1. Introduction

This decision concerns the limits of a public authority’s discretion to cancel an auction after declaring the highest bidder, particularly where the bid is above the reserve price and the auction is otherwise untainted by fraud, collusion, or illegality. The appellant, Golden Food Products India, participated in an e-auction conducted by the Ghaziabad Development Authority (GDA) for an industrial plot (Plot No. 26, Madhuban Bapudham Yojana, Ghaziabad) measuring 3150 sq. m..

The appellant cleared the technical bid stage and was declared the highest bidder in the financial bid (₹29,500 per sq. m. against a reserve price of ₹25,600 per sq. m.). Despite this, GDA cancelled the bid—without prior notice—on the premise that “similar properties” (in reality, much smaller plots) had fetched substantially higher per-square-metre rates in the same scheme.

The Allahabad High Court dismissed the appellant’s writ petitions, accepting GDA’s stance that the bidder had no “indefeasible right” to insist on execution of a sale deed and treating the re-auction decision as within administrative discretion. The Supreme Court reversed.

Key Issues

• Whether an auctioning authority may cancel a concluded auction (highest bid above reserve price) merely because it expects a higher price later.
• Whether comparing a large plot’s bid with per-square-metre prices of much smaller plots is a rational basis for cancellation.
• Whether absence of an allotment/acceptance letter defeats the bidder’s challenge despite being declared highest bidder and having complied with conditions.
• Whether cancellation without notice violates rule-of-law standards applicable to State instrumentalities (including Article 14 and natural justice norms).

2. Summary of the Judgment

The Supreme Court held that GDA’s cancellation was arbitrary, irrational, and based on irrelevant considerations. The Court emphasized the sanctity of the auction process and ruled that:

• Where an auction is lawfully held and the highest bid is above the reserve price, the bid cannot be discarded merely because the authority hopes to secure a higher price in a fresh auction.
• Benchmarking a 3150 sq. m. plot against 123–132 sq. m. plots is not a rational comparator; demand dynamics differ, and expecting identical per-square-metre outcomes is untenable.
• In the absence of fraud/collusion/illegality, the highest bid must ordinarily be accepted; otherwise the credibility of public auctions is undermined.
• Returning the earnest money does not “cure” an arbitrary cancellation; the authority cannot act “behind the back” of the bidder.

The Court quashed the cancellation, set aside both High Court orders, directed the appellant to re-deposit earnest money within four weeks, and required GDA to issue an allotment order within two weeks of re-deposit and complete consequential steps to conclude the auction.

3. Analysis

3.1 Precedents Cited (and How They Shaped the Decision)

(A) Core “auction sanctity” line supporting the appellant

K. Kumara Gupta v. Sri Markendaya & Sri Omkareswara Swamy Temple, (2022) 5 SCC 710

• Principle: Public auctions should not be set aside absent “material irregularity/illegality” or vitiating factors such as fraud/collusion; repeated interference frustrates the object of auctions and erodes sanctity.
• Role here: The Court used this to frame a high threshold for setting aside an auction that is otherwise lawful, and to stress that mere dissatisfaction with price is not enough.

Eva Agro Feeds (P) Ltd. v. Punjab National Bank, (2023) 10 SCC 189

• Principle: “Chasing a higher price” is not a lawful reason to cancel a valid auction.
• Role here: This was the decision’s doctrinal anchor. The Court treated GDA’s cancellation as precisely the kind of credibility-eroding conduct condemned in Eva Agro Feeds.

Subodh Kumar Singh Rathour v. Kolkata Metropolitan Development Authority, (2024) 15 SCC 461

• Principle: Public interest is not a pretext for arbitrary termination; mere possibility of a higher fee later is insufficient.
• Role here: Reinforced that fiscal hindsight cannot justify administrative reversal when rule-of-law constraints apply.

M.P. Power Management Company Limited v. Sky Power Southeast Solar India (Private) Limited, (2023) 2 SCC 703

• Principle: Public interest is not always reducible to monetary gain/loss alone.
• Role here: Supported a broader conception of public interest that includes process integrity, predictability, and trust in public contracting.

