Introduction:

In this landmark judgment, the Rajasthan High Court reaffirmed that once a bid in a public auction is accepted and the bidder deposits the stipulated amount, the legal relationship between the State and the bidder moves beyond a mere contractual proposal and enters a zone protected by constitutional principles of fairness, transparency, and legitimate expectation. The case arose from a writ petition filed by Jayendra Singh Sishodia, who participated in an auction conducted by the Rajasthan Housing Board for allotment of residential houses. The petitioner was declared the highest bidder at the auction venue and immediately deposited the required initial amount as per the auction terms. Ordinarily, this would be followed by formal confirmation and execution of sale documents. However, instead of proceeding with allotment, the Housing Board issued a brief communication informing the petitioner that the auction had been cancelled, without furnishing any reason and without offering any opportunity of hearing. The petitioner later discovered that the cancellation was based on an internal letter issued by the Financial Advisor, which itself did not record any justification. Feeling aggrieved, the petitioner approached the High Court contending that such unilateral cancellation was arbitrary, violative of Articles 14 and 300-A of the Constitution, and contrary to the principles governing public auctions. The matter therefore raised critical questions about the scope of administrative discretion, the legal consequences of acceptance of bids in public auctions, and whether internal administrative notings can lawfully override procedural safeguards and accrued rights of citizens.

Arguments:

On behalf of the petitioner, it was argued that the moment the bid was accepted at the auction venue and part payment was deposited, the transaction crossed the threshold of a mere offer and entered into a legally protected zone where fairness and transparency were mandatory. The petitioner contended that even if the final sale deed had not yet been executed, the State could not arbitrarily cancel the auction without disclosing reasons or granting an opportunity of hearing. It was further argued that the cancellation was based on an undisclosed internal file noting which neither reflected any public interest nor recorded any objective justification. Such secret decision-making, it was submitted, defeats the very purpose of public auctions, which are meant to ensure openness, competition, and public confidence. The petitioner also relied on the doctrine of legitimate expectation, arguing that acceptance of the bid and acceptance of money created a reasonable and legally enforceable expectation that the allotment would be finalized unless valid reasons were shown. It was contended that Clause 16 of the auction conditions, which reserved the right to reject bids without assigning reasons, could not be interpreted as granting absolute and unguided power, especially after the bid had been accepted and money received. According to the petitioner, contractual clauses cannot override constitutional guarantees, and discretion vested in public authorities must always operate within the bounds of reasonableness and non-arbitrariness. On the other hand, the State and the Rajasthan Housing Board defended their action by placing heavy reliance on Clause 16 of the amended auction procedure, which authorized the Chairman to accept or reject any bid without assigning reasons. It was argued that no vested right accrued to the petitioner because final approval of the allotment had not been granted by the Chairman of the Board, and therefore the transaction had not attained finality. The State maintained that participation in auction does not guarantee allotment, and until formal confirmation by the competent authority, the bidder cannot claim enforceable rights. It was further submitted that internal administrative processes are part of decision-making and that courts should not interfere in policy or administrative matters relating to disposal of public property. The State contended that judicial review should be limited and that cancellation of auctions, even after acceptance of bids, is permissible if the competent authority deems it appropriate, especially when the auction terms reserve such power.

Court’s Judgment:

Justice Farjand Ali, speaking for the Bench, categorically rejected the State’s defence and held that reliance on an internal file noting or undisclosed administrative communication cannot defeat the procedural and substantive rights that accrue once a bid is accepted and money is received. The Court held that discretion vested in an authority does not elevate that authority to the status of a monarch or king, and such discretion is always subject to constitutional limitations and judicial scrutiny. The Court observed that even when statutes or executive instructions confer discretion, such discretion is neither unfettered nor immune from challenge under Article 14 of the Constitution. A public authority cannot take shelter under a broadly worded clause to justify actions that are ex facie arbitrary, opaque, and discriminatory. The Court made it clear that Clause 16 of the auction conditions could not be interpreted to authorize arbitrary cancellation after acceptance of bids and receipt of money, especially when no reasons were communicated and no hearing was provided. Importantly, the Court held that the petitioner’s bid was no longer a mere offer once it was accepted and part payment was received, and at the very least, a legitimate expectation coupled with an obligation of fairness arose in favour of the petitioner. Such expectation, the Court held, could not be defeated without adherence to principles of natural justice. The Court strongly criticized the manner in which the auction was cancelled, noting that there was neither a show-cause notice nor any opportunity of hearing, and not even a single reason was assigned to the petitioner. Such casual and mechanical approach, the Court observed, is wholly unbecoming of a statutory authority dealing with valuable public property and citizens’ rights. The Court further held that cancellation of an auction without recording or communicating reasons amounts to exercise of discretion in a vacuum and is inherently arbitrary. The respondents failed to demonstrate any compelling public interest, policy necessity, or legally sustainable ground that could justify cancellation of the auction. The Court emphasized that public auctions are governed not merely by contractual terms but by constitutional principles, and arbitrary interference in concluded auction processes undermines public confidence in State transactions. The High Court therefore held that the State’s action was illegal, arbitrary, violative of Articles 14 and 300-A of the Constitution, violative of natural justice, and contrary to settled principles governing disposal of public property. Consequently, the writ petition was allowed, and the State was directed to restore the petitioner’s allotment and proceed in accordance with law, thereby reaffirming that public authorities cannot hide behind internal files and vague clauses to defeat legitimate rights arising from transparent auction processes.