Holding

No right accrued to the highest bidder as the auction was not completed and the conditions of the auction, including the need for a confirmation letter and Board acceptance, were not fulfilled; therefore the Trust’s resolution reinstating the plot to the original lessees was valid.

Summary

The appellants, who had acquired a lease of a plot from the Nagpur Improvement Trust, failed to commence and complete construction within the time limits stipulated in the lease, leading to cancellation of the allotment. The Trust put the plot up for auction; the respondent was the highest bidder up to the second round, but a court order stayed the third round, so the auction never reached its logical conclusion. While the writ petition by the appellants was pending, the Trust resolved to reinstate the cancelled allotment in favour of the original lessees, rejecting the respondent's bid. The High Court quashed this resolution and directed the Trust to transfer the land to the respondent, holding that the statutory provision required transfer to the highest bidder. The Supreme Court held that no enforceable right accrued to the respondent because the auction was incomplete and the conditions of the auction—particularly the requirement of a confirmation letter and acceptance by the Board of Trustees—were not satisfied; consequently, the Trust’s resolution stood and the High Court’s order was set aside.

Issues considered

Whether the highest bidder acquires any enforceable right when a public auction is not completed due to a stay order.
Whether Rule 4(3) of the Nagpur Improvement Trust Land Disposal Rules, 1955 obliges the Trust to transfer the land to the highest bidder irrespective of auction conditions.
Whether the Trust’s power to reject the highest bid or to reinstate a cancelled allotment can be exercised notwithstanding the High Court’s direction.

Legislation cited

Nagpur Improvement Trust Land Disposal Rules, 1955s. Rule 4(3)

Subjects

public auctionlease cancellationconstruction conditiontrust land disposal ruleshighest bidconfirmation letterstatutory obligationreinstatement of allotmentwrit petition

Judgment

I

\

A LAXMIKANT AND ORS.
v.
SATYAWAN AND ORS.
,
MARCH 19, 1996

B [N.P. SINGH A:-.ID S.C. SEN, JJ.]

Nagpur Improvement T11tst Land Disposal Rules, 1955:

R. 4(3), Proviso under control of Nagpur Improvement T111st-Allot-
C ment of plot on leas,,_cancellation on lease 011 allottee's failure to raise
const111ction within stipulated pe1io~Plot put to auctimr-Conditions of
auction contemplating accrual of 1ight to highest bidder subject to confinna-
tion lette1-Ihird round of bid being not held due to stay order by court-Auc-
tion no conzpleted--T1ust passing resolution to reinstate allotntent to
lessee-Resolution challenged by highest bidder-High Court deciding in
D favour of highest bidder-Held, High Cowt not justified in quashing the
resolution passed by T111st-Auction not being completed, and confimiation
letter not being issued to highest bidder no 1ight acc11ted to him.

Auction sale :
E
Nagpur Improvement T111st-Auction of plot by-Nagpur Improvement
T111st Land Disposal Rules empowe1i11g Tmst to reserve right to itself to reject
highest or any bi~onditions of auction contemplating accntal of 1ight on
highest bidder subject to issuance of confinnation letter to him-17tird round
of bid, not held due to stay order passed by cowt-Auction not com-
F pleted-No confimiation feller issue~laim of highest bidder upto second
round of bi~eld not maintainable.

The appellant was a transferee of the plot in dispute which was
originally leased out to the transferer by the Nagpur Improvement Trust.
Since the appellant did not comply with the condition of the lease
G whereunder the lessee was required to start construction on the said plot
withiJ) four years from the date of agreement of the lease and to complete
the construction within three years thereafter, the Trust cancelled the
allotment; and put the plot to auction, which was challenged by the
appellant in a writ petition before the High Court. At the auction, the
H respondent was the highest bidder till the second round of the bid; but
532
) LAXMIKANTv. SATYAWAN[N.P. SINGH,J.] 533

before the third round of the bid could he held, an order staying the bid A
was received and the auction proceedings did not proceed further.

