2006 (10) TMI 444 - SC - Indian Laws

SC Upholds Auction Cancellation: No Vested Right for Highest Bidder Until Formal Acceptance; Public Interest Prevails.

The SC upheld the Rajasthan Housing Board's decision to cancel an auction, emphasizing that the highest bidder does not have a vested right until formal ... Contempt petition - cancellation of the auction of commercial plots - M/s. G.S. Investments (respondent No. 1) made the highest bid - Government issued a direction summoning the records and staying all further proceeding relating to auction of the plots - HELD THAT:- In view of this condition in auction notice it is obvious that a person who had made the highest bid in the auction did not acquire any right to have the auction concluded in his favour until the Chairman of the Housing Board had passed an order to that effect. Of course the Chairman of the Housing Board could not exercise his power in an arbitrary manner but so long as an order regarding final acceptance of the bid had not been passed by the Chairman, the highest bidder acquired no vested right to have the auction concluded in his favour and the auction proceedings could always be cancelled. This being the settled legal position, the respondent acquired no right to claim that the auction be concluded in its favour and the High Court clearly erred in entertaining the writ petition and in not only issuing a direction for consideration of the representation but also issuing a further direction to the appellant to issue a demand note of the balance amount. The direction relating to issuance of the demand note for balance amount virtually amounted to confirmation of the auction in favour of the respondent which was not the function of the High Court. In the present case there was enough material before the State Government to show that in the past plots in the area had fetched a price of ₹ 10,000/- per square meter and the highest bid made by the respondent in the present case was nearly half, i.e., ₹ 5750/- per square meter, which clearly indicated that the auction had not been conducted in a fair manner. If in such a case the State Government took a decision to disapprove the auction held and issued a direction for holding of a fresh auction, obviously the said decision was taken in larger public interest. In these circumstances there was absolutely no occasion for the High Court to entertain the writ petition and issue any direction in favour of the contesting respondent. The orders passed by the learned single Judge and the order passed by the Division Bench of the High Court are clearly erroneous in law and are liable to be set aside. It appears that the respondent initiated contempt proceedings against the appellants in which a learned single Judge passed an order observing that the order passed by the learned single Judge had not been complied with in letter and spirit and a further direction was issued to comply with the said order within two weeks. The material placed before us shows that the appellant No. 1 had issued a notice to the respondent and after giving a personal hearing on the next day, had rejected its representation by the order. In these circumstances there was no occasion for initiating any contempt proceedings against the appellants. In the result the appeal is allowed with costs. The order passed by the learned single Judge and the order passed by the Division Bench of the High Court are set aside and the writ petition filed by the respondent is dismissed. The order passed by the learned single Judge in contempt proceedings is also set aside and the contempt petition filed by the respondent is dismissed. The money deposited by the respondent No. 1 shall be refunded to it forthwith. Issues Involved:1. Validity of the auction cancellation by the Rajasthan Housing Board.2. Legal right of the highest bidder in an auction.3. Scope of judicial review under Article 226 of the Constitution in commercial transactions.4. Contempt proceedings against the appellants for non-compliance with court orders.Detailed Analysis:1. Validity of the Auction Cancellation by the Rajasthan Housing Board:The Rajasthan Housing Board published auction notices and conducted an auction on 20.2.2002, where the highest bid was made by M/s. G.S. Investments. Allegations of bungling prompted the State Government to stay further proceedings and eventually cancel the auction, citing a significant discrepancy between the auction price and market rates. The State Government's actions were based on Section 60 of the Rajasthan Housing Board Act, 1970, which empowers it to issue directions necessary for carrying out the purposes of the Act. The Supreme Court upheld the State Government's decision, noting that the directions were issued to generate revenue and augment the Board's finances, thus serving the public interest.2. Legal Right of the Highest Bidder in an Auction:The auction notice contained a condition that the final acceptance of the bid was at the discretion of the Chairman of the Housing Board. The Supreme Court reiterated that a highest bidder does not acquire a vested right to have the auction concluded in their favor until the bid is formally accepted. Citing precedents, including Laxmikant vs. Satyawan, the Court emphasized that the highest bid does not automatically entitle the bidder to confirmation of the auction, especially if the auction conditions reserve the right to reject any bid.3. Scope of Judicial Review under Article 226 of the Constitution in Commercial Transactions:The Supreme Court highlighted that judicial review of administrative decisions, especially in commercial transactions, is limited to examining the decision-making process rather than the decision itself. The Court cited several precedents, including Tata Cellular v. Union of India, to assert that the Government must protect public revenue and act fairly. The Court emphasized that judicial intervention is warranted only if the decision-making process is arbitrary, biased, or violates Article 14 of the Constitution. In this case, the Court found that the High Court erred in issuing directions favoring the respondent, as the auction cancellation was justified and in the public interest.4. Contempt Proceedings Against the Appellants for Non-Compliance with Court Orders:The respondent initiated contempt proceedings, alleging non-compliance with the High Court's order. However, the Supreme Court noted that the appellants had issued a notice and conducted a personal hearing before rejecting the respondent's representation. Therefore, there was no basis for the contempt proceedings. The Supreme Court set aside the contempt order, concluding that the appellants had complied with the procedural requirements.Conclusion:The Supreme Court allowed the appeal, set aside the orders of the learned single Judge and the Division Bench of the High Court, and dismissed the writ petition filed by the respondent. The Court also set aside the contempt order and directed the refund of the amount deposited by the respondent. The judgment underscores the limited scope of judicial review in commercial transactions and the importance of public interest in administrative decisions.