Cancellation of highest bid above reserved price is arbitrary if lacking rationale or nexus to plot-specific evaluation.

In brief

The question

1. Whether the District Magistrate’s decision to cancel the auction process based on higher bids in separate areas was arbitrary and lacked a rational nexus under Rule 28(3)

The court held

The Court answered that while a highest bidder lacks a vested right, the state cannot act arbitrarily; the cancellation must be backed by reason

It also directed

The High Court quashed the order dated 19th March 2026 and the subsequent e-auction notification dated 20th March 2026. The writ petition was allowed, and the Court directed that consequences (reinstating the Petitioner's bid processing) should follow.

01Facts

The Petitioner was the highest bidder in an e-auction for a mining lease in Arazi No. 12MI, village Chakalathia, Mirzapur, offering Rs. 361/- per cubic meter against a reserved price of Rs. 140/-

¶ 1

On 19th March 2026, the District Magistrate (Respondent No. 2) cancelled the entire process under Rule 28(3) of the U.P. Minor Minerals (Concession) Rules, 2021, and issued a fresh notification for auction on 20th March 2026

¶ 1

The State justified the cancellation by claiming that other leases in different areas fetched premiums exceeding Rs. 400/- per cubic meter, thus the cancellation was in the interest of public revenue

¶ 3

The Petitioner challenged this as arbitrary, noting that the same plot had previously been leased for significantly lower bids (Rs. 112–151) between 2023 and 2025

¶ 4

02Issues

i.1. Whether the District Magistrate’s decision to cancel the auction process based on higher bids in separate areas was arbitrary and lacked a rational nexus under Rule 28(3)

¶ 5, 8

ii.2. Whether the highest bidder in an auction acquires a right to challenge the cancellation of the process if the decision is found to be devoid of rationale

¶ 3, 6-7

03Law Applied

Rule 23(4) of the U.P. Minor Minerals (Concession) Rules, 2021, which requires the fixation of a reserved price based on an evaluation of the quality and quantity of minerals

¶ 4

Rule 28(3), which grants the District Magistrate discretion to reject bids if they are "not satisfactory" in his opinion

¶ 5

The precedent in Indore Vikas Praadhikaran (IDA) v. Shri Humud Jain Samaj Trust (AIR 2025 SC 322), which establishing that while a highest bidder has no vested right to a contract, judicial review is permissible if the cancellation is arbitrary

¶ 3, 6

The principle from Golden Food Products India v. State of U.P. (AIR 2026 SC 335), which held that a decision to discard a valid bid above the reserved price must have a rational nexus to a specific reason and cannot be based merely on the expectation of a higher bid without factual substantiation

¶ 7

04Reasoning

The Court found the cancellation of the auction arbitrary. It noted that the reserved price of Rs. 140/- was presumably fixed after evaluating the specific plot's mineral quality and quantity as per Rule 23(4)

¶ 5, 8

The Petitioner’s bid of Rs. 361/- was more than double the reserved price and significantly higher than historical bids for the same plot (Rs. 112–151)

¶ 8

The State's reliance on bids exceeding Rs. 400/- for other plots was rejected because there was no evidence that those plots were comparable in mineral quality or quantity to the plot in question

¶ 8

Following the rationale in Golden Food Products India, the Court held that the "opinion" formed by the District Magistrate lacked a rational nexus to the facts, as the mere expectation of a higher bid is not a valid ground to discard a bid that is already twice the scientifically fixed reserved price

¶ 7-8