Supreme Court Upholds Auction Sale of Temple Land After 23 Years: K. Kumara Gupta vs. Sri Markendaya and Sri Omkareswara Swamy Temple (2022)

Introduction

Date of the Judgment: 18 February 2022
Citation: 2022 INSC 164
Judges: M.R. Shah, J. and B.V. Nagarathna, J.

Can a public auction sale, finalized and executed, be overturned after 23 years merely because a third party offers a higher price? The Supreme Court of India recently addressed this question, emphasizing the importance of maintaining the sanctity of public auctions. The Court held that unless there is evidence of fraud, collusion, or material irregularity, a sale cannot be set aside based on subsequent offers from non-participants. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice B.V. Nagarathna.

Case Background

The case revolves around the auction of land belonging to Sri Markendaya and Omkareswara Swamy Temple in Eluru. The auction was initiated by the Commissioner of the Endowments Department, with a notification published on 10.03.1997, and the auction notice in the Andhra Pradesh Gazette on 22.05.1997. The expected price was set at Rs. 4,00,000 per acre for the 1.81-acre land.

On 24.06.1998, an open auction was conducted where 45 people participated, including the appellant, K. Kumara Gupta. Initially, Gupta bid Rs. 5,55,000 per acre, but later increased his offer to Rs. 13,01,000 per acre, becoming the highest bidder. He deposited Rs. 7,85,000, which was one-third of the bid amount, as per the tender conditions.

Following the auction, one Shri Jagat Kumar, who did not participate in the auction, made a representation on 20.07.1998, claiming that the land could fetch more money. Although he initially expressed a willingness to pay a higher price, he did not deposit any money and later showed interest in buying only 1200 square yards, not the entire land. This led to the cancellation of the auction on 24.07.1998. However, the sale was later confirmed on 22.12.1998, in favor of the appellant. The appellant deposited the remaining amount on 30.12.1998, and a sale deed was executed on 31.12.1998, with physical possession of the land being handed over to the appellant.

The sale deed could not be registered immediately due to the non-availability of a Clearance Certificate from the Income Tax Department. The certificate was issued on 12.01.1999. Subsequently, one Shri L. Kantha Rao, who also did not participate in the auction, filed a writ petition challenging the sale. This initiated a series of litigations.

Timeline

Course of Proceedings

The initial cancellation of the auction on 24.07.1998 was challenged by the appellant, K. Kumara Gupta, in a revision under Section 93 of the Endowments Act, 1987. The sale was subsequently confirmed on 22.12.1998. However, this confirmation was challenged by Shri L. Kantha Rao, who filed Writ Petition No. 41 of 1999 in the High Court, seeking a stay on the sale deed execution.

The High Court granted an interim stay on 05.01.1999, conditional on Rao providing a bank guarantee of Rs. 30 lakhs. During the pendency of this writ petition, the Commissioner of the Endowments Department unilaterally cancelled the auction on 10.02.1999, directing a re-auction with an upset price of Rs. 30 lakhs. This order was stayed by the Government on 08.03.1999, following a revision by the appellant. Shri L. Kantha Rao then filed another writ petition (No. 11552 of 1999) challenging the stay order. The Commissioner revoked his cancellation order on 11.03.1999.

The High Court disposed of both writ petitions on 09.07.1999, noting that the revision against the cancelled order was infructuous, but granted Shri L. Kantha Rao the liberty to file a revision against the original sale confirmation order. Subsequently, Shri L. Kantha Rao filed a revision before the Government, which was allowed on 26.11.1999, quashing the sale and ordering a re-auction. This order was passed without hearing the appellant. The appellant then filed Writ Petition No. 25407 of 1999 in the High Court, challenging the government’s order. The single judge allowed the writ petition on 02.02.2018. The Temple Trust and the wife of L. Kantha Rao filed writ appeals which were allowed by the Division Bench on 18.09.2019, leading to the present appeals in the Supreme Court.

Legal Framework

The case primarily involves the interpretation of the Endowments Act, 1987, specifically concerning the sale of properties belonging to religious institutions. The Act provides for the administration and management of such institutions and their properties. The Supreme Court also considered the principles governing public auctions and the sanctity of contracts, as enshrined in the Indian Contract Act.

The Endowments Act, 1987, aims to protect the interests of religious institutions and ensure that their properties are managed efficiently and for the benefit of the deity. The relevant provisions of the Act, as interpreted by the Supreme Court, emphasize the need for transparency and fairness in the sale of such properties. The Court also considered the principle that the government acts as a trustee of temple properties, with a duty to ensure their due protection.

