Can an Auction Sale, once concluded, be cancelled if a higher offer is made by a Third Party? SC says NO

 

The Supreme Court has observed recently that it is against the sanctity of a public auction that a sale pursuant to it be set aside on the basis of some offer made by third party.

The Bench comprising of Justice MR Shah and Justice BV Nagarathna noted that a third party that too when they didn't participate in the auction proceedings cannot influence the outcome of public auction as the same cannot be intervened unless there are allegations of fraud and/or collusion and/or cartel and/or any other material irregularity or illegality.

Brief Facts of the Case

The auction of a temple land in the present case took place on 24.06.1998 in which 45 people participated. The appellant herein emerged as the highest bidder and accordingly the land was transferred to it via a sale deed executed in his favour on 31.12.1998. Later, however, the High Court allowed writ petition filed by one L. Kantha Rao (who had not participated in the auction) ordered re-auction by setting aside the previous auction/sale.

Aggrieved the appellant approached the Supreme Court with prime contention that there was no illegality in conducting the auction and therefore, the High Court ought not to have set aside such a sale after a period of approximately twenty years from the date of conducting the public auction and the sale that too at the instance of a person, who never participated in the auction.

It was also submitted that the Division Bench of the High Court has not properly appreciated the fact that the proceedings initiated by Shri L. Kantha Rao were by way of “Public Interest Litigation (PIL)” and therefore after his death, his wife could not have continued the PIL proceedings by way of writ petition before the High Court as a private litigation.

He contended that that filing of objections and entertaining the same after the conclusion of the auction and after execution of the sale deed cannot be permitted at the instance of a stranger to the auction proceeding.

 To buttress his submission, he placed reliance on Valji Khimji & Co. Vs. O.L. of Hindustan Nitroproduct Ltd.& Ors, 2008 Latest Caselaw 716 SC

Read also : Muslim Personal Law: SC ends 45 years old litigation- Widow, daughter remain deprived of ancestral property

On the other hand, it was the case of the Temple Trust that Temple is a public religious institution and registered under Section 6(b)(ii) of Act of 1987 and thus Government is necessarily bound to act for the benefit of the temples and ensure revenue maximization for the temples. The Counsel submitted that as held by this Court in a catena of decisions Government acts as a trustee of the said properties. It is submitted that as observed and held by this Court in a catena of decisions, the duty of the State is parens partriae in respect of the charitable endowments and to ensure its due protection. He referred to Paramananda Mahapatra Vs. Commissioner of Hindu Religious Endowments, Orissa and Others, Mahant Ram Saroop Dasji Vs. S. P. Sahi, 1959 Latest Caselaw 38 SC

 He empahsised, referring to Divya Manufacturing Co., Tirupati Wool Mills Shr Shangharsha Vs. Union Bank of India , The Official Liquidator & Ors, 2000 Latest Caselaw 354 SC that it is the duty of the Court to ensure that the price fetched is adequate – especially in the case of a Public Trust even though there is no suggestion of irregularity or fraud.

Supreme Court Observation



The Court upon examining the case details, noted that once 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 favour 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 is not open to set aside the auction or sale in favour of a 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.

The Court referred to Jasbhai Motibhai Desai Vs. Roshan Kumar, Haji Bashir Ahmed & Ors , 1975 Latest Caselaw 333 SC wherein it was concluded that if despite adequate opportunity, a person has not lodged any objection at an appropriate stage and time, he could not be said to have been in fact, grieved.

Noting the fact that that the sale was confirmed in favour of the appellant by the Commissioner, Endowments Department after obtaining the report of the Assistant Commissioner, the Court opined that the High Court ought not to 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 favour of the auction purchaser by observing that the value of the property might have been much more, otherwise, the object and purpose of holding the public auction and the sanctity of the public auction will be frustrated.


"Unless there is concrete material and it is established that there was any fraud and/or collusion or the land in question was sold at a throw away price, the sale pursuant to the public auction cannot be set aside at the instance of strangers to the auction proceeding. The sale pursuant to the public auction can be set aside in an eventuality where it is found on the basis of material on record that the property had been sold away at a throw away price and/or on a wholly inadequate consideration because of the fraud and/or collusion and/or after any material irregularity and/or illegality is found in conducing/holding the public auction. After the public auction is held and the highest bid is received and the property is sold in a public auction in favour of a highest bidder, such a sale cannot 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 is made only for the sake of making it and without any serious intent."

In view of the above, the Court pointed out that though Shri Jagat Kumar immediately after finalising the auction stated that he was ready and willing to pay a higher price, he subsequently, backed out however and if the auction/sale pursuant to the public auction is set aside on the basis of the 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.

The Court observed that High Court failed to appreciate the fact the objector herein had not even participated in the process and was merely a fence sitter with no stakes on his shoulder, who had simply come forward just to nullify the registered sale deed executed in favour of the appellant by adopting an indirect method of making a public offer by way of filing a “Public Interest Litigation”

The Court added that if there was any error in the decision-making process adopted by the authority, the remedy available was to question the sale deed in an appropriate proceeding available under the law and not by filing a petition under Article 226 of the Constitution of India.

 

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(With input from news agency language)

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