(Per : HONOURABLE MR.JUSTICE P.B.MAJMUDAR) 1. Present appeal is directed against the order of the learned Single Judge, dated 30.12.2010 rendered in O.J.C.A. No.535 of 2010, which was preferred in O.L.R. No.107 of 2010, whereby the learned Single Judge directed that the Earnest Money Deposit (for short, E.M.D.), deposited by the appellant, be forfeited.
2. The property of the Company in liquidation was put to public auction. Public advertisement was published in English Daily, Times of India, Ahmedabad edition, on 11.10.2010. A photocopy whereof is produced at Page-157 of the compilation. As per the said advertisement, bids were invited in connection with the properties, which were to be sold in a public auction, as per the advertisement. The last date for submission of offers was 27.10.2010 and the same were to be opened before the learned Company Judge, on 29.10.2010, at 11:00 a.m., and auction / inter se bidding was to take place in the Court, on the same day. The appellant, herein, submitted his bid in a sealed cover. Upset price of the property was fixed at Rs.4,70,00,000/-. The appellant deposited Rs.47,00,000/- towards E.M.D. before the Official Liquidator. However, it seems that, on the relevant date i.e. on 29.10.2010, the learned Company Judge was not available and the matter was placed before another learned Judge, who adjourned the matter to 19.11.2010. Meaning thereby, bids were neither placed before the learned Company Judge nor auction did take place or bids were discussed, on 29.10.2010. Aforesaid factual aspect is not in dispute. It seems that on 29.10.2010, i.e. on the date on which auction was to take place before the learned Company Judge as stipulated in the advertisement, the appellant sent a letter to the Official Liquidator informing him that he is withdrawing his bid. Ultimately, respective bids were placed before the learned Company Judge on 29.12.2010.
3. Learned Counsel for the Official Liquidator, Shri. Yadav, does not dispute the aspect that on 29.10.2010, a letter was received by the office of the Official Liquidator from the appellant to permit him to withdraw his bid. However, since, Official Liquidator has no powers to take any decision in that regard, as submitted by Mr. Yadav, said letter was kept, as it is, in the record of the Official Liquidator.
4. The appellant, herein, thereafter, preferred an application being Civil Application No.535 of 2010 before this Court, wherein he averred that the bids in question were invited by the Official Liquidator in compliance of the order of this Court dated 29.09.2010 passed in O.L.R. No.107 of 2010. It was, further, stated therein that the appellant had submitted his bid in a sealed cover along with E.M.D. of Rs.47,00,000/-, on 27.10.2010, with the office of the Official Liquidator. In the said application, it was averred that since no auction has taken place, his E.M.D. may be refunded, in view of the delay. Said application was preferred on 25.11.2010. Ultimately, aforesaid application was heard by the learned Company Judge on 30.12.2010. On the aforesaid date, the learned Company Judge found that the bid offered by the appellant being Rs. 5,71,00,000/- was the highest. Other bidders refused to raise their bid. The learned Company Judge observed that the bid was opened on 29.12.2010 and within the short time, the appellant expressed his desire to withdraw his bid. Learned Company Judge has further observed that, as such, there is no inordinate delay, and therefore, the appellant cannot be permitted to withdraw his bid. The learned Company Judge also found that the offer of the appellant was the highest. The learned Company Judge also observed that the public advertisement indicated 29.10.2010, as the date, on which the bids were to be opened before the Court. The learned Judge has also recorded that such auction did take place on 29.10.2010 and the bids were also opened. Learned Judge has, further, recorded that, even, the ground taken by the appellant, at the time of hearing of the application, that he had by mistake given his bid at Rs.5,71,00,000/-, which is considerably high than the upset price mentioned in the public advertisement, cannot be accepted. The learned Company Judge, hence, came to the conclusion that in view of the Clause-25 of the terms and conditions of the tender, the amount deposited by the appellant as E.M.D., requires to be forfeited. It is this order, which is impugned in this appeal, at the instance of the appellant-original applicant.
