Auction Cancellation Must Be Based On Objective Criteria, Not Post-Facto Subjective Satisfaction: Rajasthan High Court

The Rajasthan High Court held that whether an auction bid was fair or competitive was not a post-facto subjective notion, rather an assessment founded on objective criteria, demonstrable from the auction proceedings themselves and recorded contemporaneously with clarity and specificity.While setting aside unilateral and unreasoned cancellation of auction post acceptance of deposit by the State, the bench of Justice Farjand Ali held that mere invocation of power of cancellation without providing reasons or precise deficiency that vitiated the auction process, rendered the cancellation legally unsustainable. “It is trite law that discretion is not synonymous with absolute authority. Even where discretion is conferred, it must operate within the confines of law, reason and fairness. Discretion cannot degenerate into despotism, nor can it be exercised merely because the authority “felt so”. Administrative power exercised without reasons, or on vague and undefined grounds, strikes at the very root of Article 14 of the Constitution and violates the doctrine of non arbitrariness.”The Court was hearing a bunch of petitions filed challenging the “arbitrary, unexplained and non-speaking” rejection letter by the Rajasthan Housing Board that canceled the concluded auction proceedings despite declaring the petitioners as the successful bidders and accepting deposit money. After hearing the contentions, the Court highlighted that Clause 13 of the auction process empowered the Auction Committee to cancel the auction only when the fair and competitive bids were not received. It was held that the Clause did not confer an unfettered power to cancel the auction at their own will. Hence, the power was conditional and not absolute. If the authority failed to record a clear finding that the action failed to meet standards of fairness and competitiveness, the cancellation could not be sustained. In this background, it was held that if, in the opinion of the State the bids were uncompetitive or lacked fairness, it should have been demonstrable from the auction proceedings themselves, contemporaneously at the time of the auction, and not post facto, based on subjectivity. In case the conditions of competitiveness and fairness stood fulfilled, the State was bound to explain how the auction was still unfair. Without such reasoning, the conclusion of unfairness was bald assertion without any legal substance. The Court observed, “Reasons are the heartbeat of the rule of law; they act as a safeguard against arbitrariness, ensure accountability of decision-makers, and inspire confidence that power has been exercised on relevant considerations and not on whim, caprice or subjective satisfaction.”The Court further opined that an authority vested with discretion was not elevated to the position of a monarch, rather was duty bound to exercise that discretion cautiously, judiciously and only after due application of mind, in light of rule of law being the foundational constitutional value. Accordingly, it was held that the cancellation orders suffered from complete absence of reasoning, reflected non-application of mind, and was an arbitrary exercise of discretion that violated rule of law. Hence, the petitions were allowed, and the State was directed to restore the allotment to the petitioners. Title: Javari v State of Rajasthan Citation: 2026 LiveLaw (Raj) 20Click Here To Read/Download Order

Auction Cancellation Must Be Based On Objective Criteria, Not Post-Facto Subjective Satisfaction: Rajasthan High Court

Nupur Agrawal

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