P.I. Chacko vs Chief Commissioner of Income Tax and Others

P.K. Balasubramanyan, J.—An item of property which had vested in the Central Government u/s 269UE of the Income Tax Act was notified to be sold by public auction under instructions from the Chief Commissioner of Income Tax, Cochin (Kerala), respondent No. 1 herein as per exhibit P-1 notification. The second respondent was the auctioneer. The sale was to be held on September 22, 1993. The petitioner and respondents Nos. 3 and 4 were participants in the auction.

The terms and conditions of sale contained in exhibit P-1 provided that the properties were being sold by the auctioneer under instructions from the Chief Commissioner of Income Tax, Cochin, and the auction was subject to confirmation by the Chief Commissioner of Income Tax. It also set out a power in the Commissioner to cancel or postpone the sale in the following words :

"The Chief Commissioner of Income Tax, Cochin, reserves the right to cancel or postpone the auction at any time. He also reserves the right to reject any bid, including the highest bid, without assigning any reason. In such an event, the money already paid will be refunded to the intending purchaser without any interest, unless the same is forfeited as above."

The title of the purchaser in the auction could thus be seen to be dependent upon confirmation of the auction in favour of the purchaser and also subject to a right in the Chief Commissioner of Income Tax to cancel the auction.

At the auction held on September 22, 1993, the petitioner was the highest bidder. The reserve price set up by exhibit P-1 was Rs. 35,00,000.

As against that the petitioner bid the property for a sum of Rs. 60,50,000. Though the auctioneer knocked down the bid in favour of the petitioner the sale was not confirmed in favour of the petitioner by the Chief Commissioner of Income Tax, Cochin. By the order, exhibit P-3, dated September 22, 1993 (same day as the auction) the first respondent cancelled the auction conducted on that day by the auctioneer, respondent No. 2 herein, in respect of the property notified for sale under exhibit P-1. In exhibit P-3, the first respondent referred to complaints by two other bidders, namely, respondents Nos. 3 and 4, to the hasty and improper acceptance of the offer of the petitioner as the final offer and the hasty and improper manner in which the hammer was brought down by the auctioneer without recognising the higher bid made by respondents Nos. 3 and 4 and took the view that there was some merit in the complaint made by them and, consequently, there was a denial of fair opportunity to the participants to bid for higher amounts. Applying the power reserved on him under Clause 15 of exhibit P-1, the Chief Commissioner cancelled the auction in public interest. The petitioner whose highest bid thus stood cancelled has come up with this original petition challenging the order of the first respondent cancelling the auction.

Even at the outset, it is to be observed that the sale in question is not a statutory sale and in fairness I must observe that learned counsel for the petitioner did not argue that it is a sale in exercise of any power under the statute. Obviously, it was a sale by public advertisement and is governed by the provisions of law governing sale of property by auction. Therefore, it is really in the realm of contract and normally not within the purview of this court under Article 226 of the Constitution. In that situation, learned counsel for the petitioner submitted that Clause 15 of exhibit P-1, sale notice, reserving uncanalised and arbitrary power in the Chief Commissioner of Income Tax is illegal and violative of Article 14 of the Constitution. He submitted that the power reserved by the Chief Commissioner in himself under Clause 15 is an unrestricted power and hence is unconstitutional. He also contended that in any view in passing the order, exhibit P-3, the Chief Commissioner had violated the rules of natural justice in that he did not hear the petitioner before deciding to cancel the auction and not to accept the bid hammered down in favour of the petitioner. He, therefore, submitted that the order, exhibit P-3, was liable to be set aside. Learned counsel also pointed out that the Chief Commissioner himself was present at the auction and had seen what had taken place and had made no attempt to cancel the auction even after the fall of the hammer in favour of the petitioner and the petitioner was permitted to fulfil the obligation of handing over the earnest money of Rs. 8,75,000, at the conclusion of the proceedings by the auctioneer in terms of the notification, exhibit P-1. It is submitted that if there was any irregularity or illegality as urged by respondents Nos. 3 and 4, the Chief Commissioner should have intervened then and there and should not have acquiesced in the fall of the hammer and in the petitioner being permitted to deposit the earnest money in terms of exhibit P-1. Learned counsel for the petitioner also submitted that after passing exhibit P-3 order cancelling the auction in favour of the petitioner for Rs. 60,50,000, the first respondent should have compelled respondents Nos. 3 and 4 to deposit a higher amount in case a lesser price alone could be fetched at the reauction.

