The Board proved the new bids were lower than the bidders' own old ones, and never proved they were lower than what the market would pay. Those are not the same conclusions
Justices Aravind Kumar and Vipul M. Pancholi restored two cancelled sand-mining auctions worth over ₹100 crore a year, refused a remand, and halted the later tender for those two districts.
Two companies held three-year contracts to mine sand in Shahdol and Katni districts of Madhya Pradesh. Both surrendered those contracts in 2025 under a rule that expressly permitted surrender on three months' notice. The State corporation then re-tendered the same two groups, accepted both companies as technically qualified, ran the electronic auction to its close, and watched them emerge as the highest bidders again — at prices roughly 30 per cent and 16.5 per cent below what they had themselves offered in the earlier round. The Board of Directors concluded that the new rates were “not competitive” and cancelled the process for both districts.
On 14 October 2026 the Supreme Court set that cancellation aside and restored the tender of 18 September 2025. The reasoning is narrow and, for anyone who deals with public tenders, important: a previous bid may be relevant material, but it is not a continuing adjudication of market value, and the difference between an old bid and a new one does not become proof that the new one is inadequate without the assessment that connects them.
The arrangement
The Madhya Pradesh Sand (Mining, Transportation, Storage and Trading) Rules, 2019, as materially amended on 26 May 2023, vest the quarry leases in the Madhya Pradesh State Mining Corporation Limited, which carries out mining through Mine Developer-cum-Operators selected by e-tender-cum-e-auction under Rule 8. Rule 7 governs the base or upset price, Rule 9 a three-year contract. The bid amounts in this case were annual, not the aggregate for three years.
Rule 16, as it stood in 2025, permitted an MDO to surrender a sand group on three months' advance notice, subject to payment of dues and State approval; the application once made was irrevocable, and on receiving it the Corporation had to initiate re-tendering. Critically, the rule as it then stood did not disqualify a surrendering MDO from bidding when the same group was re-tendered, and did not require that such a bidder offer at least its earlier price. The tender conditions reserved wide powers to the Corporation: Clause 6.5.5 on determining the highest bidder, Clauses 6.6.3 and 26 on rejecting the highest bid and cancelling the process. Emerging as H1 was therefore not an acceptance, though those clauses were part of a tender issued by a State instrumentality and their operation remained subject to the law governing public power.
Shahdol and Katni
The Shahdol group comprised 34 mines with an annual tendered quantity of 17,60,000 cubic metres and a reserve price of ₹44 crore. Sahakar Global Limited had won it with an annual bid of ₹68,84,25,999, about ₹391.151 per cubic metre, and executed an agreement on 12 January 2024 for three years to 11 January 2027. Difficulties followed: the Corporation's own pleadings record environmental clearances for 23 mines corresponding to roughly 14,86,630 cubic metres against the 34 mines and 17,60,000 cubic metres notified. Sahakar had gone to the High Court in Writ Petition No. 15714 of 2025 and obtained an interim order on 9 May 2025 relating its payment obligation to the quantity actually extracted from the quantity for which clearance had been received. Its surrender notice followed on 11 July 2025, effective 10 October 2025.
Katni comprised 49 mines, 20,00,000 cubic metres annually, reserve price ₹50 crore. Dhanlaxmi Merchandise Private Limited had won it at ₹64,77,66,000 a year, about ₹323.883 per cubic metre, under an agreement of 1 November 2023. Its surrender notice came on 1 August 2025, effective 31 October 2025, and said there were no outstanding dues. No clearance dispute arose at Katni; the Corporation maintained the permissions were available. Dhanlaxmi later attributed its surrender to the commercial working of the contract, pleading sales of 8,60,970 cubic metres in the first contractual year and 16,81,512 in the second against an annual tendered quantity of 20,00,000.
Before the fresh notice inviting tenders was issued, proposals to tighten the surrender regime were already under consideration. At its 281st meeting on 18 September 2025 the Board was conscious of those proposals and of the fact that Shahdol and Katni had been surrendered, and nonetheless resolved that, to ensure continuity of sand supply, selection of MDOs for those districts and five others could proceed under the rules then prevailing. The notice issued the same day. Shahdol was notified again with 34 mines and a ₹44 crore reserve; Katni with 49 mines and ₹50 crore. Seven bidders qualified technically for Shahdol, five for Katni.
What happened in the auction room
The financial auctions ran on 10 October 2025. At Shahdol, Sahakar's opening offer was ₹46,80,00,000; the electronic auction began at 11 a.m., other participants bid higher, and Sahakar's final offer of ₹48,20,40,000 at 12.34 p.m. remained highest at closure — about ₹273.886 per cubic metre, ₹4,20,40,000 above reserve. At Katni the highest initial offer was ₹52,37,11,111; the auction began at 10 a.m., Sahakar itself bid higher at 10.48 a.m., successive bids followed, and Dhanlaxmi's ₹54,07,41,111 at 11.36 a.m. closed as H1 — about ₹270.371 per cubic metre, ₹4,07,41,111 above reserve. No letter of intent or allotment issued.
