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Haryana Urban Development Authority & Ors. v. Orchid Infrastructure Developers P. Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1016 of 2017)Decided 27 Jan 2017
Civil Appeal No. 1016 of 2017
Justice Arun Mishra · Justice Amitava Roy

Background

A company (then Bhudeep Builders, later renamed Orchid Infrastructure Developers) placed the highest bid of Rs. 111.75 crore in a 2004 public auction for a large commercial plot held by the Haryana Urban Development Authority (HUDA) in Gurgaon. After depositing 10% of the bid amount, HUDA never issued a formal allotment letter and eventually rejected the bid, refunding the deposit on the ground that the price was too low compared to similar sites elsewhere. The bidder sued for a declaration that the rejection was illegal and for a mandatory injunction directing HUDA to complete the allotment; the trial court dismissed the suit, the first appellate court also went against the bidder, but the High Court reversed and ruled in the bidder's favour, prompting HUDA's appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that HUDA's Administrator was the competent authority to accept or reject bids (since the Chief Administrator had itself referred the matter back to him), and that the rejection, based on a documented comparison with higher prices fetched for similar commercial sites in other towns, was a reasoned, non-arbitrary exercise of the reserved contractual right to refuse any bid. The Court found no concluded contract had come into existence merely because the highest bid was received, and restored the first appellate court's judgment dismissing the suit. It also held that the bidder should have paid court fee on an ad valorem basis (proportionate to the Rs. 111.75 crore claim) rather than a nominal fee, and directed payment of that fee within two months, along with imposing Rs. 5 lakh costs on the respondent payable to two welfare funds.

Lesson Learnt

Submitting the highest bid in a public auction does not by itself create a binding contract or an enforceable right to allotment: a reasoned rejection by the competent authority, especially one supported by comparative market data, can stand even against the highest bidder.

Official source (sci.gov.in)View Judgment (PDF)

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