The Supreme Court of India has set aside the orders of the Allahabad High Court and quashed the decision of the Ghaziabad Development Authority (GDA) to cancel an auction bid for an industrial plot. The Court ruled that a statutory authority cannot arbitrarily cancel a valid auction merely because it expects a higher price, specifically when such expectation is based on an irrelevant comparison with smaller plots.
In the judgment delivered on January 6, 2026, by a bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan in Golden Food Products India v. State of Uttar Pradesh & Others (2026 INSC 22), the Court held that the “expectation of a higher bid in a subsequent auction cannot be a reason to cancel an auction held in accordance with law.”
Background of the Case
The dispute arose from an auction advertised by the GDA (Respondent No. 2) on August 25, 2023, for various plots under the Madhuban Bapudham Yojana. The subject property was Plot No. 26, an industrial plot measuring 3150 square metres.
The auction employed a two-bid system. The appellant, Golden Food Products India, submitted technical and financial bids on February 2, 2024. After the technical bid was approved, an open auction was conducted on March 15, 2024. The reserve price for the plot was fixed at Rs. 25,600 per square metre.
Only two bidders participated. The appellant submitted the highest bid of Rs. 29,500 per square metre, which was 15.23% above the reserve price. However, on May 22, 2024, the GDA notified the appellant that the financial bid had been cancelled and the earnest money would be refunded.
The GDA justified the cancellation by comparing the appellant’s bid with the prices received for “similar properties” in the same scheme. The authority noted that smaller industrial plots (ranging from 123.83 to 132.20 square metres) had been sold for prices ranging between Rs. 82,000 and Rs. 1,21,000 per square metre. Based on this disparity, the GDA concluded that the appellant’s bid was too low.
The appellant challenged this decision before the Allahabad High Court in two separate writ petitions. The High Court dismissed the petitions, holding that the appellant’s bid was lower than other bids in the same scheme and that the appellant had no “indefeasible right” to insist upon the execution of a sale deed.
Arguments of the Parties
The Appellant’s Submissions: Learned senior counsel for the appellant, Sri Sanghi, argued that the cancellation was arbitrary and based on extraneous considerations not mentioned in the auction brochure. The appellant contended that comparing a large plot of 3150 square metres with much smaller plots of approximately 130 square metres was unjustified.
The appellant relied on the Supreme Court’s decision in Eva Agro Feeds (P) Ltd. vs. Punjab National Bank (2023), arguing that a “mere expectation of the Liquidator that a still higher price may be obtained can be no good ground to cancel an otherwise valid auction.” The appellant further submitted that the cancellation violated Article 14 of the Constitution of India as it amounted to rewriting tender conditions after the bids were opened.
The Respondents’ Submissions: The GDA argued that participation in an auction does not confer a vested or enforceable right to obtain the bid. They submitted that the highest bid is merely an offer revocable at the authority’s discretion until accepted.
Citing Tata Motors Ltd. vs. Brihan Mumbai Electric Supply & Transport Undertaking (2023), the respondents contended that courts must allow “fair play in the joints” to public sector undertakings. They maintained that the decision to cancel was based on objective considerations of prevailing market rates and the need to safeguard public revenue.
Court’s Analysis
The Supreme Court rejected the GDA’s justification for cancelling the bid. The Bench observed that while the reserve price for both the subject plot and the smaller plots was uniformly fixed at Rs. 25,600 per square metre, the market demand for larger plots differs significantly from that for smaller ones.
Justice Nagarathna, writing for the Bench, observed:
“Merely because the selling price or the financial bids made by the parties vis-à-vis the smaller plots were concerned was higher per square metre cannot be a reason to also expect a very high price or a similar price insofar as the subject plot measuring 3150 square metres is concerned.”
The Court noted that there were only two bidders for the subject plot, demonstrating a lower demand compared to the smaller plots. The Court held that the GDA “could not have therefore expected to receive a similar rate of bid per square metre vis-à-vis a smaller plot insofar as the subject plot is concerned.”
The Bench termed the GDA’s comparison of the subject plot with smaller plots as an decision based on an “irrelevant consideration,” rendering it “arbitrary, whimsical and irrational.”
Regarding the sanctity of the auction process, the Court stated:
“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… Merely because the authority conducting the auction expected a higher bid than what the highest bidder had bid cannot be a reason to discard the highest bid.”
The Court distinguished the present case from Haryana Urban Development Authority vs. Orchid Infrastructure Developers (P) Ltd. (2017), noting that the contract in that case contained an express clause allowing rejection without reasons, which was absent here.
Decision
The Supreme Court allowed the appeals and set aside the impugned orders of the Allahabad High Court dated May 24, 2024, and July 15, 2024. The Court issued the following directions:
- The cancellation of the bid submitted by the appellant is quashed.
- The appellant is directed to re-deposit the earnest money preferably within four weeks.
- The GDA (Respondent No. 2) must issue an order of allotment for the subject plot in favour of the appellant within two weeks from the date of the re-deposit.
- The GDA is directed to take all consequential steps to conclude the auction process in favour of the appellant.
The parties were directed to bear their own costs.
