Sale Pursuant To Public Auction Cannot Be Set Aside On The Basis Of Some Offer Made By Third Parties Subsequently: Supreme Court

The Supreme Court observed that a sale pursuant to public auction 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.

Under normal circumstances, unless there are allegations of fraud and/or collusion and/or cartel and/or any other material irregularity or illegality, the highest offer received in the public auction may be accepted as a fair value. Otherwise, there shall not be any sanctity of a public auction the bench comprising Justices MR Shah and BV Nagarathna said.

In this case, an auction of temple land took place on 24.06.1998 in which 45 people participated.  K. Kumara Gupta was declared as the highest bidder. A sale deed was also executed in favour of Kumara Gupta on 31.12.1998. By allowing a writ petition filed by L. Kantha Rao (who had not participated in the auction), the High Court ordered re-auction by setting aside the said auction/sale.

In appeal, the Apex Court bench observed that once the appellant (Kumara Gupta) 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. The court, in this regard, observed:

"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."

The court also observed that there was no material available to the effect that the valuation of the property in the year 1998 was much more and that the highest bid was for a lesser consideration than the actual value of the land.

While setting aside the High Court judgment, the bench also referred to the decision in State of Uttaranchal Vs. Balwant Singh Chaufal and Ors., (2010) 3 SCC 402, cautioning the High Courts to be more discerning / vigilant and/or 30 cautious while entertaining writ petitions apparently filed in public interest. 

"In the said decision, it is observed and held that: (1) The Courts must encourage genuine and bona fide PIL and effectively discourage and curb the PIL filed for extraneous considerations; (2) The Courts should prima facie verify the credentials of the petitioner before entertaining a PIL; (3) The Courts should be prima facie satisfied regarding the correctness of the contents of the petition before entertaining a PIL; (4) The Courts should be fully satisfied that substantial public interest is involved before entertaining the petition; (5) The Courts before entertaining the PIL should ensure that the PIL is aimed at redressal of genuine public harm or public injury. The Court should also ensure that there is no personal gain, private motive or oblique motive behind filing the public interest litigation; and (6) The Courts should also ensure that the petitions filed by busybodies for extraneous and ulterior motives must be discouraged by imposing exemplary costs or by adopting similar novel methods to curb frivolous petitions and the petitions filed for extraneous considerations", the court noted.

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