Public Authority's Act Of Revisiting Auction Process For Price Maximization Justified As Long As Enforceable Contract Isn’t Entered Into: Supreme Court

The Apex Court was considering the Civil Appeals arising out of the final judgment of the Punjab and Haryana High Court allowing the writ petition filed by M/s Bedi Hospital challenging the letters of cancellation of the bid contract and the Agreement to Sell on the ground that the bid amount offered by M/s Bedi Hospital was not reflective of the market trends.

The Division Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held, “The conduct of a public authority must be informed by fairness in action and in furtherance of public purpose. However, while dealing with matters relating to sale or lease of public property, the action of a public authority to recall or revisit the auction process would be justified if the decision is intended to maximise the price for the sale/lease of public property. This is permissible as long as the enforceable contract has not been entered into. In the present case, the decision of the Chandigarh Administration to revisit the auction was taken before finalization of the allotment letter and the consequential execution of conveyance deed. At this stage, a substantial lower price fetched at the auction can be a relevant consideration for not finalising the contract in favour of a so-called “highest bidder”.

Advocate Additional Solicitor General Vikramjeet Banerjee represented the Appellant while AOR Bhargava V. Desai represented the Respondent.

Factual Background

The Chandigarh Administration issued an e-auction notice calling for the e-auction of 12 residential sites, 1 commercial site, and 2 nursing home sites on a freehold basis. The appeal revolved around two nursing home sites. The corrigendum published by the Chandigarh Administration fixed the reserve price for both sites at Rs 6.91 crore. M/s Bedi Hospital and the appellant submitted their respective bids for Site No.3 and 4, and after conclusion of the auction process, the Appellant’s bid was accepted.

The Chandigarh Administration had a rethink about finalising formal allotment in favour of M/s Bedi Hospital for the reason that the bid amount for Site No. 4 was, according to them, not “reflective of the market trend”. In 2013, the Chandigarh Administration issued the first impugned letter to M/s Bedi Hospital cancelling the bid contract. M/s Bedi Hospital challenged the said cancellation by filing a writ petition before the Punjab and Haryana High Court. Pending disposal of the writ petition, the Chandigarh Administration proceeded further and also cancelled the Agreement to Sell which was also challenged by M/s Bedi Hospital by way of an amendment to the pending writ petition filed by it

A fresh auction was conducted, but M/s Bedi Hospital did not participate in the fresh e-auction. In view of the earlier directions of the High Court at the stage of admission of the writ petition, the Chandigarh Administration placed the conduct and conclusion of the re-auction process before the High Court by way of a status report. The Appellant filed an application for impleadment in the writ petition filed by M/s Bedi Hospital contending that, being the successful bidder in the subsequent e-auction, it was a necessary party to the writ proceedings. By the order impugned before the Apex Court, the High Court allowed the writ petition filed by M/s Bedi Hospital and quashed the Chandigarh Administration’s letters rescinding the bid contract and cancelling the Agreement to Sell.

Reasoning

The Bench, at the outset, explained that an agreement enforceable in law alone is a contract. “Such an enforceable agreement, in the present case, will come into existence only upon execution of the conveyance deed. Execution of the of the conveyance deed is the culmination of the process by which the promise, the offer, acceptance, payment of consideration, and execution of an Agreement to Sell are complete. An Agreement to Sell contemplated under Rule 5(iv) of the Chandigarh Estate Rules, 2007 in itself is not an enforceable contract under Section 2(h) of the Indian Contract Act, 1872”, it added.

Considering that the conveyance deed was not yet executed, the Bench held that the Chandigarh Administration will be in a position to exercise its power under Rule 5(vi) read with Explanation I of the Chandigarh Estate Rules, 2007 or under Clauses VI(1) and VI(5) of the General Terms and Conditions of E-Auction. It was further noted that under the Rules as well as the Tender Conditions, the Chandigarh Administration had reserved its right to “withdraw any site or building that may have been put up for auction” without assigning any reason, and the decision of the Estate Officer, acting for the Chandigarh Administration in this regard, was declared as final.

The Bench took note of the fact that the decision of the Chandigarh Administration to revisit the auction was taken before finalisation of the allotment letter and the execution of the conveyance deed. The Bench thus held, “For these reasons, we are of the opinion that there is no illegality or arbitrariness in the action of the Chandigarh Administration to revisit the auction process and call for a fresh auction for price maximization.”

The Bench also took note of the fact that the cancellation letter intimated M/s Bedi Hospitals of the exact reason why the bid contract was rescinded, and the entire consideration was refunded on the same day. The Chandigarh Administration also provided the opportunity to M/s Bedi Hospital to take part in the fresh auction for Site No.4.

Thus, allowing the Civil Appeals, the Bench directed the Chandigarh Administration to conduct a fresh e-auction of Site No. 4 after following the due procedure.

Cause Title: Satinder Pal Singh & Ors. v. Bedi Hospital & Ors. (Neutral Citation: 2026 INSC 1142)

Appearance

Appellant: Additional Solicitor General Vikramjeet Banerjee, AOR T. V. Ratnam, Advocates Rajendra Prasad Maurya,Tadimalla Bhaskar Gowtham, Bhuvan Kapoor, Varun Chugh, Krishna Kant Dubey, AOR Shreekant Neelappa Terdal

Respondent: AOR Bhargava V. Desai, Advocate Shivam

Click here to read/download Judgment