Rajasthan HC Dismisses Housing Board Appeal, Calls Minister's Auction Cancellation a Culpable Exercise of Power
A Division Bench upheld directions to honour a highest e-auction bid for a Mansarovar commercial plot, finding the Minister's unilateral cancellation arbitrary and the Board's post-facto approval a paper formality.
The High Court of Judicature for Rajasthan, Bench at Jaipur, has dismissed an appeal filed by the Rajasthan Housing Board challenging a Single Judge's order that struck down the cancellation of the highest bid for a commercial plot in Mansarovar, Jaipur. Acting Chief Justice Sanjeev Prakash Sharma and Justice Bhuwan Goyal, deciding D.B. Special Appeal Writ No. 760/2026 on 28 July 2026, found that the Urban Development and Housing Minister had cancelled the auction without authority, without recording reasons, and without giving the successful bidder any opportunity of hearing. The Board of Directors' subsequent approval was characterised by the bench as a “paper formality.” The Division Bench directed that the Single Judge's directions be implemented within four weeks.
The Auction and Its Cancellation
The Rajasthan Housing Board put up for e-auction a commercial plot and marriage garden measuring 3,004.10 square metres at Plot No. 26, VT Road, Mansarovar, Jaipur, with a minimum bid of Rs. 97,000 per square metre. The online auction ran from 21 to 23 September 2022. Sagar Mal Handala, son of Ishwar Ram Handala, participated, deposited 2% of the bid value — Rs. 58,28,000 — as earnest money, and emerged as the highest bidder at Rs. 1,01,000 per square metre. Within 72 hours, as required under the applicable rules, he deposited the remaining amount of Rs. 3,96,84,115 to bring his total deposit to 15% of the bid value.
No confirmation followed. Instead, the entire deposited amount was quietly returned to Handala's account on 20 December 2022, without any explanation. His subsequent e-mails went unanswered. It was only after Handala made a physical visit to the Housing Board's office that he was handed an office order dated 13 December 2022 — on 27 January 2023 — declaring his bid “non-competitive.”
An RTI application filed by Handala subsequently revealed the real basis: the bid was refused sanction because of a comparison with a separate auction of Plot No. 21, VT Road, Mansarovar, conducted between 11 and 13 July 2022, where the winning bid was Rs. 1,07,000 per square metre. The Housing Board treated the lower per-square-metre rate on Plot No. 26 as grounds for cancellation.
What the Original Note-Sheet Showed
When the Division Bench called for the original record, the note-sheet told a different story from the Board's official position. The file had been put up for sanction of the bid with no objection from the Accountant or the Financial Advisor. At Note No. 24, the Minister of Urban Development and Housing directed re-auction without recording any reason on the file.
Financial Officers and Advisors subsequently pointed out that the power to cancel an auction vested only with the Board of Directors, not the Chairman or the Minister. Note No. 33 recorded that the Chairman — who was the same Minister — had cancelled the bid while that authority belonged to the Board. A Board meeting was then convened, and post-facto approval of the Minister's decision was obtained. The reasons cited in the Board meeting — parity with the Plot No. 21 bid — had not appeared anywhere in the original cancellation.
The Division Bench found this sequence “apparently quite dubious.” It pressed appellants' counsel to explain why no reason had been recorded by the Minister at the time of cancellation, and why reasons were assigned only later in the Board meeting. No satisfactory answer was offered.
Why the Comparison with Plot No. 21 Did Not Hold
The bench examined the factual basis for the non-competitive label. The minimum bid for Plot No. 21, VT Road, had been fixed at Rs. 89,500 per square metre, which was lower than the Rs. 97,000 per square metre minimum fixed for Plot No. 26. The highest bid received for Plot No. 21 was Rs. 1,07,000 per square metre, finalised on 13 July 2022.
The bench observed that because the minimum price for Plot No. 26 was set higher than the minimum for Plot No. 21, any upward adjustment could, at most, have been made to the minimum price before the auction — which the Board did not do. Once Handala's bid of Rs. 1,01,000 per square metre came in above the applicable minimum of Rs. 97,000, there was no legitimate basis to declare it non-competitive by reference to a different plot with a different minimum price. The total amount deposited by Handala — Rs. 4,55,12,115 — was already with the Board when the cancellation order was issued.
Natural Justice and the Authority to Cancel
The Rajasthan Housing Board's primary argument on appeal was that the Single Judge was wrong to treat a show cause notice as mandatory before cancelling a bid. The Board contended that a submitted bid is merely an offer, and that the Notice Inviting Tenders is no more than an invitation to offer. On this basis, it argued that the principle of audi alteram partem did not attach, and that the administrative rejection of a bid does not create civil consequences.
The Division Bench disagreed. It affirmed the Single Judge's reasoning that every action of a government body or board that is adverse to a person must be preceded by an opportunity of hearing. Once an e-auction is conducted, is faceless, and no illegality in the auction process has been identified, the highest bidder acquires a right that cannot be extinguished without notice. The Board's position that the Chairman held independent power to cancel was also rejected: the record showed that the applicable rules vested cancellation authority in the Board of Directors, not in the Chairman or the Minister.
The bench further noted that even on the Board of Directors' decision, the Minister who had already taken the cancellation decision was himself the Chairman of the Board, and all other Members were subordinate to him. The Board meeting's approval was, in that context, not an independent exercise of authority but a ratification of a decision already made by the person presiding over the meeting.
Supreme Court Precedents Applied
The Division Bench relied on three Supreme Court decisions. In Union of India and Ors. v. E.G. Nambudiri, (1991) 3 SCC 38, the Supreme Court held that while reasons need not appear in the order itself, they must be available on record at the time the decision is taken. Here, no reasons existed on the file when the Minister directed re-auction at Note No. 24.
In Golden Food Products India v. State of Uttar Pradesh & Ors., 2026 INSC 22, the Supreme Court held that cancelling a highest bid without any illegality in the auction process is unjustified — facts the bench found directly applicable to the present matter.
In K. Kumara Gupta v. Sri Markendaya and Sri Omkareswara Swamy Temple and Ors., (2022) 5 SCC 710, the Supreme Court held that a public auction sale cannot be set aside on the basis of representations by parties who did not participate in the auction, and that the sanctity of a public auction and the rights of a genuine bidder must be protected. The bench quoted the Supreme Court's observation that valuation at the date of auction, not a later date, is the relevant consideration.
The Board relied on Om Sakthi Sekar v. V. Sukumar and Others, 2026 INSC 237, to assert a right to cancel the highest bid. The Division Bench distinguished that case: it arose from DRT proceedings and a recovery certificate, and the High Court had only asked the DRT to examine valuation without setting aside the auction sale. The factual matrix was entirely different.
Outcome
The Division Bench upheld the Single Judge's order dated 19 March 2026 in its entirety. It found no ground to interfere and characterised the Minister's conduct as “culpable exercise of power” that could not be allowed to sustain. The directions issued by the Single Judge — quashing the cancellation order dated 13 December 2022, directing the Housing Board to accept Handala's highest bid for Plot No. 26, VT Road, Mansarovar, and requiring issuance of a confirmation of auction-cum-demand letter within 60 days — were affirmed. The Division Bench directed that those directions be implemented within four weeks from its order dated 28 July 2026. Any amounts previously refunded to Handala are to be re-deposited by him along with the remaining bid amount after the demand letter is issued. D.B. Special Appeal Writ No. 760/2026 was dismissed, and all pending applications were disposed of.