2006 (11) TMI 689 - HC - Indian Laws

Summary

Issues Involved:
1. Rejection of the highest bid by the Delhi Development Authority (DDA).
2. Comparison of auction prices with other plots.
3. Procedural fairness and arbitrariness in the decision-making process.
4. Impact of non-acceptance of the highest bid on public confidence and development projects.

Detailed Analysis:

1. Rejection of the Highest Bid by the Delhi Development Authority (DDA):
The petitioner challenged the rejection of its highest bid for Hotel Plot No. 01 in Central Business District (East), Shahdara, Delhi. The bid was rejected by the Vice-Chairman of DDA without providing any reason. The petitioner had bid Rs. 170.001 crores, which was above the reserve price of Rs. 167.40 crores and had deposited 25% of the bid amount, i.e., Rs. 42.5 crores.

2. Comparison of Auction Prices with Other Plots:
The DDA's Finance Member recommended re-auction of the plot, citing that the bid price of Rs. 37,778 per sq. meter was lower compared to the auction prices of Rs. 75,960 to Rs. 126,068 per sq. meter for some shopping/office plots in Kondli Gharoli (East Delhi). This comparison was deemed inappropriate by the court as the hotel plot in question was significantly larger (20,000 sq. meters) and for different usage (hotel) compared to the smaller shopping/office plots.

3. Procedural Fairness and Arbitrariness in the Decision-Making Process:
The court scrutinized the decision-making process of the DDA and found it to be arbitrary and lacking in application of mind. The decision to reject the bid was based on an inappropriate comparison and did not consider the unique characteristics of the hotel plot. The court emphasized that every state action must be free from arbitrariness, bias, or mala fides and must satisfy the test of reasonableness as understood in Wednesbury's case.

4. Impact of Non-Acceptance of the Highest Bid on Public Confidence and Development Projects:
The court noted that the non-acceptance of the highest bid and the decision to re-auction the plot without proper reasoning undermined public confidence in the open bid system. It also caused avoidable delays in completing development projects, which could negatively impact the planning and growth of the city, especially considering the upcoming Commonwealth Games of 2010.

Conclusion:
The court found the DDA's decision to reject the highest bid to be irrational, arbitrary, and lacking in credibility. The comparison of the hotel plot with smaller commercial plots was deemed inappropriate. The court quashed the DDA's decision and directed the acceptance of the petitioner's bid. The writ petition was allowed, and the rule was made absolute.