The State Of Punjab vs Mehar Din on 2 March, 2022


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Supreme Court of India

The State Of Punjab vs Mehar Din on 2 March, 2022

Author: Ajay Rastogi

Bench: Ajay Rastogi, Abhay S. Oka

                                                                    NON-REPORTABLE

                                   IN THE SUPREME COURT OF INDIA
                                    CIVIL APPELLATE JURISDICTION
                                   CIVIL APPEAL NO(S). 5861 OF 2009


         STATE OF PUNJAB & OTHERS                                   ….APPELLANT(S)


                                                VERSUS


         MEHAR DIN                                                  ….RESPONDENT(S)

                                              JUDGMENT

Rastogi, J.

1. The instant appeal arises from the judgment and order

passed by the Division Bench of the High Court of Punjab and

Haryana at Chandigarh dated 13th August, 2008 setting aside the

order dated 24th August, 2006 passed by the Financial

Commissioner Revenue, Patiala with a further direction to the

competent authority to confirm the auction sale and complete all

other formalities within three months.

2. The facts in brief culled out from the record and relevant for

the purpose are that the sub-urban properties are to be disposed
Signature Not Verified

Digitally signed by
NEETU KHAJURIA
Date: 2022.03.02

of in terms of the procedure for sale by public auction, as provided
17:48:51 IST
Reason:

under Chapter III of the Punjab Package Deal Properties (Disposal)
1
Rules, 1976 (hereinafter referred to as “the Rules 1976”), framed

by the State Government in exercise of its power conferred under

Section 18 of the Punjab Package Deal Properties(Disposal) Act,

1976. Part III of Rules 1976 provides for transfer of urban

properties.

3. The appellants being the custodian of the subject property

initiated the process of putting the property to public auction

through the notice published in Punjabi Tribune of 17th May, 1993,

the extract of auction notice is reproduced as under:-

“Punjabi Tribune, Monday, 17 May 1993

AUCTION NOTICE

General public is informed that the following Sub Urban Land of
Tehsil Malerkotla will be auctioned at the time and place given below.
1/5th of the bid amount shall be given at the spot in cash. The
remaining conditions of the auction will be fold on the spot.

           Town               :       Malerkotla
           Place of Auction   :       At the spot
           Dated              :       04.06.93
           Time               :       10:00 A.M
           Khasra No.         :       Area
           185//22/2          :       7-0
           191                :       7-10
           12/2min            :       3-12
           169//23/3/1        :       4-17
           Kitte              4       22-17
           Total Kitte        4       22-17
                                                                   Sd/-
                                  Tehsildar Revenue-cum-M.O. Malerkotla”
                                                                              2

4. It has not been pleaded that the auction notice was given its

wide publicity and affixed at the conspicuous place in the locality

where the property is situated.

5. The Tehsildar Sales, Malerkotla conducted public auction on

4th June, 1993 and this fact is not disputed that only three bidders

had participated in the bidding process and bid of the respondent,

Mehar Din was the highest bid of Rs.3,90,000/-, which was

provisionally accepted by the Tehsildar. Pursuant thereto, 1/5th

of the bid amount, i.e., Rs.78,000/- was deposited by the

respondent at the spot subject to its confirmation by the Sales

Commissioner in terms of the procedure for sale by public auction

provided under Rule 8(1)(h) of Chapter III of the Rules 1976.

6. On perusal of records, the competent authority (Sales

Commissioner) was of the view that the public property has not

been put to proper publicity and the present bid is inadequate and

failed to record his satisfaction for confirmation of the bid and

accordingly the bid was cancelled by an order dated 2nd July, 1993

with a further direction for re-auction and to be auctioned in his

presence with wide publication to fetch the maximum price.

7. The order dated 2nd July, 1993 became the subject matter of

challenge at the instance of the respondent in appeal before the
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Chief Sales Commissioner, Sangrur, who after perusal of the

record, returned a finding that on the date of auction, i.e. 4th June,

1993 conducted by the Tehsildar Sales, only three persons had

participated in the bidding process and arrived to a conclusion that

the Tehsildar Sales had not conducted the bidding process

properly and adequate publicity was not made and under its order

dated 24th October 1994, confirmed the order of the Sales

Commissioner cancelling the bid.