5. Mr. Navin K. Pahwa, learned Counsel for the appellant, vehemently argued that the bids were to be opened on 29.10.2010. Admittedly, no bids were opened on that day, nor even the bids were discussed and in view of the same the appellant is entitled to withdraw his bid. It is also argued by Mr. Pahwa that on 29.10.2010, since auction had not taken place, a letter was sent to the Office of the Official Liquidator by the appellant on the very same day, stating that the appellant was not interested in proceeding further with the bid due to unavoidable circumstances. It is, further, argued that not only on 29.10.2010, but, even on subsequent dates also bids were not opened. The bids were opened by the learned Company Judge, for the first time on 29.12.2010 and at that time, the appellant pointed out that he had already preferred an application on 25.11.2010 to allow him to withdraw his bid. It is submitted that under the circumstances, the learned Company Judge has committed a grave error in rejecting the application for refund of E.M.D..
6. On the other hand, learned Counsel, Mr.
J.S. Yadav, on behalf of the Official Liquidator, has submitted that it is an admitted position that Office of the Official Liquidator received a letter from the appellant, on 29.10.2010. He is unable to say anything about the exact timing regarding receipt of the said letter, whereby the appellant requested for withdrawal of his bid and for refund of E.M.D. Mr. Yadav, has, further, submitted that, since, Official Liquidator has no power in that regard, said letter was kept in the record, as it is. Learned Counsel, further, submitted that as per the terms and conditions of the tender, a bidder is not permitted to withdraw his bid and in such an event, his E.M.D. is liable to be forfeited, as laid down under Clause-25 of the terms and conditions of the tender.
7. None is present on behalf of respondent No.2-Bank.
8. We have heard learned Counsel for the appellant and respondent No.1, at length, and have gone through the order of the learned Company Judge as well as the public advertisement and terms and conditions of the tender. We have also perused the record, produced by the learned Counsel, Mr. Yadav, on behalf of the Official Liquidator.
9. It is not in dispute that, as per public advertisement, which is produced at Page-157 of the compilation, auction was to be held on 29.10.2010, at 11:00 a.m., in the Court. The relevant portion of the public advertisement, dated 11.10.2010, reads as under:
“... The offers will be opened before the Hon'ble Judge taking company matters on 29-10-2010 at 11:00 AM In the Hon'ble High Court of Gujarat, Sola Roda, Ahmedabad and thereafter auction/inter- se-bidding will be held on the same day, when the offerers are requested to remain present to raise/revise their offers upwards. ”
10. It is an admitted position that the concerned Company Judge was not available on the relevant date, as pointed out by learned Advocate, Mr. Yadav, from the record, and hence, the matter was placed before another learned Judge. It may, however, be noted that the matter was neither discussed nor offers were placed by the Official Liquidator before the concerned Judge, and no order was passed, except, adjourning the matter to 19.11.2010.
Subsequently, the matter was adjourned several times, as can be seen from the record, produced at Page-180 of the compilation. Meaning thereby, no order was passed for opening the bids on 03.12.2010, 06.12.2010, 13.12.2010. Ultimately, for the first time, as per the record, the bids were opened in the Court by the learned Company Judge on 29.12.2010. On the aforesaid date, auction was held in the Court and the present appellant's bid being the highest, the Court was inclined to accept the same. However, in view of the application of the appellant before the Court that he may be permitted to withdraw his bid, the Court decided his application and by passing the impugned order, rejected the same, by holding that the ground advanced by the learned Counsel that original bid was made under mistake, was not tenable. The learned Company Judge also found that, as such, there is no inordinate delay, by which the applicant can be permitted to withdraw his bid. On the aforesaid date, the Court also considered the Report of the Official Liquidator giving description of various bids and thus, the bids were opened, for the first time, in the Court on 29.12.2010.
