Chandigarh Auction: SC Sets Aside HC Order on Nursing Site Auction, Directs Fresh E-Auction
Chandigarh Auction: Two identical adjacent plots, auctioned the same day in 2022, fetched Rs 18.25 crore and Rs 12.58 crore. Nearly four years, three auction notices and two courts later, the Site goes back to auction.
North Desk Correspondent
Chandigarh, October 19
The Supreme Court has set aside the Punjab and Haryana High Court judgment of April last year and directed the Chandigarh Administration to hold a fresh e-auction of Nursing Home Site No. 4 in Sector 33C, to begin and conclude within three months. The ruling ends the Chandigarh nursing home site auction dispute between Bedi Hospital and the Administration, and leaves both the original and the later highest bidders back at the starting line.
A Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe delivered the judgment. The appeals were filed by Satinder Pal Singh, the highest bidder in the later re-auction, and by the Chandigarh Administration. No order was made as to costs.
Chandigarh Auction: THE PRICE GAP
Chandigarh Auction: The dispute began with an e-auction notice dated August 31, 2022, for 12 residential sites, one commercial site and two nursing home sites on a freehold basis. The two nursing home sites, Site No. 3 and Site No. 4, are in Sector 33C and each measures 744.44 square yards. A corrigendum dated September 4, 2022 fixed the reserve price for both at Rs 6.91 crore.
Both sites were auctioned on the same day, and on October 20, 2022 the bids were accepted. According to the judgment, the appellant’s bid of Rs 18.25 crore was the highest for Site 3. For Site 4, the bid of M/s Bedi Hospital, at Rs 12.58 crore, was accepted and approved.
WHAT HAPPENED AFTER AUCTION
Bedi Hospital deposited the required 25 per cent of its bid on October 21, 2022 in the Chandigarh Auction. The Estate Officer issued an Agreement to Sell on October 28, 2022, and the hospital paid the remaining 75 per cent on November 16, 2022. When the formal Allotment Letter, needed before a conveyance deed can be executed, was not issued, Bedi Hospital wrote to the Administration on January 12, 2023 asking it to expedite formalities.
The Administration, the judgment records, had by then reconsidered. On January 27, 2023 it cancelled the bid contract. The letter said the adjacent site of the same area had fetched Rs 18,25,75,598, and that “such huge difference i.e. Rs 6 crores between the adjacent sites having same area does not reflect the market trend.” It said Site 4 would be re-auctioned with the Site 3 price as the reserve, that the refund had been processed, and that Bedi Hospital could take part in the fresh auction. The letter relied on the Estate Officer’s right under the auction terms to accept or reject any offer without assigning reasons.
INTO THE HIGH COURT
Chandigarh Auction: Bedi Hospital filed a writ petition in February 2023. While it was pending, the Administration also cancelled the Agreement to Sell on February 9, 2023, which the hospital challenged by amending its petition.
At the admission stage on February 10, 2023, the High Court gave the Administration liberty to proceed with a fresh auction but directed that it should not be finalised until the next hearing. Two fresh auction notices, dated February 18 and June 12, 2023, did not result in a valid sale because of bids not meeting the requisite technical requirements, according to the judgment. A third notice on August 5, 2023 fixed the reserve price at Rs 18.25 crore. Three participants, including Satinder Pal Singh, qualified after a pre-bid seminar on August 8, 2023.
At the auction on September 6, 2023, Satinder Pal Singh was the highest bidder at Rs 18.30 crore. Bedi Hospital did not take part. The Administration placed the outcome before the High Court through a status report dated November 20, 2023, and Singh applied to be impleaded in the writ petition.
The High Court allowed Bedi Hospital’s petition and quashed the January 27 and February 9, 2023 letters. The Administration and Singh then moved the Supreme Court, which on August 18, 2026 directed the parties to maintain status quo over the site.
