SUPREME COURT HOLDS MERE SUBMISSION OF HIGHEST BID DOES NOT GRANT OWNERSHIP RIGHTS TO AUCTION PURCHASER

Recently, a two-Judge Bench of the Supreme Court in the Municipal Committee, Barwala, District Hisar, Haryana Through Its Secretary/President vs Jai Narayan And Company & Anr Civil Appeal No. 2222 of 2022 passed a Judgment dated 29-03-2022 and decided upon the issue of grant of ownership rights to auction purchaser in respect of a land acquired in a Government auction.

In this case, Jai Narayan and Co.-Plaintiff was the highest bidder in the open auction conducted by the Sub-Divisional Officer, Hisar at Rs. 2,32,000/- per acre of land measuring 55 kanals 5 marlas (Land) on 25-10-1995. The total sale consideration of Rs. 15,76,150/- was deposited by the Plaintiff with the Municipal Committee. Based on the said transaction, Jai Narayan and Co.-Plaintiff. claimed to be the bona fide purchaser and in possession of the said Land as the owner. Jai Narayan and Co.-Plaintiff further asserted that the Municipal Committee passed a Resolution on 01-05-2002 to get the sale deed registered in respect of the said Land. However, as the sale deed was not registered, Jai Narayan and Co.-Plaintiff allegedly served a Notice upon the Municipal Committee in 2006 and thereafter, filed a Civil Suit for Mandatory Injunction before the Trial Court in Haryana on 13-06-2011. It was argued by the Municipal Committee-Defendant (Defendant Committee) that they were unable to execute the sale deed without proper sanction of the competent Authority i.e. the Government of Haryana. The Trial Court allowed the Suit vide Judgment dated 09-03-2016.

Aggrieved by the Trial Court Judgment dated 09-03-2016, the Defendant Committee filed first Appeal before the High Court of Punjab and Haryana, which was dismissed vide Judgment dated 05-09-2016. Thereafter, a second Appeal was also filed before the High Court, which was also dismissed vide Judgment dated 01-05-2018.

Aggrieved by the High Court Judgment dated 01-05-2018, the Defendant Committee filed a Civil Appeal before the Supreme Court.

The Apex Court passed a Judgment dated 29-03-2022 and made the following observations:

1) That Rule 2 of the Haryana Municipalities Management of Municipal Properties and State Properties Rules, 1976 (1976 Rules) provides that the Deputy Commissioner has to first grant sanction for sale by auction of proposed property and upon conducting such auction, the Defendant Committee has to apply to the Deputy Commissioner for sanction / confirmation of sale of proposed property to the acquirer / purchaser. Rule 2 of the 1976 Rules is reproduced below for easy reference:

Rule – 2. Procedure for alienation.–

(1)     A municipal committee proposing to alienate permanently or for a term exceeding ten years any land or other immovable property of which it is the owner shall apply to the Deputy Commissioner for sanction.

(2)     An application under sub-rule (1) shall be accompanied by a plan of the proposed property to be alienated together with a statement in Form A appended to these rules.

(3)     The Deputy Commissioner shall record an order on the application, –

(i)       sanctioning it (subject to such conditions, if any, as he thinks fit);

(ii)      refusing to sanction it, provided that no sale by auction shall be valid, until it has been confirmed by the Deputy Commissioner.

(4)     When the Deputy Commissioner has accorded sanction to a sale by auction, the Form A aforesaid shall in due course be re-submitted to him with the details regarding the auction shown in Form B. Deputy Commissioner shall thereon either confirm the sale or refuse to confirm it. If the Deputy Commissioner refuses to confirm the sale, the same shall be void.

(5)     Any orders passed by the Deputy Commissioner under sub-rules (3) and (4) shall, subject to the provisions of Section 253 of the Haryana Municipal Act, 1973, be final.

2) That in this case the Defendant Committee conducted the Sale by Auction on 25-10-1995 after obtaining prior approval / sanction from the Deputy Commissioner. However, there is no proof to show that the Deputy Commissioner confirmed the sale of Land to the Plaintiff.

3) That the Plaintiff has alleged that vide Communication dated 10-01-2007, the Deputy Commissioner has confirmed the sale of Land to the Plaintiff. However, the Supreme Court observed that it is merely an inter-departmental communication from the Deputy Commissioner to the Director, Urban Local Body Department to seek approval for sale of Land but in the absence of any approval granted, no right would accrue. Further, in the said Communication there is no endorsement of the copy of the said communication to the Plaintiff. The said Communication is not marked to the Plaintiff and does not provide any explicit confirmation of sale of Land to the Plaintiff.

4) Hence, there is no concluded contract between the Deputy Commissioner, Municipal Committee and the Plaintiff, as the Communication dated 10-01-2007 is merely an inter-departmental letter and not the decision of the State to grant approval for sale of Land to Plaintiff.

5) Thus, the Plaintiff has no vested right to file the suit for mandatory injunction and claim title and possession of the Land merely by participating in the Auction and submitting the highest bid. Secondly, even though the Plaintiff had a vested right, they could have only sought for specific performance of the so-called agreement by the Defendants.

6) Further, the Notice was sent by the Plaintiff in 2006 but the Suit was filed in 2011 in respect of the Auction conducted in the year 1995. As per Article 54 and 135 of the Schedule of the Limitation Act 1963, a suit for specific performance of a contract and a suit for mandatory injunction can be filed within 3 years from the date fixed for performance respectively. However, in this case, the Plaintiff filed the Suit for Mandatory Injunction on or after 13.6.2011, i.e., more than 12 years after the Auction was conducted. Hence, the Suit for Mandatory Injunction / Specific Performance are barred by limitation.

Thus, based on the aforesaid grounds, the Apex Court held that there is no concluded contract between the Plaintiff and the Defendant, hence, the Plaintiffs cannot seek specific performance / mandatory injunction against the Defendants and also, the Suit is barred by limitation. Hence, the Supreme Court allowed the Appeal and set aside the Trial Court Judgment dated 09-03-2016 and High Court Judgment dated 01-05-2018.

The Apex Court further directed that as the Plaintiff is in unlawful possession of the Land, the Municipal Committee shall take back possession of the Land and the amount of Rs. 15,76,150/- paid by the Plaintiff shall stand forfeited towards damages for illegal occupation of the Land for more than 20 years since the date of Auction.

 

Harini Daliparthy

Senior Associate

The Indian Lawyer