The Supreme Court has upheld the Chandigarh Administration’s decision to cancel the auction of a nursing home site after an adjoining plot of the same size fetched a substantially higher price, holding that payment of the entire bid amount and execution of an agreement to sell did not conclude the transaction under the applicable auction framework.
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held that the Administration could revisit the auction before issuance of the allotment letter and execution of the conveyance deed, provided its decision satisfied the requirements of fairness, reasonableness and public purpose.
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The Court set aside the Punjab and Haryana High Court’s judgment granting relief to the original successful bidder. However, instead of directing allotment to the successful bidder in the subsequent auction, it ordered a fresh e-auction to be commenced and completed within three months.
The judgment was delivered on October 16, 2026, in Satinder Pal Singh & Ors. v. Bedi Hospital & Ors., along with a connected appeal.
The dispute concerned Nursing Home Site No. 4 in Sector 33C, Chandigarh, measuring 744.44 square yards.
The Chandigarh Administration had invited bids for several properties through an e-auction notice dated August 31, 2022. These included two adjoining nursing home sites—Site Nos. 3 and 4—each measuring 744.44 square yards. Their reserve price was fixed at ₹6.91 crore each.
In the auction concluded on October 20, 2022, Site No. 3 attracted a highest bid of approximately â‚ą18.25 crore from the appellants. Bedi Hospital emerged as the highest bidder for Site No. 4 with an offer of â‚ą12.58 crore.
The hospital deposited 25% of the bid amount on October 21, 2022. An agreement to sell followed on October 28, 2022, and the remaining 75% was deposited on November 16, 2022.
When the allotment letter was not issued, the hospital requested the Administration to expedite the formalities.
The Administration reconsidered the proposed allotment because the adjoining site, auctioned on the same day and having the same area, had fetched a substantially higher amount.
On January 27, 2023, it cancelled the bid contract, stating that the difference between the prices of the adjoining sites did not reflect the market trend. It proposed to re-auction Site No. 4 with the price fetched by Site No. 3 as the reserve price.
The entire consideration paid by the hospital was refunded. The Administration also expressly permitted the hospital to participate in the fresh auction.
Bedi Hospital challenged the cancellation before the Punjab and Haryana High Court. During the proceedings, the Administration separately cancelled the agreement to sell on February 9, 2023, which the hospital also challenged.
While issuing notice on the hospital’s petition, the High Court permitted the Administration to proceed with a fresh auction but restrained it from finalising the process until the next hearing.
Following unsuccessful earlier attempts, a subsequent e-auction was conducted on September 6, 2023. The appellants emerged as the highest bidders for Site No. 4 with an offer of â‚ą18.30 crore. Bedi Hospital did not participate.
The Administration placed the result before the High Court through a status report. Nevertheless, the High Court allowed the hospital’s petition and quashed both cancellation letters.
The subsequent successful bidders and the Chandigarh Administration challenged that judgment before the Supreme Court.
Agreement To Sell Did Not Conclude Transaction Under Applicable Rules
The Supreme Court examined Rule 5 of the Chandigarh Estate Rules, 2007, the auction conditions and the prescribed agreement to sell.
It noted that the framework contemplated successive stages: acceptance of the highest bid, payment of 25% of the consideration, execution of an agreement to sell, payment of the balance, issuance of an allotment letter and execution of the conveyance deed.
In the context of this framework, the Court held that the agreement to sell contemplated under Rule 5(iv) did not itself constitute an enforceable contract under Section 2(h) of the Indian Contract Act, 1872. The enforceable agreement would arise upon execution of the conveyance deed.
Since neither an allotment letter nor a conveyance deed had been issued or executed, the Administration retained the power to cancel under the rules and auction conditions.
The ruling therefore turned on the particular statutory rules and conditions governing the Chandigarh auction.
The Court clarified that the Administration’s power was subject to public law restrictions against arbitrary and unreasonable action.
“The conduct of a public authority must be informed by fairness in action and in furtherance of public purpose,” the Bench observed.
Nevertheless, before an enforceable contract was concluded, a decision to revisit the sale or lease of public property could be justified where it sought to maximise the price.
Here, the substantially lower price fetched by Site No. 4 was a relevant consideration. The Bench consequently found no illegality or arbitrariness in cancelling the original auction and seeking fresh bids.
It relied on Chairman and Managing Director, SIPCOT, Madras & Ors. v. Contromix Pvt. Ltd. concerning the importance of securing the best price for public property through adequate publicity and public participation.
The Bench distinguished Vice-Chairman and Managing Director, CIDCO v. Shishir Realty Private Limited, which concerned cancellation of executed lease deeds on the basis of alleged violations.
In the present case, no conveyance deed had been executed, the entire consideration had been refunded, and the original bidder had been invited to participate again.
The Court also distinguished Golden Food Products India v. State of Uttar Pradesh, where cancellation had involved failures of transparency and natural justice. Here, the cancellation letter expressly communicated the reason for the decision, and the hospital had an opportunity to participate in the fresh auction.
The Supreme Court criticised the High Court’s failure to address the consequences of the subsequent auction permitted by its own interim order.
Although the Bench held that the subsequent auction was legal and valid, it considered the prolonged dispute and the competing positions of the bidders.
During the hearing, Bedi Hospital offered to match the subsequent bid of â‚ą18.30 crore. The appellants opposed this, pointing out that they had paid the entire consideration and that the hospital had chosen not to participate in the subsequent auction.
The Court ultimately concluded that a fresh auction would serve the interests of justice and public purpose.
Allowing the appeals, it set aside the High Court’s judgment dated April 1, 2025, and directed the Chandigarh Administration to conduct a fresh e-auction for Site No. 4 under the Chandigarh Estate Rules, 2007. The entire process must commence and conclude within three months of the judgment. No order as to costs was passed.
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