New Delhi, Jan 6 (PTI) The Supreme Court on Tuesday said merely because the authority conducting the auction expected a higher bid than what the highest bidder had offered cannot be a reason to discard the entire process.
A bench of Justices BV Nagarathna and R Mahdevan set aside an order of Allahabad High Court upholding cancellation of bid by Golden Food Products India for an industrial plot under Madhuban Bapudham Yojana in Ghaziabad measuring an area of 3,150 square metres.
The company alleged that despite being the highest bidder in the 2023 auction held by Ghaziabad Development Authority (GDA), its bid was cancelled.
The GDA claimed in the auction process it has noticed that similar properties in the same scheme had received substantially higher prices than offered by the company in its bid, the auction committee recommended cancelling the appellant’s bid in order to conduct a fresh auction.
The bench while setting aside the high court orders of May 24, 2024 and July 15, 2024 and directed the company to re-deposit the earnest money preferably within four weeks.
It said within two weeks from the date of the re-deposit of the earnest money, the GDA shall make an order of allotment of the subject plot in favour of the company herein and take all consequential steps for concluding the auction process in favour of the firm.
“An auction process has a sanctity attached to it and only for valid reasons that the highest bid can be discarded in an auction which is otherwise held in accordance with law. If a valid bid has been made which is above the reserve price, there should be a rationale or reason for not accepting it,” the top court said.
It added that the decision to discard the highest bid must have a nexus to the rationale or the reason.
“Merely because the authority conducting the auction expected a higher bid than what the highest bidder had bid cannot be a reason to discard the highest bid,” the apex court said.
Referring to the case, the bench said no other party had placed a bid higher than the company and there was no infirmity in the conduct of the auction.
“No other party had complained about the process of auction conducted by the GDA – respondent No.2. The bid offered by the appellant herein was the highest and above the reserve price. In the circumstances, the said bid ought to have been accepted by GDA – respondent No.2 rather than cancelling the same without notice to the appellant herein. Hence, the cancellation of the bid submitted by the appellant herein is quashed,” the top court said.
Justice Nagrathna said in court’s view there cannot be any imprimatur of the Court to such arbitrary cancellation of auction by an instrumentality or agency of the State in the absence of there being any fraud, collusion, suppression etc.
“Merely because the smaller plots measuring 123 to 132 square metres were auctioned and sold at a higher price as compared to the subject plot measuring 3150 square metres which is a large sized plot, could not have been the basis for cancelling the auction insofar as the subject plot is concerned,” it said.
It said the demand for smaller plots being higher was sold at a higher price per square metre than the subject plot, where there was no demand for the subject plot as only two bidders participated in the auction.
“The bid of the appellant was above the reserve price. There was no other reason to cancel the auction sale of the subject plot. Therefore, GDA – respondent No.2 was under an obligation in law having accepted the bid offered by the appellant to issue the allotment letter instead of cancelling the auction on the basis of irrelevant considerations that took place behind the back of the appellant,” it said.
The top court said that the expectation of a higher bid in a subsequent auction cannot be a reason to cancel an auction held in accordance with law.
It said the company herein, as also all bidders would have, made all financial arrangements before making technical and financial bids in an auction.
“The technical bid of the appellant herein was accepted. There was no reason to decline the financial bid made by the appellant which was the highest bid. The financial bid was also over and above the reserve price.
“There was no reason attributed to the appellant for cancellation of the auction sale. In the circumstances, the appellant had a legitimate expectation to receive an allotment letter vis-à-vis the subject plot as it was the highest bidder,” it added.
The bench said instead, without any prior notice to the company the auction itself was cancelled which constrained the appellant to approach the high court.
It said the high court has lost sight of these facts of the matter and has simply dismissed the writ petitions filed by the company herein which is not correct. PTI MNL NB
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