In a significant judgment by the Supreme Court of India, the case of Gulati v. CCIT-2, Mumbai delves into the nuances of judicial review and public interest. The court’s decision addresses the concerns raised by Shri Kavin Gulati regarding the auction process conducted by the Chief Commissioner of Income Tax-2, Mumbai. The case sheds light on the importance of transparency, fairness, and administrative decisions in matters of public interest.
Facts
- The CBDT directed auction proceedings to be put on hold and appointed a Valuer from outside the state.
- An earlier auction where the appellant bid Rs.30.21 crores was cancelled.
- A fresh auction was scheduled with a higher bid than the appellant’s Rs.30.21 crores.
- The Valuer valued the property at Rs.36,51,59,000/- and a new auction was initiated based on this valuation.
- The appellant contested the need for multiple auctions and argued for his status as the highest bidder.
- The appellant made various offers to purchase the property, but they were not accepted by the CBDT.
- The appellant filed a writ petition in the High Court of Judicature at Bombay challenging the auction process cancellation.
- Property auction conducted under instruction from CCIT-2, Mumbai subject to confirmation by him/her.
- Successful bidder to pay balance amount within 90 days from confirmation of sale.
- Money already paid will be refunded without interest if sale is not confirmed.
- High Court permitted a fresh auction without confirmation of sale.
- Fresh auction conducted with sole bidder being respondent No 4 at reserve price of Rs.31.10 crores.
- High Court found cancellation of previous auction not arbitrary even without reason.
- Appellant argues cancellation without reason is invalid in law.
Also Read: Court’s Jurisdiction in Re-appraising Arbitrator’s Findings
Arguments
- Shri Kavin Gulati argued that there was no infirmity in the entire process.
- He referred to a report highlighting that the decision for a fresh auction was not arbitrary.
- The appellant had previously offered a higher sum than the amount payable in the auction conducted.
- Under clause 16 of the brochure, the Chief Commissioner had the right to reject any tender form without giving reasons.
Also Read: Contrary Directions in Issuance of Letter of Intent
Analysis
- Multiple auctions conducted since 1994, including one on 27.03.2017, failed to attract buyers.
- Appellant had opportunities to bid in fresh auctions but chose not to participate.
- Validity and parameters of judicial review in such cases are clear.
- Valuation reports were consistently used to fix reserve prices for transparency and public interest.
- The appellant’s bid of Rs.30.21 crores exceeded the reserve price of Rs.30 crores but auction was withheld.
- Reason for cancellation of the auction was the discrepancy between the bid amount and higher amounts from similar property sales in the area.
- Subsequent materials can be considered in the larger public interest to support an administrative order.
- Reasons must inform all governmental decisions, including administrative decisions, for fairness and to avoid arbitrariness.
- The judgment in ‘PRP Exports and Ors. v. Chief Secretary, Government of Tamil Nadu and Ors.’ (2014) 13 SCC 692 emphasizes the importance of reasons in administrative decisions.
- The case of ‘Mohinder Singh Gill v. Chief Election Commissioner’ 1978 (1) SCC 405, which is often quoted, may not apply in cases involving larger public interest.
- The case of ‘Michigan Rubber (India) Ltd. v. State of Karnataka & Ors.’ [2012 (8) SCC 216] at paragraph 21 has been cited in this context.
Also Read: Application for Stay in Civil Suit Rejected: Court’s Legal Analysis
Decision
- Government of India’s report and letter confirm no arbitrariness in the auction process
- Appeal dismissed based on fair offer made by Shri Kavin Gulati
- Amount of Rs. 35 crores to be paid to Union treasury within 12 weeks
- Interest of 9% on the amount of Rs. 7.78 crores to be subtracted before payment to Union
Case Title: SANKALP RECREATION PRIVATE LIMITED Vs. UNION OF INDIA
Case Number: C.A. No.-007438-007438 / 2019
