TMI Blog2006 (1) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 6,50,000/-. 2. The above advertisements also indicated that the Company can be sold as going concern and bids can be submitted even for such purchase. On 23-6-2003, tenders were opened in presence of bidders, secured creditors. Out of total 9 offers received, 3 were interested in purchasing the company as going concern . In the inter se bidding held, following offers were received :- PARTIES OFFER Bhaskar Exxols Ltd. ₹ 4,87,00,000/- SankhImpex. ₹ 4,85,00,000/- Mahendra Kumar and Co. ₹ 1,17,00,000/- 3. As Mahendra Kumar and Company were lowest and unwilling to go further in inter se bidding, the Official Liquidator returned their earnest money. It is alleged that Sankh Impex had put certain conditions which were not accepted by the Official Liquidator and hence, it withdrew its offer to purchase as going concern . According to Bhaskar Exxols Ltd., the sale notice was dated 13-6-2003 and it had quoted ₹ 3,11,00,000/- as its composite offer and it deposited ₹ 6,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice for forfeiture, on 23-11-2003 and 7-11-2003, the above-mentioned two bidder's filed their replies and pointed out that there is no provision and also reason to order such forfeiture. The Official Liquidator has filed rejoinder on 29-9-2005 justifying the proposed forfeiture. All the parties were then heard and they have also placed on record written notes of arguments along with relevant case law. The question to be decided, therefore, now is whether the Earnest Money Deposit of ₹ 6,50,000/- each of Bhaskar Exxols Ltd. and Sankh Impex needs to be and can be forfeited. 5. Mrs. Wandile, Adv. for the Liquidator has relied heavily upon the terms and conditions of the sale to state that acceptance of tender or offer is subject to the decision of Company Court i.e. this Court and till then, there is no question of any party withdrawing from the process in which it has participated. The Earnest money can be refunded only after this Court accepts the appropriate bid. According to her, both the above bidders were not right in attempting to withdraw before finalisation as per orders of this Court and hence, the earnest money deposit furnished by them needs to be forfeite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and they were called for meeting, the offer of Sankh Impex was not accepted. He further states that, in this background, withdrawal of his client's bid was communicated to the Official Liquidator and refund was claimed already. According to him, therefore, neither the earnest money deposit of his client nor that of Bhaskar Exxols Ltd. can be forfeited. He has also relied upon the same case law, as mentioned above, by the Counsel for Bhaskar Exxols Ltd. 8. Andhra Pradesh Paper Mills Ltd vs. State of Maharashtra reported at 2003 (4) Mh.L.J. 760 needs to be considered first because all the parties have placed reliance upon it. The Andhra Pradesh Paper Mills Ltd filed petition under Article 226 of the Constitution, of India for directing the respondent - State of Maharashtra and the Conservator of Forest, North Chandrapur Circle to refund an amount of ₹ 69,59,078/- with interest @ 20% p.a. from 15-8-1987 till realisation of the said amount. Respondent No. 2 there had issued a Tender Notice dtd. 8-6-1987 for sale of Bamboo Units in Vadasa and Gadchiroli. The respondent No. 3 had also issued a Tender Sale Notice in respect of Bhamragarh of Chandrapur Circle for the same p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Contract, it is clear that the final sale result was to be declared within 30 days on getting approval of the competent authority that is to say till 14-8-1987 and if the highest tender was not considered acceptable in any case the final sale result was to be declared within 45 days i.e. 29-8-1987. Thus, in our view, in either case the outer limit for declaring final result was either on 14-8-1987 or 30-8-1987. 18. The respondents had a right to forfeit the earnest money deposit as provided in Clause 5(v) only if the tender was withdrawn prior to the declaration of the final sale result i.e. either 14-8-1987 or 30-8-1987. In our view, taking into consideration the relevant clauses of the Tender Notice viz. Clause 5(iv), (v), (vi), (vii) and (ix), it will have to be held that the date of the final result was fixed by an outer limit and the said date did not depend upon the approval of the competent authority as submitted by the respondents. It is an admitted position that the petitioner has withdrawn its offer after expiry of 45 days when there was no communication from the respondents either of acceptance or rejection of its bid in the said auction. This being an admitted positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document have played important role in reaching this conclusion and interpretation. After appreciating these cases, the Division Bench concluded as under :- 24. In the light of the ratio laid down in the aforesaid Judgment, we have no hesitation in holding that the petitioner had withdrawn its bid before the conclusion of the contract and, therefore, the petitioner is entitled to get the refund of the earnest money deposited which it had paid to the respondents at the time of making its offer in the form of a bid to the Tender Notice issued by the respondents. In the result, the impugned communication at Annexure 1, dated 23-9-1987 informing the petitioner that its earnest money deposit was forfeited on account of withdrawal of tender and communication at Annexure J dated 24-9-1987 informing the petitioner that the earnest money deposit could not be refunded because the State Government had accepted the tender on 17-9-1987, will have to be quashed and set aside. In the present case that the acceptance by respondents of the offer made by the petitioner was on 17-9-1987 which was communicated much after the last date of declaration of final sale result which was 30-8-1987 as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-10-1996 by opening the tender box. But mere opening of the box is not sufficient. The tender forms are to be scrutinised as to whether they are valid tenders and find out who is the successful bidder. That process admittedly, was not gone through and even according to the respondent the sealed covers are not opened on the given date and were kept back in the box. The opening of tenders by removing the seals and scrutinising the tender forms was postponed because of the interim orders of this Court. Before the actual process started, the petitioner had asked for return of the E.M.D. Hence, it is not possible to accede to the contention of the learned counsel for the respondent. Though the