I have given my anxious consideration to these submissions made on behalf of the petitioner. No doubt there is some justification in the complaint of the petitioner that the petitioner was not given an opportunity to put forward his case regarding the allegations against the manner of the conduct of the auction by the second respondent auctioneer. But all the same the right put forward by the petitioner is in the realm of contract and it appears to me that if the petitioner is aggrieved by the cancellation of his bid after it had been accepted, the remedy available to him is in the civil court and not in proceedings under Article 226 of the Constitution. It will also be not possible for this court to conduct an enquiry on the various questions whether the complaints raised by respondents Nos. 3 and 4 were justified or whether the mode of acceptance of the bid of the petitioner by the auctioneer was itself proper. I am of the view that it is not possible for this court to undertake an investigation into these aspects and from that point of view this court is not in a position to exercise its jurisdiction under Article 226 of the Constitution.

It is to be also noticed that the petitioner gets an indefeasible title only after the auction is confirmed by the Chief Commissioner of Income Tax in terms of Clause 1 of the terms and conditions for sale in exhibit P-1 and admittedly there has been no such confirmation. There will also be the question whether the power exercised by the Commissioner under Clause 15 of the terms and conditions of sale is justified on the facts and circumstances of this case. These aspects also cannot appropriately be decided in proceedings under Article 226 of the Constitution.

There is another aspect. The auction sale has been cancelled by the first respondent in public interest going by exhibit P-3. That he has retained in himself such a power is clear from Clause 15 of exhibit P-1. Though there is a sentence stating that the order of the first respondent annulling the auction was the result of some behind the scene activities and instructions, there is no allegation of any mala fides against the first respondent. There is also no material to support the allegation of any behind the scene activities and instructions referred to in the original petition. It is, therefore, not possible prima facie to accept the case that the exercise of power by the first respondent was not bona fide and was not really in public interest. Therefore, even if there is some substance in the complaint of the petitioner that he was not given an opportunity of being heard, since what has been done is something done in public interest I am not inclined to entertain the attack against exhibit P-3, on the ground that it was passed in violation of the principles of natural justice since I feel that what ought to prevail is public interest and not the possible right that may have accrued to the petitioner by the fall of the hammer at his last bid. Therefore, I am of the view that this is not a fit case where this court should exercise its discretion to interfere with exhibit P-3 in favour of the petitioner in this proceeding under Article 226 of the Constitution.

Learned counsel for the petitioner contended that the power conferred on the Chief Commissioner of Income Tax by Clause 15 of exhibit P-1 is uncanalised and arbitrary and hence Clause 15 of exhibit P-1 ought to be struck down as unconstitutional. The petitioner has, acting on the notification, participated in the auction process. He had bid the auction and in terms of exhibit P-1 had even deposited the earnest money. Having thus acquiesced in the procedure laid down by exhibit P-1 and having thus participated in the auction held pursuant to exhibit P-1, I am of the view that the petitioner cannot turn round and attack Clause 15 of exhibit P-1. As noticed by me any right in favour of the petitioner would finally accrue only when in terms of Clause 1 of exhibit P-1 the auction in his favour is confirmed by the first respondent-Commissioner. It is also to be noticed that pursuant to the order, exhibit P-3, the petitioner took back the draft for Rs. 8,75,000 and acknowledged receipt of the same as disclosed from paragraph 8 of the original petition itself. In such a situation I am not inclined to entertain the plea of the petitioner that exhibit P-3 is the result of exercise of an arbitrary power by the Chief Commissioner of Income Tax. I am of the view that prima facie the first respondent-Chief Commissioner has acted bona fide and in public interest and it will not be just or proper to interfere with the decision, exhibit P-3, in proceedings under Article 226 of the Constitution.

Thus I find no reason to entertain this original petition. The same is dismissed.