Reserve price and timely payment safeguards are mandatory in public auctions; unauthorized delay and undervaluation vitiate the sale.

In a public auction of mortgaged property by a State financial corporation, the court held that failure to fix and disclose a reserve price, despite a valuation report, deprived the sale of an essential safeguard and rendered the process unfair because public property must be sold to secure the best price. It further held that the auction conditions requiring payment of the balance consideration within thirty days were mandatory; acceptance of belated payment without authority, after default and rejection of another bidder's matching offer, amounted to violation of the sale terms and unfairness. The sale was therefore set aside and a fresh auction ordered with reserve price and fresh valuation.

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Issues: (i) Whether the sale of the mortgaged property could be sustained when the Corporation failed to fix a reserve price and sold the property below the market value obtained in the valuation report; (ii) Whether the sale could stand when the successful bidder did not pay the balance 90% within the stipulated period and the Corporation nevertheless accepted belated payment contrary to the auction conditions.

Issue (i): Whether the sale of the mortgaged property could be sustained when the Corporation failed to fix a reserve price and sold the property below the market value obtained in the valuation report.

Analysis: The property was sold in a first public auction under the Corporation's powers after taking possession under Section 29. The valuation report fixed the market value, but the auction notice did not disclose a reserve price. In a sale of public property, the dominant consideration is to secure the best price, and reserve price serves as the minimum starting point to protect against sale at an inadequate value. Absence of reserve price, especially in a first sale involving substantial immovable property, deprived the process of an important safeguard and indicated that the property was not put to sale in a fair and transparent manner.

Conclusion: The sale was vitiated on this ground and could not be sustained.

Issue (ii): Whether the sale could stand when the successful bidder did not pay the balance 90% within the stipulated period and the Corporation nevertheless accepted belated payment contrary to the auction conditions.

Analysis: The auction notification and confirmation order expressly required payment of the balance amount within thirty days and stated the consequence of forfeiture on default. The stipulation was mandatory and binding on both the Corporation and the bidder. The bidder failed to pay within time, yet the Corporation condoned the delay, accepted payment after the stipulated period, and issued the sale certificate. The appellant had meanwhile sought to match the bid amount, but that request was rejected arbitrarily. Such conduct amounted to statutory violation, unfairness, and collusion, and the Corporation had no authority to extend time in the absence of an enabling clause.

Conclusion: The sale could not be upheld and was liable to be set aside.

Final Conclusion: The sale in favour of the third respondent was set aside, and the Corporation was directed to take possession and conduct a fresh auction in a transparent manner with reserve price and fresh valuation.

Ratio Decidendi: In a public auction by a State financial corporation, mandatory sale conditions, including timely payment of the balance consideration and adherence to reserve price safeguards, must be strictly enforced; any unauthorized extension of time or sale at an inadequate price vitiates the auction.

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