(B) Authorities relied on by GDA / distinguished by the Court

Tata Motors Ltd. v. Brihan Mumbai Electric Supply & Transport Undertaking, (2023) 19 SCC 1

• Principle: Limited judicial review in tenders; courts should give “fair play in the joints.”
• How treated: Not rejected, but effectively confined: “fair play in the joints” does not extend to arbitrary cancellation based on irrelevant comparisons after a lawful auction yields a highest bid above reserve price.

Haryana Urban Development Authority v. Orchid Infrastructure Developers (P) Ltd., (2017) 4 SCC 243

• Principle in that case: The contract contained an express clause allowing rejection without reasons.
• Distinction drawn: The Supreme Court noted such a clause was “conspicuous by its absence” here—reducing GDA’s ability to justify cancellation as an unreviewable discretion.

Rajasthan Housing Board v. G.S. Investments, (2007) 1 SCC 477

• Principle in that case: Re-auction ordered amid allegations/news of bungling and prices much below market rate.
• Distinction: No comparable allegations or circumstances existed here; process integrity was not impeached.

State of Orissa v. Harinarayan Jaiswal, (1972) 2 SCC 36

• Principle in that case: Power to accept/reject vested in the highest authority; re-auction directed as price was considered inadequate.
• How treated: The Court suggested the direction may have been fact-specific; it did not endorse a general “inadequacy” ground where reserve price is met and comparators are irrelevant.

Uttar Pradesh Avas Evam Vikas Parishad v. Om Prakash Sharma, (2013) 5 SCC 182

• Principle in that case: Bid below reserve price can be rejected.
• Distinction: Here the bid was above reserve price; therefore the “below reserve” rationale was inapplicable.

Meerut Development Authority v. Association of Management Studies, (2009) 6 SCC 171

• Principle in that case: Allotment could be denied where quoted price for remaining land was below reserve price.
• Distinction: Again, not a “below reserve” scenario; the present case involved a highest bid exceeding the reserve.

Indore Vikas Praadhikaran (IDA) v. Shri Humud Jain Samaj Trust, 2024 SCC OnLine SC 3511

• Principle in that case: Distinguished Eva Agro Feeds because cancellation was based on an objective impediment (outstanding property tax of ₹1.25 crore) discovered during finalisation.
• Distinction: Here there was no such disqualifying discovery or objective encumbrance; cancellation was grounded only in an expectation of higher returns based on non-comparable plots.

Nagar Nigam, Meerut v. Al Faheem Meat Exports (P) Ltd., (2006) 13 SCC 382

• Principle: Tender/auction promotes transparency, competition and elimination of irregularities; exceptions exist (emergency, single-source, repeated failed auctions, too-low bids, etc.).
• How treated: The Supreme Court’s reasoning implicitly aligns with this: exceptions must be real and demonstrable; they cannot be manufactured by “comparative price dissatisfaction” after the auction.

3.2 Legal Reasoning (Why the Supreme Court Intervened)

(i) Reserve price and rational comparators: large-plot economics matter

A central move in the Court’s reasoning is its economic/administrative realism: demand for large industrial plots is typically lower than for smaller plots. GDA itself fixed the same reserve price (₹25,600 per sq. m.) for both the large plot (3150 sq. m.) and much smaller plots (≈124–132 sq. m.). Having calibrated reserve price at that level, it was irrational to later invalidate the outcome by referencing the higher per-square-metre prices fetched by tiny plots, especially when only two bidders participated for the large plot.

The Court therefore treated “comparison with smaller plots” as an irrelevant consideration—a classic public law ground of invalidity.

(ii) “Expectation of higher price” is not a lawful cancellation ground

The judgment squarely applies the principle of Eva Agro Feeds (P) Ltd. v. Punjab National Bank: a public auction cannot be cancelled simply because the authority thinks it might do better next time. That approach, the Court warned, undermines the credibility and reliability of auction mechanisms—key components of transparent public disposal.

(iii) Article 14 discipline in contractual settings: discretion is not whim

While government bodies enjoy discretion in commercial matters, that discretion is bounded by non-arbitrariness. Here, the Court characterised GDA’s act as “arbitrary, whimsical and irrational,” indicating a violation of the constitutional discipline that applies to State instrumentalities even in contractual/auction contexts.

