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Sankalp Recreation Private Limited v. Union of India & Ors.

Civil Appeal · 2019 INSC 1060Decided 19 Sept 2019
Civil Appeal No. 7438 of 2019
Justice Rohinton Fali Nariman · Justice Surya Kant

Background

A valuable plot of land in Santacruz, Mumbai, acquired by the Union of India in 1994 under the Income Tax Act, went through repeated failed auction attempts over more than two decades. In a 2017 auction with a reserve price of Rs. 30 crore, the appellant company was the sole bidder at Rs. 30.21 crore, but the authorities kept the sale in abeyance because the appellant had earlier separately offered a higher price (Rs. 32.11 crore) for the same property by private treaty. The auction was eventually cancelled without formal reasons, a fresh auction was held at a higher reserve price where a different bidder won, and the appellant's challenge to the cancellation was dismissed by the Bombay High Court, leading to this appeal.

Decision Breakdown

The Supreme Court held that although the cancellation letter itself gave no reasons, the underlying record (a report and a subsequent government letter) showed the decision was not arbitrary: it was taken in the public interest to fetch a genuinely higher price for government property, especially since the appellant had itself quoted a higher figure earlier and later also declined to join the re-auction. Applying settled principles on judicial review of auctions (citing Michigan Rubber v. State of Karnataka and 63 Moons Technologies v. Union of India), the Court found no illegality and dismissed the appeal. It did, however, hold the successful bidder-respondent to a "with prejudice" offer made during the hearing to pay Rs. 35 crore (adjusted for interest already accrued on deposited earnest money) within 12 weeks.

Lesson Learnt

Courts give government auctions a wide berth as long as the process is bona fide and aimed at securing the best public-interest price, even when a cancellation decision is not accompanied by a formally stated reason, so long as a legitimate reason is discernible from the surrounding record.

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

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