Court’s Decision
The Bombay High Court quashed the cancellation of a hospital plot auction by the City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO). The Court held that CIDCO acted arbitrarily in cancelling the tender process for Plot No. 25 at Dronagiri despite the Chief Minister’s approval to include partnership firms in the eligibility criteria. It directed CIDCO to issue an allotment letter in favour of the petitioner, a maternity and fertility clinic partnership firm, noting that “CIDCO’s mistakes cannot result in denial of public amenities like healthcare” .
Facts
The petitioner, a registered partnership firm, participated in CIDCO’s April 2022 tender for hospital plots. The eligibility criteria were expanded by CIDCO’s Board Resolution No. 12458 dated 31 July 2021 to include partnership firms, pending State approval. The petitioner bid ₹40,211 per sq. mtr. for Plot No. 25, emerging as the highest bidder.
However, CIDCO withheld allotment until State approval was received. While the Chief Minister approved the resolution on 8 February 2024, CIDCO claimed it received communication only in October 2024. Meanwhile, CIDCO cancelled the tender on 3 September 2024 citing non-receipt of approval and passage of time, later communicating cancellation by letter dated 4 October 2024. The petitioner challenged this cancellation before the High Court .
Issues
- Whether CIDCO’s cancellation of the tender process for Plot No. 25 was arbitrary given that State approval was already granted.
- Whether the reason of potential higher valuation due to lapse of time justified cancellation.
- Whether denial of allotment violated public interest in providing healthcare facilities.
Petitioner’s Arguments
The petitioner contended that CIDCO’s cancellation was illegal since the Chief Minister had already approved inclusion of partnership firms months earlier. The delay in communication of approval could not prejudice the petitioner.
It argued that the cancellation order was cryptic, without proper reasoning, and contrary to precedents mandating recording of reasons by public authorities. It further submitted that its bid exceeded the revised reserve price in the subsequent July 2025 auction, causing no financial loss to CIDCO. Reliance was placed on Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, Ravi Yashwant Bhoir v. District Collector, Raigad, and S.N. Mukherjee v. Union of India to stress that administrative orders must contain reasons .
Respondent’s Arguments
CIDCO argued that it had no choice but to cancel the tender as the State’s approval was not received until October 2024. It claimed no vested right accrued to the petitioner merely for being the highest bidder. CIDCO also emphasised that market rates had risen, justifying re-auction for higher revenue. It relied on Hare Krishna Enterprises v. CIDCO (2025), where cancellation of auction was upheld due to potential for higher bids .
Analysis of the Law
The Court examined CIDCO’s powers under the Maharashtra Regional and Town Planning Act, 1966 and its land disposal regulations. It held that while CIDCO could cancel tenders, its decision must be rational and not arbitrary.
- The first ground of cancellation (non-receipt of approval) was rejected since the Chief Minister had already approved the resolution on 8 February 2024. CIDCO’s failure to track approval status for eight months was termed negligence.
- The second ground (change in valuation) was also rejected since the petitioner’s bid of ₹40,211 per sq. mtr. exceeded the revised base price of ₹35,039 in July 2025.
The Court stressed that healthcare allotments serve a welfare function distinct from commercial auctions. Delay in allotting hospital plots adversely impacts public access to medical facilities, undermining the object of the scheme .
Precedent Analysis
- Kranti Associates Pvt. Ltd. (2010, SC) — Held that all administrative decisions affecting rights must contain reasons. Applied here to invalidate CIDCO’s cryptic cancellation order.
- Ravi Yashwant Bhoir (2012, SC) — Reiterated the duty to record reasons in administrative decisions.
- S.N. Mukherjee (1990, SC) — Established that reasoned orders are part of natural justice.
- Neena Singh Thakur (2025, HP HC) — Cited by petitioner to emphasise transparency in cancellation orders.
- Hare Krishna Enterprises (2025, Bom HC) — Distinguished; there, higher competing bids were available, unlike here where petitioner’s bid already exceeded reserve price .
Court’s Reasoning
The Court found CIDCO guilty of two mistakes:
- Including new categories in eligibility before formal approval.
- Failing to follow up with the State on approval status despite proximity to Mantralaya.
It held that these errors could not justify depriving the petitioner of allotment. The Court underscored that the purpose of the scheme was public healthcare, not speculative revenue maximisation. It observed:
“For mistakes committed by CIDCO, the petitioner cannot be made to suffer. Administrative lapses cannot override the larger public interest of ensuring timely provision of healthcare facilities.”
Conclusion
The High Court set aside CIDCO’s cancellation order dated 4 October 2024 and directed it to issue the allotment letter for Plot No. 25 to the petitioner. It held that arbitrary cancellation on unsustainable grounds violated fairness and public interest .
Implications
This ruling establishes that State instrumentalities must act fairly and diligently, especially where allotments concern public amenities like healthcare. It limits CIDCO’s discretion to cancel auctions arbitrarily and reaffirms judicial oversight to prevent administrative lapses from harming citizens. For future healthcare infrastructure projects, it ensures that delays or negligence by authorities cannot derail essential public services.
FAQs
Q1. Can CIDCO cancel an auction after bids are submitted?
Yes, but cancellation must be based on rational grounds. Arbitrary or perverse reasons, as in this case, are unsustainable.
Q2. Does a highest bidder have a vested right to allotment?
Not automatically, but where cancellation is arbitrary and public interest is affected, courts can direct allotment.
Q3. Why did the Court emphasise healthcare needs in this case?
Because the plots were earmarked for hospitals, and delays in allotment meant denial of medical facilities to Navi Mumbai residents .