Public auction bid rejection must be reasoned and non-arbitrary; highest bid accepted after flawed comparison and irrational refusal.
Rejection of the highest bid in a public auction is valid only if based on relevant considerations and a reasoned, non-arbitrary process consistent with Article 14. The approving authority compared the hotel plot with smaller plots at a different location without properly accounting for differences in size, use, location, prior failed auctions, the enhanced reserve price, and the strong bidder response. The later re-auction, in which no bidder came forward, reinforced the absence of a rational assessment. The rejection was therefore held arbitrary, irrational and vitiated by non-application of mind, and the bid was required to be accepted.
Issues: Whether the rejection of the highest bid in a public auction of a hotel plot was arbitrary, irrational and vitiated by non-application of mind, and whether the bid ought to have been accepted.
Analysis: The decision to reject the bid was tested on the standards of reasonableness and arbitrariness under Article 14 of the Constitution of India. The approving authority relied on comparison with much smaller shopping and office plots at a different location, without adequately accounting for the differences in size, use, location, prior failed auctions, the enhanced reserve price, and the strong response in the auction where fifty-one bidders participated. The subsequent re-auction, in which no bidder came forward for the subject plot and other plots, reinforced that the earlier rejection had not been based on a rational and well-informed assessment. The power to reject the highest bid existed, but it had to be exercised on relevant considerations and through a reasoned decision-making process.
Conclusion: The rejection of the petitioner's bid was held to be arbitrary, irrational and the result of non-application of mind, and the bid was required to be accepted.
Ratio Decidendi: A statutory authority may reject the highest bid in a public auction, but such rejection is valid only if it is founded on relevant considerations and a reasoned, non-arbitrary decision-making process consistent with Article 14 of the Constitution of India.
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