request of the petitioner did not specifically refer to withdrawal of the tender, still no one will ask for return of the E.M.D. unless there is an intention not to participate in the tender. The respondent had also understood this because in the reply dt. 14-11-1996 the respondent had clearly stated that the petitioner should participate in the opening of the tenders to which date it was postponed i.e. 16-11-1996 and expressed the inability to return the E.M.D. referring to Clause (12) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of petitioner. It held that when the government accepted sole tender of petitioner, there was no offer by him and there could not be any contract between parties. Again, the tender permitted withdrawal and the view taken is in the background of condition mentioned above and the facts of the case. 14. Learned counsel for the Official liquidator has relied upon AIR 1995 SC 1176 between Delhi Development Authority vs. Grahsthapana Co-operative Housing Society Ltd. to point out the significance of payment or acceptance of earnest money in such contracts. The respondent-society before the Hon'ble Apex Court deposited fixed earnest money and formally applied for allotment to the Appellant before it. On acceptance of offer, formal allotment of plot was made by Appellate Authority. However, before delivery of possession Authority communicated enhancement of premium of land. Respondent allottee-society failed to make payment within time extended by Delhi High Court while upholding enhancement and hence Appellant forfeited earnest money deposited by it. Respondent-society again approached the High Court which directed the Appellant Authority not to make any deduction and to refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f property of Company in liquidation by Official Liquidator as per directions of High Court. The opening para itself gives the terms and conditions of offer. It is observed that the characteristics of earnest money is that it serves two purposes - firstly, it goes in part payment of the purchase money for which it is deposited and, secondly, but primarily, it is security for the performance of the contract. There, the tenders for purchase of property of a company under liquidation were invited by the Official Liquidator at the direction of the High Court. The highest bidder deposited the amount of Earnest Money and also 25% of the bid amount as per terms of the tender notice. However, the bid of the highest bidder was not accepted by the Court and direction was given to invite fresh tenders. This was a case where the sale proceedings were cancelled on account of the conduct of the parties in not doing one or the other acts provided under the terms of sale. The act attributed to the highest bidder was that he had adopted the stance of filibuster by indulging in dilatory tactics in postponing the proceedings for confirmation of sale. If the Court had confirmed the sale, other terms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other stipulated by way of penalty. In the latter case, the measure of damages is by section 74 of the Contract Act-reasonable compensation not exceeding the penalty stipulated for. In Fateh Chand vs. Balkishen Das, AIR 1963 SC 1405- it was observed that section 74 of Contract Act boldly cut across the web of rules under English Common Law by enacting uniform principle applicable to all stipulations naming amounts to be paid in case of breach and stipulations by way of penalty. The Supreme Court explained the scope of section 74 of the Contract Act in Sir Chunilal V. Mehta and Sons Ltd. vs. Century Spinning and Manufacturing Co. Ltd., AIR 1962 SC 1314 - and stated that the sum to be paid in repudiated contracts and stipulation for payment of the same by way of liquidated damages would exclude the right to claim unascertained sum of money as damages. The right to claim liquidated damages is enforceable under section 74 of the Contract Act and when such a right is found to exist, no question of ascertaining damages really arises. Where the parties have deliberately specified the amount of liquidated damages, there can be no presumption that they at the same time, intended to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Clause No. 5 which is important states that The earnest money deposit given for participating in the auction sale will be returned to respective bidder by the Official Liquidator in the event of his offer not accepted. No interest shall be payable on earnest money. Clause No. 6 reads - No person shall at the bidding offer a sum less than that shall be fixed by the Official Liquidator or retract from bid . Clause No. 7 - The sale is subject to confirmation by the Hon'ble Court, Mumbai, Nagpur Bench, Nagpur. Clause No. 9 requires highest bidder whose bid is accepted by Official Liquidator to deposit balance 25% of bid amount within two weeks and remaining balance of purchase price within two months or three months depending upon whether his offer is composite or otherwise. Clause 10 which provides for forfeiture, it reads :- If the purchaser does not pay the balance of the purchase money in the manner and within the time as specified by the Official Liquidator or in other respect fails to perform these conditions or any of them the earnest money shall stand forfeited and the Official Liquidator, High Court, Nagpur shall resale the said property as described in the schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but here, in any case, both the bidders raised their bid only in negotiations on 23-6-2003 and the bids were placed for consideration of this Court in these proceedings on 3-7-2003 in a very reasonable time. Advertisements were issued by the Official liquidator on 15th/17th/18th, June only. Both these bidders could have made appropriate grievance before this Court at the time of consideration of their offers. If they wanted to retract, they could have done so after seeking permission of this Court and only if such permission was granted. Otherwise, they were duty bound to continue to participate till appropriate orders in this respect were passed by this Court. The obligation cast by terms and conditions is on each bidder whose offer is to be placed for consideration of this Court. The second highest bidder, therefore, cannot take shelter behind the first highest bidder. Otherwise, the very purpose of incorporating clause Nos. 6 and 8 in said terms and conditions will stand defeated. The said property was required to be re-advertised and sold by undertaking fresh exercise, expenditure and at less price. The breach of clauses 10 and 6 above by Bhaskar Exxols Ltd. and Sankh Impex i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
