Sale Pursuant To Public Auction Cannot Be Set Aside At Instance Of Strangers Or Third Party - Supreme Court

A two-judge bench of the Supreme Court comprising of Justice M.R. Shah and Justice B.V. Nagarathna has observed that the sale pursuant to the public auction could not be set aside at the instance of strangers to the auction proceeding.

In this case, a proposal was published by the office of the Commissioner, Endowments Department to auction the land which belonged to Sri Markendaya and Omkareswara Swamy Devasthanam, Eluru. The Commissioner of Endowments Department granted permission to sell the land in question and the Executive Officer of the Temple Trust issued tender/public notice to sell the land in question by way of an open auction. The Appellant became the highest bidder fixing the price at Rs.13,01,000/- per acre. The Appellant deposited Rs.7,85,000/- immediately as per the tender conditions. The Appellant deposited a balance amount of Rs.15,69,810/- vide four banker cheques dated 30.12.1998. The sale deed was executed in favor of the Appellant by Executive Officer on behalf of the Temple vide Sale Deed.

As mentioned in the sale deed, the physical possession of the land in question was also delivered to the Appellant. On the basis of the liberty granted by the High Court, the said Shri L. Kantha Rao filed a revision before the Government challenging the order although he was not a participant in the auction in which Appellant was declared the highest bidder. The said revision was quashed and directed the Commissioner to refund the amount paid by the Appellant and to conduct a re-auction. The Appellant filed a petition before the Andhra Pradesh High Court where the Single Judge allowed the petition. Respondent No.1 – the Temple through its Executive Officer filed an Appeal before the Division Bench. The wife of Shri L. Kantha Rao also filed an appeal. The Division Bench of the High Court allowed the said appeals. Thus, the original Respondent No.4 before the High Court and the auction purchaser preferred the appeals before the Apex Court

Senior Advocate, Shri Harin P. Raval, appeared on behalf of the Appellant, Senior Advocate Shri S. Niranjan Reddy represented the Respondent – Temple Trust, and Senior Advocate, Shri Siddhartha Dave, represented the wife of Shri L. Kantha Rao – the original writ petitioner before the Supreme Court.

The primary issue in this case was –

Whether a re-auction of a property could have been ordered by the Division Bench of the Andhra Pradesh High Court.

It was contended by the Appellant that that merely because somebody, subsequently to the completion of the public auction and the sale deed had been executed in the favour of the highest bidder states that he was ready and willing to pay a higher amount than the highest bid amount, would frustrate the object and purpose of holding the public auction if, at such a person's instance, the auction/sale was interfered with in any manner.

On the other hand, Respondent No.1 i.e. the Temple Trust / Devasthanam in addition submitted that in the matter of sale of public property/auction, the dominant consideration was to secure the best price for the property. It was further argued that the Court should always keep the larger interest of the public in mind while interfering with the decision of the authority. Further, the concept of locus standi had been widened by this Court while dealing with matters of public interest. It was further claimed that it was the duty of the Court to see that the price fetched was adequate.

The Supreme Court relied on the case of Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed and observed that the Appellant was found to be the highest bidder in a public auction in which 45 persons had participated and thereafter when the sale was confirmed in his favor and even the sale deed was executed, unless and until it was found that there was any material irregularity and/or illegality in holding the public auction and/or auction/sale was vitiated by any fraud or collusion, it was not open to set aside the auction or sale in favor of the highest bidder on the basis of some representations made by third parties, who did not even participate in the auction proceedings and did not make any offer.

Thus, the Apex Court opined that the High Court should not have ordered re-auction of the land in question after a period of 23 years of confirmation of the sale and execution of the sale deed in favor of the auction purchaser by observing that the value of the property had been much more, otherwise, the object and purpose of holding the public auction and the sanctity of the public auction would be frustrated.

According to the Court, unless there was concrete material and it was established that there was any fraud and/or collusion or the land in question was sold at a throwaway price, the sale pursuant to the public auction could not be set aside at the instance of strangers to the auction proceeding.

The Court opined that the sale pursuant to the public auction could be set aside in an eventuality where it was found on the basis of material on record that the property had been sold away at a throwaway price and/or on a wholly inadequate consideration because of the fraud and/or collision and/or after any material irregularity and/or illegality is found in conducing/holding the public auction. After the public auction was held and the highest bid was received and the property was sold in a public auction in favor of the highest bidder, such a sale could not be set aside on the basis of some offer made by third parties subsequently and that too when they did not participate in the auction proceedings and made any offer and/or the offer was made only for the sake of making it and without any serious intent.

Thus, in this case, the Court held that, though Shri Jagat Kumar immediately after finalizing the auction stated that he was ready and willing to pay a higher price, however, subsequently, he backed out. The Court asserted that if the auction/sale pursuant to the public auction was set aside on the basis of such frivolous and irresponsible representations made by such persons then the sanctity of a public auction would be frustrated and the rights of a genuine bidder would be adversely affected.

It was further observed that as such there was no material available with the Division Bench to the effect that the valuation of the property in the year 1998 was much more and that the highest bid of the Appellant was for a lesser consideration than the actual value of the land.

Thus, the impugned judgment and order passed by the Division Bench of the Andhra Pradesh High Court was held to be unsustainable by the Supreme Court and was quashed and set aside. The judgment and order passed by the Single Judge were restored. Thus, the appeals were accordingly allowed to the aforesaid extent.

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