Subtitle: Setting aside the Punjab and Haryana High Court’s judgment, the Supreme Court held that public authorities can reconsider auctions before concluding enforceable contracts to maximise revenue from public property.
Supreme Court Upholds Chandigarh Administration’s Decision to Re-Auction Nursing Home Site
The Supreme Court has upheld the Chandigarh Administration’s decision to cancel the Chandigarh Nursing Home Auction and invite fresh bids to maximise public revenue. The Court ruled that public authorities can reconsider an auction before concluding an enforceable contract. It allowed the Administration’s appeal against the Punjab and Haryana High Court’s judgment concerning Bedi Hospital’s ₹12.58 crore bid.
The Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe examined the Administration’s decision to cancel the auction. The dispute concerned a nursing home site in Sector 33C, Chandigarh.
The Court found that an adjoining plot of identical size had attracted a substantially higher bid. This price difference justified the Administration’s decision to reconsider the transaction.
The Supreme Court directed the Chandigarh Administration to conduct a fresh e-auction within three months. It also noted that a subsequent auction had attracted ₹18.30 crore, approximately ₹6 crore above Bedi Hospital’s original offer.
Background: Two Nursing Home Sites Auctioned in Chandigarh
In August 2022, the Chandigarh Administration issued an e-auction notice for residential, commercial and nursing home sites.
The dispute involved two nursing home plots in Sector 33C, Chandigarh. Each plot measured 744.44 square yards and carried a reserve price of ₹6.91 crore.
During the auction on October 20, 2022, the Administration accepted a bid of ₹18.25 crore for Site No. 3. Meanwhile, Bedi Hospital emerged as the highest bidder for Site No. 4 with an offer of ₹12.58 crore.
Bedi Hospital deposited 25% of its bid amount on October 21, 2022. The parties executed an Agreement to Sell on October 28, 2022. Subsequently, the hospital paid the remaining 75% on November 16, 2022.
However, the Administration reconsidered the transaction before issuing the allotment letter or executing the conveyance deed.
Officials observed a substantial price difference between the two adjoining nursing home sites. Although both plots had identical areas, Site No. 3 attracted approximately ₹6 crore more than Site No. 4.
Chandigarh Administration Cancels Bid Over Price Difference
On January 27, 2023, the Chandigarh Administration cancelled Bedi Hospital’s bid contract.
The Administration cited the significant difference between the prices offered for the adjoining properties. It maintained that Bedi Hospital’s bid did not reflect prevailing market trends.
Consequently, the Administration decided to conduct another auction for Site No. 4. It fixed the new reserve price at the highest bid received for Site No. 3.
The Administration also refunded the entire amount Bedi Hospital had deposited. Additionally, it cancelled the Agreement to Sell.
Bedi Hospital challenged the cancellation before the Punjab and Haryana High Court. The High Court set aside the Administration’s decision.
The Chandigarh Administration subsequently approached the Supreme Court to challenge that judgment.
Chandigarh Estate Rules, 2007 Allow Withdrawal Before Allotment
The Supreme Court examined the Chandigarh Estate Rules, 2007, alongside the terms of the e-auction notice.
The Bench found that the auction conditions complied with the Rules. These provisions permit the tendering authority to withdraw from an auction before issuing the allotment letter to maximise revenue.
The Court emphasised that the Administration had neither issued an allotment letter nor executed a conveyance deed.
Therefore, the Administration retained the authority to cancel the auction under the applicable Rules.
The Bench observed:
“As the Allotment Letter was not issued with no corresponding Conveyance Deed executed, the Chandigarh Administration is entitled to exercise its power to cancel.”
The Supreme Court found no illegality or arbitrariness in the Administration’s decision. It recognised revenue maximisation as a legitimate consideration when dealing with public property.
Supreme Court Explains When Authorities Can Revisit Auctions
The Supreme Court clarified the legal principles governing auctions involving public property.
It held that public authorities may reconsider an auction when their objective is to secure the maximum possible price. However, they must exercise this power before entering into an enforceable contract.
The Bench observed:
“While dealing with matters relating to sale or lease of public property, the action of a public authority to recall or revisit the auction process would be justified if the decision is intended to maximise the price for the sale/lease of public property. This is permissible as long as the enforceable contract has not been entered into.”
The Court explained that public authorities must protect the financial interests of the public when selling or leasing government property.
A substantially lower bid may justify reconsideration, particularly when comparable properties attract significantly higher offers.
In this case, the Administration reviewed the transaction before finalising the allotment letter and executing the conveyance deed.
Accordingly, the Court considered the price difference a relevant factor in the Administration’s decision.
The Bench concluded that the decision to invite fresh bids was neither illegal nor arbitrary.
Higher Bid for Adjoining Plot Supports Re-Auction Decision
The Chandigarh Nursing Home Auction dispute highlighted the importance of comparing bids for similar public properties.
Both nursing home plots measured 744.44 square yards. However, Site No. 3 attracted ₹18.25 crore, while Bedi Hospital offered ₹12.58 crore for Site No. 4.
The substantial difference prompted the Administration to review the transaction.
The Supreme Court also considered the ₹18.30 crore bid received during a subsequent auction. That amount exceeded Bedi Hospital’s original offer by approximately ₹6 crore.
These circumstances supported the Administration’s decision to pursue a higher price for the public asset.
The Court held that the Administration acted within its authority because it had not completed the contractual formalities necessary for an enforceable transaction.
Supreme Court Orders Fresh E-Auction Within Three Months
The Supreme Court allowed the Chandigarh Administration’s appeal and set aside the Punjab and Haryana High Court’s judgment.
It directed the Administration to conduct a fresh e-auction for the nursing home site in Sector 33C within three months.
The ruling establishes that emerging as the highest bidder does not automatically prevent a public authority from reconsidering an auction.
Public authorities may withdraw from an auction before concluding an enforceable contract when the applicable rules permit such action.
The judgment also reinforces the importance of protecting public revenue during the sale or lease of government property.
By upholding the Administration’s decision, the Supreme Court clarified that authorities may pursue better financial returns when substantial price differences justify reconsidering an unfinished auction process.
