Revenue recovery auction cancellation needs recorded reasons, and cannot defeat a buyer after full consideration is paid.

In revenue recovery proceedings, a suo motu cancellation of an auction sale under section 38 of the A.P. Revenue Recovery Act, 1864 must be supported by recorded reasons showing a legally sustainable basis such as material irregularity, mistake or fraud causing substantial injury; a bare reference to higher instructions, news reports or alleged undervaluation was insufficient, so the cancellation was invalid. Once the highest bidder had paid the entire sale consideration, the purchaser's right to confirmation could not be defeated by a later cancellation, because revenue auctions must remain reliable and the purchaser is entitled to protection from subsequent recovery-process changes. The cancellation order was set aside and the auction sale was protected.

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Issues: (i) whether the cancellation of the auction sale already conducted was authorised and supported by reasons under the Revenue Recovery Act; (ii) whether the auction sale could be cancelled after the entire sale consideration had been received from the highest bidder.

Issue (i): whether the cancellation of the auction sale already conducted was authorised and supported by reasons under the Revenue Recovery Act.

Analysis: The power to set aside a sale under section 38 of the A.P. Revenue Recovery Act, 1864 is available on an application showing material irregularity, mistake or fraud and substantial injury, and the Collector may also act suo motu, but in that event reasons must be recorded in writing. The record disclosed no application by the defaulter to set aside the sale. The impugned cancellation order rested only on bald assertions about higher instructions, alleged adverse news items and alleged under-valuation, without any legally sufficient reasons. The order also did not meaningfully refer to the alleged grant of instalments or disclose a bona fide decision-making process.

Conclusion: The cancellation was not a valid exercise of power under section 38 of the A.P. Revenue Recovery Act, 1864 and was unsustainable.

Issue (ii): whether the auction sale could be cancelled after the entire sale consideration had been received from the highest bidder.

Analysis: Once the highest bidder had paid the full sale consideration, the purchaser's right to confirmation could not be defeated by a subsequent cancellation. The Court applied the principle that a stranger auction purchaser must be protected from later vicissitudes affecting the underlying recovery process, since otherwise public auctions would lose credibility and the exchequer would suffer. On the admitted facts, the entire consideration had been received before the cancellation order.

Conclusion: The auction could not be cancelled after receipt of the entire sale consideration, and the petitioner was entitled to confirmation and conveyance of the property.

Final Conclusion: The writ petition succeeded. The cancellation order was set aside, the sale in favour of the petitioner was protected, and the State was directed to act on the auction sale in accordance with law.

Ratio Decidendi: A sale conducted in revenue recovery proceedings cannot be cancelled after the purchaser has paid the full consideration, and any suo motu cancellation under section 38 of the A.P. Revenue Recovery Act, 1864 must be supported by recorded reasons demonstrating a legally sustainable basis.

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