Public Authority Can Revisit Auction Before Binding Contract

Source: Supreme Court

Why in News?

A bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe of the Supreme Court decided Satinder Pal Singh & Ors. v. Bedi Hospital & Ors. (2026). The Court set aside a Punjab and Haryana High Court judgment that had quashed the Chandigarh Administration’s decision to cancel Bedi Hospital’s ₹12.58 crore bid for a nursing home site, and directed a fresh e-auction of the site within three months. 

What was the Background of Satinder Pal Singh v. Bedi Hospital (2026) Case? 

• In August 2022, the Chandigarh Administration issued an e-auction notice for residential, commercial and nursing home sites. 
• The dispute concerned two adjacent nursing home sites in Sector 33C, Chandigarh, each measuring 744.44 square yards, with a reserve price of ₹6.91 crore each. 

The auction: 

• In the auction held on 20 October 2022:  
  • The appellants’ bid for Site No. 3 was accepted at ₹18.25 crore. 
  • Bedi Hospital was the highest bidder for Site No. 4 at ₹12.58 crore. 
• Bedi Hospital deposited 25% of the bid amount on 21 October 2022, an Agreement to Sell was executed on 28 October, and the remaining 75% was paid on 16 November 2022. 

Cancellation by the Administration: 

• Before the allotment letter was issued and the conveyance deed executed, the Administration reconsidered the transaction, as the adjacent site of the same size had fetched about ₹6 crore more. 
• On 27 January 2023, it cancelled Bedi Hospital’s bid, stating that the price difference did not reflect market trends. 
• It decided to re-auction Site No. 4, fixing the reserve price at the highest bid received for Site No. 3, and refunded the entire amount deposited by Bedi Hospital. 
• The Agreement to Sell was subsequently cancelled as well. 

Proceedings before the High Court: 

• Bedi Hospital challenged the cancellation, and the Punjab and Haryana High Court quashed the Administration’s decision. 
• Aggrieved, the appellants approached the Supreme Court. 

What were the Court’s Observations? 

On the power to withdraw from the auction: 

• The Court relied on the Chandigarh Estate Rules, 2007, with which the terms and conditions of the e-auction notice were aligned. 
• These Rules specifically permit the tendering authority to withdraw from the auction before the letter of allotment is issued, for the purpose of revenue maximisation. 
• Since no allotment letter had been issued and no conveyance deed executed, the Administration was entitled to exercise its power to cancel. 

On revisiting auctions of public property: 

• In matters of sale or lease of public property, a public authority is justified in recalling or revisiting the auction if the decision is aimed at maximising the price. 
• This is permissible as long as an enforceable contract has not been entered into. 
• At that stage, a substantially lower price fetched at the auction is a relevant consideration for not finalising the contract in favour of the so-called highest bidder. 
• The Court found no illegality or arbitrariness in the Administration’s decision. 

On the appropriate relief: 

• In the subsequent auction, Site No. 4 fetched ₹18.30 crore, about ₹6 crore more than Bedi Hospital’s original bid, and the appellants emerged as the highest bidder. 
• Bedi Hospital informed the Court that it was willing to match the appellants’ price. 
• Instead of granting relief to either party, the Court held that the interests of justice and public purpose would be served by a fresh auction. 

Directions: 

• The High Court’s judgment was set aside. 
• The Chandigarh Administration was directed to hold a fresh e-auction of Site No. 4 in Sector 33C under the Chandigarh Estate Rules, 2007. 
• The entire process must commence and conclude within three months. 

What are the Principles Governing Auction of Public Property? 

Constitutional basis: 

• Article 298 of the Constitution extends the executive power of the Union and the States to carrying on trade or business and to acquiring, holding and disposing of property, and making contracts for any purpose. 
• Article 14 requires that the State act fairly, transparently and without arbitrariness while dealing with public property. 

Key principles: 

• Public trust: Public property is held by the State in trust for the public, and its disposal must aim at securing the best possible price. 
• No vested right of the highest bidder: The highest bidder acquires no vested right to have the auction concluded in their favour until the bid is accepted and a binding contract comes into existence (State of Orissa v. Harinarayan Jaiswal, 1972; Rajasthan Housing Board v. G.S. Investments, 2007). 
• Right to refuse inadequate bids: The authority may refuse to accept even the highest bid if it is inadequate, provided the decision is bona fide and not arbitrary. 
• Limited judicial review: Courts interfere only where the decision is arbitrary, mala fide or contrary to the governing rules, and do not substitute their own commercial judgment. 
• Concluded contract as the cut-off: Once an enforceable contract has been concluded, the authority cannot resile from it merely to obtain a higher price.