Sankalp Recreation Private Limited vs Union Of India

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7438 OF 2019 (Arising out of SLP (C) No. 21790 of 2018)

SANKALP RECREATION PRIVATE LIMITED Appellant(s)

VERSUS

UNION OF INDIA & ORS. Respondent(s)

J U D G M E N T

R. F. NARIMAN, J.

Leave granted.

The present appeal discloses a very sorry state of

affairs in that a property admeasuring 1053.5 square meters

bearing Plot No. 27/A, Survey No. 8, 9, 10 Opposite Santacruz

Police Station, Junction of Juhu Tara Road and Linking Road,

Santacruz (W), Mumbai-54, though acquired by the Union of

India in 1994 under Section 269UD(1) of the Income Tax Act,

could only be sold in 2018. Despite various attempts to sell

the property starting in 1994, several auctions conducted qua

the said property failed. Even an auction dated 27.03.2017

with a reserve price fixed at Rs.32.11 crores failed to

elicit a response from any buyer.

Signature Not Verified This being the case, the Digitally signed by R NATARAJAN Date: 2019.09.25 17:38:31 IST Reason: appellant before us then made an offer to the Central Board

of Direct Taxes (hereinafter referred to as ‘CBDT’) to

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purchase the aforesaid property for a sum of Rs.32.11 crores.

This offer could not be accepted as the CBDT stated that

accepting such an offer by private treaty would be beyond

their jurisdiction. However, in the meanwhile, a fresh

valuation report of the aforesaid property was called for,

which was submitted on 04.09.2017, valuing the property at

Rs.29,91,35,000/-. Pursuant to the aforesaid, a

brochure/catalogue was circulated sometime in September,

2017, in which clauses 2, 12 and 16 are 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 subject to confirmation by him/her. ………………………………………………………………….

………………………………………………………………….

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

……………………………………………………………….

……………………………………………………………….

16. The Chief Commissioner of Income Tax 2 Mumbai reserves the right to reject any tender form any bid including the highest bid, without assigning any reason. In such an event, the money already paid will be refunded to the intending purchaser without any liability of interest. However, no refunds for amounts forfeited shall be made.”

Pursuant to the aforesaid, the reserve price being

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fixed at Rs.30 crores, the appellant was the sole bidder,

having bid at a sum which is Rs.21 lakhs above the reserve

price at a total sum amounting to Rs.30.21 crores. In its

letter dated 26.09.2017, respondent No.3 sent a report to

respondent No.2, in which it was stated that though the bid

of 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 offered by 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 this report, on

20.11.2017, the CBDT directed that the auction proceedings be

kept in abeyance for the time being, and appointed a Valuer

from outside the State, viz., Mr. P. Ramaraj, District

Valuation Officer, Chennai. Pursuant to this, a valuation

report dated 23.02.2018 was submitted by the aforesaid Valuer

valuing the aforesaid property at Rs.31.07 crores as on

23.01.2018, as a cap in the TDR which would be available by

way of FSI, had been introduced in January, 2018. Short

of this cap, the Valuer valued the aforesaid property at

Rs.36,51,59,000/-. Based on the aforesaid valuation report,

the property was put up for yet another auction.

Meanwhile, by a letter dated 04.05.2018, the earlier

auction which yielded the sum of Rs.30.21 crores from the

appellant was treated as cancelled. The said letter

specifically called upon the appellant to participate in the

upcoming auction to be conducted shortly.

3 CIVIL APPEAL NO. 7438 OF 2019

The appellant, by its communication dated 12.04.2018,

referred to the return of the Demand Drafts of Rs.7.5 crores

and Rs.5 lakhs towards Earnest money and Caution money

stating that burden of interest liability was continuing.

The appellant made it clear that its participation in a

future auction will still be very much there as they are not

exiting the auction proceedings.