WHAT THE SUPREME COURT HELD
The Bench examined the Chandigarh Estate Rules, 2007, framed under the Capital of Punjab (Development and Regulation) Act, 1952, and the terms of the e-auction notice. Its main findings, as recorded in the judgment:
- An Agreement to Sell under Rule 5(iv) is not by itself an enforceable contract under Section 2(h) of the Indian Contract Act, 1872. An enforceable contract in this scheme comes into existence on execution of the conveyance deed.
- As the Allotment Letter had not been issued and no conveyance deed executed, the Administration could exercise its power under Rule 5(vi) read with Explanation I, and Clauses VI(1) and VI(5) of the auction terms, to withdraw a site or reject the highest bid without assigning reasons.
- The only restriction is a public-law one: the Administration must not act arbitrarily or unreasonably. The Bench said a decision to revisit an auction to maximise the price of public property is justified, as long as no enforceable contract has been entered into, and relied on the SIPCOT v. Contromix (1995) ruling that the dominant consideration in selling public property is securing the best price.
- At this stage, the Bench held, a substantially lower price at auction can be a relevant consideration for not finalising a sale in favour of a “so-called highest bidder”. It found no illegality or arbitrariness in the Administration’s decision to call a fresh auction.
The Bench distinguished the two precedents relied on by the High Court and Bedi Hospital. The Bench said the cancellation letter gave the exact reason, the entire consideration was refunded, and Bedi Hospital was invited to bid again.
THE COURT’S OBSERVATIONS ON THE LITIGATION
The Bench said “the story does not end here”. It observed that the difficulty arose because the High Court, instead of dismissing the petition at the admission stage or staying the cancellation letters, allowed a fresh e-auction to go ahead. That interim arrangement, it said, opened a “second phase of litigation” that has run for more than two years. It also noted that when the High Court finally heard the petition, it did not discuss the consequences of the interim order or the status report on the re-auction.
The Bench held the subsequent auction was “legal and valid”, conducted on the High Court’s direction with Bedi Hospital free to participate. It noted that the re-auction fetched about Rs 6 crore more and said the court “cannot shut its eyes” to the facts on price discovery.
THE OFFER TO MATCH
During the hearing, the Bench asked senior advocate P.S. Patwalia, appearing for Bedi Hospital, whether his client would match the appellant’s price. After consulting the hospital, he said it would pay Rs 18.30 crore. Senior advocate Guru Krishna Kumar, for Singh, argued that his client had paid the entire consideration and that it would be unjust to let Bedi Hospital replace him by matching the price, since its earlier deposit had been refunded and it had chosen not to take part in the later auction. ASG Vikramjit Banerjee appeared for the Chandigarh Administration.
The Bench said that, given the “inconclusive interim arrangement” by the High Court, the interests of justice and public purpose would be served by a fresh e-auction. It allowed the appeals, set aside the High Court’s judgment and directed the Administration to hold the auction under the Chandigarh Estate Rules, 2007, with the process starting and concluding within three months of the order.
QUICK TIMELINE
- Aug 31, 2022: E-auction notice for 15 sites; Sep 4: reserve price for both nursing home sites fixed at Rs 6.91 crore
- Oct 20, 2022: Site 3 bid of Rs 18.25 crore and Site 4 bid of Rs 12.58 crore accepted
- Oct 28 and Nov 16, 2022: Agreement to Sell issued; Bedi Hospital pays full amount
- Jan 27, 2023: Bid contract for Site 4 cancelled
- Feb 6, 2023: Writ petition filed; Feb 9: Agreement to Sell cancelled; Feb 10: High Court allows re-auction but bars finalisation
- Feb 18 and Jun 12, 2023: Two fresh notices fail on technical requirements
- Aug 5, 2023: Third notice, reserve price Rs 18.25 crore
- Sep 6, 2023: Satinder Pal Singh highest bidder at Rs 18.30 crore; Bedi Hospital does not participate
- Apr 1, 2025: High Court allows Bedi Hospital’s petition
- Aug 18, 2026: Supreme Court orders status quo
- Oct 16, 2026: Supreme Court sets aside High Court order, directs fresh e-auction within three months
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