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TMI Blog2017 (10) TMI 1553X X X X Extracts X X X X X X X X Extracts X X X X ..... the controversy involved in the appeal. 3. The Appellant is the Plaintiff whereas the Respondents (State of M.P. and its officials) are the Defendants in a civil suit out of which this appeal arises. 4. Respondent No. 3 (Defendant No. 3)-a Nazul Officer, Bhopal issued an advertisement on 07.01.1996 in daily newspaper for and on behalf of State of M.P. wherein it was published that four nazul plots of the State would be sold in public auction on 11.01.1996 on the terms and conditions set out therein. Anyone interested could participate in the public auction by following the terms and conditions mentioned in the public notice. It is apposite to reproduce the public notice including its terms/conditions hereinbelow: All are hereby informed that the public auction of Government nazul plots of situated at Mahavir Nagar, Arera Colony, Bhopal is to be carried out. The description of the nazul plots is as follows: The public auction of the aforesaid plots will done on 11.01.1996 starting at 11 A.M. in the court of the nazul officer capital city scheme Bhopal and the conditions of the auction will be as follows: 1. Each plot shall be auctioned separately. 2. Bidder must be Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3 on 29.01.1996 stating that the "special terms and conditions" mentioned in the letter were neither published nor informed to him at any point of time earlier and nor was he ever made aware of any such terms and conditions till he received the letter dated 25.01.1996. The Appellant, therefore, declined to accept the "special terms and conditions" and requested Respondent No. 3 to return the security amount of Rs. 3 lakhs, which he had deposited at the time of submission of the bid. 10. On 08.02.1996, Respondent No. 2 issued a show cause notice to the Appellant stating therein as to why the amount of Rs. 3 lakhs be not "forfeited" and the plot in question is re-auctioned. The Appellant, vide his reply dated 12.02.1996 replied that since he has not accepted the "special terms and condition" offered by Respondent No. 3 in their acceptance letter, the Appellant is entitled to ask for refund of the security amount of Rs. 3 lakhs from Respondent No. 3 and that Respondent No. 2 has no right to forfeit such amount. 11. Respondent No. 2, by his letter dated 24.02.1996 informed to the Appellant that a sum of Rs. 3 lakhs deposited by him (Appellant) towards security has been forfeited. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence. By judgment/decree-dated 23.12.1997, the Trial Court dismissed the suit. It was held that the Appellant failed to deposit the 1/4th amount immediately as per the terms of the public notice inasmuch as the Appellant deposited the amount by cheque and later stopped its payment, which constituted a breach on his part of the terms of the public notice. It was also held that the demand of certain money by way of "special terms and conditions" mentioned in the acceptance letter dated 24.01.1996 was in accordance with the Rules of RBC and, therefore, such terms and conditions were binding on the Appellant for ensuring its compliance and lastly, in the light of the two breaches committed by the Appellant, the Respondents were justified in forfeiting the security amount deposited by the Appellant. 16. The Appellant, felt aggrieved, filed first appeal before the High Court. The Division Bench, by impugned order, dismissed the appeal and upheld the judgment/decree of the Trial Court. The High Court held that since the similar issue was the subject matter of another appeal (F.A. No. 794/2000- M/s. Priyanka Builders v. State of MP decided on 11.11.2006) and the said appeal having been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny person enters into any bail-bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under t he orders of the Central Government or of any State Government gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. Explanation-A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested. 23. Reading of Section 74 would go to show that in order to forfeit the sum deposited by the contracting party as "earnest money" or "security" for the due performance of the contract, it is necessary that the contract must contain a stipulation of forfeiture. In other words, a right to forfeit being a contractual right and penal in nature, the parties to a contract must agree to stipulate a term in the contract in that behalf. A fortiori, if there is no stipulation in the contract of forfeiture, there is no such right available to the party to forfeit the sum. 24. The learned author-Sir Kim Lewison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State and, if so, in what contingencies. 29. In our opinion, a stipulation for deposit of security amount ought to have been qualified by a specific stipulation providing therein a right of forfeiture to the State. Similarly, it should have also provided the contingencies in which such right of forfeiture could be exercised by the State against the bidder. It is only then the State would have got a right to forfeit. It was, however, not so in this case. 30. So far as the four special conditions are concerned, these conditions were also not part of the public notice and nor they were ever communicated to the bidders before auction proceedings. There is no whisper of such conditions being ever considered as a part of the auction proceedings enabling the bidders to make their compliance, in case, their bid is accepted. 31. In our considered opinion, it was mandatory on the part of the Respondents(State) to have published the four special conditions at the time of inviting the bids itself because how much money/rent the bidder would be required to pay to the State on allotment of plot to him was a material term and, therefore, the bidders were entitled to know these material terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the contract. It is in the light of such facts, Their Lordships examined the question of forfeiture in the context of Section 74 of the Contract Act. Such is not the case here. 37. Our reasoning is supported by a recent decision of this Court in Union of India v. Vertex Broadcasting Company Private Limited and Ors. (2015) 16 SCC 198 wherein Their Lordships held inter alia that in the absence of any power in the contract to forfeit the license money deposited by the licensee, the action of the Union to forfeit the license fees is held illegal. This is what was held: 10. Coming to the aforesaid question of availability of a power to order forfeiture, a reading of the relevant clauses i.e. Clauses 8(f), 10(d) and 12 extracted above would go to show that the Union had not protected/empowered itself to forfeit the licence fee. The forfeiture contemplated by the aforesaid clauses are altogether in different contexts and situations. In the absence of any such power, the forfeiture that has taken place in this case will have to be adjudged as null and void. 38. Learned Counsel for the Respondents (State) then argued that the Appellant had committed the breach of Clause 4 of public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for recovery of his legitimate amount which took almost 21 years to recover. 43. Indeed, this reminds us of the apt observations made by the Chief Justice M.C. Chagla in a case reported in Firm Kaluram Sitaram v. The Dominion of India (AIR 1954 Bombay 50). The learned Chief Justice in his distinctive style of writing while deciding the case between an individual citizen and the State made the following pertinent observations in para 19: .....we have often had occasion to say that when the State deals with a citizen it should not ordinarily reply on technicalities, and if the State is satisfied that the case of the citizen is a just one, even though legal defences may be open to it, it must act, as has been said by eminent Judges, as an honest person. 44. We are in respectful agreement with the aforementioned observations as, in our considered opinion, they apply fully to the case in hand against the State. 45. We are, therefore, of the considered opinion that both the Courts below were not justified in their respective reasoning and the conclusion in dismissing the Appellant's suit. The Appellant's suit should have been decreed against the Respondents. We hereby do so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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