As stated hereinabove, pursuant to the valuation

report, on 10.05.2018, a notice for public auction was

published with the reserve price fixed this time at Rs.31.10

crores. On 17.05.2018, the Income Tax Department wrote to

the appellant, in which it intimated the fact that a fresh

auction was to be conduced on 30.05.2018 and that the

appellant should participate in the same.

Meanwhile, the appellant being aggrieved by the

cancellation of the auction process in which he was the

highest bidder at Rs.30.21 crores, filed a writ petition in

the High Court of Judicature at Bombay on 21.05.2018. On

23.05.2018, the High Court permitted respondent Nos. 2 and 3

to conduct a fresh auction subject to refraining from

confirmation of the sale.

On 30.05.2018, fresh auction was conducted and

respondent No. 4 was the sole bidder, with the bid being

equal to the reserve price of Rs.31.10 crores.

Ultimately, by the impugned judgment dated 27.07.2018,

finding no infirmity in the auction process and finding that

4 CIVIL APPEAL NO. 7438 OF 2019

the cancellation, though without reason, was not arbitrary,

the High Court dismissed the writ petition so filed.

Learned counsel appearing on behalf of the appellant

has argued that the cancellation being without reason is per

se invalid in law and therefore, ought to have been set aside

by the High Court. He also argued that the process of

conducting yet another auction after so many auctions had

failed, was itself arbitrary and that, as he was the highest

bidder at Rs.30.21 crores, that is Rs.21 lakhs above the

reserve price, the auction sale ought to have been confirmed

in his favour.

Further, after citing a number of judgments before us,

he made a with prejudice offer stating that he was willing to

abide by the earlier offer made by him of Rs.32.11 crores.

Shri Kavin Gulati, learned senior counsel appearing for

respondent No.4, painstakingly took us through the record and

argued that there was no infirmity whatsoever in the entire

process. He highlighted the fact that under clause 16 of the

brochure/catalogue, the Chief Commissioner reserved the right

to reject any tender form, including the highest bid, without

assigning any reason. He also referred to the report dated

26.09.2017 that was sent by respondent No. 3 to respondent

No. 2 highlighting the fact that the decision for conducting

fresh auction could not possibly be said to be arbitrary when

the appellant himself had earlier offered a higher sum than

the amount that was ultimately payable by him in the auction

5 CIVIL APPEAL NO. 7438 OF 2019

conducted. At every stage, according 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

itself contained any reason for cancellation, the reason was

forthcoming from the letter dated 06.04.2018, in which it was

stated that other properties of a similar nature in the same

area was sold for a considerably higher amount, as a result

of which the amount that was fetched was found to be low. He

also took us through the valuation report that was submitted

so far as the last auction was concerned, in which he was the

successful bidder, and ultimately, also made a with prejudice

offer that if we were to dismiss the appeal, his client would

pay a sum of Rs.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 client a reasonable rate of

interest thereon.

Having heard learned counsel for both the sides, it is

important to first advert to the facts of this case. As has

been pointed out, several auctions were conducted from the

year 1994, including an auction as recent as 27.03.2017 which

failed to elicit a response from any buyer.

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 dated 26.09.2017 in which it was

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pointed out that this figure was considerably lower than the

figure offered by the appellant itself at Rs.32.11 crores and

that, therefore, a fresh auction be held.

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 that the highest possible price be fetched

for such properties. Further, we have also seen how at every

stage valuation reports were submitted by reputed Valuers,

first from Mumbai, and then from Chennai, and have no reason

to doubt what has been stated to be the Fair Market Value in

any of these reports. It may also be pointed out that though

the appellant was given several opportunities to bid in the

fresh auction conducted, ultimately, for reasons best known

to him, he chose to refrain from participating in the fresh

auction that was conducted.

So far as the judgments cited by the appellant are

concerned, there cannot be any doubt whatsoever as to the

parameters of judicial review in these matters. Broadly

speaking, so long as the auction process is conducted bona

fide and in public interest, a judicial hands off 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.

