Highest Bidder Has No Vested Right”: Rajasthan High Court Upholds Rejection of SEZ Plot Allotment

Jaipur: In a recent judgment, the Rajasthan High Court upheld the decision to reject the application of M/s Sant International Jewellers for allotment of a plot in the Special Economic Zone (SEZ) Phase-II, Sitapura Industrial Area, Jaipur. The judgment, delivered by Hon’ble Justice Avneesh Jhingan, emphasized the discretionary powers of the authorities in public auctions and the lack of vested rights for applicants in the allotment process.

M/s Sant International Jewellers had applied for Plot No.H1-138, measuring 500 square meters, in response to a June 2008 advertisement inviting applications for setting up Gems & Jewelry industries in the SEZ. The petitioner had deposited 25% of the reserve price along with 1% security, with the balance due within sixty days of allotment. The application, along with sixteen others for five available plots, was reviewed by a committee. It was discovered that the reserve price of Rs.2,000 per square meter, effective from June 2005, was significantly lower than the highest bid of Rs.4,709 per square meter received in May 2007. Consequently, it was decided to revise the reserve price and reject all current applications, refunding the deposited amounts. The revised rates were later set at Rs.4,800 per square meter in November 2008.

The court reaffirmed that the mere submission of an application for plot allotment does not confer any vested rights upon the applicant. Referring to the Supreme Court’s ruling in State of Punjab vs. Mehar Din (AIR 2022 SC 1413), the court highlighted, “The highest bidder has no vested right to have the auction concluded in his favour. Acceptance of the highest bid is always provisional and subject to conditions of holding public auction.” This principle was reiterated in the court’s decision, emphasizing that the authorities retain discretion to accept or reject applications based on revised conditions and public interest.

Justice Jhingan underscored the limited scope of judicial review in tender matters, noting that courts should not interfere unless there is clear evidence of arbitrariness, irrationality, bias, or malafides. “A plausible decision is not to be interfered with,” the court stated, reiterating that the petitioner’s application was rejected along with all others due to a decision to re-advertise the plots at revised rates. This approach ensured a fair and transparent process, free from any discriminatory or irrational actions.

The court referred to the settled law as stated in Haryana Urban Development Authority vs. Orchid Infrastructure Developers P. Ltd. (AIR 2017 SC 882), which confirmed that the highest bidder does not acquire a vested right to allotment merely by submitting the highest bid and depositing the initial amount. The acceptance of the bid is contingent upon further scrutiny and acceptance by the competent authority, reinforcing the provisional nature of such applications.

Justice Jhingan remarked, “The right of the highest bidder is always provisional, and authorities are not bound to accept the highest bid. It cannot be overlooked that in the present case, even the bidding stage had not been reached.”

The Rajasthan High Court’s decision to dismiss the petition underscores the importance of discretion and procedural fairness in public auctions and allotments. By affirming the authorities’ decision to reject all applications and revise the reserve price, the judgment reinforces the principle that no vested rights are conferred by the mere submission of an application. This ruling is expected to have significant implications for future cases involving public auctions and the allotment of public resources, ensuring that authorities can make necessary adjustments in the interest of transparency and fairness.

Date of Decision: August 1, 2024