Cancellation of Highest Bid in Public Auction Impermissible Without Valid Grounds

The Hon’ble Supreme Court of India in the case of Golden Food Products India v. State of Uttar Pradesh, (2026 SCC OnLine SC 24), decided on January 6, 2026, reaffirmed the sanctity of public auctions and held that once an auction is conducted in accordance with law and the highest bid is above the reserve price, the auctioning authority cannot cancel the bid merely on the expectation that a higher price may be obtained in a future auction, in the absence of fraud, collusion, or material illegality.

The case arose from an auction conducted by the Ghaziabad Development Authority (GDA) for allotment of an industrial plot measuring 3150 square metres under the Madhuban Bapudham Yojana. The auction followed a two-bid system, and the appellant’s technical bid was approved. In the financial bid, the appellant quoted ₹29,500 per square metre, about 15.23% above the reserve price of ₹25,600 per square metre and was declared the highest bidder. There were only two bidders for the plot.

Despite this, the GDA cancelled the auction after comparing the appellant’s bid with higher per-square-metre prices fetched by smaller plots in the same scheme and decided to conduct a fresh auction. The appellant challenged the cancellation before the Hon’ble Allahabad High Court, which dismissed the writ petitions on the ground that the appellant had no indefeasible right to allotment. The matter reached the Supreme Court.

Allowing the appeals, the Supreme Court held that the comparison of bids for a large plot with bids for much smaller plots was an irrelevant and extraneous consideration. The court noted that larger plots often attract fewer bidders and lower per-unit prices, which is why a uniform reserve price had been fixed. Once the highest bid exceeded the reserve price and there was no infirmity in the auction process, the authority could not cancel the auction solely because it believed a higher price might be achievable later.

Relying on earlier precedents including Eva Agro Feeds (P) Ltd. v. Punjab National Bank, [(2023) 10 SCC 189], dated September 27, 2025, the Court emphasised that mere expectation of better revenue cannot justify discarding a valid auction, as repeated interference erodes the credibility and certainty of the auction process. The Court also held that returning the earnest money does not cure an otherwise arbitrary cancellation and that the bidder was entitled to fair and non-arbitrary treatment under Article 14 of the Indian Constitution, 1950. Consequently, the Supreme Court set aside the High Court’s orders, quashed the cancellation of the appellant’s bid, and directed the GDA to issue an allotment letter and complete the auction process in favour of the appellant, subject to re-deposit of the earnest money.

In conclusion, the judgment reaffirmed that public authorities cannot arbitrarily cancel the highest bid that is above the reserve price on the mere expectation of securing a higher price in the future, and that the sanctity and certainty of the auction process must be preserved.