Equally, there can be no manner of doubt that

ordinarily, reasons must inform all governmental decisions

including administrative decisions of Government so that both

7 CIVIL APPEAL NO. 7438 OF 2019

the administration as well as challenges made to such orders,

can be said to be fair and not arbitrary.

‘Mohinder Singh Gill v. Chief Election Commissioner’

1978 (1) SCC 405 which was relied upon for the oft quoted

passage in paragraph 8, has been the subject matter of future

comment in some later cases.

In 63 Moons Technologies Ltd. (Formerly known as

Financial Technologies India Ltd.) & Ors. v. Union of India &

Ors. 2019 (7) SCALE 50, this Court had occasion to deal with

this celebrated passage and its aftermath in paragraph 63 and

64 of the said judgment. This Court concluded:

“It will be seen that there is no broad proposition that the case of Mohinder Singh Gill (supra) will not apply where larger public interest is involved. It is only subsequent materials, i.e., materials in the form of facts that have taken place after the order in question is passed, that can be looked at in the larger public interest, in order to support an administrative order. To the 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].”

Following these judgments, suffice is to state that the

reasons disclosed both in the Report dated 26.09.2017 and the

letter dated 06.04.2018 from the Government of India,

Ministry of Finance, to the Chief Commissioner of Income Tax,

make it clear that there is no arbitrariness that is

discernible in the entire auction process. This being the

case, we dismiss this appeal and hold Shri Kavin Gulati,

learned senior counsel, to the offer very fairly made to us.

8 CIVIL APPEAL NO. 7438 OF 2019

We may indicate that from the figure of Rs.35 crores, which

will be paid within a period of 12 weeks from today directly

to the Union treasury, a sum equivalent to interest of 9 per

cent on the amount of Rs.7.78 crores, that is lying with the

Union, calculated from the date on which it was deposited

with the Union till today be substracted, and the net figure

be handed over as aforesaid.

………………………………………………………., J.

[ R. F. NARIMAN ]

………………………………………………………., J.

[ SURYA KANT ]

New Delhi;

September 19, 2019.

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ITEM NO.12 COURT NO.5 SECTION IX

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s). 21790/2018

(Arising out of impugned final judgment and order dated 27-07-2018 in WP No. 1598/2018 passed by the High Court of Judicature at Bombay)

SANKALP RECREATION PRIVATE LIMITED Petitioner(s)

VERSUS

UNION OF INDIA & ORS. Respondent(s)

Date : 19-09-2019 This matter was called on for hearing today.

CORAM :

HON'BLE MR. JUSTICE R. F. NARIMAN HON'BLE MR. JUSTICE SURYA KANT

For Petitioner(s) Mr. R. K. Patel, Adv.

Ms. Manisha T. Karia, AOR Mr. Shashank S. M., Adv. Ms. Sukhda Kaira, Adv. Mr. Aman I., Adv.

For Respondent(s) Mr. Sanjay Jain, ASG. Mr. K. Radhakrishnan, Sr. Adv. Mr. H. R. Rao, Adv.

Ms. Seema Bengani, Adv. Mr. Anas Zaid, Adv.

Mrs. Anil Katiyar, AOR

Mr. Kavin Gulati, Sr. Adv. Mr. Avi Tandon, Adv.

Mr. Anish Agarwal, Adv. Ms. Vanshika Gupta, Adv. Ms. Meghna Tandon, Adv. Mr. Ish Karan Singh, Adv. Mr. Shriman Kumar, Adv. Mr. T. Mahipal, AOR

UPON hearing the counsel the Court made the following O R D E R

Leave granted.

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The appeal is dismissed in terms of the signed reportable judgment.

Pending application stands disposed of.

(NIDHI AHUJA) (RENU DIWAN) COURT MASTER (SH) ASSISTANT REGISTRAR

[Signed reportable judgment is placed on the file.]

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