Can sale pursuant to a public auction, be set aside at the instance of strangers to the auction proceeding? SC decides

Supreme Court of India: While deliberating on the instant appeals expressing grievance over the judgment of Andhra Pradesh HC (Amravati) wherein it had directed the authorities concerned to conduct a re-auction of the entire properties by fixing the upset price higher than what has been fixed earlier, the Division Bench of M.R. Shah* and B.V. Nagrathna, JJ., held that 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.

Facts and Litigation Trajectory

As per the facts of the case, a proposal was published by the office of Commissioner, Endowments Department to auction the land in question belonging to Sri Markendaya and Omkareswara Swamy Devasthanam, Eluru, which was published in the newspaper on 10.03.1997. Notification to sell the subject land was published in the Andhra Pradesh Gazette on 22.05.1997. Nobody raised any objection against the said proposal. The probable expected price of the land was fixed at Rs. 4,00,000/- per acre and the total extent of land was about 1.81 acre. The Commissioner of Endowments Department granted permission to sell the land. The Executive Officer of the Temple Trust issued tender/public notice to sell the land in question by way of an open auction in the presence of the Deputy Commissioner, Endowments on 22.05.1998. Thereafter the auction took place on 24.06.1998 in which 45 people participated. The appellant herein was declared as the highest bidder.

One L. Kantha Rao, who did not participate in the auction held on 24.06.1998, filed a Writ Petition in 1999 before the High Court to direct the Executive Officer/ the Temple Committee not to execute the sale deed in respect of the auctioned land. The High Court granted interim stay of all further proceedings subject to the condition that he furnishes a bank guarantee of a sum of Rs.30 lakhs within two weeks from the date of the said interim order. During the pendency of the aforesaid writ petition the office of the Commissioner, Endowments Department unilaterally passed an order dated 10.02.1999 cancelling the auction held on 24.06.1998. The Executive Officer of the Temple was instructed to conduct a re-auction for the land in question keeping the upset price of Rs.30 lakhs. The matter reached the High Court and it observed that while Commissioner had revoked the order dated 10.02.1999, the revision filed against the same had become infructuous, however, liberty was granted to the said L. Kantha Rao to file a revision against the original order passed by the Commissioner.

Then 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 dated 22.12.1998 although he was not a participant in the auction in which appellant herein was declared the highest bidder. The said revision was allowed thereby quashing and setting aside the order dated 22.12.1998 and directing the Commissioner to refund the amount paid by the appellant and to conduct a re-auction of the land.

The appellant filed a writ in before the Single Judge bench of the HC who decided that Kantha Rao had not locus standi. He did not participate in the tender-cum-auction and when 45 persons participated in tender-cum-auction, nothing prevented him to participate in tender-cum- auction proceedings.

Mere depositing the money saying that the amount would fetch more is of no argument that can be looked into without establishing malafides or fraud played by the vendor or vendee”.

The Division Bench of the HC set aside the judgment and order passed by the learned Single Judge and directed the authorities concerned to conduct the re-auction of the entire land by fixing the upset price higher than what had been fixed earlier by observing that since more than twenty years had elapsed from the date of issuance of GO Rt. No. 1808 dated 26.11.1999 and price of the land in question had risen. The Division Bench also observed that the writ petitioner as well as the appellant shall also be allowed to participate in the re-auction, if they are otherwise eligible.

Contentions

Harin P. Raval, appearing on behalf of the appellant, contended that the Division Bench of the HC has committed a grave error in setting aside the 1998 auction and ordering a re-auction, as the decision was reached by an improper appreciation of the facts. he also contended that the auction sale was conducted after wide publicity in the well-known newspapers, so there was no illegality in conducting the auction, therefore, the Division Bench of 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. Since the respondent did not even participate in the 1998 auction, therefore he does not have any locus.

The Division Bench of the High Court did not properly appreciated the fact that the proceedings initiated by L. Kantha Rao were by way of  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.

The counsels for the respondents argued that the duty of the State is parens partriae in respect of the charitable endowments and to ensure its due protection, therefore the Government cannot act against the interest of the temple. Thus the re-auction was justified if in case of a trust, the consideration is inadequate. They 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 has been widened by this Court while dealing with matters of public interest. It is the duty of the Court to see that the price fetched is adequate.

Observations

Upon perusing the facts and the rival contentions, the Court observed that the Division Bench of the HC failed to appreciate and consider the lack of bonafides of L. Kantha Rao. Noting that since Rao did not participate in the 1998 auction proceedings or made any offer, the Court stated that he should not have been permitted to to raise any objection subsequently on the valuation.

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 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 further noted that Kantha Rao did not raise any objection at an appropriate stage or time, therefore is unlikely that he had any grievance vis-a-vis the auction. The Court also pointed out the failure of the Division Bench to not analyze the covert method applied by a fence sitter to nullify the auction proceedings via filing a PIL. The Court noted that the “subsequent lucrative offer” for the land was made simply to frustrate the auction proceedings with malafide intent-

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”.

Finally the Court observed that more than 23 years have passed since the auction and the sale, hence it is obvious that the value of the land won’t be the same as it was in 1998. Therefore the point of consideration is the “value of the property at the time when the sale was conducted”. The Court pointed out that the respondents could not point out with any material that price offered by the appellant in the year 1998 was not a fair value.

Conclusion

Based on the facts, the Court concluded that the auction was conducted and held in the year 1998 and was sold in favour of the appellant then on payment of the full sale consideration as per the highest bid offered by him. Therefore, the valuation as on the date of auction is the relevant consideration and not the value after so many years and over two decades after conducting the auction and confirming the sale.

The Court also set aside the impugned decision of the Division Bench and restored the decision rendered by the Single Judge Bench of the HC.

K. Kumara Gupta v. Sri Markandeya and Sri Omkareswara Swamy Temple and ors., 2022 SCC OnLine SC 196, decided on 18.02.2022


*Judgment by: Justice MR Shah


Sucheta Sarkar, Editorial Assistant has put this report together


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