9911796707
TMI Blog2006 (1) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... ened 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 ₹ 6,50,000/- as earnest money. On 23-6-2003, it provisionally increased its offer to ₹ 4,87,00,000/- as the Official Liquidator could not disclose details about liability status of the company in liquidation. It is alleged that, therefore, it and the other bidders did not sign the bid sheet and the proceedings dated 23-6-2003 remained inconcl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 forfeited. She has relied upon Andhra Pradesh Paper Mills Ltd. vs. State of Maharashtra reported at 2003 (4) Mh. L.J. 760, AIR 1995 SC 1176 between Delhi Development Authority vs. Grahstthapana Co-operative Housing Society Ltd., 2005 (3) Mh. L.J. 149 between Hasmukhlal vs. Municipal Corporation, AIR 1997 Kar 185, Narendrakumar vs. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxols 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 purpose. The terms and conditions of both the tender notices were identical. The tender was to be submitted in the prescribed form on or before 15-7-1987 and sealed tenders received from the bidders were to be opened on the same day and tenderers were to pay earnest money deposit @10% of the total royalty to be worked out on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 position the contention raised by the respondents that the period of final sale was to be calculated as 30 days after the approval of the competent authority cannot be accepted. It is an accepted principle of interpretation of the documents that effect has to be given to all the terms and conditions by reading it as a whole and not by readi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the relevant clauses of the Tender Notice, viz. Clauses (vi), (vii) and (ix) had before the communication of acceptance by the respondents, the petitioner had already withdrawn its offer after the period of 45 days as stipulated by clauses as above. 10. The Andhra Pradesh Paper Mills Ltd. kept its offer valid for 45 days, as required by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 tender notification. But that clause comes into operation only after the tenders are opened and the highest bidder is declared and such a declaration can come only after scrutinising the tenders. In the present case, that did not take place till 16-11-1996 and the petitioner had asked for return of E.M.D. second time on 15-11-1996 stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 refund entire amount to the society. The Hon'ble Apex Court while allowing the appeal of Authority held forfeiture not to be illegal as communication by Authority as to enhancement was in continuation of earlier offer and respondent society had accepted offer. contained in said communication. Paragraph 5 of Judgment is important and it reads:- 5. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily, 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 and conditions in the offer of sale would have become applicable. In the absence of such an event of confirmation of sale, the only conclusion to be drawn as per the Division Bench was that the bidder is prima facie entitled to the entire refund of the money. However, the question whether the highest bidder did not perform his part of the Contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting 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 allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach. It has been noticed in Maula Bux's case (AIR 1970 SC 1955) that forfeiture of earnest under a contract of sale of property - if the amount reasonable does not fall w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 schedule by public auction and subject to such conditions and in such manner in all respects as the Official Liquidator shall think fit and proper and deficiency in price, if any occasioned by such resale and the costs thereof shall be made good by defaulting purchaser with interest on the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 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 is established in the matter. Where the parties have deliberately specified the amount of ₹ 6,50,000/- as Earnest Money for each bidder and agreed to stipulation in clause No. 10 above, there can be no presumption that, at the same time, it was intended to allow the bidder ..... X X X X Extracts X X X X X X X X Extracts X X X X
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