Supreme Court Quashes Cancellation of Highest Bid in State Auction, Directs Allotment After Re‑Deposit of Earnest Money

A bench of Justices B.V. Nagarathna and R. Mahadevan heard appeals by Golden Food Products India challenging two final orders of the Allahabad High Court that had dismissed writ petitions seeking allotment of an industrial plot after the Ghaziabad Development Authority (GDA) cancelled the appellant’s financial bid. The core issue before the Court was whether the auctioning authority could cancel a valid highest bid—placed above the reserve price—on the ground that smaller plots in the same scheme fetched higher per‑square‑metre rates.

The Supreme Court allowed the appeals, set aside the High Court orders dated 24.05.2024 and 15.07.2024, quashed the cancellation of the appellant’s bid and directed specific performance steps subject to a procedural compliance. The Court held that an auction held in accordance with law carried sanctity and that the expectation of obtaining a higher price in a subsequent auction could not justify discarding a valid highest bid in the absence of fraud, collusion or other infirmity. The Court observed that the authority’s comparison of the subject large plot with substantially smaller plots for the sole purpose of cancelling the bid amounted to an irrelevant and arbitrary consideration. The Court, in its reasoning, observed: "An auction process has a sanctity attached to it and only for valid reasons that the highest bid can be discarded in an auction which is otherwise held in accordance with law. If a valid bid has been made which is above the reserve price, there should be a rationale or reason for not accepting it. ... Expectation of a higher bid in a subsequent auction cannot be a reason to cancel an auction held in accordance with law." The judgment also relied on the principle noted in Eva Agro Feeds that “…mere expectation of the Liquidator that a still higher price may be obtained can be no good ground to cancel an otherwise valid auction and go for another round of auction. Such a cause of action would not only lead to incurring of avoidable expenses but also erode the credibility of the auction process itself.”

Background The dispute arose from a GDA auction dated 25.08.2023 for multiple plots under the Madhuban Bapudham Yojana. The subject industrial plot measured 3,150 sq. metres and carried a reserve price of Rs.25,600 per sq. metre. Golden Food Products submitted technical and financial bids; its financial bid of Rs.29,500 per sq. metre was the highest and its earnest money of Rs.80,64,000 was deposited. No allotment letter issued, and on 22.05.2024 GDA notified the appellant that its financial bid had been cancelled and that a fresh auction would be held; the earnest money was refunded.

The appellant challenged the cancellation before the Allahabad High Court by writ petitions seeking a mandamus to issue an allotment letter and execute a sale deed. The High Court dismissed the petitions, accepting GDA’s explanation that the appellant’s rate was low compared to prices fetched for smaller plots in the same scheme and observing that no indefeasible right to allotment arose until formal acceptance. The appellant then moved this Court.

At the Supreme Court, the appellant argued cancellation was arbitrary, was not a ground in the auction brochure, violated Article 14 and principles of natural justice, and amounted to rewriting the tender post facto. The respondents contended that participation in an auction did not vest a right until acceptance and that the authority reserved final discretion under the tender terms; judicial review of tender processes must be restrained. The Court examined precedents including K. Kumara Gupta, Eva Agro Feeds, Tata Motors and others, and distinguished cases where material irregularity, fraud, collusion or statutory reservation of a right to reject without reasons existed. Finding no fraud, collusion or statutory clause permitting arbitrary rejection here, the Court concluded the cancellation was arbitrary and quashed it.

The appeals were allowed; the appellant was directed to re‑deposit the earnest money preferably within four weeks and, within two weeks of re‑deposit, GDA was directed to make an order of allotment and take consequential steps to conclude the auction process in favour of the appellant. Parties were directed to bear their own costs.

Case No.: 2026 INSC 22 Case Title: Golden Food Products India v. State of Uttar Pradesh & Others Appearances: For the Petitioner(s): Sri Sanghi (Senior Counsel) For the Respondent(s): Learned counsel for respondents (names not specified)