SC: State not bound to accept the highest tender of bid

Fact and Issue of the case

The facts in brief culled out from the record and relevant for the purpose are that the sub-urban properties are to be disposed of in terms of the procedure for sale by public auction, as provided under Chapter III of the Punjab Package Deal Properties (Disposal) Rules, 1976 (hereinafter referred to as “the Rules 1976”), framed by the State Government in exercise of its power conferred under Section 18 of the Punjab Package Deal Properties(Disposal) Act, 1976. Part III of Rules 1976 provides for transfer of urban properties.

The 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 17th May, 1993. It has not been pleaded that the auction notice was given its wide publicity and affixed at the conspicuous place in the locality where the property is situated. The Tehsildar Sales, Malerkotla conducted public auction on 4th June, 1993 and this fact is not disputed that only three bidders had participated in the bidding process and bid of the respondent, Mehar Din was the highest bid of Rs.3,90,000/-, which was provisionally accepted by the Tehsildar. Pursuant thereto, 1/5th of the bid amount, i.e., Rs.78,000/- was deposited by the respondent at the spot subject to its confirmation by the Sales Commissioner in terms of the procedure for sale by public auction provided under Rule 8(1)(h) of Chapter III of the Rules 1976.

On perusal of records, the competent authority (Sales Commissioner) was of the view that the public property has not been put to proper publicity and the present bid is inadequate and failed to record his satisfaction for confirmation of the bid and accordingly the bid was cancelled by an order dated 2nd July, 1993 with a further direction for re-auction and to be auctioned in his presence with wide publication to fetch the maximum price. The order dated 2nd July, 1993 became the subject matter of challenge at the instance of the respondent in appeal before the Chief Sales Commissioner, Sangrur, who after perusal of the record, returned a finding that on the date of auction, i.e. 4th June, 1993 conducted by the Tehsildar Sales, only three persons had participated in the bidding process and arrived to a conclusion that the Tehsildar Sales had not conducted the bidding process properly and adequate publicity was not made and under its order dated 24th October 1994, confirmed the order of the Sales Commissioner cancelling the bid.

The order of the Chief Sales Commissioner, Sangrur dated 24th October, 1994 came to be challenged by the respondent under Section 10 of the Act 1976. The Divisional Commissioner, after recording a finding that no opportunity was afforded to the bidder before passing of the order of cancellation of the bid dated 4th June, 1993 and after 1/5th of the bid towards earnest money was deposited and being the highest bidder, no reasons were assigned for cancellation and accordingly by its order dated 17th September, 2003, set aside the order of cancellation of the competent authority dated 2nd July, 1993 and so also of the appellate authority dated 24th October, 1994.

The order dated 17th September, 2003 became the subject matter of challenge under Section 15(1) of the Act, 1976 before the Financial Commissioner Revenue, Punjab, Chandigarh at the instance of the appellants and after re-appraisal of the record, the Financial Commissioner, Revenue, by its order dated 24th August 2006. The order passed by the Financial Commissioner dated 24th August, 2006 became the subject matter of challenge at the instance of the respondent by filing writ petition before the High Court under Articles 226 and 227 of the Constitution.

Observation of the Tribunal

The court has heard learned counsel for the parties and with their assistance perused the material placed on record. The Scheme of Chapter III of Rules, 1976 is related to transfer of urban properties laying down the procedure to be followed for sale by public auction. The extract of Rule 8 of the Rules, 1976. As per Rule 8(1)(c), auction notice has to be given wide publicity and one copy of the notice is to be affixed at the conspicuous place in the locality where the property is situated and as per Rule 8(1)(h), if the bid money exceeds Rs.500/-, the bidder shall be required to pay an amount equal to 1/5th of the bid amount as earnest money and acceptance of the highest bid in respect of which the deposit has been made shall be provisional, subject to confirmation by the Sales Commissioner.

It is not disputed that the auction sale conducted by the Tehsildar Sales on 4th June, 1993 was provisionally accepted in favour of the respondent being the highest bidder. Pursuant thereto, 1/5th of the bid amount as earnest money was deposited, but that acceptance being provisional, was subject to confirmation by the Sales Commissioner. When the proceedings of auction were placed for confirmation before the competent authority (Sales Commissioner), the competent authority after perusing the record of auction observed that the provisional bid is quite on the lower side and looking to the location of the property in question, it needs a good publicity to fetch the better sale price of the subject land and while cancelling the auction sale, directed to initiate the process of re-auction and further observed that he should be informed in advance and intended to remain present at the time of auction by order dated 2nd July, 1993. That apart, it is not disputed that total applicants were fourteen but only three bidders had participated in the bidding process.

Proceeding on the said premise, the appellate authority, after due appraisal of record, confirmed the action of the Sales Commissioner in cancelling the auction and was finally confirmed by the Financial Commissioner(the revisional authority), under its order dated 24th August, 2006, of which reference has been made. 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. The scope of judicial review in the matters of tenders/public auction has been explored in depth by this Court in a catena of cases. Plausible decisions need not be overturned and, at the same time, latitude ought to be granted to the State in exercise of its executive power. However, allegations of illegality, irrationality and procedural impropriety would be enough grounds for Courts to assume jurisdiction and remedy such ills.

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. This being a settled law that 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, 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.

To the contrary, the limited scope of judicial review for which interference could have been permissible to prevent arbitrariness, irrationality, bias, malafides or perversity, if any, in the approach of the authority while dealing with the auction proceedings, was never the case of the respondent at any stage. 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. In our considered view, the finding recorded by the High Court in the impugned judgment is unsustainable and deserves to be set aside. Before we conclude, it has been informed to this Court that the respondent had deposited Rs.78,000/- being 1/5th of the bid amount as earnest money on 5th June, 1993. Let the amount of Rs.78,000/- deposited by the respondent be refunded with interest at the rate of 12% per annum from the date of its deposit until its actual payment. The order be complied with within two months from today. The appeal succeeds and accordingly allowed. The impugned judgment of the High Court dated 13th August, 2008 is hereby set aside.