(iv) Procedural fairness: cancellation “behind the back” of the bidder

The Court noted the cancellation occurred without prior intimation to the appellant. Although the judgment does not build the outcome solely on audi alteram partem, it treats the absence of notice/hearing as aggravating the arbitrariness, especially when no bidder default, disqualification, or public-interest impediment existed.

(v) Rights and obligations after the highest bid is accepted/declared

The High Court’s approach leaned heavily on “no vested right absent allotment letter.” The Supreme Court rejected that framing on these facts: once the auction is duly held, the bid is highest and above reserve, and the authority has accepted and declared the highest bidder, the Court described this as a “crystallization of the future rights and obligation of the parties”—implying a public-law duty to proceed to allotment unless a legally relevant reason exists to stop.

Importantly, the Court did not treat issuance of a sale deed as automatic; it directed re-deposit of earnest money (since it had been refunded) and then mandated allotment and consequential steps, thereby restoring the parties to the position consistent with a lawful auction outcome.

3.3 Impact

(A) Constraining “re-auction for better revenue” impulses

Development authorities and other State instrumentalities frequently justify re-auctions on “public revenue” grounds. This judgment tightens the rule: where reserve price is met and process integrity is unimpeached, a re-auction motivated by the hope of “better price” is vulnerable to being struck down as arbitrary—especially when the comparator set is flawed (e.g., large plot compared to smaller plots).

(B) Strengthening bidder confidence and auction credibility

The Court explicitly links rule-of-law compliance to the credibility of auctions. Practically, this reduces “post-auction uncertainty” and should encourage participation—an indirect economic benefit that aligns with the public interest beyond immediate revenue maximisation.

(C) Doctrinal clarification: limited judicial review does not mean “no review”

Authorities often rely on “limited judicial review” propositions (as in Tata Motors Ltd. v. Brihan Mumbai Electric Supply & Transport Undertaking). This decision demonstrates that courts will still intervene where:

• the reason for cancellation is irrelevant or irrational,
• the action appears whimsical or selective, or
• the authority uses “public interest” as a pretext for price-chasing.

(D) Guidance on comparability and valuation logic

A notable practical takeaway is the Court’s insistence on sensible comparators: per-square-metre outcomes for small plots cannot automatically benchmark large-plot auctions. This may influence how authorities design reserve prices, segmentation of plots, and internal decision-making standards for acceptance/rejection.

4. Complex Concepts Simplified

• Reserve price: The minimum price set by the authority. If the highest bid is below it, rejection is usually justified. If it is above it, rejection needs a legally relevant, rational reason.
• Two-bid system (technical + financial): Technical bid checks eligibility/compliance; financial bid determines price competition among technically qualified bidders.
• Earnest money deposit (EMD): A security amount submitted with the bid to demonstrate seriousness. Refund of EMD does not automatically validate an illegal cancellation; it mainly restores money, not legality.
• Writ of mandamus: A constitutional remedy directing a public authority to perform a public/legal duty—used here to compel completion of a lawful auction outcome.
• Article 14 (non-arbitrariness): Even in contracts, the State must act fairly, on relevant considerations, without whim or discrimination.
• “Fair play in the joints”: Courts give the executive room to manage contracts, but this does not protect decisions that are irrational, irrelevant, or undermine transparent process.
• Legitimate expectation (in substance): When a bidder is declared highest in a lawful process and meets conditions, it is reasonable to expect the authority to proceed—unless a valid reason emerges (fraud, illegality, disqualification, encumbrance, etc.).

5. Conclusion

GOLDEN FOOD PRODUCTS INDIA v. STATE OF U.P. cements a stringent rule-of-law constraint on post-auction reversals: a public authority cannot cancel a valid auction (highest bid above reserve price) merely to chase a potentially higher price, particularly by relying on non-comparable benchmarks such as much smaller plots.

The judgment harmonises limited tender-review deference with constitutional non-arbitrariness, reinforces the sanctity and credibility of public auctions, and signals that “public interest” cannot be reduced to speculative revenue maximisation at the cost of fairness, rationality, and process integrity.