SANKALP RECREATION PRIVATE LIMITED versus UNION OF INDIA & ORS. on 19 September 2019

1. Leave granted.

2. The present appeal discloses a very sorry state of affairs inthat a property admeasuring 1053.5 square meters bearing Plot No. 27/A, Survey No. 8, 9, 10 Opposite Santacruz Police Station, Junction ofJuhu Tara Road and Linking Road, Santacruz (W), Mumbai-54, thoughacquired by the Union of India in 1994 under Section 269UD(1) of theIncome Tax Act, could only be sold in 2018. Despite various attemptsto sell the property starting in 1994, several auctions conducted qua G

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Athe said property failed. Even an auction dated 27.03.2017 with a reserveprice fixed at Rs.32.11 crores failed to elicit a response from any buyer.This being the case, the appellant before us then made an offer to theCentral Board of Direct Taxes (hereinafter referred to as ‘CBDT’) topurchase the aforesaid property for a sum of Rs.32.11 crores. This offercould not be accepted as the CBDT stated that accepting such an offerBby private treaty would be beyond their jurisdiction. However, in themeanwhile, a fresh valuation report of the aforesaid property was calledfor, which was submitted on 04.09.2017, valuing the property atRs.29,91,35,000/-. Pursuant to the aforesaid, a brochure/catalogue wascirculated sometime in September, 2017, in which clauses 2, 12 and 16Care material and are set out hereinbelow:

“2. The property is being sold under the instruction from CCIT-2, Mumbai and the auction by way of sealed tenders is subjectto confirmation by him/her.

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12. The balance amount by the successful bidder will have tobe paid within 90 days from the date of confirmation of sale bythe Chief Commissioner of Income Tax 2, Mumbai.

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16. The Chief Commissioner of Income Tax 2 Mumbai reservesthe right to reject any tender form any bid including the highestbid, without assigning any reason. In such an event, the moneyFalready paid will be refunded to the intending purchaser withoutany liability of interest. However, no refunds for amountsforfeited shall be made.”

3. Pursuant to the aforesaid, the reserve price being fixed at Rs.30crores, the appellant was the sole bidder, having bid at a sum which isGRs.21 lakhs above the reserve price at a total sum amounting toRs.30.21 crores. In its letter dated 26.09.2017, respondent No.3 sent areport to respondent No.2, in which it was stated that though the bidof Rs.30.21 crores offered by the appellant was above the reserve price,it was yet less than the sum of Rs.32.11 crores that had been offeredHby the same bidder earlier. In this view of the matter, a clarification was sought as to the future course of action in the matter. Given thisreport, on 20.11.2017, the CBDT directed that the auction proceedingsbe kept in abeyance for the time being, and appointed a Valuer fromoutside the State, viz., Mr. P. Ramaraj, District Valuation Officer,Chennai. Pursuant to this, a valuation report dated 23.02.2018 wassubmitted by the aforesaid Valuer valuing the aforesaid property atRs.31.07 crores as on 23.01.2018, as a cap in the TDR which wouldbe available by way of FSI, had been introduced in January, 2018.Short of this cap, the Valuer valued the aforesaid property atRs.36,51,59,000/-. Based on the aforesaid valuation report, the propertywas put up for yet another auction.

4. Meanwhile, by a letter dated 04.05.2018, the earlier auctionwhich yielded the sum of Rs.30.21 crores from the appellant was treatedas cancelled. The said letter specifically called upon the appellant toparticipate in the upcoming auction to be conducted shortly.

5. The appellant, by its communication dated 12.04.2018, referredto the return of the Demand Drafts of Rs.7.5 crores and Rs.5 lakhstowards Earnest money and Caution money stating that burden ofinterest liability was continuing. The appellant made it clear that itsparticipation in a future auction will still be very much there as theyare not exiting the auction proceedings.

6. As stated hereinabove, pursuant to the valuation report, on10.05.2018, a notice for public auction was published with the reserveprice fixed this time at Rs.31.10 crores. On 17.05.2018, the IncomeTax Department wrote to the appellant, in which it intimated the factthat a fresh auction was to be conduced on 30.05.2018 and that theappellant should participate in the same.

7. Meanwhile, the appellant being aggrieved by the cancellationof the auction process in which he was the highest bidder at Rs.30.21crores, filed a writ petition in the High Court of Judicature at Bombayon 21.05.2018. On 23.05.2018, the High Court permitted respondentNos. 2 and 3 to conduct a fresh auction subject to refraining fromconfirmation of the sale.

8. On 30.05.2018, fresh auction was conducted and respondentNo. 4 was the sole bidder, with the bid being equal to the reserve priceof Rs.31.10 crores.

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A9. Ultimately, by the impugned judgment dated 27.07.2018, findingno infirmity in the auction process and finding that the cancellation,though without reason, was not arbitrary, the High Court dismissed thewrit petition so filed.

10. Learned counsel appearing on behalf of the appellant hasBargued that the cancellation being without reason is per se invalid inlaw and therefore, ought to have been set aside by the High Court.He also argued that the process of conducting yet another auction afterso many auctions had failed, was itself arbitrary and that, as he wasthe highest bidder at Rs.30.21 crores, that is Rs.21 lakhs above thereserve price, the auction sale ought to have been confirmed in hisCfavour.