11. Considering the aforesaid factual aspect, it is clear that, even though, there is clear stipulation in the public advertisement that bids were to be opened on 29.10.2010, admittedly, neither auction took place nor any bids were considered and the matter was simply adjourned to next date. In fact, on the dates subsequent thereto viz., 03.12.2010, 06.12.2010, 13.12.2010, the matter was adjourned without bids being opened in the Court nor the bids were discussed and it is only on 29.12.2010, when, for the first time, the bids were taken for consideration. In a case, where, the bids were discussed on the first date and the matter was adjourn to the next date, then, as per Clause-25 of the terms and conditions of the tender, a bidder cannot be permitted to withdraw his bid. In the case on hand, on 29.10.2010 i.e. the date on which the auction was to take place, nobody knew as to what were the bids of the others. Even, on the subsequent dates also, the bids were not opened.
The present appellant send a letter to the Official Liquidator, on the very same day i.e. 29.10.2010, to permit him to withdraw his bid and also filed an application, being Civil Application No. 535 of 2010, on 25.11.2010, wherein he clearly stated that, since, bids were not opened, he is not interested to remain in fray. Considering the said aspect, we are of the opinion that the learned Company Judge has committed an error in coming to the conclusion that within short time, after making the offer, the appellant cannot be permitted to withdraw the same. At this stage, it would be relevant to refer to the observations made by the learned Company Judge in Para-9 of the order under challenge, which reads as under:
“9. It is not in dispute that offer of the applicant was found to be highest when the bids were opened by the Court on 29.12.2010. The applicant now desires to withdraw his offer citing delay as a reason for the same. From the record it appears that the advertisement indicated 29.10.2010 as the date on which the bids will be opened by the Court and inter-se bidding would take place. Though such auction did take place on 29.10.2010, eventually all bids were opened on 29.12.2010 and inter-se bidding was conducted. Time gap between first date envisaged in advertisement and actual date when such auction took place, under no circumstances can be stated to be unduly long so as to enable the applicant to change his mind, withdraw his offer and insist on return of EMD. This, along with the stand of the applicant that he had put the figure of sale offer by mistake that too after finding out that his offer is the highest, clearly shows that he is trying to wriggle out of his offer some how or other.”
12. Insofar as the observations made by the learned Company Judge in Para-9 of the impugned order that “in fact, the auction did take place on 29.10.2010” is concerned, same is factually incorrect, as it is fairly conceded by the learned Counsel for the Official Liquidator, Mr. Yadav, that no such auction took place on 29.10.2010. We have perused the original order of the learned Company Judge and the same sentence finds place therein that the auction did take place on 29.10.2010, despite the fact that neither the matter was taken up for hearing nor the respective bids were discussed. Under the circumstances, it would not be appropriate to forfeit the E.M.D. submitted by the appellant. If, the offers were not opened on the relevant date, as stipulated in the public advertisement and if a particular bidder is not willing to wait because of uncertainty of the matter, such a person cannot be compelled to continue in the fray. The clause pertaining to forfeiture of E.M.D. is not meant to punish, but, it is for the purpose to see that somebody, who has really taken a chance by submitting his bid, may not be permitted to withdraw the same, subsequently. In a given case, if a bid is submitted and an offer is given and if, offers of various bidders are discussed in the Court and thereafter, if the proceedings are adjourned, the person having participated in such proceedings cannot be permitted to withdraw his bid and in such a case, his E.M.D. is required to be forfeited.
13. In the case on hand, admittedly, nothing happened on 29.10.2010, and though, the bidders were present before the Court, no order was passed by the concerned Court, except, posting the matter on a subsequent date. Even, the inter se bidding also did not take place. The appellant, herein, therefore send a letter to the Office of the Official Liquidator, on the very same day i.e. on 29.10.2010 to permit him to withdraw his bid. Later on, the appellant also preferred an application being Civil Application No. 535 of 2010 before this Court, on 25.11.2010. Thus, if, what the learned Company Judge has recorded in Para-9 of the impugned order is correct that the bids were opened on 29.10.2010, then, the appellant has naturally no right whatsoever to seek refund of E.M.D.. Admittedly, no bids were opened on 29.10.2010. It, therefore, seems that the learned Company judge committed a factual error, while making observation in this behalf in the impugned order. Considering the said aspect and considering the fact that the matter was adjourned, thereafter, from time to time and in the meanwhile, the appellant filed Civil Application No.535 of 2010, on 25.11.2010, seeking withdrawal of his E.M.D., we are of the opinion that the appellant is entitled to withdraw his bid and there is no justification in forfeiting the entire E.M.D..
