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2012 DIGILAW 381 (ORI)

Pratap Chandra Parida v. State of Orissa

2012-08-29

S.K.MISHRA, V.GOPALA GOWDA

body2012
ORDER Heard Mr. P.C. Nayak, learned counsel for the petitioner and Mr. B.K. Nayak, learned Addl. Government Advocate. 2. The petitioner, who is the tenderer is before this Court seeking issuance of a writ of mandamus directing the opposite parties 2 and 3 to release the EMD amount of the petitioner amounting to Rs.2,93,000/-of Oriental Bank of Commerce vide term Deposit Certificate No.0731258 under Annexure-3, which has been duly pledged in favour of the opposite party no.3 at the time of submission of tender, as per provisions of O.P.W.D. Code. Since this fact is undisputed, it needs to be referred to various facts and pleadings of the parties. 3. Learned counsel for the petitioner placed reliance upon the Clause 3.5.20 of the O.P.W.D. Code. Note (II) of the said clause reads as follows: “(II) Earnest money given by all the contractors except the three lowest tenders should be refunded within a week from the date of receipt of tenders. The earnest money given by the other two parties except the one whose tender is accepted should also be refunded within 15 days of the acceptance of the tender.” The Apex Court has placed reliance on a judgment of the Supreme Court reported in 2007(1) CTLJ 84 (SC) (Yogesh Mehta v. Custodian appointed under the Special Court and others), wherein the Apex Court referred to two earlier decisions of the Supreme Court in Chairman of the Bankura Municipality, Bankura v. Lalji Raja and sons, AIR 1953 SC 248 . At page 250, the Supreme Court explained the definition of the word ‘forfeiture’ and also forfeiture of the “earnest money” with reference to the provisions of the Indian Contract Act, 1872. It is held that the forfeiture is permissible only when a concluded contract has come into being and not prior thereto. The apex Court has referred to the case of Maula Bux v. Union of India, AIR 1970 SC 1955 and Saurabh Prakash v. DLF Universal Ltd., 2006 (12) SCALE 531 . It is held that the forfeiture is permissible only when a concluded contract has come into being and not prior thereto. The apex Court has referred to the case of Maula Bux v. Union of India, AIR 1970 SC 1955 and Saurabh Prakash v. DLF Universal Ltd., 2006 (12) SCALE 531 . Further the Supreme Court has placed reliance upon the judgment of the Madhya Pradesh High Court in Rajendra Kumar Verma v. State of Madhya Pradesh and others, AIR 1972 Madhya Pradesh 131, wherein the Division Bench of Madhya Pradesh High Court while dealing with Section 5 of the Contract Act, 1872 held that a person is entitled to withdraw his proposals before its acceptance is intimated to him and further placed reliance in paragraph 4 of the judgment by referring to Article 299 (1) held that it cannot be a valid contract, unless there is a valid contract executed as envisaged by Article 299(1), where the Government is a party, there could be no enforceable contract at all. However, it is found that the apex Court in K.P.Choudhury v. State of M.P., AIR 1967 SC 203 and further he has placed reliance upon the decision of the Karnatak High Court in Bandi Ramappa v. State of Karnataka and others, 2009 (2) CTLJ 281 (Karnataka). In the said case, Section 5 of the Contract Act, 1872 was examined and referred to the judgments of the Supreme Court and other decisions of the Karnataka High Court and Madhya Pradesh High Court held that forfeiture of earnest money deposit is held to be bad in law. Mr. Nayak, learned counsel for the petitioner further submits that the petitioner attended the office of the opposite party no.3 in late, but due to late attendance, the documents are not allowed to be verified as per Annexure-5. 4. Learned Addl. Standing Counsel Mr. B.K. Nayak strongly supported the action of the opposite parties 2 and 3 and submits that forfeiture of the earnest money deposited amount on the ground of non-submission of the documents for verification is justified, as the same is based on the instructions given by the Superintending Engineer, wherein he placed reliance on the Clause 15.7 (c) of the Instruction to the Bidders, which states thus: “15.7. The Bid Security may be forfeited c. If the Bidder fails to submit the original documents within the stipulated date pursuant to clause 3.1.” Further he has placed reliance upon the decision of the Villayati Ram Mittal Private Limited v. Union of India and another, (2010) 10 SCC 532 , in support of the action taken by the opposite parties for not returning the E.M.D. amount on the ground of non-submission of the original documents and for non-execution of the agreement in favour of the petitioner. The apex Court after distinguishing the judgment rendered by the Privy Council in Chiranjit Singh v. Har Swarup, AIR 1926 PC 1, has held that the forfeiture of the earnest money deposit for non-compliance of the terms and conditions of the tender call notice for execution of the agreement as the offer was not accepted by the employer. Therefore, he submits that the petitioner is not entitled to the relief sought. The questions that would arise for consideration of this Court are a. Whether the forfeiture of the earnest money deposited by the petitioner at the time of submission of the tender is permissible under law ? b. Whether the petitioner is entitled to release of the earnest money deposit by the opposite parties ? c. To what order ? 5. The undisputed fact before us in this case is that the petitioner has deposited the earnest money and as per terms and conditions at the time of submission of tender, the bidders are required to submit the originals thereof for verification in the office of the opposite party no.2 and thereafter price bid is to open and execute an agreement. But that has not been done by the petitioner. On this ground forfeiture of the earnest money deposit was made by the opposite party no.2. Forfeiture of earnest money was under consideration of the apex Court in the case of Yogesh Mehta v. Custodian appointed under the Special Court and others, 2007(1) CTLJ 84 (SC), wherein the petitioner’s counsel has rightly placed reliance on paragraphs 31 and 32 of the decision of the Supreme Court, which reads as follows: “31. Forfeiture of earnest money was under consideration of the apex Court in the case of Yogesh Mehta v. Custodian appointed under the Special Court and others, 2007(1) CTLJ 84 (SC), wherein the petitioner’s counsel has rightly placed reliance on paragraphs 31 and 32 of the decision of the Supreme Court, which reads as follows: “31. In Chairman of the Bankura Municipality, Bankura v. Lalji Raja and sons, AIR 1953 SC 248 at 250, this court noticed the definition of the word ‘forfeiture’ in the following terms: “The word ‘forfeiture’ is defined in Murray’s Oxford Dictionary-“The fact of losing or becoming liable to deprivation of goods in consequence of a crime, offence, or breach of engagement” …” the penalty of the transgression” or a “punishment for an offence’” 32. While directing forfeiture of the ‘earnest money’ the provisions of the Indian Contract Act, 1872 are to be kept in mind. Forfeiture is permissible only when a concluded contract has come into being and not prior thereto. [See Maula Bux vs. Union of India, AIR 1970 SC 1955 = (1969) 2 SCC 554 and Saurabh Prakash vs. DLF Universal Ltd., 2006 (1`2) SCALE 531=2007(1) CTLJ 71 (SC)]” 6. In view of the aforementioned legal position, the Supreme Court by three Judge Bench in Maula Bux v. Union of India, AIR 1970 SC 1955 held that while directing forfeiture of the earnest money, the provisions of the Indian Contract Act, 1872 are to be kept in mind and forfeiture is permissible only when a concluded contract has come into being and not prior thereto. That apart, the Madhya Pradesh High Court in Rajendra Kumar Verma v. State of Madhya Pradesh and others, (supra), interpreting Section 5 of the Contract Act, 1872 in paragraph 3 held that a person who makes an offer is entitled to withdraw his offer or tender before its acceptance is intimated to him. The Government, by merely providing such a clause in tender notice could not take away that legal right of the petitioner. The fact that the petitioner had applied for withdrawal of the tender is not denied. It is, therefore, quite clear that when the tender of technical bid was opened, there was really no offer by the petitioner and, therefore, there could be no contract either impliedly or explicitly between the parties. 7. The fact that the petitioner had applied for withdrawal of the tender is not denied. It is, therefore, quite clear that when the tender of technical bid was opened, there was really no offer by the petitioner and, therefore, there could be no contract either impliedly or explicitly between the parties. 7. In the case of Bandi Ramappa v. State of Karnataka and others, 2009(2) CTLJ 18` (Karnataka), to which judgment the Chief Justice has presided the Bench, after referring to Section 5 of the Contract Act and referring to judgment of Madhya Pradesh High Court and Supreme Court referred to supra has taken the same view as was taken by Madhya Pradesh High Court holding that forfeiture of earnest money deposited is bad in law and the appellant is entitled to refund of the EMD amount. In the case of Yogesh Mehta v. Custodian appointed under the Special Court and others, 2007(1) CTLJ 84 (SC), the apex Court has relied upon the Three Judge Bench decision of the Supreme Court namely Maula Bux v. Union of India referred to supra. That judgment has not been considered in the case of State of Haryana and others v. Malik Traders, (2011) 13 SCC 200 and Villayati Ram Mittal Private Limited v. Union of India and another referred to supra, wherein reliance has been placed in paragraphs 11 and 12 of the said judgment. The Three-Judge-Bench decision of the Supreme Court in Maula Bux case has been followed in the case of Yogesh Mehta’s case. Therefore, the binding decision upon this Court is the Larger Bench decision of the Apex Court is the law laid down by the Apex Court in the case reported in Siddharam Satlingappa Mhetre v. State of Maharashtra and others, 2010 (8) Supreme 353 (Para-149). 8. In that view of the matter, we decide point nos. 1 and 2 in favour of the petitioner and direct opposite parties 2 and 3 to release the earnest money deposited, which has been forfeited by them, in favour of the petitioner. The said amount must be released within seven days. With the aforesaid direction, the writ petition is allowed. Rule issued. Urgent certified copy of this order be granted on proper application.