A new town square was planned for the heart of the development
A proposal by Sainsbury's that was designed to allow a Cumbrian town's stalled development scheme move forward has been rejected.
Penrith's New Squares redevelopment came to a halt last Autumn when the backer, an Australian bank, pulled out, blaming the credit crunch.
Following a debate on Thursday night, councillors decided not to accept Sainsbury's plan.
However, the council was told to hold further discussions with all partners.
Councillor Colin Nineham, leader of Eden District Council, said: "There has been a lot of hard work put in by various partners to bring the proposal forward but members felt that it did not meet what the council wanted to achieve.
"Even in these difficult times, it is vital we get the right outcome for the town that enables us to attract visitors and meet the needs of residents."