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Auction must fetch fair market value

Fixation of a reserved price for auction by a public authority based on the circle rate of a property does not imply that it must sell it at that price. Circle rates are not a true measure to determine the actual market value of a property, the Supreme Court stated while dismissing the appeal case, E-City Entertainment vs State of Uttar Pradesh. The court explained that the authority must be satisfied that the price offered truly represented the market value. Otherwise, it can cancel the auction.

In this case, the Kanpur Corporation offered for sale a prime plot with a reserve price of Rs 15.47 crore. The firm offered Rs 21.51 crore, which was the highest of the three bids. However, after some time, the corporation cancelled the entire tender process because even the highest bid was far below the market value, which was assessed at Rs 100 crore.

While ordering the return of the earnest money to the firm, the judgment said: "The property offered by the corporation is admittedly public property in the hands of the corporation as a trustee who is not only entitled but duty-bound to protect its interest by making sure that the same is sold at the optimum price it is capable of fetching in the open market."

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