Summary
The Ghaziabad Development Authority cancelled the appellant's highest bid (15.23% above the reserve price) for a 3150 sq. m. industrial plot, without notice, because much smaller plots in the same scheme had fetched higher per-square-metre prices. The Court held the cancellation arbitrary and based on an irrelevant comparison, since an expectation of a higher price is no ground to cancel a valid auction free of fraud or collusion; it set aside the High Court's orders and directed allotment to the appellant on re-deposit of the earnest money.
Issues
- Whether a development authority could cancel the highest bid, above the reserve price, in an auction free of irregularity, because smaller plots in the same scheme had fetched higher rates.
- Whether the High Court was right in dismissing the writ petitions on the footing that the highest bidder had no vested right, no acceptance letter having issued and the earnest money having been refunded.
Held
- Unless there is material irregularity, illegality, fraud or collusion in a public auction, the highest offer should ordinarily be accepted as fair value; repeated interference frustrates the sanctity of public auctions, and a mere expectation of a higher price in a fresh auction is no good ground to cancel a valid auction. (¶¶ 21, 22, 28, 32)
- The large 3150 sq. m. plot could not be compared with plots of about 123-132 sq. m. auctioned in the same scheme: the reserve price was the same, demand for large industrial plots was scarce (only two bidders), and higher per-square-metre bids for small plots gave no basis to expect a similar rate. Cancelling on that comparison rested on an irrelevant consideration and was arbitrary, whimsical and irrational. (¶¶ 25, 26, 27, 28)
- Once the appellant's technical bid was accepted and it was declared the highest bidder above the reserve price, absent fraud or collusion it was entitled to an allotment letter and the authority was obliged to issue it; the appellant also had a legitimate expectation of allotment, and cancellation behind its back without notice was unsustainable. (¶¶ 27, 28, 29)
- The High Court erred in treating the absence of an acceptance letter and the refund of earnest money as defeating the appellant's claim; refunding the deposit could not legitimise an arbitrary cancellation. (¶¶ 27, 29)
- The highest valid bid above the reserve price can be discarded only for a valid reason having a nexus with the decision; cases where the tender reserved a right to reject without reasons, where bids were below the reserve price, or where there was evidence of bungling or other specific defects were distinguished. (¶¶ 30, 31, 32)
Result
Appeals allowed; High Court orders dated 24.05.2024 and 15.07.2024 set aside and the cancellation of the appellant's bid quashed; appellant to re-deposit the earnest money preferably within four weeks, and the GDA to make an order of allotment within two weeks thereafter and conclude the auction in its favour; parties to bear their own costs.