NEW DELHI: In a significant ruling on public tender law and the exercise of State power, a Supreme Court bench comprising Justice Aravind Kumar and Justice Vipul M. Pancholi has set aside the cancellation of an e-tender-cum-auction for sand mining groups in Shahdol and Katni districts of Madhya Pradesh. The Court held that a bidder’s past commercial offer cannot automatically serve as an immutable benchmark for judging current market value in a subsequent competitive bidding process, and directed the Madhya Pradesh State Mining Corporation Limited to restore the September 2025 tender process in favour of the highest bidders.
Background of the Controversy
Under the Madhya Pradesh Sand (Mining, Transportation, Storage and Trading) Rules, 2019 (as amended in May 2023), the Corporation retained quarry leases while appointing Mine Developer-cum-Operators (MDOs) through competitive bidding. Sahakar Global Limited had earlier secured the Shahdol sand group at an annual bid of Rs 68,84,25,999 on 12.01.2024. However, operational issues arose over non-availability of statutory environmental clearances for all 34 notified mines, leading Sahakar to approach the High Court and obtain an interim order linking payments to actual mineral extraction. Sahakar subsequently exercised its right under Rule 16 to surrender the contract on 11.07.2025.
Similarly, Dhanlaxmi Merchandise Private Limited had secured the Katni sand group on 01.11.2023 at an annual bid of Rs 64,77,66,000, but surrendered the group on 01.08.2025 citing operational expenses, transportation, and low demand. At the relevant time, Rule 16 permitted surrender on three months’ advance notice and did not bar surrendering contractors from participating in subsequent re-tendering.
On 18.09.2025, the Board of Directors of the Corporation consciously resolved to initiate fresh tenders under the prevailing rules to ensure uninterrupted sand supply, despite pending proposals to tighten surrender norms. A fresh Notice Inviting Tender (NIT) was issued on the same day with a reserve price of Rs 44 crore for Shahdol and Rs 50 crore for Katni.
In the financial e-auctions held on 10.10.2025, seven bidders competed for Shahdol, where Sahakar emerged as the highest (H1) bidder at Rs 48,20,40,000 (exceeding the reserve price by Rs 4.20 crore). For Katni, five bidders participated, and Dhanlaxmi emerged as H1 at Rs 54,07,41,111 (exceeding the reserve price by Rs 4.07 crore).
Although an internal legal opinion dated 11.11.2025 advised that the successful bidders were neither debarred nor blacklisted, the Board on 19.11.2025 resolved to cancel the auctions for both districts on the ground that the rates were non-competitive. The Board compared the new bids to the earlier surrendered contracts—noting a 29.98% drop in Shahdol and a 16.52% drop in Katni. The High Court of Madhya Pradesh dismissed the contractors’ challenge on 18.03.2026, holding that the cancellation was justified to protect public revenue.
Contentions of the Parties
Appearing for Sahakar, Senior Advocate Mukul Rohatgi argued that the Corporation arbitrarily compared two distinct commercial situations. The earlier Shahdol bid was mired in statutory permission deficits, as environmental clearance existed for only 23 of 34 mines. He contended that Sahakar exercised a lawful right to surrender under the unamended Rule 16, that genuine multi-bidder competition took place above the reserve price, and that a prospective rule amendment dated 30.01.2026—which subsequently barred surrendering MDOs from re-participating—could not be applied retrospectively.
Senior Advocate K. Parameshwar, appearing for Dhanlaxmi, submitted that while Katni did not face environmental clearance disputes, a past commercial estimate could not permanently tie down future market values. He argued that no valuation or market data was produced to show that the Rs 54.07 crore offer was commercially inadequate in October 2025, and that the numerical difference alone could not be equated to an exchequer loss.
Opposing the appeals, Solicitor General Tushar Mehta and Senior Advocate Maninder Singh, representing the State and the Corporation, contended that highest bidders acquire no vested right to the award of a contract. Citing Clauses 6.6.3 and 26 of the tender conditions, they argued that the Corporation possesses wide commercial latitude to reject bids. They maintained that the Board was justified in curbing a pattern where contractors surrendered high-value bids only to reacquire the same mineral groups weeks later at deeply discounted prices. Counsel for subsequent bidders in a later February 2026 tender also opposed restoring the process, highlighting that higher initial price offers had been received.
The Court’s Analysis
Analyzing the scope of judicial review under Article 14 in tender matters, the Supreme Court noted that while an H1 bidder does not hold an absolute right to contract allotment, public authorities cannot exercise contractual discretion arbitrarily. Referring to judicial precedents including Tata Cellular v. Union of India, Food Corporation of India v. Kamdhenu Cattle Feed Industries, and Golden Food Products India v. State of Uttar Pradesh, the bench stressed that any bid rejection must be anchored in rational, germane material.
The Court observed:
“An earlier bid may well be relevant to such an enquiry. It may indicate that the same asset had previously attracted a higher commitment and may warrant a closer examination of whether the later competition was satisfactory. But a previous bid is not, by itself, a continuing adjudication of market value. It records what a bidder undertook to pay in an earlier contractual setting. The liabilities arising from that bargain remain enforceable according to its terms, but the amount once quoted does not thereby become an immutable minimum for every subsequent auction of the same district group.”
The bench pointed out that the fresh tenders were not for the residual period of old leases, but contemplated an entirely new three-year tenure. The Board had neither found collusion, cartelisation, nor procedural manipulation, nor had it commissioned any contemporaneous valuation to establish the realistic market price in October 2025.
Critiquing the blanket invocation of State revenue, the Court held:
“Public revenue is undoubtedly an important consideration, but so too are fairness in State action, certainty in public dealings and the integrity of processes by which the State invites private parties to compete for public opportunities.”
The bench further observed:
“In the present case, the Board established that the appellants’ current bids were materially lower than their earlier bids. It did not establish that the current bids were materially lower than the value which the State could reasonably expect to obtain from the market in October 2025. Those are not the same conclusions.”
The Court also rejected the retrospective application of the 30.01.2026 rule amendment or the reliance on subsequent February 2026 tenders to justify the cancellation, pointing out that an earlier decision must stand or fall on the contemporaneous record existing at the time it was made.
The Decision
Allowing the appeals, the Supreme Court set aside the High Court judgment and quashed the Board’s decision dated 19.11.2025 and the cancellation notices dated 05.12.2025 regarding Shahdol and Katni. Declining a remand to the Corporation, the Court ordered:
- The September 2025 tender process stands restored for Shahdol and Katni.
- Sahakar and Dhanlaxmi must communicate their unconditional willingness to stand by their final bids (Rs 48,20,40,000 and Rs 54,07,41,111 respectively) within two weeks.
- The Corporation must notify the required security and performance formalities within two weeks thereafter, and complete the allotment process, Letter of Intent, and contract execution within six weeks of compliance.
- The subsequent tender process initiated on 10.02.2026 for Shahdol and Katni is closed, and earnest money deposits of participants in that round must be refunded within four weeks.
- The Court clarified that this judgment does not determine surviving dues, accounts, or liabilities under the earlier surrendered contracts, nor does it question the validity of the 30.01.2026 rule amendments for future tenders.
Case Details
Case Title: M/s Dhanlaxmi Merchandise Pvt. Ltd. v. State of Madhya Pradesh & Ors.
Case No.: Civil Appeal Nos. 13749 & 13750 of 2026
Bench: Justice Aravind Kumar and Justice Vipul M. Pancholi
Date: October 14, 2026
