Court holds that mere expectation of higher bids is no valid ground to cancel auction; subsequent allotment during pendency of writ petition declared void, with refund directions for innocent bidder.
In a significant judgment dated November 3, 2026, the Allahabad High Court (Division Bench) adjudicated the writ petition filed by Amit Kumar challenging the repeated cancellation of his highest bid by the Ghaziabad Development Authority (GDA) in respect of Plot No. A-252 in Kaushambi Yojana, Ghaziabad. The Court found the Authority's conduct arbitrary and a colourable exercise of power, quashing the cancellation and restoring the auction in favor of the petitioner.
Background:
The GDA conducted a series of auctions for the disputed plot starting July 30, 2025, with a reserve price fixed at Rs. 93,000 per square meter. Despite receiving a highest bid of Rs. 1,95,000 per square meter in the first auction, the Authority rejected it, citing the rationale that as it was the first auction, the plot might fetch a higher price in future. Successive auctions were held with gradually declining highest bids, all rejected because they did not meet or exceed the first auction's highest bid. Finally, on October 15, 2025, Amit Kumar emerged as the highest bidder at Rs. 1,11,000 per square meter, above the reserve price. However, the Authority cancelled his bid on the ground that it was hoping for a higher price in subsequent auctions.
Legal Issues:
The petitioner contended that the cancellation order was illegal and arbitrary since his bid was the highest and above the reserve price, and the auction process was free from fraud or collusion. The Authority defended the cancellations, relying on a clause reserving the right of final acceptance or rejection to the Vice Chairman and arguing that the auction was not concluded until confirmation. They also submitted that the subsequent auction held on December 29, 2025, fetching Rs. 2,06,000 per square meter, was valid and that the writ petition was liable to be dismissed for non-impleadment of the successful bidder in the subsequent auction.
Court's Findings:
The Court meticulously examined the auction records and found the repeated cancellation of highest bids by the Authority was motivated solely by speculative expectations of higher bids, without any rational basis or material supporting such expectations. The reserve price remained unchanged across auctions despite the Authority's knowledge of bids far exceeding it. The Court emphasized the sanctity of the auction process, underscoring that once a valid highest bid above the reserve price is received in a fair auction, it should not be discarded except for valid reasons such as fraud, collusion, or infirmities in the process.
Relying on the Supreme Court's decision in Golden Foods Products India v. State of U.P. (2026 INSC 22), the Court held that mere hope or expectation of higher bids cannot justify cancellation of the highest bid. The Authority's practice of repeatedly canceling auctions to obtain a better price was held to be arbitrary, perverse, and a colourable exercise of power.
Regarding the Authority's argument on the clause reserving confirmation rights to the Vice Chairman, the Court held that such power is subject to judicial review to prevent arbitrariness, and the absence of valid reasons for cancellation rendered the exercise unlawful.
The Court also applied the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882, holding that the subsequent auction and allotment conducted during the pendency of the writ petition were ineffective, binding the subsequent allottee to the outcome of the pending litigation. Although the subsequent allottee was not impleaded in the writ petition, the Court observed that since the allottee had not completed payment or taken possession, the petitioner's challenge could not be dismissed on that ground.
Relief Granted:
1. The Court set aside the cancellation intimation dated October 27, 2025, and reinstated the auction held on October 15, 2025, recognizing Amit Kumar as the highest bidder entitled to allotment.
2. The GDA was directed to issue the allotment letter to the petitioner and proceed as per the bid terms upon timely payment.
3. The subsequent auction and allotment dated December 29, 2025, and January 19, 2026, respectively, were declared void.
4. The subsequent allottee was held entitled to restitution of the entire amount deposited with 6% interest, payable within one month. Failure to refund timely would attract enhanced interest at 9%.
Significance:
This judgment reaffirms the principle that public auctions conducted by government authorities must be transparent, fair, and non-arbitrary. It curtails the discretion of development authorities to repeatedly cancel auctions based merely on speculative hopes of higher bids, protecting bidders' legitimate expectations once they make the highest valid bid. The decision also clarifies that judicial review is available against arbitrary rejection of highest bids, even when the bid document reserves confirmation rights to a public official.
Bottom Line:
Public auction - Development Authority cannot repeatedly cancel highest bid merely on speculative expectation of obtaining a higher price in future auctions when bid is above reserve price and auction process is otherwise untainted - Such action is arbitrary, colourable exercise of power and amenable to judicial review - Subsequent allotment made during pendency of writ petition is hit by doctrine of lis pendens and does not defeat relief to original highest bidder.
Statutory provision(s): Transfer of Property Act, 1882 Section 52
Amit Kumar v. Ghaziabad Development Authority (GDA), (Allahabad)(DB) : Law Finder Doc Id # 3010282