The Corporation took legal advice on 31 October 2025. The opinion of 11 November 2025 recorded that the successful bidders had neither been debarred nor blacklisted, that the Corporation had said they complied with the current tender's requirements, and that no document warranting an adverse inference had accompanied the reference; the advice was that the Corporation could proceed subject to the remaining requirements. On 19 November 2025 the Board compared the earlier annual bids with the new ones: at Shahdol a difference of ₹20,63,85,999, about 29.98 per cent; at Katni ₹10,70,24,889, about 16.52 per cent. It resolved that the highest rates were not competitive, rejected the offers and cancelled the process for the two groups. It did not declare either appellant ineligible or blacklist them, and did not determine liabilities under the surrendered agreements. The cancellation was communicated on 5 December 2025 in brief letters referring to the power in the tender conditions.
While the writ petitions were pending, the Sand Rules were amended on 30 January 2026. The substituted Rule 16 made a surrendering MDO, and its proprietor, director or partner, ineligible to participate in the auction of the same group for a prescribed three-year period, provided for adjustment of loss on re-tendering against the former MDO's security and recovery of any balance, and altered the upset-price methodology for surrendered groups. A fresh notice followed on 10 February 2026 with reserve prices of ₹52.80 crore for Shahdol and ₹60 crore for Katni. A common judgment of the Madhya Pradesh High Court at Jabalpur dated 18 March 2026 dismissed both writ petitions, accepting that the difference was substantial and that cancellation protected public revenue.
The arguments
Mr Mukul Rohatgi for Sahakar put the point that the cancellation assumed the earlier bid of ₹68.84 crore represented the continuing value of the Shahdol opportunity and could be used without more as the benchmark for the September 2025 auction. He took the Court through the clearance position, the pre-surrender litigation, and the Board's own decision of 18 September 2025 to proceed under the existing rules in the knowledge that amendments were being considered. Seven bidders had qualified, the auction had generated successive bids, the final figure exceeded reserve by ₹4.20 crore, and there was no allegation of collusion, cartelisation or manipulation. He did not claim an absolute right from H1 status; his point was that rejection of a validly discovered above-reserve price had to rest on material rationally demonstrating why the offer was unacceptable.
Mr Parameshwar for Dhanlaxmi adopted those submissions on judicial review and on the prospective amendment but kept Katni on its own footing, not relying on the clearance dispute. A bidder which had misjudged a contract's commercial potential remained liable for its earlier obligations until surrender took effect, but its earlier commercial judgment could not bind every future auction; ₹64.77 crore could not become a permanent minimum price for Katni. He drew attention to Mandla, Anuppur and Balaghat, where subsequent tender values were said to have been materially lower, not to argue that every district is identical but to show that a lower price after surrender had not invariably been treated as proof that the later auction was unacceptable. Before a numerical difference could be called a loss to the State, there had to be some basis for treating the earlier annual return as reasonably realisable in October 2025, and the Board resolution referred to no contemporaneous valuation or market material of that kind.
Shri Tushar Mehta, Solicitor General, and Shri Maninder Singh supported the High Court. No letter of intent had issued and no agreement had been executed; the tender reserved the power not to accept even the highest offer. The Board faced a specific pattern — the same operators which had undertaken to pay substantially more had surrendered and returned to the same groups at materially reduced prices, 29.98 per cent and 16.52 per cent lower — and could not reasonably be expected to ignore differences of that magnitude where public revenue was involved. The mine counts and quantities were unchanged, so the earlier bid for the same group was highly relevant. On Shahdol, the bidder had contracted with full knowledge of the clearance position, the tender required inspection, and the Board agenda had expressly noticed the clearance litigation. A reserve price was a threshold, not a promise of acceptance. The amendment of 30 January 2026 was accepted to be prospective but was said merely to supply a stricter response to a concern that already existed; the Board did not need the amended rule as the source of its power.
The principle, and the gap
The Court restated the settled law. No highest bidder acquires a right to the contract; equally, the State acting in a commercial field is not at liberty to exercise discretion as a private individual might. The thread runs from Ramana Dayaram Shetty v. International Airport Authority, that State largesse cannot be distributed by standards that are arbitrary or departed from at will, through Star Enterprises v. CIDCO, that notwithstanding a contractual reservation permitting rejection the action must be supportable by reasons germane to the decision, and Food Corporation of India v. Kamdhenu Cattle Feed Industries, that the highest tenderer has no absolute right but legitimate expectation arising from the conduct of a tender is a facet of fairness. Tata Cellular and the line through Jagdish Mandal, Michigan Rubber, Silppi Constructions and N.G. Projects counsel restraint where the challenge is to the wisdom of a commercial choice — but, the Court said, they do not exclude interference where the decision proceeds on a consideration which does not reasonably sustain the conclusion reached.
