Supreme Court: a government e-auction bid becomes a binding contract only on the conveyance deed, not before

The Supreme Court has upheld the Chandigarh Administration's cancellation of a hospital's winning e-auction bid for a nursing-home plot, holding that no enforceable contract existed at the time of cancellation. Bedi Hospital had been declared the highest bidder for a plot in Sector 33C, Chandigarh, paid the full price, and received an Agreement to Sell, but before a conveyance deed was executed, the Administration cancelled the bid because an adjoining plot of the same size had fetched nearly six crore rupees more. The Punjab and Haryana High Court had quashed the cancellation; the Supreme Court set that aside.

Justices P.S. Narasimha and Alok Aradhe held that an Agreement to Sell made under Rule 5(iv) of the Chandigarh Estate Rules, 2007 is not, by itself, an enforceable contract under Section 2(h) of the Indian Contract Act, 1872; a binding contract arises only when the conveyance deed is executed. Until then, a public authority may withdraw a plot from auction to secure a better price for public property, so long as it acts fairly, discloses its reasons, and refunds the bidder in full, as the Administration had done here. The Court directed a fresh e-auction within three months and, since the hospital was now willing to match the eighteen-crore-plus bid secured at the later auction, left both bidders free to compete for the plot afresh.