A Rs 6 crore gap between two identical Chandigarh plots ends in a third auction ordered by the Supreme Court

Justices P.S. Narasimha and Alok Aradhe held Chandigarh could cancel a low bid before the conveyance deed, but neither bidder gets Site No. 4; a fresh e-auction must finish in three months.

On 20 October 2022 the Chandigarh Administration auctioned two nursing home sites in Sector 33C. They were side by side and each measured 744.44 square yards. Site No. 3 went for ₹18.25 crore. Site No. 4 went to M/s Bedi Hospital for ₹12.58 crore. Bedi Hospital paid in full, but the Administration then cancelled the sale, saying a ₹6 crore difference between identical neighbouring plots did not reflect the market. The Punjab and Haryana High Court restored the sale. On 16 October 2026 the Supreme Court set that judgment aside, holding that the Administration was entitled to cancel before the conveyance deed was executed. It did not, however, hand the site to the bidder who had won a re-auction in the meantime. It ordered the Administration to auction Site No. 4 again, within three months, under the Chandigarh Estate Rules, 2007.

How Site No. 4 was sold, unsold and sold again

The e-auction notice of 31 August 2022 put up 12 residential sites, one commercial site and two nursing home sites on a freehold basis. A corrigendum on 4 September fixed the reserve price for each nursing home site at ₹6.91 crore. The appellant, Satinder Pal Singh, won Site No. 3. Bedi Hospital won Site No. 4.

Bedi Hospital did everything the rules required of it. It deposited 25 per cent of its bid on 21 October 2022, received an Agreement to Sell on 28 October, and paid the remaining 75 per cent on 16 November. When no allotment letter followed, it wrote on 12 January 2023 asking the Administration to complete the formalities.

By then the Administration had reconsidered. On 27 January 2023 it cancelled the bid contract. The letter cited the ₹18.25 crore fetched by the adjacent site, said the Administration would re-auction Site No. 4 with that figure as the reserve price, and invited Bedi Hospital to bid again. It relied on the Estate Officer's reserved right to accept or reject any offer without reasons, and on Clause 4 of the Agreement to Sell, which limited the buyer to a refund. The full amount was refunded. On 9 February 2023 the Administration also cancelled the Agreement to Sell.

Bedi Hospital filed a writ petition on 6 February. At admission on 10 February, the High Court let the Administration proceed with a fresh auction but told it not to finalise the result until the next hearing. Two attempts, in February and June 2023, did not produce a qualifying bid. A third notice on 5 August 2023 set the reserve at ₹18.25 crore. Three bidders qualified, Bedi Hospital did not take part, and on 6 September 2023 Satinder Pal Singh won with ₹18.30 crore. The Administration reported this to the High Court on 20 November 2023, and the new bidder applied to be impleaded.

On 1 April 2025 the High Court allowed Bedi Hospital's petition and quashed both cancellation letters. Satinder Pal Singh and the Chandigarh Administration appealed. On 18 August 2026 the Supreme Court ordered status quo over the site.

No contract until the conveyance deed

The Court set out Rule 5 of the Chandigarh Estate Rules, framed under the Capital of Punjab (Development and Regulation) Act, 1952, and the auction terms that copy it. Under that scheme, the highest bidder pays 25 per cent when the hammer falls and signs an Agreement to Sell in Form B. It pays the remaining 75 per cent within 90 days. Only then does the Estate Officer issue an allotment letter and call on the buyer to execute a conveyance deed in Form C within 30 days. Explanation I to Rule 5, and Clause VI(5) of the auction terms, let the Estate Officer withdraw any site or reject the highest bid without giving reasons, and make that decision final.

The Court held that only an agreement enforceable in law is a contract, and here that point is reached only when the conveyance deed is executed. The Agreement to Sell under Rule 5(iv) was not, by itself, an enforceable contract under Section 2(h) of the Indian Contract Act, 1872. Because no allotment letter had issued and no conveyance deed had been executed, the Administration could still use its reserved power to cancel.

The public law limit, and why it was not crossed

That power is not unlimited. A public authority selling public land must act fairly and for a public purpose, and cannot act arbitrarily. The Court held that revisiting an auction to get a better price for public property is a legitimate purpose, provided it happens before an enforceable contract comes into existence. It relied on SIPCOT v. Contromix (1995), where the Court said the dominant consideration in selling public property is to secure the best price. A much lower price than the market suggests can be a relevant reason for not finalising a sale to a so-called highest bidder.

The High Court had relied on CIDCO v. Shishir Realty, where the Supreme Court warned that a bare claim of loss to the public exchequer cannot override contractual obligations. The Court distinguished it. In Shishir Realty, executed lease deeds were cancelled for alleged breaches that both courts found did not exist, with no chance to cure. Here there was no executed deed, the reason was stated, the money was refunded the same day, and Bedi Hospital was invited to bid again.

Bedi Hospital also relied on Golden Food Products India v. State of Uttar Pradesh, decided in 2026, where the Court said that an auction has sanctity and a valid highest bid cannot be discarded merely because a higher one was expected. In that case, the allotment was cancelled without notice and the bidder found out only by inspecting the authority's internal notes. The Court held that nothing of the kind happened in Chandigarh: the cancellation letter gave the exact reason, and there was no breach of natural justice or transparency. The High Court's reasoning was set aside.

The problem the interim order created

Having found for the Administration, the Court did not simply restore the re-auction. It said the difficulty in the case came from the High Court's interim order. At admission, the High Court could have dismissed the petition or stayed the cancellations. Instead it allowed a fresh auction, and that produced a second round of litigation lasting more than two years. When it later decided the petition, it did not deal with the rights the re-auction had created or with the Administration's status report.

The Court held that the re-auction was legal and valid. It had been held under the High Court's own direction, Bedi Hospital was free to take part, and it raised about ₹6 crore more. The bench said it could not shut its eyes to that result. At the hearing, the Court asked Bedi Hospital's senior counsel, P.S. Patwalia, whether his client would match the new price. After some hesitation it agreed to pay ₹18.30 crore. Senior counsel Guru Krishna Kumar, for Satinder Pal Singh, objected. His client had paid the full price, Bedi Hospital had taken its refund and stayed out of the re-auction, and letting it step in now by matching the price would be unjust.

Faced with two bidders each offering the same price and each with a grievance, the Court decided that justice and the public purpose were best served by neither being awarded the site on the existing record.

Order

The appeals were allowed and the High Court's judgment of 1 April 2025 was set aside. The Chandigarh Administration must hold a fresh e-auction of Site No. 4, Sector 33C, following the Chandigarh Estate Rules, 2007, and the process must begin and end within three months of 16 October 2026. There is no order as to costs.