance be refunded to him with interest at the rate of 12 per cent per annum from the date of its deposit until its actual payment. .Advocate Ranjeeta Rohatgi appeared for the appellants. Advocate R Gopalkrishnan appeared for the respondent..[Read Judgment]