During the pendency of the writ petition filed by the appellant, the
Trust took a decision to reinstate the allotments which Jtad been cancelled
due to non-completion of the construction. The appellant withdrew the writ
petition and the Trust passed a resolution rejecting the bid of the respon- B
dent and reinstating the plot in favour of the appellant.

The respondent filed a writ petition before the High Court challeng-
ing the rejection of his bid. The High Court though held that because of
the order of stay the third round of bid could not be held and as such there C
was no completed contract which could be enforced in court, yet it directed
the trust to transfer the land to the respondent who was the highest bidder
at the auction.

Aggrieved, the appellant filed the appeal.
D
Allowing the appeal, this Court

HELD : 1.1. Since third round of the bid could not be held and the
public anction had not culminated to its logical end the High Court erred
in holding that the respondent had acquired a right in respect of the plot
in dispute. [537-B-C] E
1.2. The acceptance of the highest bid is snbject to the conditions of
holding the public auction and the right of the highest bidder has to be
examined in context with the different conditions nnder which such auction
has been held. In the present case no right had accrued to the respondent
either on the basis of the statutory provision under Rule 4(3) or under the F
conditions of the sale had been notified before the public auction was held.
[538-D-E]
1.3.'From a bare reference to the conditions of auction it is apparent
and explicit that even if the public auCtion had been completed and the
respondent was the highest bidder, no right had accrued to him till the G
confirmation letter, as envisaged by condition No. 3, had been issued to
him. No such confirmation letter was issued to the respondent. The
conditions of the auction clearly conceived and contemplated that the
acceptance of the highest bid by the Board of Trustees was a must and the
Trust reserved the right to itself to reject the highest or any bid. [538-B] H
534 SUPREME COURT REPORTS [1996] 3 S.C.R.

A 1.4. The High Court, was not justified In quashing the resolution
dated 27.2.1981 of the Trust to rdnstate the plot in favour of the appel·
lants. That decision had been taken by the Board of Trustees which power
was neither challenged nor could have been challenged. As such no right
had accrued to the respondent which could have been enforced by the High
B Court in the writ jurisdiction. [538·F·G]

Tri/ochan Mishra, etc. v. State of Orissa & Ors., [1971] 3 SCC 153,
State of Orissa and 01~. v. Harinarayan Jaiswal and Ors., [1972] 2 SCC 36,
Union of India & 01~. v.M/s. BhimSen Walaiti Ram, [1970] 2 SCR 594 and
State of Uttar Pradesh and Ors. v. Vijay Bahadur Singh and Ors., [1982] 2
c sec 365 referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1683 of
1982.

From the Judgment and Order dated 15.12.81 of the Bombay High
D Court in W.P. No. 843 of 1981.
VA. Bobde and A.K. Sanghi for the AppeJlants.

V.N. Ganpule, S.K. Agnihotri and P.V. Holay for the Respondents.

S.M. Jadhav for A.S. Bhasme for the Respondent.
E
M.N. Shroff, S.K. Mishra and Ms. Reema Bhandari for the Respon-
dent No. 2.

The judgment of the Court was delivered by

F N.P. SINGH, J. This appeal has been filed for setting aside the
judgment of the High Court quashing the resolution dated 27.2.1981 of the
respondent - Nagpur Improvement Trust (hereinafter referred to as the
Trust) and directing the Trust to transfer the land in question to writ-
petitioner/respondent (hereinafter referred to as the respondent) being the
G highest bidder.

The said Trust had framed a scheme known as "Central Avenue
Scheme" and plot No. 57 in Circle No. 7/12 was leased out to C.P.
..
Syndicate, Nagpur. However, the aforesaid C.P. Syndicate on 30.10.1957
transferred its right, title and interest in the lease-hold to the appellant No.
H 1, Laxrnikant. The other appellants are brothers of appellant No. 1. One
)
I
LAXMIKANTv. SATYAWAN [N.P. SINGH, J.] 535

