'Can't bypass the highest bidder in an auction'

Auctions, particularly those held by government authorities, are often manipulated to suit vested interests. When the highest bidder is not declared successful due to extraneous considerations, can he approach the consumer forum for redressal of his grievance? This interesting issue was decided through a judgment of the National Commission delivered on August 1, 2011 by member Anumpam Dasgupta.

Shiv Shankar Lal Shukla was the highest bidder for a plot of land auctioned by Uttar Pradesh Avas Evam Vikas Parishad. Yet, he was not allotted the plot. Shukla filed a consumer complaint before the Kanpur district forum, which upheld his complaint alleging negligence and deficiency in service. The Parishad challenged this order before the Uttar Pradesh State Commission, which upheld the forum’s order and dismissed the appeal. Not content at having lost two rounds of litigation, the Parishad filed a revision petition before the National Commission.

The Parishad’s main contention was that the housing commissioner had been vested with the discretionary power to accept or reject any bid, a fact not considered either by the district forum or the State Commission.

The National Commission had considered this submission in the light of an earlier government notification issued on February 6, 1997, in view of repeated cancellation of auction sales. The notification said the government had received several complaints that despite receiving bids/tenders that were higher than the reserve price, some officers either delay giving approvals to the auction proceedings on one pretext or the other, or, in some cases, even include the auctioned property in the next auction, due to personal reasons. Sometimes, they justify their action by claiming that the bid/offer received in the subsequent auction was higher than the original one. So, their action of not considering the original highest bid was in the interest of the organisation. After analysing the complaints, the government found these arguments were incorrect and against the principles of natural justice. It was observed that fair competition in a public auction could be seen only if the highest bidder got the property in question. Also, it would be unfair to promote a culture where the highest bidder (meeting the reserve price requirement) was left to the mercy of the discretionary powers of a particular authority.

Hence, with a view to stop such malpractices and to introduce transparency in the auction proceedings, it was necessary to clamp the corruption. The authority would have the power to interfere in the auction proceedings only in exceptional circumstances in which it was suspected that the bidders were either working in connivance with each other, or dummy bidders were participating in the auction proceedings. In such a situation, a decision should be taken within a day after the auction was held, indicating the reasons for such interference in the proceedings.

The Parishad attempted to justify the non-allotment of the plot, saying there were only two people who had participated in the auction, including Shukla.

This contention was proved to be false, since in an earlier correspondence, the Parishad had listed the names of four people who had participated in the auction. Moreover, the decision in respect of the validity of the auction had not been taken within a day, as prescribed by the government notification. It had been kept in abeyance for more than two months, without any justifiable reason.

The Parishad argued Shukla could not be termed a “consumer” and the dispute was not a “consumer dispute”. Overruling this, the commission said when a development authority invited applications for allotment of sites/plots for construction of houses, but failed or delayed the handing over of possession, it amounted to a deficiency in service.

Accordingly, the commission said non-acceptance of the highest bid for extraneous reasons would constitute both deficiency in service, as well as an unfair trade practice. Also, non-observance of the statutory directions issued by the government of Uttar Pradesh to the Housing Parishad would amount to “negligence per se”. The Parishad’s revision petition was thus dismissed, upholding the order in favour of the consumer.

A consumer who faces arbitrary and high-handed action of a government official can now invoke the provisions of the Consumer Protection Act to fight for his rights.

The author is a consumer activist