Supreme Court of India allows auction cancellation to maximize public revenue

The Supreme Court of India has ruled that a public authority may cancel a successful e-auction bid to seek a higher price for public property, provided an enforceable contract has not yet been established through a conveyance deed.

The ruling arose from a dispute involving the Chandigarh Administration, which cancelled a bid for a nursing home site after an adjacent plot of similar size fetched a significantly higher price. The Court overturned a Punjab and Haryana High Court judgment that had previously quashed the cancellation.

In its decision, the Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe noted that under the Chandigarh Estate Rules, 2007, the Estate Officer maintains the power to withdraw sites or reject the highest bid. The Court clarified that an ‘Agreement to Sell’ does not constitute an enforceable contract under the Indian Contract Act, 1872; such a contract only arises upon the execution of the conveyance deed.

The Court held that revisiting an auction process is justified when intended to maximize revenue for public property, provided the authority does not act arbitrarily. The Supreme Court has directed a fresh e-auction of the disputed site to be conducted within three months.