Golden Food Products India Vs State of Uttar Pradesh & Others (Supreme Court of India)
Highest Valid Bid Cannot Be Cancelled Arbitrarily: Expectation of Higher Price Is No Ground to Scrap a Lawful Auction
The Supreme Court held that cancellation of a concluded public auction solely on the expectation of obtaining a higher price in a future auction is arbitrary, irrational, and violative of Article 14. Where an auction is conducted in accordance with law, the highest bid is above the reserve price, and there is no allegation of fraud, collusion, or procedural irregularity, the auctioning authority cannot discard the bid on extraneous considerations. Public authorities are bound to respect the sanctity of the auction process and cannot rewrite tender conditions after bids are opened.
In the present case, the Ghaziabad Development Authority cancelled the appellant’s highest bid for a large industrial plot on the ground that smaller plots in the same scheme fetched higher per-square-metre prices. The Court rejected this reasoning, holding that large plots cannot be benchmarked against smaller plots, especially when the reserve price was uniformly fixed and the appellant’s bid was 15.23% above the reserve price. The mere fact that only two bidders participated reflected lower demand for large plots and did not justify cancellation. Returning the earnest money did not cure the arbitrariness, nor could the absence of a formal allotment letter defeat the bidder’s legitimate expectation.
The Court distinguished precedents where auctions were cancelled due to bids below reserve price, statutory irregularities, or public interest concerns, and relied on Eva Agro Feeds to reiterate that mere hope of a better price undermines credibility of public auctions. It held that once the technical and financial bids were accepted and the bidder was declared the highest bidder, the authority was duty-bound to proceed with allotment, absent valid reasons.
Accordingly, the Supreme Court set aside the High Court’s orders, quashed the cancellation of the bid, directed the appellant to re-deposit the earnest money, and ordered the authority to issue the allotment letter and conclude the auction process within a stipulated time, reaffirming that State instrumentalities must act fairly, transparently, and consistently in contractual matters
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
