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Noting that while it is settled law that the highest bidder has no vested right to have the auction concluded in his favour, the Top Court has held that under the limited scope of judicial review under Article 226 of the Constitution, the High Court is not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision is totally arbitrary or unreasonable.

"..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", remarked a bench of Justices Ajay Rastogi and Abhay S Oka.

The state of Punjab approached the top court assailing a judgment and order passed by the division bench of the Punjab and Haryana High Court setting aside an order dated August 24, 2006.

The order was 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 3 months.

Sub-urban properties in the state were to be disposed of in terms of the procedure for sale by public auction, as provided under Chapter III of the Punjab Package Deal Properties (Disposal) 2 Rules, 1976 (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.

A public auction was conducted on June 4, 1993 and only 3 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.

The Sales Commissioner was of the view that the public property has not been put to proper publicity and Mehar Din's bid was inadequate. Accordingly the bid was cancelled with a further direction for re-auction in his presence with wide publication to fetch the maximum price.

This order was upheld by the Financial Commissioner which came to be challenged before the High Court by Mehar Din.

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 was no reason for vitiating the auction process.

Relying on the scheme of Chapter III of Rules 1976, the bench found it to be apparent and explicit that even if the public auction had been completed to the highest bidder, no right was accrued till the confirmation letter was issued to him as the acceptance of the highest bid is provisional, subject to its confirmation by the competent authority.

It was further found that the right of the highest bidder at public auctions was dealt with 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."

Talking about the limited scope of judicial review for which interference could have been permissible to prevent arbitrariness, irrationality, bias, malafides or perversity, if any, in the approach of the authority while dealing with the auction proceedings, the Court found that this was never the case of the respondent at any stage.

Accordingly, the premise on which the High Court had proceeded in recording a finding, particularly, in the matters of auction of public properties was held to be unsustainable in law and also not found in conformity with the Scheme of auction of public properties as defined under Chapter III of Rules 1976.

The appeal by the state succeeded with a direction to refund Rs.78,000/- deposited by Mehar Din with interest at the rate of 12% per annum from the date of its deposit until its actual payment.

Cause Title: State of Punjab & Ors. vs Mehar Din