On Haryana Urban Development Authority v. Orchid Infrastructure, which the High Court had relied on, the Court made a pointed observation: what is equally instructive there is that the rejection was supported by material concerning auction trends, comparable sites and prevailing prices. The decision illustrates both sides — the absence of an enforceable right from H1 status, and the necessity of relevant material when the authority concludes the highest bid is inadequate. Golden Food Products India v. State of Uttar Pradesh came closest: an auction conducted in accordance with law carries a sanctity which cannot be disregarded merely because the authority later thinks a higher figure might have been desirable, and the reason for rejecting the highest bid must bear a rational nexus to the subject matter and circumstances of the auction actually conducted.
Applying that, the Court found the process had worked as designed. Competition was real, with seven and five qualified bidders and successive bids in both districts. The Board recorded no finding of cartelisation, collusion, suppression of competition, manipulation of the platform or procedural defect, and found neither appellant technically ineligible. That did not oblige the Corporation to accept the result, but it did require some material to explain why the result was commercially unacceptable. An earlier bid may be relevant to that enquiry and may warrant closer examination of whether the later competition was satisfactory. “But a previous bid is not, by itself, a continuing adjudication of market value.” It records what a bidder undertook to pay in an earlier contractual setting; the liabilities from that bargain remain enforceable on their own terms, but the amount once quoted does not become an immutable minimum for every subsequent auction of the same district group — the more so since the September 2025 process contemplated a fresh three-year tenure under Rule 9 and not the unexpired residue of the old agreements.
No contemporaneous valuation showing that ₹48.20 crore for Shahdol or ₹54.07 crore for Katni was below the value reasonably obtainable in October 2025 was referred to; nor any current comparable auction showing that either group should have yielded something approaching the earlier bid. The resolution compares the historical and current figures, notes the percentage reduction and proceeds to the conclusion. The numerical difference is beyond dispute; what is absent is the material that would convert that difference into proof of present inadequacy. At Shahdol the difficulty was sharpest, because the earlier bid arose in an operational setting already the subject of a genuine dispute about how much of the tendered opportunity was in practice available. The Court was careful to say it was not deciding whether the Corporation was in breach or whether Sahakar's obligations stood reduced.
The invocation of public revenue did not conclude the matter either. Sand is a public mineral resource and the Corporation must protect the State's finances; a reliable valuation showing material undervaluation, evidence of collusion or artificially depressed bidding, absence of effective competition or a genuine supervening policy decision could all justify rejecting an above-reserve offer. But public interest must emerge from the material on which the decision is taken. Here the Board established that the current bids were lower than the appellants' earlier bids. It did not establish that they were lower than what the State could reasonably expect from the market in October 2025. “Those are not the same conclusions.”
Restoration, not remand
On relief the Court refused the State's request for a remand. Remand is appropriate where relevant material has not been considered or a fresh technical or commercial evaluation is still required; here the Corporation had invited the bids, scrutinised eligibility, run the auction, determined H1 and consciously rejected the results, and the reasons for rejection had been placed before both courts. A remand cannot be ordered merely to let the authority reconsider the very comparison that has failed judicial scrutiny, nor, after the decision has been defended throughout on identified grounds, to leave the completed process open for the discovery of entirely new reasons for rejecting the same bids — that would render relief on a successful challenge largely illusory.
Equally, the appellants must stand by their bids: neither could seek restoration while resiling from ₹48,20,40,000 and ₹54,07,41,111, and the passage of time during the litigation gave no entitlement to a reduction or to relaxation of an essential tender condition. The subsequent Shahdol process, which attracted initial offers around ₹57 crore, did not persuade the Court to preserve it: those figures arose under an altered regime at an enhanced reserve and at a later date, no final allotment had been reached because of the Court's order of 25 March 2026, and to let the later process defeat the relief would in substance allow a later event to validate the cancellation retrospectively.
The appeals were allowed. The High Court's judgment of 18 March 2026, the Board decision of 19 November 2025 and the cancellation communicated on 5 December 2025 were quashed so far as they reject the appellants' bids and cancel the auction for Shahdol and Katni; no other part of the Board's decision was disturbed. The tender of 18 September 2025 stands restored for those two groups. Within two weeks the appellants must communicate unconditional willingness to stand by their final bids of 10 October 2025 and to comply with the remaining requirements; within a further two weeks the Corporation must intimate the deposits, bank guarantees, performance securities and other formalities outstanding, with equivalent security to be furnished where earlier security has expired or been released. On compliance, the Corporation must complete the approval and allotment process, including the letter of intent and execution of the agreement, within six weeks — and the bids are not to be rejected afresh on the ground that the appellants surrendered their earlier contracts, that their October 2025 offers were lower than their previous bids, or by applying the January 2026 participation restriction retrospectively to the completed auction.
The process begun on 10 February 2026 is not to be carried further for Shahdol and Katni, and deposits and bank guarantees furnished for those two groups are to be returned or released within four weeks; the later process is unaffected for other groups. The Court clarified that it adjudicated nothing about the accounts, dues or recoveries arising from the surrendered contracts, and that nothing in the judgment questions the validity of the January 2026 amendments.