Kerala High Court orders inquiry into KSEB’s handling of scrap auction cancelled after the winning bidder paid in full

Hiba Trading Company, a scrap trader, won an MSTC e-auction for dismantled penstock/LPP pipes belonging to the Kerala State Electricity Board (KSEB).

After the company paid the full consideration and received a delivery order, KSEB cancelled the sale, initially citing administrative reasons.

In response to the company’s representation, KSEB relied on the auction price being substantially below a prior sale rate, the material being distributed across several locations, and difficulties in measuring, verifying, and delivering it.

KSEB stated that it had invoked Clause 16 of the auction’s Special Terms and Conditions.

The Single Judge dismissed the company’s writ petition, and the company appealed.

A fresh e-auction was scheduled for 29 September 2026.

1. Whether KSEB’s cancellation of the completed sale, after the successful bidder had paid the full consideration and received a delivery order, warranted interference in the writ appeal.

2. Whether KSEB’s failure to address the grounds later relied upon for cancellation before proceeding with the original auction warranted further action.

The judgment cites no statute, precedent, or specific legal test governing cancellation of the sale.

KSEB relied on Clause 16 of the MSTC e-auction’s Special Terms and Conditions as authority for cancellation.

The Court emphasized that public auctions involve public funds and that the authority must act with accountability when conducting and recalling an auction.

It left the legality of the cancellation and any claim for loss or damage open to determination in appropriate legal proceedings.

The Court considered KSEB’s explanation that the auction price was substantially lower than a prior sale rate and that the pipes’ dispersed locations and varying dimensions made accurate measurement and delivery difficult.

However, it questioned why KSEB had not assessed those matters before fixing the reserve price, accepting the bid, and allowing the appellant to pay the full consideration.

Although the Court regarded KSEB’s approach as lacking accountability, it declined to interfere with the cancellation in light of the stated risk of financial loss to KSEB.

It instead directed an inquiry into why the grounds for cancellation had not been considered before the original sale proceeded.

The Chairman of KSEB was directed to constitute a high-level committee to investigate the matter and complete its inquiry within six weeks of communication of the order.

The appellant was permitted to participate in the scheduled or any rescheduled auction and could pursue civil remedies for any loss or damage; the cancellation remained open to challenge before a competent forum, whose decision would not be constrained by observations in the appeal.