8. The order of the Chief Sales Commissioner, Sangrur dated

24th October, 1994 came to be challenged by the respondent under

Section 10 of the Act 1976. The Divisional Commissioner, after

recording a finding that no opportunity was afforded to the bidder

before passing of the order of cancellation of the bid dated 4th June,

1993 and after 1/5th of the bid towards earnest money was

deposited and being the highest bidder, no reasons were assigned

for cancellation and accordingly by its order dated 17th September,

2003, set aside the order of cancellation of the competent authority

dated 2nd July, 1993 and so also of the appellate authority dated

24th October, 1994.

9. The order dated 17th September, 2003 became the subject

matter of challenge under Section 15(1) of the Act, 1976 before the

4
Financial Commissioner Revenue, Punjab, Chandigarh at the

instance of the appellants and after re-appraisal of the record, the

Financial Commissioner, Revenue, by its order dated 24th August

2006, observed as under:-

“4. Mehar Din has the following things against him as per the
arguments of the State in the courts below. First-Although this
auction has fetched more money than the previous auction held in
1983 but could have still fetched a better price. This is duty of the
Sale Agency to try to get the maximum price people and even in this,
Mehar Din’s name is mentioned twice. That leaves effectively a total
of three persons. Collusion between the Sales Agency and the
possible vendors is likely. Thirdly, this being sub-urban land as the
State (Tehsildar Sales) mentions, the land couId have fetched Rs.8-
10 lakhs. Even basically, the Sales Commissioner is not bound to
accept the price settled in the auction because he is to always strive
for a better price.

5. Therefore, 1 accept the appeal and set aside the orders dated
17.09.2003 of the Commissioner, Patiala Division. The land is to be
re-auctioned after proper munadi.”

10. The order passed by the Financial Commissioner dated 24th

August, 2006 became the subject matter of challenge at the

instance of the respondent by filing writ petition before the High

Court under Articles 226 and 227 of the Constitution.

11. The High Court proceeded on the premise that the reasons

adopted by the Financial Commissioner were based on conjectures

and surmises and once the auction purchaser’s bid was higher

than the reserved price which was notified at site and more than

the price of the last auction and in the absence of any irregularity

or illegality being committed in the auction proceedings, there is
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no reason for vitiating the auction process and accordingly, while

setting the aside the order of the Financial Commissioner dated

24th August, 2006 directed the competent authority to confirm the

sale and complete other formalities under the order dated 13th

August, 2008. The operative part of the order of the High Court

dated 13th August, 2008 is reproduced hereunder:-

“A perusal of the aforesaid observations and reasons adopted by the
Financial Commissioner clearly shows that the said revisional
authority has acted only on conjectures, surmises and suppositions.
It is not in dispute that the price as· offered by the petitioner-auction
purchaser was much more than the price of last auction and there is
no material produced by the State to show that there was any
irregularity or illegality in the auction proceedings that might have
taken place due to which it stood vitiated. Still further, nothing could
be shown that the value of the land was Rs.8 to 10 lacs as noticed by
the Financial Commissioner in the impugned order. Furthermore, no
material has been shown which may impel to infer that there was any
connivance between the three persons who had given bid and that the
price as offered by the petitioner was not the real price of the land in
question. The impugned order dated 24.08.2006 is thus, legally
unsustainable and is accordingly set aside. The writ petition is
allowed and it is directed that the competent authority shall confirm
the sale and complete all formalities within a period of three months
from the date of receipt of a certified copy of this order.”

12. We have heard learned counsel for the parties and with their

assistance perused the material placed on record.

13. The Scheme of Chapter III of Rules, 1976 is related to transfer

of urban properties laying down the procedure to be followed for

sale by public auction. The extract of Rule 8 of the Rules, 1976

relevant for the purpose is reproduced hereinbelow:-

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“8. (1) Procedure for sale by public auction. – (a) The urban
property to be sold by public auction shall be sold by Tehsildar
(Sales) or Naib-Tehsildar (Sales).