14. Here, it may be noted that Clause-10 of the Terms and Conditions of the tender starts with, “APPLICABLE ONLY ON SALE OF LAND (11 TO
13)”. Even, Clauses-14 to 16 also appear to be applicable only after the sell of land. In other words, the clauses from Clause-10 onwards, shall be applicable only after sale takes place. Clause-25 pertains to the offer and it provides that the offerer shall not be entitled to withdraw or cancel his offer once submitted, and if, any offerer withdraws or cancels his offer, his Earnest Money Deposit shall be liable to be forfeited and he will also be liable to pay the Official Liquidator the loss, damages suffered consequent upon his backing out of his offer. Clause-25, further, provides that property / assets in question will then be re-sold at the risk and consequences of the offerer. It is,
therefore, clear that, in a case where, an offerer's offer is accepted, then, subsequently he cannot withdraw his bid and the property / asset is required to be resold.
15. Clause-30 of the conditions, provides that pending confirmation of sale by the High Court, bidders will not be allowed to withdraw their offer. Admittedly, such a condition shall be applicable, only when the bids were opened by the Court and bids of the different bidders were discussed in the Court and in such an eventuality, no bidder can be permitted to withdraw his bid. In the case on hand, admittedly, bids were neither opened nor discussed on 29.10.2010, as mentioned in the public advertisement. The appellant, therefore, send a letter to the Office of the Official Liquidator on the very same day, expressing his desire to withdraw his bid, on the ground of delay. Had the matter been taken up by the concerned Judge on 29.10.2010 and the bids were discussed and same was, then, adjourned to subsequent date for increasing the bid, then, as per Clause-25, a bidder could not be permitted to withdraw from fray, at that stage, and his E.M.D. is liable to be forfeited.
16. In the instant case, in spite of clear stipulation in the public advertisement, the bids were neither opened nor were discussed before the Court on 29.10.2010. Even, the report of the Official Liquidator was also not placed before the Court nor any request was made on the part of the learned Counsel for the Official Liquidator for opening the bids. If, the bids were opened on 29.10.2010, and thereafter, the matter was adjourned, the appellant cannot be said to be entitled to get his E.M.D. back. Considering the aforesaid aspect and, more particularly, in view of the fact that no proceedings took place on 29.10.2010, despite the clear stipulation in the public advertisement, and even on the subsequent dates also no auction took place, we are of the opinion that the appellant was well within his right to seek withdrawal of his bid.
17. In support of his submissions, learned Counsel for the appellant, Mr. Pahwa, has placed reliance on a decision of the Hon'ble Apex Court in “UNION OF INDIA AND ORS. VS. M/S. BHIM SEN WALAITI RAM”, reported in 1969(3) SCC 146, wherein, in Para-4, the Hon'ble Apex Court has observed as under:
“4. On behalf of the appellants it was contended by Dr. Seyid Muhammad that the respondent was under a legal obligation to pay one-sixth of the annual fee within seven days of the auction under cl. 21 of r. 5.34 and it. was due to his default that a resale of the excise shep was ordered. Under cl. 22 of r. 5.34 the respondent was liable for the deficiency in price and all expenses of such resale which was caused by his default. We are unable to accept this argument. The first portion of cl. 21 requires the "person to whom the shop has been sold" to deposit one-sixth of the total annual fee within seven days. But the sale is deemed to have been made in favour of the highest bidder only on the completion of the formalities before the conclusion of the sale. Clause 16 of r.
