Sanjay Kumar vs. Union Of INDIA Through Its Secretary, Department Of Finance

Facts

The petitioner, Sanjay Kumar, was the second highest bidder in an e-auction for a salvaged vehicle, offering Rs. 14,62,500/-, which was above the reserve price of Rs. 13 lakhs. The highest bidder (H1) had bid Rs. 35 lakhs but defaulted, leading to forfeiture of their earnest money. The petitioner challenged the 4th respondent's decision not to accept his bid, as communicated on July 1, 2026. The 2nd and 3rd respondents, representing the insurer, argued that they were duty-bound to secure the best price. They had obtained additional quotations, including a commercial offer of Rs. 16 lakhs (basic) plus GST, amounting to Rs. 18,88,000/- gross, indicating the vehicle's value was higher than the petitioner's bid. Consequently, they decided to re-auction with a revised reserve price of Rs. 16 lakhs, offering the petitioner a chance to participate, which he declined.

Held

The Court held that while Clause 3 of the e-auction instructions rendered the second highest bidder eligible to proceed, it did not guarantee acceptance of their bid. The Court found that the insurer's duty to secure the best possible price was paramount. The rejection of the petitioner's bid was justified by cogent reasons, including independent quotations that indicated a significantly higher market value for the salvaged vehicle than the petitioner's bid of Rs. 14,62,500/-. The Court noted that the insurer had obtained a commercial offer of Rs. 18,88,000/- gross. The decision to re-auction with an increased reserve price of Rs. 16 lakhs was considered a bona fide effort to achieve fair market realization. The petitioner was offered an opportunity to participate in the re-auction but declined. The Court distinguished the case from Golden Food Products India, finding no arbitrariness or unreasonableness in the respondents' actions, which were aimed at maximizing the realization of salvage value. Therefore, the writ petition was dismissed.

Key Issues

1. Whether the 4th respondent's decision not to accept the petitioner's bid, despite being the second highest bidder and the highest bidder defaulting, was arbitrary and unreasonable, violating principles of natural justice and constitutional law, particularly in light of Clause 3 of the e-auction instructions? 2. Whether the insurer's duty to obtain the best possible price for the salvaged vehicle justified the rejection of the petitioner's bid and the decision to re-auction, especially when additional quotations indicated a higher market value? Petitioner's arguments: The petitioner contended that as the second highest bidder, and with the highest bidder defaulting, he was eligible to proceed with the bid as per Clause 3 of the e-auction instructions. He argued that the reason provided for rejecting his bid was unreasonable and arbitrary, and that the cancellation of the auction based on the expectation of a higher bid in a subsequent auction was impermissible, citing Golden Food Products India Vs. State of Uttar Pradesh and others, 2026 SCC OnLine SC 24. Respondents' arguments: The respondents argued that the insurer's duty was to obtain the best possible price. They presented evidence of additional quotations showing a significantly higher market value than the petitioner's bid. They also relied on e-auction terms allowing cancellation or rejection of bids without assigning reasons, asserting that in this case, cogent reasons were provided, and the decision to re-auction was in the interest of fair market realization. They highlighted that the petitioner was given an opportunity to participate in the re-auction with a revised reserve price.