Summary
The highest bidder for a 27887.50 sq. metre market complex plot auctioned by the Gwalior Development Authority in 1997 defaulted on the instalment schedule, paid in full only in August 2005, and then executed a registered lease deed without demur in March 2006 for a reduced area of 18262.89 sq. metres, the balance being adjusted as interest. Three and a half years later the High Court issued a mandamus directing the Authority to execute a lease for the remaining 9625.50 sq. metres without further consideration. The Supreme Court set the direction aside: the auction transaction stood concluded by the registered lease deed, which could not be altered in writ jurisdiction under Article 226, and the Authority's indulgence to the defaulting bidder was itself an abuse of discretion. The respondent was given a first opportunity to buy the remaining land at the prevailing circle rate.
Issues
- Whether, after a successful auction bidder who defaulted on the instalment schedule executed a registered lease deed without demur for a reduced area, the High Court could by mandamus under Article 226 direct execution of a lease for the remaining auctioned area without consideration.
- Whether a public authority's extension of time for years to a defaulting bidder, instead of cancelling the auction and forfeiting earnest money, is a permissible exercise of discretion.
Provisions considered
- Article 226, Constitution of IndiaA concluded commercial transaction embodied in a registered instrument cannot be reopened, and the instrument cannot be amended, by a writ of mandamus; the High Court's direction was beyond jurisdiction. (¶¶ 18, 19, 20)
- Section 17, Registration Act, 1908The lease deed was compulsorily registrable and, once registered, was not open to alteration even by the High Court in writ jurisdiction. (¶ 18)
- Article 14, Constitution of IndiaThe Authority's undue indulgence in allowing a defaulting bidder to pay instalments due by October 1999 as late as August 2005 was an abuse of discretion and an undue favour, business transactions being governed by commercial principles where equity has no role. (¶ 17)
Held
- Once the parties, after negotiation, executed and registered a lease deed without demur for 18262.89 sq. metres in March 2006, the transaction initiated by the 1997 tender stood concluded; it was not open to either party to question it in writ jurisdiction, and a mandamus to execute a lease for the remainder without consideration amounted to amending a registered instrument and was contrary to settled law. (¶¶ 18, 19, 20)
- On the bidder's failure to pay the last instalment by October 1999 the auction ought to have been cancelled and the earnest money forfeited; the Authority's indulgence in accepting payment up to August 2005 was an abuse of discretion violative of Article 14, though the Court declined to disturb what had already transpired. (¶ 17)
- Having declined the remaining land at the Government circle rate during negotiations, the respondent could not later insist on it at that rate; the parties remain free to negotiate afresh, and in view of the long pendency and escalation in value the respondent, as the original bidder, is to be given a first opportunity to purchase the remaining area on priority at the prevalent circle rate, failing which the Authority may dispose of it under its land disposal rules. (¶¶ 21, 22, 23)
Result
Appeal allowed; High Court judgment dated 21.04.2011 directing execution of a lease deed for the remaining 9625.50 sq. metres quashed and set aside, with the observation that the respondent be afforded the first opportunity to purchase the remaining area at the prevalent Government circle rate, failing which the Authority may dispose of it under its land disposal rules; pending applications disposed of.