(b) The Tehsildar (Sales) or Naib-Tehsildar (Sales) shall order a
proclamation of the intended sale to be made in the language of the
principal civil court of original jurisdiction within whose jurisdiction
the property is situate.

(c) Notice of the intended sale shall be given at least fifteen days
before the proposed sale and every such notice shall indicate the
date, time and place of the proposed sale, the description of the
urban property to be sold, its location and boundaries, where
possible the terms and conditions of the sale and any other
particulars which the Tehsildar (Sales) or Naib-Tehsildar (Sales)
considers material. One copy of the notice shall be affixed at a
conspicuous place in the locality where the property is situate. The
notice of the intended sale shall also be given by beat of drum in the
locality, where such property is situate.

(d) Where the Tehsildar (Sales) or Naib-Tehsildar (Sales) thinks it
desirable that the notice of the intended sale of an urban property
should also be published in the daily newspapers, he may get such
notice published accordingly before putting it to auction.

(e) The Tehsildar (Sales) or Naib-Tehsildar (Sales) may by an order
in writing and after recording reasons for so doing withhold sale of
any urban property notified for sale.

(f) An urban property put to auction shall be sold subject to a reserve
price fixed in respect thereof, but such reserve price shall not be
disclosed.

(g) The Tehsildar (Sales) or Naib-Tehsildar (Sales) may, for reasons
to be recorded, in writing, adjourn the sale to a specific date and
hour and an announcement to that effect shall be made at the time
of the adjournment of the sale.

Provided that where a sale is adjourned for a period
exceeding fifteen days, a fresh notice shall be given in the
manner indicated in clause (c).

(h) A person declared to be the highest bidder at the public auction
shall be required to pay in cash, at the fall of the hammer, the whole
amount of the bid if it does not exceed Rs. 500 in case the amount of
bid money exceeds the said amount of Rs. 500, he shall be required
to pay an amount equal to 20 per cent of the bid as earnest money
and to pay the balance within fifteen days of the date of receipt of
intimation of acceptance of the bid. If this amount is not paid, the
bid shall be deemed to have been cancelled and the urban property
put to re-auction. The acceptance of the highest bid in respect of
which a deposit has been made shall be provisional, subject to the
confirmation of sale by the Sales Commissioner, provided that no bid

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shall be finally accepted until after the expiry of ten days from the
date of auction.”

14. As per Rule 8(1)(c), auction notice has to be given wide

publicity and one copy of the notice is to be affixed at the

conspicuous place in the locality where the property is situated

and as per Rule 8(1)(h), if the bid money exceeds Rs.500/-, the

bidder shall be required to pay an amount equal to 1/5th of the bid

amount as earnest money and acceptance of the highest bid in

respect of which the deposit has been made shall be provisional,

subject to confirmation by the Sales Commissioner.

15. It is not disputed that the auction sale conducted by the

Tehsildar Sales on 4th June, 1993 was provisionally accepted in

favour of the respondent being the highest bidder. Pursuant

thereto, 1/5th of the bid amount as earnest money was deposited,

but that acceptance being provisional, was subject to confirmation

by the Sales Commissioner. When the proceedings of auction were

placed for confirmation before the competent authority (Sales

Commissioner), the competent authority after perusing the record

of auction observed that the provisional bid is quite on the lower

side and looking to the location of the property in question, it needs

a good publicity to fetch the better sale price of the subject land

8
and while cancelling the auction sale, directed to initiate the

process of re-auction and further observed that he should be

informed in advance and intended to remain present at the time of

auction by order dated 2nd July, 1993. That apart, it is not

disputed that total applicants were fourteen but only three bidders

had participated in the bidding process.

16. Proceeding on the said premise, the appellate authority, after

due appraisal of record, confirmed the action of the Sales

Commissioner in cancelling the auction and was finally confirmed

by the Financial Commissioner(the revisional authority), under its

order dated 24th August, 2006, of which reference has been made.

