New Delhi: The Supreme Court has ruled that an auctioning authority cannot arbitrarily cancel the highest bid in a valid auction merely because it expects to fetch a better price in a subsequent auction, and that comparing bids for dissimilar properties amounts to imposing new conditions after the auction.
The Court, comprising Justice B.V. Nagarathna and Justice R. Mahadevan, delivered the decision on January 6, 2026, while allowing appeals filed by Golden Food Products India against orders of the Allahabad High Court.
The appeals challenged orders dated May 24, 2024, and July 15, 2024, which had dismissed the appellant’s writ petitions seeking allotment of an industrial plot in Ghaziabad.
The Ghaziabad Development Authority (GDA) had conducted an auction on March 15, 2024, for an industrial plot measuring 3,150 square metres with a reserve price of ₹25,600 per square metre. The appellant submitted a bid of ₹29,500 per square metre, which was 15.23% above the reserve price, and was declared the highest bidder among only two participants. The appellant’s technical bid had been approved on March 14, 2024, and earnest money of ₹80.64 lakh was deposited.
However, on May 22, 2024, the GDA cancelled the appellant’s bid without prior notice, claiming that the rate was low compared to rates fetched for smaller plots (ranging from 123 to 132 square metres) sold on the same date, which had received bids between ₹82,000 and ₹1,21,000 per square metre. The GDA refunded the earnest money and announced a fresh auction.
The appellant argued that the cancellation was arbitrary and violated Article 14 of the Constitution, as the ground for cancellation was not mentioned in the auction brochure and was only discovered through RTI applications. It was contended that comparing bids for a 3,150 square metre plot with much smaller plots amounted to rewriting the tender conditions after bids were opened.
The Court found merit in these submissions. It held that, ordinarily, when large areas of industrial land are auctioned, demand is lower compared to smaller plots, and pricing is assessed differently. The GDA had intentionally fixed an identical reserve price of ₹25,600 per square metre for both the large plot and the smaller plots, recognising the lower demand for larger areas.
In a detailed analysis of auction law, the Court emphasised that merely because smaller plots measuring 123–132 square metres fetched higher prices could not justify cancelling an auction for a 3,150 square metre plot where demand was demonstrably lower. The presence of only two bidders for the subject plot, as against higher competition for smaller plots, reflected the difference in market dynamics.
The Court rejected the GDA’s argument that it had discretion to cancel the auction in “public interest” or to maximise revenue. Relying on its earlier decision in Eva Agro Feeds (P) Ltd. v. Punjab National Bank (2023), the Court reiterated that “mere expectation 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 course of action would not only lead to incurring of avoidable expenses but also erode the credibility of the auction process itself.”
The Court also distinguished several cases cited by the respondents. Unlike Haryana Urban Development Authority v. Orchid Infrastructure Developers (2017), where the contract expressly reserved the right to reject bids without assigning reasons, no such clause existed in the present auction terms. Similarly, cases such as Rajasthan Housing Board v. G.S. Investments (2007), involving allegations of large-scale bungling, and Uttar Pradesh Avas Evam Vikas Parishad v. Om Prakash Sharma (2013), where the bid was below the reserve price, were held to be inapplicable.
On the issue of contractual rights, the Court held that declaration as the highest bidder crystallises future rights and obligations between the parties. The appellant had a legitimate expectation of receiving an allotment letter, particularly in the absence of fraud, collusion, or any other valid ground for cancellation. The GDA was under a duty to issue the allotment letter after accepting both the technical and financial bids.
The Court observed that bidders make substantial financial arrangements before participating in auctions, and that cancelling valid bids on irrelevant considerations undermines the sanctity of the process. Cancellation without prior notice violated principles of natural justice, and merely returning the earnest money could not legitimise such arbitrary action.
In a significant observation on administrative law, the Court emphasised that “there cannot be any imprimatur of the Court to such arbitrary cancellation of auction by an instrumentality or agency of the State in the absence of fraud, collusion, suppression, etc.” An auction process, the Court held, carries inherent sanctity and can be interfered with only for valid and lawful reasons.
The Court also noted that the GDA had allotted adjacent plots and plots measuring over 2,000 square metres at prices only marginally above the reserve price, rendering its treatment of the appellant’s bid—15.23% above the reserve price—selective, inconsistent, and arbitrary.
Holding that the High Court had been erroneously swayed by the GDA’s submissions and had failed to appreciate the distinction between an “indefeasible right to allotment” and a “right to fair and non-arbitrary treatment,” the Supreme Court set aside both impugned orders.
The Court directed the appellant to re-deposit the earnest money within four weeks, following which the GDA was directed to issue an allotment order within two weeks and complete all consequential steps to conclude the auction process in favour of the appellant.
Reiterating its position, the Court held that public interest cannot be used as a pretext to arbitrarily terminate contracts, and that mere dissatisfaction with the financial outcome does not justify cancellation of an otherwise valid auction.
Case Title: Golden Food Products India v. State of Uttar Pradesh and Others
(Civil Appeal arising out of SLP (C) Nos. 18095–18096 of 2024)
