2015 (4) TMI 555 - HC - Income Tax

Forfeiture of bid amount - extension of period to make the payment of bid amount - Held that - As at the time of inviting the bids as well as even at the time of confirmation of sale in favour of the petitioner, the petitioner was informed that the petitioner has to make the payment of bid amount within a period of 90 days from the date of confirmation of the sale, failing which the amount already deposited shall be forfeited. It is required to be noted that as such on the aforesaid terms and conditions the sale came to be confirmed in favour of the petitioner. Despite the above, the petitioner has failed to make the payment of bid amount within 90 days from the date of confirmation of sale. It is required to be noted that the sale came to be confirmed in favour of the petitioner on the aforesaid terms and conditions vide communication dated 14.02.2014 which came to be communicated to the petitioner vide communication dated 27.02.2014. Thus, within a period of 90 days from 14/27.02.2014, the petitioner was required to make the payment of entire bid amount, which admittedly the petitioner has failed to make. Under the circumstances, as such the consequences on breach of the terms and conditions on which the sale came to be confirmed must follow. At the time of making bid the petitioner was required to make the provision for deposit of the bid amount. Now, so far as the request on behalf of the petitioner to grant extension to the petitioner to deposit the balance bid amount is concerned, the same cannot be accepted now. It is required to be noted that as such the petitioner was required to deposit / pay the entire bid amount within a period of 90 days from 14/27.02.2014 i.e. on or before 14/27.05.2014. Therefore, time to make the payment of entire bid amount had expired as far as back in the month of May, 2014. Granting of further time and/or extension of time further would tantamount to varying the terms and conditions on which the bids were invited and even the terms and conditions on which the sale came to be confirmed in favour of the petitioner.In any case this Court in exercise of powers under Article 226 of the Constitution of India cannot extend the period to make the payment of bid amount which would tantamount to varying the terms and conditions of inviting the bids and/or terms and conditions on which the sale is confirmed in favour of the petitioner. As observed herein above, on nonfulfillment of the terms and conditions and/or in breach of the terms and conditions on which the sale is confirmed, the necessary consequences as provided under the terms and conditions of the tender agreement / the sale confirmation must follow. Thus he impugned communication/decision of the CCIT forfeiting the amount on failure of the petitioner to make the payment of entire bid amount within stipulated time is illegal and/or arbitrary and/or in breach of the terms and conditions on which the sale came to be confirmed in favour of the petitioner.

Summary

Issues:
Challenge to forfeiture of bid amount due to failure to make full payment within stipulated time period.

Analysis:
The petitioner participated in an auction for a property and made the highest bid of Rs. 2,56,00,000. The terms required the successful bidder to pay 25% of the bid amount within 30 days and the balance within 90 days from the confirmation of sale. The petitioner paid the initial 25% on time but failed to pay the remaining amount within the stipulated period. Requests for extensions were made, but the Chief Commissioner of Income Tax (CCIT) rejected them citing non-compliance with the terms and conditions. Consequently, the CCIT issued a notice forfeiting the amount already paid by the petitioner.

The petitioner argued that the forfeiture was harsh and requested more time to pay the balance amount, as they had already paid a significant portion of the bid amount. However, the court noted that the terms clearly stated the requirement to pay the full bid amount within 90 days from the confirmation of sale. The court emphasized that the petitioner was aware of these conditions when participating in the auction and confirmed that the sale came with these specific terms. As the petitioner failed to adhere to the payment timeline, the consequences of forfeiture were deemed appropriate.

The court rejected the petitioner's plea for an extension, stating that granting additional time would alter the terms and conditions of the auction, potentially affecting other bidders. The court also addressed the petitioner's argument regarding the legality of the CBDT Circular No.1908 dated 19.07.1993, noting that the circular had not been challenged and that the terms of the auction clearly outlined the payment timeline. Ultimately, the court found no illegality or arbitrariness in the CCIT's decision to forfeit the amount due to the petitioner's failure to fulfill the payment obligations within the specified timeframe. Therefore, the petition was dismissed.