Arguments

Appellant’s Arguments (K. Kumara Gupta):

• The auction was conducted after wide publicity, and 45 people participated. The appellant was the highest bidder, and the sale was confirmed after due process.
• The High Court erred in setting aside the sale after 23 years, especially at the instance of a person who did not participate in the auction.
• Merely because someone offers a higher price after the auction does not justify setting aside a valid sale. The object and purpose of holding a public auction would be frustrated if such objections were entertained.
• The Division Bench did not find any illegality in the auction process itself.
• The litigation initiated by Shri L. Kantha Rao was essentially a private interest litigation disguised as a public interest litigation (PIL).
• The wife of the deceased Shri L. Kantha Rao could not have continued the PIL proceedings as a private litigation.
• The Temple Trust never objected to the auction until the judgment of the Single Judge.
• The sale was confirmed after approval by the competent authority of the Endowments Department.
• Reliance was placed on Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and Others, (2008) 9 SCC 299, to argue that objections after the conclusion of the auction cannot be permitted, especially by a stranger to the auction.

Respondent’s Arguments (Temple Trust and Wife of Shri L. Kantha Rao):

• The Temple is a public religious institution, and the Government is bound to act for its benefit and ensure revenue maximization.
• The Government acts as a trustee of temple properties, with a duty to protect them. Reliance was placed on Paramananda Mahapatra Vs. Commissioner of Hindu Religious Endowments, Orissa and Others, AIR 1966 SC 1544 and Mahant Ram Saroop Dasji Vs. S.P. Sahi, 1959 Supp (2) SCR 583.
• The consideration paid by the appellant was inadequate at the time of the auction. Subsequent offers from Shri Jagat Kumar and Shri L. Kantha Rao indicated that the land was worth much more.
• The value of the property has significantly increased over time.
• It is the duty of the Court to ensure that the price fetched is adequate, especially in the case of a Public Trust. Reliance was placed on Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Ors., (2000) 6 SCC 69.
• The Division Bench of the High Court rightly directed for a re-auction. Reliance was placed on Princess Fatima Fauzia and Anr. Vs. Syeed UI-Mulk alias Nawab Saheb Chathari & Ors., AIR 1979 AP 229.
• The concept of locus standi has been widened by the Supreme Court while dealing with matters of public interest.
• The dominant consideration in the sale of public property is to secure the best price. Reliance was placed on Chairman and Managing director, SIPCOT, Madras and Ors. Vs. Contromix Pvt. Ltd., (1995) 4 SCC 595; Union Bank of India Vs. Official Liquidator H.C of Calcutta and Ors., (2000) 5 SCC 274 and Navalkha and Sons Vs. Sri Ramanya Das and Ors., (1969) 3 SCC 537.

Submissions by Parties

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issues:

1. Whether the High Court was justified in ordering a re-auction of the land after a period of 23 years from the date of the original auction sale, especially when the sale was confirmed in favor of the highest bidder and a sale deed was executed.
2. Whether the High Court was right in setting aside the sale based on subsequent offers from third parties who did not participate in the auction, without any finding of fraud or illegality in the auction process.
3. Whether the High Court was justified in entertaining the writ appeals filed by the Temple Trust and the wife of the original writ petitioner, considering that the Temple Trust had not challenged the auction earlier and the original writ petitioner did not participate in the auction.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and Others, (2008) 9 SCC 299 – Cited to emphasize that objections after the conclusion of the auction cannot be permitted, especially by a stranger to the auction.
• Jasbhai Motibhai Desai Vs. Roshan Kumar, Haji Bashir Ahmed and Ors., (1976) 1 SCC 671 – Cited to highlight the importance of locus standi in writ petitions and that a person who has not lodged any objection at an appropriate stage cannot be said to be aggrieved.
• Paramananda Mahapatra Vs. Commissioner of Hindu Religious Endowments, Orissa and Others, AIR 1966 SC 1544 – Cited to emphasize that the Government acts as a trustee of temple properties, with a duty to protect them.
• Mahant Ram Saroop Dasji Vs. S.P. Sahi, 1959 Supp (2) SCR 583 – Cited to emphasize that the Government acts as a trustee of temple properties, with a duty to protect them.
• Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Ors., (2000) 6 SCC 69 – Cited to emphasize that it is the duty of the Court to ensure that the price fetched is adequate, especially in the case of a Public Trust.
• Princess Fatima Fauzia and Anr. Vs. Syeed UI-Mulk alias Nawab Saheb Chathari & Ors., AIR 1979 AP 229 – Cited by the respondent to argue that authorities ought to permit re-auction where the consideration is inadequate.
• Chairman and Managing director, SIPCOT, Madras and Ors. Vs. Contromix Pvt. Ltd., (1995) 4 SCC 595 – Cited to emphasize that the dominant consideration in the sale of public property is to secure the best price.
• Union Bank of India Vs. Official Liquidator H.C of Calcutta and Ors., (2000) 5 SCC 274 – Cited to emphasize that the dominant consideration in the sale of public property is to secure the best price.
• Navalkha and Sons Vs. Sri Ramanya Das and Ors., (1969) 3 SCC 537 – Cited to emphasize that the dominant consideration in the sale of public property is to secure the best price.
• State of Uttaranchal Vs. Balwant Singh Chaufal and Ors., (2010) 3 SCC 402 – Cited to caution High Courts to be more discerning while entertaining writ petitions filed in public interest.