17. From the Scheme of Chapter III of Rules 1976, it is apparent

and explicit that even if the public auction has been completed to

the highest bidder, no right is accrued till the confirmation letter

is issued to him as the acceptance of the highest bid is provisional,

subject to its confirmation by the competent authority.

Undisputedly, the competent authority (Sales Commissioner) has

failed to confirm the bidding process and after recording its

satisfaction cancelled the auction bid under its order dated 2nd

July, 1993.

9

18. This Court has examined right of the highest bidder at public

auctions in umpteen number of cases and it was repeatedly

pointed out that the State or authority which can be held to be

State within the meaning of Article 12 of the Constitution, is not

bound to accept the highest tender of bid. The acceptance of the

highest bid or highest bidder is always subject to conditions of

holding public auction and the right of the highest bidder is always

provisional to be examined in the context in different conditions in

which the auction has been held. In the present case, no right had

accrued to the respondent even on the basis of statutory provisions

as being contemplated under Rule 8(1)(h) of Chapter III of the

Scheme of Rules, 1976 and in terms of the conditions of auction

notice notified for public auction.

19. The scope of judicial review in the matters of tenders/public

auction has been explored in depth by this Court in a catena of

cases. Plausible decisions need not be overturned and, at the

same time, latitude ought to be granted to the State in exercise of

its executive power. However, allegations of illegality, irrationality

and procedural impropriety would be enough grounds for Courts

to assume jurisdiction and remedy such ills.

10

20. In Tata Cellular v. Union of India1 it was held that judicial

review of government contracts is permissible in order to prevent

arbitrariness or favouritism. It was fearlessly opined in this case

as under:-

“94. The principles deducible from the above are:

(1) The modern trend points to judicial restraint in administrative
action.

(2) The court does not sit as a court of appeal but merely reviews the
manner in which the decision was made.

(3) The court does not have the expertise to correct the administrative
decision. If a review of the administrative decision is permitted it will be
substituting its own decision, without the necessary expertise which
itself may be fallible.

(4) The terms of the invitation to tender cannot be open to judicial
scrutiny because the invitation to tender is in the realm of contract.
Normally speaking, the decision to accept the tender or award the
contract is reached by process of negotiations through several tiers.
More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a
fair play in the joints is a necessary concomitant for an administrative
body functioning in an administrative sphere or quasi-administrative
sphere. However, the decision must not only be tested by the
application of Wednesbury principle of reasonableness (including its
other facts pointed out above) but must be free from arbitrariness not
affected by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative burden on the
administration and lead to increased and unbudgeted expenditure.”
(emphasis in original)

21. The exposition of law on the subject has been consistently

followed by this Court even in the later decisions holding that

superior Courts should not interfere in the matters of tenders,

unless substantial public interest was involved or the transaction

1
(1994) 6 SCC 651

11
was malafide. It was consistently stressed by this Court that the

need for overwhelming public interest should always be kept in

mind to justify judicial intervention in contracts involving the State

and its instrumentalities and while exercising power of judicial

review in relation to contracts, the Courts should consider

primarily the question whether there has been any infirmity in the

decision-making process.

22. This view has been further considered by this Court in

Jagdish Mandal v. State of Orissa and Others2, wherein it was

observed as under:-

“22. Judicial review of administrative action is intended to
prevent arbitrariness, irrationality, unreasonableness, bias and
mala fides. Its purpose is to check whether choice or decision is
made “lawfully” and not to check whether choice or decision is
“sound”. When the power of judicial review is invoked in matters
relating to tenders or award of contracts, certain special features
should be borne in mind. A contract is a commercial transaction.
Evaluating tenders and awarding contracts are essentially
commercial functions. Principles of equity and natural justice
stay at a distance. If the decision relating to award of contract is
bona fide and is in public interest, courts will not, in exercise of
power of judicial review, interfere even if a procedural aberration
or error in assessment or prejudice to a tenderer, is made out.

