Editor’s Note
This ruling by the Rajasthan High Court underscores a fundamental principle of contract and auction law: the terms set at the time of a sale are binding. The decision reinforces the security of transactions and protects bidders from post-hoc financial demands by the government.
The Rajasthan High Court has ruled that the government cannot change the terms of lease rent after an auction. In a 1995 case, the court decided in favor of the buyer and rejected a demand for additional fees.
According to a report by The Economic Times, the case began on September 18, 1995. At that time, the government advertised an auction for plots in Sumerpur. An individual participated by depositing ₹10,000, won the plot with the highest bid, and took possession. After the bid was approved, the buyer took possession of the plot and even began construction work. However, three years later in June 1998, the government issued a new order to the buyer.
The government told the buyer that they must now pay an annual lease rent of 5% of the plot’s value. Furthermore, a condition stipulated that this rent would increase by 25% every 15 years. The buyer challenged this government order, which imposed an additional financial burden, in court. After a lengthy hearing, on November 6, 2025, the Rajasthan High Court ruled in favor of the buyer and rejected the government’s demand.
The High Court outlined three main legal grounds in its decision…
1. **Auction Terms Are Final:** The 1995 notice made no mention of annual rent. The court stated that when a government agency auctions land based on set terms, those terms constitute a contract. The government cannot later impose new financial burdens at its discretion.
2. **Principle of Promissory Estoppel:** The buyer paid the money and undertook construction relying on the auction terms. The government cannot now go back on its promise. This is known in law as ‘promissory estoppel’.
3. **Transfer of Property Act:** Citing Section 105, the court said a lease can be granted by paying a premium only once; it is not mandatory to collect rent every year.
The state government argued that the buyer had given an undertaking to sign the lease deed approved by the government. The court made a stern observation on this, stating that such an undertaking cannot be considered the buyer’s voluntary consent. Buyers had no other option at the time, as refusal could have led to the forfeiture of their plot. The court dismissed the government’s appeal and upheld the earlier decision of the single judge.