WHEN THE HIGHEST BID IS STILL NOT ENOUGH: PRESERVING THE SANCTITY OF PUBLIC AUCTIONS

INTRODUCTION
In Golden Food Products India v. State of Uttar Pradesh & Ors., 2026 INSC 22, the Supreme Court of India revisited the contours of fairness, arbitrariness and public accountability in State-conducted auctions. The Judgment, delivered on 6 January 2026 in Civil Appeals arising out of SLP (Civil) Nos. 18095–18096 of 2024, was authored by Justice B.V. Nagarathna with Justice R. Mahadevan concurring.
The decision sets aside two Orders of the Allahabad High Court and emphatically reiterates that a valid highest bid, once accepted and found free from fraud or illegality, cannot be cancelled merely on the speculative expectation of fetching a higher price in a re-auction.

BRIEF FACTS
The Ghaziabad Development Authority (GDA) advertised an auction dated 25.08.2023 for allotment of various plots, including a large industrial plot admeasuring 3150 square metres under the Madhuban Bapudham Yojana. The auction followed a two-bid system comprising a technical bid and a financial bid.
Golden Food Products India submitted its bids on 02.02.2024. Its technical bid was approved on 14.03.2024 and in the open financial auction conducted on 15.03.2024, the Appellant quoted ₹29,500 per square metre, which was 15.23% above the reserve price of ₹25,600 per square metre. There were only two bidders and the Appellant emerged as the highest bidder.
Despite this, no allotment letter was issued. Instead, on 22.05.2024, the Appellant was informed that its bid had been cancelled and that a fresh auction would be conducted. The GDA justified the cancellation on the ground that smaller plots in the same scheme had fetched much higher rates per square metre.
Aggrieved, the Appellant approached the Allahabad High Court through two writ petitions, both of which were dismissed. The matter ultimately reached the Supreme Court.

ISSUES OF LAW
The Supreme Court primarily examined the following issues:
1) Whether a development authority can cancel a duly concluded auction merely because higher prices were fetched for smaller or dissimilar plots in the same scheme.
2) Whether such cancellation, without prior notice and despite the bid being higher than the reserve price, is arbitrary and violative of Article 14 of the Constitution.
3) Whether the High Court was justified in refusing relief on the ground that no indefeasible right accrued to the highest bidder in the absence of an allotment letter.

ANALYSIS OF THE JUDGMENT
The Supreme Court undertook a meticulous evaluation of the auction process and the rationale advanced by the GDA. It noted that the reserve price for both the subject plot and the smaller plots was uniformly fixed, despite the obvious difference in size and demand. The Court observed that large industrial plots naturally attract fewer bidders, while smaller plots witness higher competition and consequently higher per-square-metre prices.
The Court rejected the comparison drawn by the GDA between the Appellant’s bid and the prices fetched by significantly smaller plots. Such a comparison, the Court held, was irrational and based on irrelevant considerations, particularly when the auction for the subject plot was conducted on the same date, with full knowledge of prevailing market conditions.
Relying on its earlier decisions, including Eva Agro Feeds (P) Ltd. v. Punjab National Bank, the Court reaffirmed that mere expectation of a higher price in a future auction cannot justify cancellation of a lawful auction. To permit such conduct would erode the sanctity and credibility of the public auction process and inject uncertainty into State contracts.
Crucially, the Court distinguished between the absence of an “indefeasible right to allotment” and the right to fair, non-arbitrary treatment. While participation in an auction may not guarantee allotment, once a bid is accepted as the highest, above reserve price and free from infirmities such as fraud or collusion, the State authority cannot act whimsically. The unilateral cancellation without notice, the Court held, violated principles of natural justice and fairness.
The High Court’s reasoning—that the Appellant had no enforceable right due to the absence of an allotment letter—was found to be flawed. The Supreme Court held that the Appellant had a legitimate expectation arising from a concluded auction process, which the GDA was bound to honour.

CONCLUSION
This Judgment is a strong reaffirmation of the rule of law in public auctions. The Supreme Court has sent an unambiguous message that State instrumentalities cannot discard valid auctions on speculative or extraneous grounds under the guise of maximising revenue.
By restoring primacy to transparency, fairness and rational decision-making, the Court has reinforced confidence in public procurement and auction processes. The ruling ensures that once the hammer falls in a lawful auction, the State must stand by its process, unless compelling and legally sustainable reasons dictate otherwise.

SARTHAK KALRA
Senior Legal Associate
The Indian Lawyer & Allied Services

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