The award was given posthumously to Lieutenant T. E. Waters of the West Yorkshire Regiment.
During the Korean War the young and inexperienced officer Terence was captured and imprisoned in the foul conditions of the Kangdong Caves.
After urging his own troops to save themselves by pretending to submit to North Korean Communists propaganda - Terence refused as the last remaining officer.
He eventually died from starvation and a lack of medication and was given the George Cross posthumously.
The honour was given for 'the 'highest gallantry that may be asked of any Briton: he sacrificed his life rather than dishonour his nation''.
The award has been sold on behalf of the Bristol-based family of Terence Edward Waters - in a live auction from Dix Noonan Webb - fetching £280,000.
Christopher Mellor-Hill, head of client liaison of Dix, Noonan, Webb, said: “This has to be one of the most heroic George Cross’s awarded for bravery.
''It stands out for being awarded to a hero of The Battle of Imjin River who having died as a POW in the notorious North Korean ‘Caves’ during the Korean War was denied a further gallantry award but who sacrificed his life in defying the North Korean propaganda command by staying with his fellow POW’s, exemplifying all those high traditions of British leadership with courage.”
T E Waters who was born in Salisbury, Wiltshire in June 1929 and was accepted into the Royal Military College Sandhurst in 1948.
The following year commissioned Second Lieutenant into the West Yorkshire Regiment.
At the battle of Imjin, Terence's A Company withstood the brunt of repeated frenzied attacks by a large force of Chinese troops, suffering severe casualties.
Badly wounded in the head later in the battle, Terence was recommended for a Military Cross for his ‘splendid example of coolness and gallantry.’
The award was later revised to an M.I.D. solely on account of his death in captivity - posthumous M.C.s were not permitted.
Captured subsequent to the Battle, Terence was imprisoned in the dark and partially flooded tunnels near Pyongyang.
Eventually, as the only officer with the British party, Terence ordered his men to save themselves by pretending to submit to subversion at a Peace Camp while.
Although in rags, starving, and badly wounded, steadfastly refusing to do so himself.
He died a short time later - dressed in rags, starving, and badly wounded.
The final paragraph from Terence's original George Cross recommendation states: “He was a young, inexperienced officer, comparatively recently commissioned from the Royal Military Academy, Sandhurst.
"Yet he set an example of the highest gallantry that may be asked of any Briton: he sacrificed his life rather than dishonour his nation.
"Surely his death, chosen so selflessly and so courageously at Pyongyang, must stand with the finest epics of personal courage in the history of British prowess."