5.34 states that "all sales are open to revision by the Chief Commissioner". Under cl. 18, the Collector has to make a report to the Chief Commissioner where in his discretion he is accepting a lower bid. Clause 33 of the Conditions, Ex. D- 28, states that "all final bids will be made subject to the confirmation by the Chief Commissioner who may reject any bid without assigning any reasons." It is, therefore, clear that the contract of sale was not complete till the bid was confirmed by the Chief Commissioner and till such confirmation the person whose bid has been provisionally accepted is entitled to withdraw his bid. When the bid is so withdrawn before the confirmation of the Chief Commissioner the bidder will not be liable for damages on account of any breach of contract or for the shortfall on the resale. An acceptance of an offer may be either absolute or conditional. If the acceptance is conditional the offer can be withdrawn at any moment until absolute acceptance has taken place. This view is borne out by the decision of the Court of Appeal in Hussey v. HornePayne(1). In that case V offered land to P and P accepted ’subject to the title being approved by my solicitors’. V later refused to go on with the contract and the Court of Appeal held that the acceptance was conditional and there was no binding contract and that V could withdraw at any time Until P’s solicitors had approved the title. Jessel, M.R. observed at p. 626 of the report as follows:
"The offer made to the Plaintiff of the estate at that price was a simple offer containing no reference whatever to title. The alleged acceptance was an acceptance of the offer, so far as price was concerned, ’subject to the title being approved by our solicitors’. There was no acceptance of that additional term, and the only question which we are called upon to decide is, whether that additional term so expressed amounts in law to an additional term or whether it amounts, as was very fairly admitted by the counsel for the Respondents, to nothing at that is, whether it merely expresses what the law would otherwise have implied. The expression ’subject to the title being approved by our solicitors’ appears to me to be plainly an additional term. The law does not give a right to the purchaser to say that the title shall be approved by any one, either by his solicitor or his conveyancing counsel, or any one else. All that he is entitled to require is what is called a marketable title, or, as it is sometimes called, a good title. Therefore, when he puts in ’subject to the title being approved by our solicitors’, he must be taken to mean what he says, that is, to make a condition that solicitors of his own selection shall approve of the title."
It was submitted on behalf of the appellant that the phrase "person to whom a shop has been sold" in cl. 21 of r.
5.34 means a "’person whose bid has been provisionally accepted". It is not possible to accept this argument. As we have already shown the first part of cl.
21 deals with a completed sale and the second part deals with a situation where the auction is conducted by an officer lower in rank than the Collector. In the latter case the rule makes it clear that if any person whose bid has been accepted by the officer presiding at the auction fails to make the deposit of one-sixth of the annual fee, or if he refuses to accept the licence, the Collector may resell the licenee, either by public auction or by private contract and any deficiency in price and all expenses of such resale shall be recoverable from the defaulting bidder. In the present case the first part of cl. 21 applies. It is not disputed that the (1) [1878] 8 Ch. D.
670 at 676. Chief Commissioner has disapproved the bid offered by the respondent. If the Chief Commissioner had granted sanction under cl. 33 of Ex. D-23 the auction sale in favour of the respondent would have been a completed transaction and he would have been liable for any shortfall on the resale. As the essential pre-requisites of a completed sale are missing in this case there is no liability imposed on the respondent for payment of the deficiency in the price.”
18. Mr. Yadav, learned Counsel for the Official Liquidator, in support of his arguments, has placed reliance on a decision of the Hon'ble Apex Court in “VILLAYATI RAM MITTAL PRIVATE LIMITED VS. UNION OF INDIA AND ANR.”, reported in (2010) 10 SCC 532, wherein the Hon'ble Apex Court, in Paras- 8 to 11, has observed as under:
“8. We find that Clause 6 of the Notice clearly stipulated that “if any firm revokes its offer during the validity period, its earnest money shall be forfeited”. Hence, the question that arose before the High Court for decision was whether the petitioner by revising one of the figures in its tender from Rs.23,76,000/- to Rs.32,76,000/- revoked its offer and the High Court has taken the view in the impugned judgment that as a consequence of the change in the figures, the offer of the petitioner for the work was enhanced from Rs.32 crores to Rs.41 crores and, therefore, the original offer of Rs.32 crores for the work stood revoked.
