A valid bid exceeding the reserve price cannot be rejected merely because other shops received higher bids.

Nagar Palika Parishad, Sukma issued a tender for allotment of shops, reserving Shop No. 4 for ex-servicemen, freedom fighters and disabled persons.

The offset price was fixed at ₹3,00,000. The petitioner, an ex-serviceman, submitted a bid of ₹3,21,000, which exceeded the prescribed offset price.

His bid was rejected by order dated 25 March 2021 on the ground that bids exceeding ₹4,00,000 had been received for other shops in the same tender.

The petitioner challenged the rejection and sought allotment or lease of Shop No. 4, relying, inter alia, on Condition No. 37 of the tender notice.

The Nagar Palika did not appear despite service.

The Court applied the principle that an auction or tender process has sanctity and that a valid highest bid above the reserve or offset price may be rejected only for a rational and legally sustainable reason.

Relying on Golden Food Products India v. State of Uttar Pradesh & Others, 2026 SCC OnLine SC 244, particularly paragraph 32, the Court held that the mere expectation of a higher bid is insufficient to discard a valid bid; the decision must have a rational nexus with the stated reason.

The Court also applied the tender condition prescribing the offset price and the principle that a bid exceeding that prescribed price cannot be rejected merely by comparing it with bids for distinct shops.

The petitioner’s bid of ₹3,21,000 exceeded the offset price of ₹3,00,000 fixed specifically for Shop No. 4.

The reason given by the Municipal Council—that higher bids exceeding ₹4,00,000 had been received for other shops—did not establish any defect in the petitioner’s bid or in the tender process relating to the reserved shop.

Applying Golden Food Products India, the Court found that the rejection lacked a rational nexus to the tender conditions and was therefore arbitrary.

However, although the Court quashed the rejection insofar as it related to Shop No. 4, it did not itself order allotment; instead, it directed the Municipal Council to reconsider the petitioner’s case in accordance with law.

The order dated 25 March 2021 was quashed to the extent that it related to Shop No. 4.

Respondent No. 1 was directed to reconsider the petitioner’s case in accordance with law within thirty days from receipt of the order.

The Court clarified that it had expressed no opinion on the merits of the petitioner’s entitlement to allotment or lease.