Explained: When Can Government Recall An Auction Of Public Property? Supreme Court Answers

The Supreme Court has held that public authorities can revisit or recall an auction for the sale of public property before the contract is finally concluded if the objective is to secure the best possible price and maximise public revenue.

A Bench of Justices P S Narasimha and Alok Aradhe said such action is not per se arbitrary or unreasonable, provided it is guided by public interest, fairness and procedural transparency.

Court said that the fall of the hammer or execution of an agreement to sell does not, by itself, conclude a contract for the sale of public property under the Chandigarh Estate Rules, 2007. The contract becomes final only upon issuance of the allotment letter and execution of the conveyance deed.

Court made the observations while setting aside a Punjab and Haryana high court judgment that had quashed the Chandigarh Administration's decision to cancel the bid of M/s Bedi Hospital and conduct a fresh e-auction for a nursing home site. The Supreme Court directed the administration to conduct another e-auction within three months.

"The conduct of a public authority must be informed by fairness in action and in furtherance of public purpose. However, while dealing with matters relating to sale or lease of public property, the action of a public authority to recall or revisit the auction process would be justified if the decision is intended to maximise the price for the sale/lease of public property," the Bench said.

Court added that a substantially lower price fetched at an auction could be a relevant consideration for deciding not to finalise a contract in favour of the highest bidder.

M/s Bedi Hospital was declared the highest bidder for a site intended for a nursing home after offering Rs 12.58 crore. It deposited 25% of the bid amount and subsequently paid the remaining 75%. However, the Chandigarh Administration did not issue the allotment letter.

The administration reconsidered the auction after finding that an adjacent site of the same extent had fetched Rs 18.25 crore on the same day, significantly more than Bedi Hospital's bid.

On January 27, 2023, the administration cancelled Bedi Hospital's bid, returned the entire amount deposited by it and announced its intention to conduct a fresh e-auction. It also clarified that Bedi Hospital could participate in the fresh auction.

Bedi Hospital challenged the cancellation before the Punjab and Haryana High Court.

Meanwhile, three participants, including Satinder Pal Singh, qualified for the fresh e-auction following a pre-bid technical seminar. Singh emerged as the highest bidder, offering Rs 18.30 crore. Bedi Hospital did not participate in this auction.

The high court subsequently allowed Bedi Hospital's writ petition and quashed the administration's letters cancelling its bid and agreement to sell.

Singh appealed the high court's decision before the Supreme Court.

The Supreme Court found that the Chandigarh Administration had decided to revisit the auction before issuing the allotment letter and executing the conveyance deed. Consequently, no enforceable contract for the sale of the property had been concluded.

The Bench held that the administration was entitled to reconsider the auction to secure a better price, particularly when the difference between the original bid and the amount fetched in the subsequent auction was substantial.

"For these reasons, we are of the opinion that there is no illegality or arbitrariness in the action of the Chandigarh Administration to revisit the auction process and call for a fresh auction for price maximization," the Bench said.

Court also upheld the validity of the subsequent auction, which fetched Rs 18.30 crore, around Rs 5.72 crore more than Bedi Hospital's original bid of Rs 12.58 crore.

Court also criticised the manner in which the high court had handled Bedi Hospital's writ petition.

It noted that the high court, instead of either dismissing the petition at the admission stage or staying the cancellation letters, had permitted the Chandigarh Administration to conduct a fresh e-auction. This interim arrangement resulted in a second phase of litigation that continued for more than two years.

The Bench said the high court failed to consider the consequences of the subsequent auction when it finally decided the writ petition. In particular, it did not examine the rights and liabilities that had arisen after the fresh auction or the status report submitted by the administration following its successful completion.

"Surprisingly, when the high court took up the writ petition for final hearing, it did not consider the consequences of the rights and liabilities of parties that had been created due to the subsequent auction. High court simply proceeded to consider the writ petition on its merits and disposed it of," the Bench noted.

Court further noted that Bedi Hospital had subsequently offered to match Singh's bid of Rs 18.30 crore. Given the complications arising from the high court's interim arrangement and the competing claims over the property, the Bench directed the Chandigarh Administration to conduct a fresh e-auction within three months, following due procedure.

The Supreme Court accordingly set aside the high court's April 1, 2025 judgment.

Case Title: Satinder Singh & Ors Vs M/s Bedi Hospital & Ors

Bench: Justices P S Narasimha and Alok Aradhe 

Date of Judgment: October 16, 2026