Supreme Court of India· 25 November 2024

Is the cancellation of an auction after a bidder has been declared the highest bidder manifestly arbitrary, or does it depend on the reasons for cancellation?

INDORE VIKAS PRAADHIKARAN (IDA) & ANR v. SHRI HUMUD JAIN SAMAJ TRUST & ANR

SLP (Civil) No. 9940 of 2022 · SLP (Civil) No. 9940 of 2022
Coram: Bela M. Trivedi; Satish Chandra Sharma

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Answer

It depends on the reasons. Cancellation of an auction without providing any reason after the highest bidder has been declared is manifestly arbitrary. But where the cancellation was undertaken to remedy the erroneous minimum rate provided in the NIT — here an outstanding property tax demand not taken into account while fixing the base price — the decision is not unfounded and the authority is well within its rights to cancel the auction, particularly where the bidder did not participate in the second NIT.

Headnote

Judicial review of tender process — Notice Inviting Tender — Highest bidder — No vested right — Concluded contract — Cancellation of bid — Fair treatment — Freedom of contract — Judicial review of tender — Highest bidder — no vested right without allotment letter — Held: The highest bidder has no vested right to have the auction concluded in his favour; in the absence of an allotment letter and acceptance of the highest bid there is no concluded contract, and no relief could have been granted. (¶12, 14) Judicial review of tender — Annulment of tender — no interference absent mala fide exercise of power — Held further: While exercising the power of judicial review the Court does not sit as an appellate Court over the decision of the government but merely reviews the manner in which the decision was made; absent mala fide exercise of power, the Tender Committee's decision stands. (¶13) Judicial review of tender — Writ court fixing base price — beyond the function of the High Court — Held further: A writ court cannot fix the base price or modify the offer and direct allotment; that virtually amounts to confirmation of the auction in favour of the bidder, which is not the function of the High Court. (¶13, 14) Judicial review of tender — Bidder's rights — fair treatment, no further negotiation — Held further: A bidder has no right in the matter of bid except of fair treatment and cannot insist for further negotiation; where the bid was rejected for valid and cogent reasons the interference was unwarranted. Appeal allowed. (¶14, 17)

In the Court's own words

Paragraph 15Learned Counsels for respondent No. 1 placed heavy reliance on Eva Agro (supra) stating that the Appellant does not have absolute or unfettered discretion to cancel the auction. While we agree with the principle that the auctioning authority must adhere to the rule of law, the facts of the present case are entirely distinguishable from Eva Agro (supra). In that case, after the Appellant therein was declared the highest bidder, the auction was cancelled without providing any reason. This decision was found to be manifestly arbitrary by this Court and therefore, the appeal was allowed. However, in the present case, the decision to cancel the auction was not unfounded, it was undertaken to remedy the erroneous minimum rate provided in the NIT dated 07.07.2020, as noted in the report of the Div. Commissioner of the IDA. Therefore, the Appellants were well within their rights to cancel the auction. More importantly, in the present case, pursuant to the cancellation of the first NIT, a second NIT was issued wherein the respondent No. 1 did not participate. Despite this fact, the Division Bench of the High Court effectively usurped the powers of the auctioning authority and fixed the price at Rs. 26,000/- per square meter. Hence, being entirely distinguishable on facts, the reliance placed is of no assistance to respondent No. 1.

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Also decided in this judgment

Does the highest bidder in a tender process acquire a vested right to have the auction concluded in his favour where no allotment letter has been issued and the bid has not been accepted?In exercising judicial review over a decision annulling a tender process, may a court sit in appeal over the government's decision where mala fide exercise of power is neither pleaded nor established?Can a High Court, hearing a writ appeal, fix the base price of the land and direct the authority to allot it to the erstwhile highest bidder?Where a Notice Inviting Tender empowers the authority to accept or reject any or all bids, can a bidder insist on further negotiation of his bid?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections