Research › Search › Judgment

Andhra High Court · body

2008 DIGILAW 869 (AP)

S. K. Agarwal v. A. P. Housing Board

2008-10-13

V.V.S.RAO

body2008
ORDER : The Andhra Pradesh Housing Board (APHB), first respondent herein, issued notification dated 19-7-2005 inviting sealed tenders for auctioning upon the land admeasuring 7,700 sq. yards situated adjacent to waterworks reservoir, red hills, Hyderabad. The last date for submission of bid was 5-8-2005. First petitioner acting on behalf of other petitioners submitted bid quoting Rs.15,050/- per sq. yard (total Rs.11,58,85,000/-). By communication dated 5-8-2005, the executive engineer (housing) second respondent herein; informed the petitioners that they are the highest bidders for the land offered for sale. Second respondent also informed the petitioners that they have to pay an amount of Rs.2,96,30,100/- by 8-8-2005 as per the terms and conditions of the bid as otherwise earnest money deposit (EMD) of Rs.5,00,000/- paid by them will be forfeited. After receiving said communication first petitioner submitted objections, inter alia, stating as the survey plan was not provided and that Bharatiya Vidya Bhavan (BVB) was claiming lease of the land. Yet another communication dated 13-8-2005 through their counsel was also sent with similar objections. By communication dated 25-8-2005 the Vice Chairman (VC) and Housing Commissioner of APHB sent the impugned order forfeiting EMD of Rs.5,00,000/- paid by the petitioners. Almost simultaneously APHB’s counsel also sent a reply to the petitioners and illegal notice dated 13-8-2005 rejecting the contentions of the petitioners. Thereafter assailing the communication dated 25-8-2005 instant writ petition is filed. It is mainly contended by the petitioners that APHB did not disclose the defects in title and therefore, under Section 55 of the Transfer of Property Act, 1882 (TP Act, for brevity) the buyer is entitled to compel the seller to remove all the defects and then alienate the property. It is also contended that while not disclosing the cloud over the property by reason of lease claimed by BVB, it is APHB that has committed breach of contract and not the petitioners and therefore, forfeiture of EMD is illegal. The petitioners prayed for a writ of Certiorari to quash the impugned order and also declaration that the auction conducted on 5-8-2005 is null and void. 2. The petitioners prayed for a writ of Certiorari to quash the impugned order and also declaration that the auction conducted on 5-8-2005 is null and void. 2. Second respondent filed a detailed counter-affidavit opposing the writ petition while denying various contentions and allegations in the writ affidavit it is stated that as per condition (11) of the terms and conditions of auction notification (TCAN), it is responsibility of the purchaser to satisfy about the land before he/she participating in the auction and APHB would not entertain any kind of objections after bid is knocked down in favour of highest bidder. 3. Learned counsel for the petitioners made the following submissions. The action of APHB in issuing impugned order forfeiting EMD is illegal and arbitrary. The petitioners have not committed any breach of contract and therefore, any forfeiture would be unsustainable. As per Section 55 of TP Act seller is bound to disclose the material defects in the property and the buyer has a right to decline and accept the delivery of the property with defect and insist upon the rectification of the defects or encumbrances of the property. Learned counsel relied on decisions in Sohan Lal v. Bal Kishan : 1960 AIR Punjab 275 and N. Narasingarayudu v. N. Ankineedu : 1961 ALT 421 . 4. Per contra, learned standing counsel for APHB submits that as per TCAN the petitioners have no right to claim the land till the auction is confirmed by VC and therefore, an agreement of sale cannot be readily presumed. According to him before confirmation of sale in favour of the petitioners APHB and the petitioners are bound by TCAN which alone would govern the transaction as well as the jural relationship of the parties. He also submits that even though the highest bidder has right to withdraw from the bid the same shall be subject to TCAN including the forfeiture clause. He placed reliance on H.U.D.A. v. Kewal Krishan Goel : 1979 AIR SC 1628, Delhi Development Authority (DDA) v. Grihsthapana Coop. Group Housing Society Ltd. : 1995 Supp SCC SCC 751 and National Highways Authority of India v. Ganga Enterprises : 1996 (2) ALT 29 (DNSC) 5. He placed reliance on H.U.D.A. v. Kewal Krishan Goel : 1979 AIR SC 1628, Delhi Development Authority (DDA) v. Grihsthapana Coop. Group Housing Society Ltd. : 1995 Supp SCC SCC 751 and National Highways Authority of India v. Ganga Enterprises : 1996 (2) ALT 29 (DNSC) 5. The only point that arises for consideration is whether APHB acted without jurisdiction and illegally in forfeiting EMD of Rs.5,000/- paid by the petitioners at the time of submission of their tender/bid for purchase of open land admeasuring 7,700 sq.yards offered for sale in public auction. 6. There is no gainsaying that in contractual matters the scope of judicial review is very limited. It is more restrictive when disputes arise between the parties after entering into contract. In such an event all such disputes have to be resolved in civil Court or before an arbitrator, if so provided for. Insofar legal relationship between tenderer and authority inviting tenders is concerned all such relations are governed by TCAN themselves which are in the nature of binding administrative/executive instructions (See Ramana v. I.A. Authority of India : 2003 (6) ALT 381 ). 7. Though TCAN are in the nature of administrative instructions, they have to be strictly complied with by both the parties. There is no dispute on this. Therefore, it has to be seen as to what are the terms and conditions relevant for the purpose of this case in the matter of forfeiture of EMD. They are conditions (1), (2), (4) and (11), which read as under: 1. The participants in the sealed Tender should deposit Rs.5.00 lakhs, as E.M.D. by means of Demand Draft obtained in favour of the Executive Engineer (Hg.), Central Division, A.P. Housing Board, Hyderabad and submit the same before time as fixed above. The amount of E.M.D. will not be accepted in cash. 2. The highest bidder should deposit 25% of the bid amount and 1% (one per cent) auction expenses on the total amount by 8-8-2005, balance 75% of the bid amount should be remitted within the three months from the date of confirmation of auction by the Vice-Chairman and Housing Commissioner. The V.C. and H.C. reserves the right of confirmating or rejecting the auction bid. Any one who is prepared for one bullet payment matching the highest sealed tender/bid will be given preference. This one bullet payment should be made within 72 hours of tender operating. The V.C. and H.C. reserves the right of confirmating or rejecting the auction bid. Any one who is prepared for one bullet payment matching the highest sealed tender/bid will be given preference. This one bullet payment should be made within 72 hours of tender operating. However, 25% of bid amount and 1% will be paid by 8-8-2005. 4. For violation of condition 2 above, 25% of bid amount and 1% (one per cent) auction expenses remitted by the successful bidder will be forfeited to the A.P.Housing Board and the plot will be put to re-auction. 11. It shall be the responsibility of the purchaser to satisfy himself/herself about the land before he/she participating in the auction. The Housing Board would not entertain any kind of objections after the bid is knocked down in favour of the highest bidder. 8. A participant in sealed tenders should deposit Rs.5,00,000/- as EMD by means of demand draft at the time of submission of sealed tender. The highest bidder has to deposit 25% of the bid amount and 1% auction expenses on the total amount by 8-8-2005 and balance 75% of the bid amount should be remitted within three months from the date of confirmation of auction by VC. Auction was conducted on 5-8-2005. As per condition (4) of TCAN if highest bidder violates condition (2) thereof regarding deposit of 25% of the bid amount and 1% auction expenses, APHB is entitled to forfeit said amount and re-auction the plot. Therefore, the impugned order does not suffer from any illegality. 9. The submission with regard to the alleged breach of contract of APHB and enforceability of Section 55 of TP Act is wholly misconceived. It cannot be ignored that as per condition (6) of TCAN, highest bidder gets a right only when auction is confirmed by VC. Before such confirmation, the pre-contract stage, as held supra, is regulated by the TCAN including the conditions regarding forfeiture of EMD and 25% of the bid amount. There is no denial that after receiving the communication dated 5-8-2005 by second respondent calling upon the petitioners to pay 25% of the bid amount, they did not pay the amount and therefore, the condition (4) of TCAN springs into action. There is no challenge to such condition and indeed the petitioners submitted their bid knowing fully well of TCAN. There is no denial that after receiving the communication dated 5-8-2005 by second respondent calling upon the petitioners to pay 25% of the bid amount, they did not pay the amount and therefore, the condition (4) of TCAN springs into action. There is no challenge to such condition and indeed the petitioners submitted their bid knowing fully well of TCAN. At that stage the principles of contract and the provisions of TP Act cannot have any application. 10. The submission of learned counsel for the petitioners that after submitting the bid the petitioners came to know about the encumbranes over the property and therefore, they sought clarification, as a result of which they did not pay the amount is also without any merit. Condition (11) of TCAN is a caveat emptor clause, which requires the buyer/purchaser to satisfy about the land before bidding as APHB shall not entertain any kind of objections. Having participated in the auction and submitting highest bid the petitioners cannot now be permitted to turn around and plead the defective title in the land offered for sale by auction. Nothing prevented the petitioners to seek clarification from APHB before submission of their bid. Knowing fully well they submitted bid and therefore they cannot go back and contravene condition (2) of TCAN, for default of which, impugned order was issued. In a case of doubt about the defective title the petitioners had a right to withdraw from the bid. Even in such a case the right of APHB to forfeit EMD as well as 25% of the bid amount as per condition (2) of TCAN is not taken away. 11. In H.U.D.A. (3 supra) and DDA (4 supra) the Supreme Court upheld the right of forfeiture of the public authority when TCAN were not complied with. In National Highways Authority (5 supra) tenders were called for collection of toll on a portion of Highway in Rajasthan. As per the tender conditions the bid shall remain valid for a period of 120 days. Respondent’s tender was accepted, but it withdrew the tender before expiry of 120 days. Nonetheless, NHAI encashed the bank guarantee of Rs.50,00,000/- paid as bid security. Respondent’s writ petition for refund of the amount was allowed by Delhi High Court. It was argued for the respondent that withdrawal of the bid by the tenderer before expiry of validity period disentitles NHAI from encashing bid security. Nonetheless, NHAI encashed the bank guarantee of Rs.50,00,000/- paid as bid security. Respondent’s writ petition for refund of the amount was allowed by Delhi High Court. It was argued for the respondent that withdrawal of the bid by the tenderer before expiry of validity period disentitles NHAI from encashing bid security. The plea was rejected. The Supreme Court while allowing the appeal of NHAI observed as under. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of hi own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted. 12. In view of the binding authority of Supreme Court this Court does not feel it necessary to consider two citations referred to by learned counsel for the petitioners. This Court, therefore, holds that the impugned orders does not suffer from any infirmity or illegality. 13. 12. In view of the binding authority of Supreme Court this Court does not feel it necessary to consider two citations referred to by learned counsel for the petitioners. This Court, therefore, holds that the impugned orders does not suffer from any infirmity or illegality. 13. The writ petition deserves to be dismissed and is accordingly dismissed. No costs.