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by sayum
14 November 2026 12:13 PM
"Once the highest price is received in an auction, then any Authority/ public body conducting the auction must abide by the highest price received, unless there are extenuating circumstances which would render the entire auction proceedings vitiated," Allahabad High Court
PRAYAGRAJ: The Allahabad High Court has ruled that a statutory development authority cannot arbitrarily cancel a valid competitive auction and discard a highest bid exceeding the reserve price merely on the speculative anticipation of securing a higher price in future auctions. A Division Bench comprising Justice Siddhartha Varma and Justice Kunal Ravi Singh held on November 3, 2026, that public auctions carry legal sanctity under Article 14 of the Constitution of India and public instrumentalities cannot conduct serial re-auctions in the hope of securing a windfall without demonstrating fraud, collusion, or material illegality. The Court further held that any subsequent re-auction and allotment undertaken during the pendency of writ proceedings challenging the cancellation is squarely hit by the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882.
The controversy arose after the Ghaziabad Development Authority advertised a residential plot in Kaushambi Yojana with a reserve price of Rs 93,000 per square meter, wherein the petitioner emerged as the highest bidder offering Rs 1,11,000 per square meter. Without disclosing any reasons in its formal cancellation email, the Authority rejected the petitioner's bid on the internal justification that an earlier cancelled auction had fetched Rs 1,95,000 and higher bids were expected in prospective rounds. Aggrieved by the arbitrary cancellation, the petitioner instituted writ proceedings before the High Court, but the Authority proceeded to hold a fourth auction during the intervening winter recess of the High Court and allotted the plot to a third party.
The primary legal issues framed by the Court were whether the non-disclosure of reasons and the cancellation of the highest bid amounted to a colourable exercise of power; whether the speculative expectation of obtaining higher bids in subsequent auctions constitutes a lawful justification to discard an offer above the reserve price; and whether the non-impleadment of the subsequent allottee who participated during the pendency of the litigation rendered the writ petition non-maintainable.
Auction process carries legal sanctity and cannot be discarded on mere speculation
Scrutinizing the original records produced by the Authority, the Bench observed that the reserve price remained static at Rs 93,000 per square meter across multiple auction attempts over several months, while the Authority repeatedly cancelled competitive bids solely because they did not match a discarded bid from the initial round. The Bench noted that once the Authority rejected the initial bid of Rs 1,95,000 per square meter, that rejected figure lost all legal relevance for measuring subsequent public bids.
The Court emphasized that public bodies must operate transparently and cannot treat public auctions as open-ended speculative gambles.
The Court observed: "What is the rationale of the Auction committee to form an opinion that a higher bid would be received in future is not reflected in the records. It appears to be a mere speculative exercise in the hope of a big windfall. Unfortunately, in the second and third auctions the highest bid kept falling and it is only in the fourth auction, the bid price was significantly higher than the reserve price but not that substantially higher than the highest bid received in the first auction."
Discretion to reject highest bid subject to Article 14 judicial review
Addressing the Authority's defence that Clause (xi) of the bid conditions vested absolute discretion in the Vice-Chairman to accept or reject any bid without objection, the Bench reiterated that a reservation of power in tender brochures does not immunize administrative actions from judicial review under Article 14 of the Constitution of India.
The Court held that the decision-making process must rationally demonstrate that the bid was unacceptable due to legitimate public interest or procurement infirmities.
Citing the Supreme Court judgment in M/s Dhanlaxmi Merchandise Pvt. Ltd v. State of Madhya Pradesh, the Bench underlined that while a highest bidder lacks an absolute right to allotment, the tendering authority's discretion is bounded by constitutional standards of reasonableness and non-arbitrariness.
The Bench reiterated: "Where the decision is challenged, the Court is entitled to examine whether the consideration which moved the public authority was relevant; whether the material before it reasonably supported the conclusion; and, whether the power was exercised consistently with the constitutional requirement of non-arbitrariness."
Anticipation of higher bid in prospective auctions is legally impermissible ground
Applying the Supreme Court's ruling in Golden Foods Products India v. State of U.P., the Bench observed that discarding a valid highest bid that exceeds the reserve threshold requires a direct nexus to a lawful and sufficient reason, such as vitiating cartelization or procedural corruption.
The Court noted that in the absence of any infirmity, the Authority was duty-bound to respect the highest bid received.
The Bench observed: "What the Supreme Court has reaffirmed in Golden Food (Supra) is that the auction conducted has a legal sanctity to it which cannot be set at naught if there is no infirmity in conducting the auction. The infirmity may arise due to reasons of collusion, suppression of material facts or any other reason which would vitiate the auction proceedings. The Court goes to say that the reason to discard the highest bid must have a rationale nexus to it and merely because 'the Authority conducting the auction expected a higher bid than what the highest bidder had offered cannot be a reason to discard the highest bid'."
The Court accordingly held that the decision-making process culminating in the cancellation order dated October 24, 2025, and the subsequent notification email dated October 27, 2025, suffered from patent perversity and constituted a colourable exercise of power.
Subsequent allotment during pendency of litigation attracted Section 52 Transfer of Property Act
Dealing with the objection that the subsequent auction purchaser had not been arrayed as a party respondent, the Bench rejected the plea of non-joinder by invoking the doctrine of lis pendens enshrined under Section 52 of the Transfer of Property Act, 1882.
The Court observed that the Authority conducted the fourth auction on December 29, 2025, despite having full knowledge and formal written notice of the pending writ petition.
Relying on Usha Sinha v. Dina Ram and Singhara Singh v. Daljit Singh, the Bench ruled that any alienation of the disputed parcel during the pendency of judicial proceedings binds the alienee, who cannot defeat the petitioner's prior accrued rights.
The Court explained: "As the allotment has been made during the pendency of the writ proceedings to which the Authority had complete notice, therefore, any alienation of the disputed plot by the Authority would attract the doctrine of lis pendens as enshrined under Section 52 of the Transfer of Property Act. Mere fact that the Authority had neglected to inform the subsequent allottee about the pendency of the writ petition would not enable the subsequent allottee to claim any right, as the allottee in the present case can be suitably compensated by refund of money along with interest."
Invoking Delhi Development Authority v. Corporation Bank, the Court held that while the subsequent allottee entered into the transaction without knowledge of the litigation and was entitled to complete pecuniary restitution, the subsequent transaction lacked legal sanctity and could not stand in the way of reviving the petitioner's valid auction.
Allowing the writ petition, the High Court quashed the cancellation email dated October 27, 2025, and the underlying cancellation order dated October 24, 2025, thereby restoring the auction conducted on October 15, 2025, in favour of the petitioner. The Court directed the Authority to issue a formal allotment letter to the petitioner subject to payment terms, while nullifying the subsequent auction and directing a full refund of deposited sums to the subsequent purchaser with six percent interest per annum.
Date of Decision: November 3, 2026