The power of judicial review will not be permitted to be invoked
to protect private interest at the cost of public interest, or to
decide contractual disputes. The tenderer or contractor with a
grievance can always seek damages in a civil court. Attempts by
unsuccessful tenderers with imaginary grievances, wounded
pride and business rivalry, to make mountains out of molehills
of some technical/procedural violation or some prejudice to self,
and persuade courts to interfere by exercising power of judicial
review, should be resisted. Such interferences, either interim or
final, may hold up public works for years, or delay relief and

2
(2007) 14 SCC 517

12
succour to thousands and millions and may increase the project
cost manifold…..”

23. This Court in a recent judgment in Silppi Constructions

Contractors v. Union of India and another3 held as under:

“20. The essence of the law laid down in the judgments referred
to above is the exercise of restraint and caution; the need for
overwhelming public interest to justify judicial intervention in
matters of contract involving the State instrumentalities; the
courts should give way to the opinion of the experts unless the
decision is totally arbitrary or unreasonable; the court does not
sit like a court of appeal over the appropriate authority; the court
must realise that the authority floating the tender is the best
judge of its requirements and, therefore, the court’s interference
should be minimal. The authority which floats the contract or
tender, and has authored the tender documents is the best judge
as to how the documents have to be interpreted. If two
interpretations are possible then the interpretation of the author
must be accepted. The courts will only interfere to prevent
arbitrariness, irrationality, bias, mala fides or perversity. With
this approach in mind we shall deal with the present case.”

24. The law on the subject is settled that the Courts being the

custodian of fundamental rights are under an obligation to

interfere where there is arbitrariness, irrationality,

unreasonableness, malafides and bias, if any, but at the same

time, the Courts should exercise the power of judicial review with

a lot of restraint, particularly in contractual and commercial

matters.

3
(2020) 16 SCC 489

13

25. Undisputedly, the provisional bid, in the instant case, was

not confirmed by the competent authority (Sales Commissioner)

and not being accepted after recording its due satisfaction by an

order dated 2nd July, 1993 and the decision of the authority in

passing the order of cancellation of the auction bid was

scrutinized/examined by the appellate/revisional authority and

the discretion exercised by the competent authority in taking

decision of cancellation was upheld at later stages.

26. This being a settled law that the highest bidder has no vested

right to have the auction concluded in his favour and in the given

circumstances under the limited scope of judicial review under

Article 226 of the Constitution, the High Court was not supposed

to interfere in the opinion of the executive who were dealing on the

subject, unless the decision is totally arbitrary or unreasonable,

and it was not open for the High Court to sit like a Court of Appeal

over the decision of the competent authority and particularly in

the matters where the authority competent of floating the tender

is the best judge of its requirements, therefore, the interference

otherwise has to be very minimal.

27. To the contrary, the limited scope of judicial review for which

interference could have been permissible to prevent arbitrariness,

14
irrationality, bias, malafides or perversity, if any, in the approach

of the authority while dealing with the auction proceedings, was

never the case of the respondent at any stage. The High Court

has recorded a finding to the contrary that the appellants have

failed to show any irregularity or illegality in the auction

proceedings and in the absence whereof, the auction proceedings

could not be held to be vitiated. The premise on which the High

Court has proceeded in recording a finding, particularly, in the

matters of auction of public properties is unsustainable in law and

that apart, it is also not in conformity with the Scheme of auction

of public properties as defined under Chapter III of Rules 1976.

28. In our considered view, the finding recorded by the High

Court in the impugned judgment is unsustainable and deserves to

be set aside.

29. Before we conclude, it has been informed to this Court that

the respondent had deposited Rs.78,000/- being 1/5th of the bid

amount as earnest money on 5th June, 1993. Let the amount of

Rs.78,000/- deposited by the respondent be refunded with interest

at the rate of 12% per annum from the date of its deposit until its

actual payment. The order be complied with within two months

from today.

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30. The appeal succeeds and accordingly allowed. The impugned

judgment of the High Court dated 13th August, 2008 is hereby set

aside.

31. Pending application(s), if any, shall stand disposed of.

…………………………….J.

(AJAY RASTOGI)

……………………………J.

(ABHAY S. OKA)

NEW DELHI
MARCH 02, 2022

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