Why auto white balance is based on the neutral colors?..Is there any care to be taken while choosing the reference color.?
In computer RGB systems, Neutral is defined as having equal RGB components.
White is RGB(255, 255, 255)
Black is RGB(0, 0, 0)
Middle gray is considered to be RGB(127,127,127) if in linear space, however gamma makes it be around RGB(186,186,186) in histograms. But equal if it was neutral gray.
Other lighter or darker gray neutral shades have varying but equal RGB components.
See Wkipedia: RGB Color Model
A color cast would make one or more RGB components have a different number, not equal. A little or a lot, but not equal. There does exist gray tones (paint for example) with pink or blue casts, NOT neutral. Neutral is special, equal RGB, and no color cast.
So the whole idea in White Balance is that if we photograph a KNOWN neutral white or gray card, and the lighting or incorrect WB setting gives it a color cast, the WB tool clicks it.
Clicking it tells the computer "We know this spot is neutral, so make it be neutral". And it does, and it is. Result is equal RGB, i.e., no color cast. This makes correcting bad WB results be mostly trivial to do. More about that at http://www.scantips.com/lights/whitebalance.html
Clicking an orange card would also make the orange spot be a neutral gray, but of course, that totally spoils the picture. With orange removed, picture would be decidedly blue overall. But if it were a neutral white card turned orange by wrong lighting, this click would instead fix it to be perfect.
Orange is about the typical color of incandescent lights. That light gives the neutral card an orange cast (if seen in say Daylight WB setting). Clicking WB on it removes the orange, resulting picture is corrected so that neutral shows as neutral. An accurate WB result then.
Neutral is very special.
Things to consider in a WB card:
18% gray cards are pretty dark, Even black "can work" but lighter gray or white can work better. Actual WB cards are white or light gray. The 18% cards are only specified to be 18% reflectance, they are not spec'd to be neutral. A $5 Porta Brace White Balance card is good.
There are many colors of off-white or off-gray to beware of, not close enough to neutral.
However, in the real world, many colors of white objects that "look like they should be neutral" are perhaps not all 100% perfect, but are in fact close enough for decent white balance results. White envelopes and copy paper, white T-shirts and shirt collars, porcelain dishes, church steeples and picket fences, white pizza signs, white plastic bottle tops, even white dots in the kids pajamas, all can mostly be quite close, esp so when no other choice. Wall paint or cars, not so much.
The objective is to render neutral colors like white, lite-gray, medium-gray, dark-gray, as pure i.e. no bias as to hue. If these "memory" colors are renderd correctly, all other colors will be rendered correctly.
If a white balance was based on some other hue, a color bias would result. Why not experiment and find out for yourself?
In theory, we could do "blue balance", by adjusting colour balance so that a reference patch in the image comes out as a defined shade of blue.
The problem with this: how would you find an object with this specific blue in the real world? The sky is blue, but which blue?
It would work with a colour reference card, but not with nature. But, conversely, it's relatively easy to find a white or gray object in the real world. In fact, experience tells us that a "normal" scene will, on average, be pretty close to neutral gray overall!
So that is why white balance was implemented like this in cameras (and software).
You do not have to use a neutral if you want to affect the image purposely.
As a photographer, sometimes the scene looks too blue for my interpretation. I want to "warm it up" a bit so I use a cool off-white as my "white" reference. Sometimes, the scene is too warm and I want to "cool the scene" (purely for my interpretation of the rendition.) In that case, I would choose a warm off-white for that.
Along with my 18% mid-grey card which has a 90% white (for detail in the highlights), I also carry some "light yellow" and some "light blue" sheets of paper. Get them at a copy centre for a few cents a sheet.
You don't even have to use a full sheet of the tint. I can tear a sheet in four and put a quarter of the tint against a white sheet and average the whole sheet to slightly alter the white balance to get something in between two extremes.
It doesn't have to be. We could purposefully take a colour and balance to it, so that colour would 'come out' as white and every other colour would be adgusted accordingly. Maybe we even do that, for a special effect or when we know a movie shot will progress from daylight to artificial light and we want to fool the camera into a half-way setting (though adjustment in post-production would probably be easier). But, mostly, we want white balance to be WHITE balance, so we use a neutral card.