of the conditions imposed by the Trust in respect of the aforesaid lease A
was that the construction should st~rt within four years from the date of
the agreement of lease and it sho.uld be completed within three years
thereafter. As this condition was not complied with, a notice was issued to
the appellants alongwith other defaulters as to. why the lease be not
cancelled. Show cause was filed on behalf of the appellants which was
accepted by the trust on a condition that the appellants should make the B
construction on the plot on or before 30.6.1971. As there was a default on
the part of the appellants, the allotment of the plot was cancelled on
11.1.1972. Again representations were filed before the Trust but the plot
in question was put on auction on 21.1.1974. The respondent participated
at the said auction and offered Rs. 3,12,000, and he was the highest bidder C
till the second round of the bid. But before the third round of the bid could
be held an order staying the auction was received. There is no dispute that
the third round of bid could not be held. However, the respondent
deposited an amount of Rs. 31,200 as an earnest money as per conditions
of the auction.
D
The writ petition (W.P. No 102 of 1974) filed on behalf of the
appellants was admitted onll.3.1974. It appears that in the meantime the
Trust took a decision to reinstate the allotments which had been cancelled
due to non completion of the construction over the plots of different
lessees. We were informed that there were 17 lessee including the appel-
lants. It is an admitted position that the cancellation order in respect of 16 E
lessees have been recalled and their allotments have been reinstated with
reference to the different plots allotted in their favour. On behalf of the
appellants, it was stated that as writ petition on their behalf was pending,
they were required to withdraw the writ petition, so that further action
could be taken. The appellants withdrew the said writ petition on 30.9.1980. F
Thereafter, a meeting of the Board of the Trust was held on 27.2.1981 to
consider the question as to whether the highest bid of the respondent be
rejected and the plot be reinstated in favour of the appellants. The relevant
part of the resolution says :

''The Board, therefore, decided by majority of votes that the G
·• highest bid of Shri S.S. Bhojwani, Chief Promoter, Indus Co-
Operative Housing Society Ltd., received in the auction should be
·. rejected and the plot should be reinstated in favour of the original
allottees Shri Laxmikant Itkelwar and others on the following terms
and conditions ..........". H
536 SUPREME COURT REPORTS [1996] 3 S.C.R.

A This very resoludon has been quashed by the High Court by the impugned
judgment saying that as the respondent was the highest bidder at the
auction aforesaid, the Trust had to perform its statutory obligation under ;
Rule 4(3) of the Nagpur Improvement Trust Land Disposal Rules, 1955
which is as follows : -

B "Where it is proposed to depose of any Trust land by auction,
the premium to be paid for the transfer of such land shall be put
to auction after giving due publicity to the date and place of auction
and the Trust land to be auctioned and the land shall be transferred
to the highest bidder subject among other things, to be condition of
c payment of ground rent at two per cent of the premium annau//y :

Provided that if, for reason to be recorded in writing, the Chair-
man or the Officer authorised by him in this behalf conside1~ -

(a) that it would be in the interest of the Trust to accept a lower
D bid, he may accept such lower bid and that land shall be transferred
accordingly, or

(b) that no fair bid is forthcoming, he may withdraw the land
from the auction of the day and put it up for auction on future date
1
to be announced later. '
E
(emphasis supplied)

According to the High Court, as sub-rule (3) of Rule 4 aforesaid provides
that once a decision had been taken to depose of the land by auction, after
the auction of the land it has to be transferred to the "highest bidder", no
F discretion was left with the trust to refuse to make such transfer. The
proviso to the said sub-rule (3) of Rule 4 provides that under conditions
prescribed therein a lower bid may be accepted or the land in question
may be withdrawn from auction. It will be proper to refer to the fmding of
the High Court in respect of the auction so held :
G "It is also clear that unless the third bid is accepted, there is
no completed contract and the question of enforcement of any
rights under the contract does not arise in the present case. If it
is brought to the notice of this Court that statutory Body like the
Nagpur Improvement Trust is refusing to perform its statutory
H obligation, then certainly this Court can entertain a petition to find
I

LAXMIKANTv. SATYAWAN [N.P. SINGH, J.] 537

out whether that grievance be redressed or not. In may opinion, A
therefore, no such question of any enforcement of a contract or
' rights thereunder arises in th~' case."

