Rejection Of Highest Bid Needs Material Showing Current Inadequacy, Not Mere Comparison With Bidder’s Earlier Bid: Supreme Court
The Bench noted that the reserved power to reject does not place its exercise beyond judicial review; public interest must emerge from material on which decision is taken.
The Supreme Court has held that a public authority rejecting the highest bid in an auction must have material showing that the bid is presently inadequate, and cannot rest the rejection on a comparison with the bidder’s own earlier bid alone. Setting aside the cancellation of two sand mining auctions in Madhya Pradesh, the Court held that a previous bid is not, by itself, a continuing adjudication of market value, and that the State must show that the current bids were materially lower than the value it could reasonably expect to obtain from the market.
The Court clarified that a highest bidder acquires no vested right and that the State may reject even an above-reserve offer, but a clause reserving the power to reject does not place its exercise beyond judicial review under Article 14 of the Constitution of India. A reliable valuation, evidence of collusion or artificially depressed bidding, absence of effective competition, or a genuine supervening policy decision may justify rejection. Public interest, however, must emerge from the material on which the decision is taken, the Bench said.
A Bench of Justice Aravind Kumar and Justice Vipul M. Pancholi observed, “We are equally unable to accept that the invocation of public revenue concludes the matter. Sand is a public mineral resource and the Corporation is under an obligation to protect the financial interests of the State. A reliable valuation demonstrating material undervaluation, evidence of collusion or artificially depressed bidding, absence of effective competition, or a genuine supervening policy decision may furnish ample justification for rejection of even an above reserve H1 offer. Public interest, however, must emerge from the material on which the decision is taken. In the present case, the Board established that the appellants' current bids were materially lower than their earlier bids. It did not establish that the current bids were materially lower than the value which the State could reasonably expect to obtain from the market in October 2025. Those are not the same conclusions”.
Senior Advocates Parameshwar, Mukul Rohatgi appeared for the appellant and Solicitor General Tushar Mehta, Senior Advocate Maninder Singh appeared for the respondent.
Sahakar Global Ltd. and Dhanlaxmi Merchandise Pvt. Ltd. had surrendered their earlier contracts for the Shahdol and Katni sand groups under Rule 16 of the Madhya Pradesh Sand Rules, 2019, then in force. The Madhya Pradesh State Mining Corporation re-tendered both groups under a notice dated September 18, 2025. In the auction of October 10, 2025, Sahakar was the highest bidder for Shahdol at ₹48,20,40,000 and Dhanlaxmi for Katni at ₹54,07,41,111, both above the reserve price.
These were about 29.98% and 16.52% below their earlier bids. On November 19, 2025, the Board rejected the bids as non-competitive, which was communicated on December 05, 2025.
The Madhya Pradesh High Court dismissed the writ petitions by a common judgment dated March 18, 2026. On March 25, 2026, the Supreme Court restrained finalisation of the fresh auction for the two groups. Meanwhile, the Rules were amended on January 30, 2026 to bar a surrendering operator from re-bidding for the same group, and a fresh notice was issued on February 10, 2026.
The Court held that a highest bidder acquires no vested right and the State may reject even the highest offer, but that power remains public power. It noted that the Rule then in force neither barred participation by a surrendering operator nor fixed its earlier bid as a floor.
The Board had consciously decided to proceed under existing Rules, genuine competition took place, and no collusion was found. The Board produced no contemporaneous valuation or comparable auction data and treated the earlier bids as the measure of loss. The Court held that the High Court erred in adopting the same premise. It held the January 2026 amendment prospective, and the later process, held under a different regime, could not validate the cancellation.
The Court allowed the appeals, set aside the High Court judgment and quashed the Board’s rejection and cancellation for both groups. It restored the tender and directed the appellants to confirm their bids within two weeks. The Corporation must then specify pending formalities within two weeks and complete allotment within six weeks thereafter. The bids cannot be rejected afresh on grounds of surrender, lower bids or retrospective application of the 2026 restriction. The later process for the two groups cannot proceed, and deposits are to be released within four weeks. Disputes over the earlier contracts remain open, and no costs were awarded.
Cause Title: M/s Dhanlaxmi Merchandise Pvt. Ltd. v. State of Madhya Pradesh & Ors. (Neutral Citation: 2026 INSC 1125)
Appearances:
Appellant: Senior Advocates Mukul Rohatgi, Parameshwar.
Respondents: Solicitor General Tushar Mehta, Senior Advocate Maninder Singh.