The Courts should exercise the power of judicial review with a lot of restraint, particularly in commercial and contractual matters

In the matter of State of Punjab and ors. v Mehar Din, Civil Appeal No.(s) 5861 of 2009 decided on 02.03.2022

FACTS

The sub-urban properties are 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) Rules, 1976.

The Appellants (State of Punjab and ors) being the custodian of the said property initiated a public auction on 4th June 1993 and only 3 bidders participated in the bidding process and the bid of the respondent (Mehar Din) was the highest bid.

The Sales Commissioner on perusal of records was of the view that the public property has not been put to proper publicity and the present bid is inadequate, accordingly the bid was cancelled vide order dated 02.07.1993 with a further direction to re-auction.

The Respondent challenged the said order in appeal before the Chief Sales Commissioner where the order of the Sales Commissioner was confirmed and the said appeal was dismissed. The Respondents further challenged the order of the Chief Sales Commissioner before the Divisional Commissioner where the said order was set aside vide order dated 17.09.2003. The said order dated 17.09.2003 of the Divisional Commissioner was set aside by the Financial Commissioner.

The order passed by the Financial Commissioner was challenged by filing a writ petition before the High Court where the High Court observed that once the auction purchaser’s bid was higher than the reserved price and in the absence of any illegality being committed in the auction proceedings there is no reason for vitiating the auction process and accordingly the order of the Financial Commissioner was set aside by the High Court.

Hence the Appellants moved the present appeal.

 

OBSERVATIONS

The Hon’ble Supreme Court examined the right of the highest bidder, stating that the State or authority which can be held to be the State within the meaning of Article 12 of the Constitution is not bound to accept the highest tender of bid. It is a well settled principle that the highest bidder has no vested right to have the auction concluded in his favour and right of the highest bidder is always provisional to be examined in the context in different conditions in which the auction has been held.

The Hon’ble Bench further examined the scope of Judicial Review in the matters of tenders/public auction. The following observations were made in this regard: –

  • The 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, the allegations of illegality and irrational would be enough grounds for Courts to assume jurisdiction.
  • Superior Courts should not interfere in the matters of the tenders, unless substantial public interest is involved or the transaction was malafide.
  • The Courts should exercise the power of judicial review with a lot of restraint, particularly in commercial and contractual matters

In the present matter it is 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.

Therefore, in the view of the Hon’ble Supreme Court the findings by the High Court in the impugned judgment is unsustainable and accordingly set aside.