11. Further, after citing a number of judgments before us, hemade a with prejudice offer stating that he was willing to abide by theearlier offer made by him of Rs.32.11 crores.

D12. Shri Kavin Gulati, learned senior counsel appearing forrespondent No.4, painstakingly took us through the record and arguedthat there was no infirmity whatsoever in the entire process. Hehighlighted the fact that under clause 16 of the brochure/catalogue, theChief Commissioner reserved the right to reject any tender form,including the highest bid, without assigning any reason. He also referredEto the report dated 26.09.2017 that was sent by respondent No. 3 torespondent No. 2 highlighting the fact that the decision for conductingfresh auction could not possibly be said to be arbitrary when the appellanthimself had earlier offered a higher sum than the amount that wasultimately payable by him in the auction conducted. At every stage,Faccording to the learned senior counsel, valuation reports were taken,and on the basis of such valuation reports, reserve price was fixed.He argued that though it is true that the cancellation letter did not itselfcontained any reason for cancellation, the reason was forthcoming fromthe letter dated 06.04.2018, in which it was stated that other propertiesof a similar nature in the same area was sold for a considerably higherGamount, as a result of which the amount that was fetched was foundto be low. He also took us through the valuation report that wassubmitted so far as the last auction was concerned, in which he wasthe successful bidder, and ultimately, also made a with prejudice offerthat if we were to dismiss the appeal, his client would pay a sum ofHRs.35 crores with an adjustment qua the Earnest money that has been deposited and lying with the Union of India, if we were to give his clienta reasonable rate of interest thereon.

13. Having heard learned counsel for both the sides, it is importantto first advert to the facts of this case. As has been pointed out, severalauctions were conducted from the year 1994, including an auction asrecent as 27.03.2017 which failed to elicit a response from any buyer.

14. Ultimately, the auction with the reserve price of Rs.30 crores,on which the appellant bid was Rs.30.21 crores, was kept in abeyance.The reason that is available from the record is in a Report dated26.09.2017 in which it was pointed out that this figure was considerablylower than the figure offered by the appellant itself at Rs.32.11 croresand that, therefore, a fresh auction be held.

15. We cannot say that the aforesaid reason can be said to be,in any manner, arbitrary. After all, it was in public interest to see thatthe highest possible price be fetched for such properties. Further, wehave also seen how at every stage valuation reports were submittedby reputed Valuers, first from Mumbai, and then from Chennai, andhave no reason to doubt what has been stated to be the Fair MarketValue in any of these reports. It may also be pointed out that thoughthe appellant was given several opportunities to bid in the fresh auctionconducted, ultimately, for reasons best known to him, he chose to refrainfrom participating in the fresh auction that was conducted.

16. So far as the judgments cited by the appellant are concerned,there cannot be any doubt whatsoever as to the parameters of judicialreview in these matters. Broadly speaking, so long as the auctionprocess is conducted bona fide and in public interest, a judicial handsoff is mandated by the decisions that have been cited, in particular,‘Michigan Rubber (India) Ltd. v. State of Karnataka & Ors.’ [2012(8) SCC 216] at paragraph 21.

17. Equally, there can be no manner of doubt that ordinarily,reasons must inform all governmental decisions including administrativedecisions of Government so that both the administration as well aschallenges made to such orders, can be said to be fair and not arbitrary.

18. ‘Mohinder Singh Gill v. Chief Election Commissioner’ 1978(1) SCC 405which was relied upon for the oft quoted passage inparagraph 8, has been the subject matter of future comment in somelater cases.

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A19. In 63 Moons Technologies Ltd. (Formerly known asFinancial Technologies India Ltd.) & Ors. v. Union of India & Ors.2019 (7) SCALE 50, this Court had occasion to deal with this celebratedpassage and its aftermath in paragraph 63 and 64 of the said judgment.This Court concluded:

B“It will be seen that there is no broad proposition that the caseof Mohinder Singh Gill (supra) will not apply where largerpublic interest is involved. It is only subsequent materials, i.e.,materials in the form of facts that have taken place after theorder in question is passed, that can be looked at in the largerpublic interest, in order to support an administrative order. ToCthe same effect is the judgment in PRP Exports and Ors. v.Chief Secretary, Government of Tamil Nadu and Ors.’ (2014)13 SCC 692 [at paragraph 8].”

20. Following these judgments, suffice is to state that the reasonsdisclosed both in the Report dated 26.09.2017 and the letter datedD06.04.2018 from the Government of India, Ministry of Finance, to theChief Commissioner of Income Tax, make it clear that there is noarbitrariness that is discernible in the entire auction process. This beingthe case, we dismiss this appeal and hold Shri Kavin Gulati, learnedsenior counsel, to the offer very fairly made to us. We may indicateEthat from the figure of Rs.35 crores, which will be paid within a periodof 12 weeks from today directly to the Union treasury, a sum equivalentto interest of 9 per cent on the amount of Rs.7.78 crores, that is lyingwith the Union, calculated from the date on which it was deposited withthe Union till today be substracted, and the net figure be handed overas aforesaid.F

Ankit Gyan

Appeal dismissed.

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