2019 (11) TMI 1788 - SC - Indian Laws

Seeking extension of time to pay the security amount - whether in view of the Clause contained in 9(iv) of the tender notification the Appellant should be driven to initiate the legal proceedings or for public demand recovery after refunding the amount which is deposited as contended by the learned Advocate for the private Respondents despite taking note of the intent of such deposit? HELD THAT - It is no doubt true dehors the writ proceedings initiated by the private Respondents and in the absence of such deposit option in any event was open to the Appellant to make the recovery through such proceedings. It is noticed that apart from the right available to recover the amount by forfeiting the additional security deposit the Appellant had also clearly indicated that the subsequent sale would be made at the cost and risk of the private Respondents herein which would mean that the difference of the cost between the first and second auction and the resultant loss to the Appellant if attributable to the private Respondents is recoverable from the private Respondents. However it is no doubt true that such recovery is to be made after quantifying the same by following due process of law - when the contention of loss being caused was put forth the amount ought to have been allowed to be retained till the procedure as contemplated in law is followed and a decision is taken though not directly as forfeiture. The direction to refund the amount unconditionally is not found justified and is accordingly set aside. The Appellant shall issue appropriate notice(s) to the private Respondents indicating details about the manner in which they computed the loss after conducting the second auction at the cost and risk of the private Respondent. On receiving response to the same a detailed consideration be made and a speaking order be passed in that regard. The Respondents are at liberty to challenge the speaking order to be passed by the Appellant and the process being pursuant to a contractual matter the private Respondent if aggrieved are entitled to avail their legal remedy before the appropriate forum in accordance with law and the entitlement of the amount will be decided therein. As per the speaking order passed by the Appellant if it is found that the loss suffered is within the amount available in deposit appropriate adjustment should be made and the balance if any be refunded. The adjustment of the amount by the Appellant if made after passing the speaking order the same shall be without prejudice to the contention of both parties and the same shall be subject to the outcome of the proceedings in the matters where the Respondents may challenge the speaking order in accordance with law. Appeal allowed in part.

Summary

Issues Involved:
1. Validity of the termination of the agreement by the Odisha Forest Development Corporation Ltd. (OFDC Ltd.)
2. Entitlement to the refund of the deposit made by the private Respondents.
3. Right of the OFDC Ltd. to recover losses incurred due to the re-tendering process.

Detailed Analysis:

1. Validity of the Termination of the Agreement by OFDC Ltd.:
The OFDC Ltd. issued an e-tender notification for the advance sale of phal Kendu leaf (KL) of the 2017 crop. The private Respondent, being the successful bidder, was required to execute an agreement and deposit a provisional security deposit of Rs. 5,00,000/-. The private Respondent executed the agreement and was further required to deposit an additional security amount by 31.05.2017. Upon failing to deposit the required amount, the private Respondent sought an extension, which was denied by the OFDC Ltd. Consequently, the agreement was canceled, and the lot was put to re-tender. The private Respondent challenged the cancellation and subsequent auction process in a writ petition but later withdrew the petition, leading to the High Court directing the refund of the deposit.

2. Entitlement to the Refund of the Deposit Made by the Private Respondents:
The High Court initially directed the private Respondents to deposit certain amounts as a condition for staying the finalization of the re-tender process. The High Court later ordered the refund of these deposits when the writ petitions were withdrawn. The Supreme Court examined whether the High Court's direction for the refund was justified. It was noted that the deposits were not explicitly classified as additional security deposits under the contract terms. However, the Supreme Court emphasized that the deposits were conditional and intended to protect the interests of the OFDC Ltd. The Court held that the High Court's direction to refund the amount unconditionally was not justified.

3. Right of the OFDC Ltd. to Recover Losses Incurred Due to the Re-tendering Process:
The Supreme Court acknowledged the right of the OFDC Ltd. to recover losses incurred due to the re-tendering process. The Court referred to the contractual terms, which allowed the OFDC Ltd. to recover any losses suffered due to the failure of the private Respondents to fulfill their obligations. The Court directed the OFDC Ltd. to issue notices to the private Respondents, detailing the computation of losses incurred from the re-tendering process. The private Respondents were to be given an opportunity to respond, and a speaking order was to be passed by the OFDC Ltd. detailing the losses. The Court allowed the OFDC Ltd. to retain the deposited amounts until the completion of this process and any subsequent legal proceedings.

Conclusion:
The Supreme Court set aside the High Court's direction to unconditionally refund the deposits and allowed the OFDC Ltd. to retain the amounts until a detailed assessment of the losses was conducted. The OFDC Ltd. was directed to issue notices to the private Respondents, compute the losses, and pass a speaking order. The private Respondents were given the liberty to challenge the speaking order through appropriate legal remedies. The process was to be completed within two months, and the amounts were to be retained in fixed deposits until then. The appeals were allowed in part, with no order as to costs.