The High Court having held that because of the order of stay, the third
round of bid could not be held and as such there was no completed
contract which could be enforced in Court, issued the impugned direction, B
directing the Trust to transfer the land in question to the respondent, who
was the highest bidder at the auction aforesaid. We are not able to
reconcile the findings of the High Court. If the public auction had not
culminated to its logical end because the third round of bid was a must,
then how High Court came to conclusion that the respondent had acquired C
any right in respect of the plot in question ? When sub-rule (3) of Rule 4
aforesaid requires the trust to transfer the· land in question after the auction
it assumes that a valid right has accrued to the bidder which has been
accepted by the Trust. Sub-Rule (3) of Rule 4 has to be read alongwith the
proviso thereto referred to above which vests power to accept a lower bid
or to withdraw the land itself from auction inspite of the highest offer being D
made by any person.

Apart from that the High Court overlooked the conditions of auction
which had been notified and on basis of which the aforesaid public auction
was held. Condition No. 3 clearly said that after the auction of the plot was
over, the highest bidder had to remit 1/10 of the amount of the highest bid E
and the balance of the premium amount was to be remitted to the trust
office within thirty days 'from the date of the letter informing confirmation
of the auction bid in the name of the person concerned'. Admittedly, no
such confirmation letter was issued to the respondent. Condition Nos. 5, 6
and 7 are relevant :
F
"5. The acceptance of the highest bid shall depend on the Board
of Trustees.

6. The Trust shall reserve to itself the right to reject the highest
m~M G
7. The person making a highest bid shall have no right to take
back his bid. The decision of the Chairman of the Board of
Trustees regarding acceptance or rejection of the bid shall be
binding on the said person. Before taking tbe decision as above
and informing the same to the individual concerned, if the said H
538 SUPREME COURT REPORTS [1996]3 S.C.R.

A individual takes back his bid, the entire amount remitted as deposit
towards the amount of bid shall be forfeited by the Trust."

From a bare reference to the aforesaid conditions, it is apparent and
explicit that even if the public auction had been completed and the respon-
dent was the highest bidder, no right had accrued to him till the confir-
B mation letter had been issued to him. The conditions of the auction clearly
conceived and contemplated that the acceptance of the highest bid by the
Board of Trustees was a must and the Trust reserved the right to itself to
reject the highest or any bid. This Court has examined the rightof the
highest bidder at public auctions in the cases of Trilochan Mishra, etc. v.
State of Orissa & Ors., (1971] 3 SCC 153, State of 01issa & Ors. v.
C Ha1inarayan Jaiswal & Ors., (1972] 2 SCC 36, Union of India & Ors. v. M/s.
Bhim Sen Walaiti Ram, [1970] 2 SCR 594 and State of Uttar Pradesh & Ors.
v. Vijay Bahadur Singh & Ors., [1982] 2 SCC 365. It has been repeatedly
pointed out that State or the authority which can be held to be State within
the meaning of Article 12 of the Constitution is not bound to accept the
D highest tender or bid. The acceptance of the highest bid is subject to the
conditions of holding the public auction and the right of the highest bidder
has to be examined in context with the different conditions under which
such auction has been held. In the present case no right had accrued to
the respondent either on the basis of the statutory provision under Rule
4(3) or under the conditions of the sale which had been notified before the
E public auction was held.

The learned counsel appearing for the respondent urged that in view
of the statutory provision of Rule 4(3) it was not open to the Trust to
prescribe the conditions of auction referred to above. The respondent
having participated at the said public auction on basis of those conditions
F which were in nature of supplementary provisions for holding the auction
could not be questioned by the respondent. The High Court, was not
justified in quashing the resolution dated 27.2.1981 of the Trust, to reinstate
the plot in question in favour of the appellants on conditions mentioned in
the said resolution. That decision had been taken by the Board of Trustees
G which power was neither challenged nor could have been challenged. As
such no right had accrued to the respondent which could have been
enforced by the High Court in the writ jurisdiction. Accordingly, the appeal
is allowed. The impugned judgment of the High Court is set aside. In the
facts and circumstances of the case, there shall be no orders as to cost.

H R.P. Appeal allowed.