9. In para 12 of the counter affidavit filed in reply to the Writ Petition in the High Court the respondents have stated that after receiving the letter dated 06.05.2004 of the petitioner correcting the figures in its tender, the respondents sent letters to the petitioner giving opportunity to the petitioner to withdraw its letter dated 06.05.2004 on or before 04.06.2004 and yet the petitioner did not withdraw its letter dated 06.05.2004. These facts clearly establish that the petitioner was not willing to stand by its original offer of Rs.32 crores for the work and was willing to do the work only at the revised bid of Rs.41 crores. The High Court was thus right in coming to the conclusion that the petitioner had revoked its offer of Rs.32 crores for the work.
10. The legal principles relating to “Earnest Money’ are well settled. In Chiranjit Singh v. Har Swarup [AIR 1926 PC 1], the Judicial Committee of the Privy Council held:
“Earnest money is part of the purchase price when the transaction goes forward: it is forfeited when the transaction falls through, by reasons of the fault or failure of the vendee”.
These observations of the Judicial Committee have been quoted in the judgment of this Court in Shri Hanuman Cotton Mills & Ors. v. Tata Air Craft Limited [(1969) 3 SCC 522] in which the principles relating to earnest money have been laid down.
11. Similarly, in H.U.D.A. & Anr. v. Kewal Krishan Goel & Ors.,etc. [(1996) 4 SCC 249], this Court quoted the following observations of Hamilton, J. in Summer and Leivesley v. John Brown & Co. [25 Times LR 745] with regard to the meaning of ‘earnest’ :
“10. ... 'Earnest’ … meant something given for the purpose of binding a contract, something to be used to put pressure on the defaulter if he failed to carry out his part. If the contract went through, the thing given in earnest was returned to the giver, or, if money, was deducted from the price. If the contract went off through the giver’s fault the thing given in earnest was forfeited.”
19. As observed by the Hon'ble Apex Court in the case of “VILLAYATI RAM MITTAL PRIVATE LIMITED”(Supra), at Para-9, that petitioner, therein, was given an opportunity to withdraw his letter, but, he did not withdraw the same and it was found that the petitioner was not willing to stand by his original offer and was not willing to undertake the work at revised bid. Under the circumstances, the Apex Court held that his E.M.D. was rightly forfeited.
20. In the instant case, the bid of the appellant was never opened or discussed on the first date fixed for opening the same i.e. 29.10.2010. Had it been the case, where the bids were opened or discussed on the date appointed for the said purpose and then, the matter was adjourned for further discussion, at such a stage, no offerer can be permitted to withdraw his bid, which is not the case, here. At the most, the expenditure incurred by the Official
Considering the same, appeal requires to be allowed.
21. At this stage, Mr. Yadav, learned Counsel for the Official Liquidator pointed out that they had to bear expenses of about Rs.1,00,000/- towards public advertisement etc., and therefore, the appellant be directed to pay, at least, the said amount.
22. Mr. Pahwa, learned Counsel for the appellant, has submitted that the appellant has no objection, if, reasonable amount is deducted, while refunding the E.M.D.. Under the circumstances, an amount of Rs.1,00,000/- be deducted towards expenditure incurred by the Official Liquidator for re-advertisement etc. and the remaining amount of Rs.46,00,000/- be refunded to the appellant. At this juncture, Mr. Pahwa, requested that since amount of E.M.D. is placed in Fixed Deposit by the Official Liquidator, interest accrued on the same may also be paid to the appellant.
23. Insofar as the aspect of interest on the amount of E.M.D. is concerned, since, it is stipulated, that the amount of E.M.D. shall be interest free, aforesaid request of the learned Advocate, Mr. Pahwa, is rejected.
30.12.2010 is set aside. The appellant shall be REFUNDED an amount of Rs.46,00,000/- by the Official Liquidator, after DEDUCTING the amount of Rs.1,00,000/- incurred by the Official Liquidator towards expenses of advertisement etc., within a period of FOUR WEEKS from, today, failing which the appellant shall be entitled to claim interest at the rate of NINE per cent per annum, on the amount of refund. Appeal is DISPOSED OF, accordingly.
25. Since, appeal is disposed of civil application shall not survive and it stands DISPOSED OF, accordingly. Direct service is permitted.
(P.B. MAJMUDAR, J.)
(MOHINDER PAL, J.)
Umesh/