Legal Provisions:

• Section 93 of the Endowments Act, 1987 – Used by the appellant to file a revision against the cancellation of the auction
• Endowments Act, 1987 – The Act under which the auction was conducted.
• Indian Contract Act – The Act which governs contractual obligations, particularly in tender-cum-auction.

Authorities Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and Others, (2008) 9 SCC 299* to emphasize that objections after the conclusion of the auction cannot be permitted, especially by a stranger to the auction.
• The Court relied on Jasbhai Motibhai Desai Vs. Roshan Kumar, Haji Bashir Ahmed and Ors., (1976) 1 SCC 671* to highlight the importance of locus standi in writ petitions.
• The Court acknowledged the principle laid down in Paramananda Mahapatra Vs. Commissioner of Hindu Religious Endowments, Orissa and Others, AIR 1966 SC 1544* and Mahant Ram Saroop Dasji Vs. S.P. Sahi, 1959 Supp (2) SCR 583* that the Government acts as a trustee of temple properties, but held that this principle did not justify setting aside a validly conducted auction.
• The Court acknowledged the principle laid down in Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Ors., (2000) 6 SCC 69* that it is the duty of the Court to ensure that the price fetched is adequate, but held that this principle did not justify setting aside a validly conducted auction.
• The Court distinguished the facts of the case from the facts in Princess Fatima Fauzia and Anr. Vs. Syeed UI-Mulk alias Nawab Saheb Chathari & Ors., AIR 1979 AP 229*.
• The Court relied on Chairman and Managing director, SIPCOT, Madras and Ors. Vs. Contromix Pvt. Ltd., (1995) 4 SCC 595*, Union Bank of India Vs. Official Liquidator H.C of Calcutta and Ors., (2000) 5 SCC 274*, and Navalkha and Sons Vs. Sri Ramanya Das and Ors., (1969) 3 SCC 537* to emphasize that the dominant consideration in the sale of public property is to secure the best price, but held that this did not justify setting aside a validly conducted auction.
• The Court relied on State of Uttaranchal Vs. Balwant Singh Chaufal and Ors., (2010) 3 SCC 402* to caution High Courts to be more discerning while entertaining writ petitions filed in public interest.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Sanctity of Public Auctions: The Court emphasized the importance of maintaining the integrity of public auctions. Allowing sales to be overturned based on subsequent offers would undermine the entire process.
• Locus Standi: The Court was critical of the fact that the objectors did not participate in the auction. It held that they had no right to challenge the sale.
• Lack of Evidence of Fraud or Illegality: The Court noted that there was no evidence of fraud, collusion, or material irregularity in the auction process.
• Time Lapse: The Court found it problematic that the sale was being challenged 23 years after it had been finalized.
• Private Interest Litigation: The Court observed that the litigation was essentially a private interest litigation disguised as a PIL.

The Court’s reasoning was a combination of legal principles and factual analysis. The Court relied heavily on the principle of maintaining the sanctity of public auctions and the importance of locus standi in writ petitions. The Court also considered the factual circumstances of the case, including the time lapse and the lack of evidence of fraud or illegality.

Flowchart of Events and Decisions

Conclusion

The Supreme Court allowed the appeals filed by K. Kumara Gupta, setting aside the order of the Division Bench of the High Court. The Court held that the auction sale in favor of the appellant was valid and should not have been set aside after 23 years based on subsequent offers from non-participants. The Court emphasized the importance of maintaining the sanctity of public auctions and the principle of locus standi in writ petitions.

This judgment reinforces the principle that a validly conducted public auction sale cannot be set aside merely because someone offers a higher price later. It underscores the need for transparency and fairness in public auctions and protects the interests of those who participate in them. The judgment also serves as a caution against the misuse of public interest litigation for private gains.