State Of Maharashtra vs A. P. Paper Mills LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2006 Supreme(SC) 301

2006(3) Supreme 309
SUPREME COURT OF INDIA
(From Bombay High Court)
Arijit Pasayat and Tarun Chatterjee, JJ.
State of Maharashtra & Ors.—Appellants
versus
A.P. Paper Mills Ltd.—Respondent
Civil Appeal No. 4487 of 2003
Decided on 3-4-2006
Counsel for the Parties :
For the Appellants : V.N. Raghupathy, Advocate.
For the Respondent : M.N. Rao, Sr. Advocate, P.N. Gupta, H. Devarajan, Advocates.

Headnote:Constitution of India—Article 226—Writ directing appellant to refund earnest money which was forfeited—Tender was submitted on 15.7.1987 with earnest money—As per conditions stipulated offer was to be considered valid for 45 days from date of Tender sale—Final sale result was to be declared within 30 days—Respondent by Telegram on 15-8-1987 withdrew its offer stating that since result had not been declared in 30 days and requested for return of earnest money--Another letter was addressed on 2-9-1987 that even after expiry of 45 days final results were not declared and refund of earnest money was claimed--Request for refund of earnest money was rejected—High Court held that respondent had withdrawn bid before conclusion of contract and was entitled to refund of earnest money—Appeal—Bid once made remained operative for 45 days—Withdrawal made before expiry of that period, earnest money was to be forfeited—Stand that because of delay in declaration of final result there was no bar on withdrawal of tender was untenable—Interpretation put by High Court was erroneous and impugned order deserved to be set aside.
Held : An offer under the tender was valid for a period of 45 days from the date of tender of sale and in the instant case from 29.8.1987. Stand of the respondent that the sale results should have been declared for getting approval of the competent authority by 14.8.87 is clearly wrong. If the highest tender is not considered acceptable the final sale result was required to be declared within 45 days i.e. by 29.8.87. The bid once made remains operative for a period of 45 days. Therefore, the decision could be taken on the bid on or before 29.8.87. The withdrawal was made before the expiry of the period i.e. on 15.9.87. Stand of the learned counsel for the respondent that another request was made after the expiry of the 45 days period does not change the situation. Clause 5(v) clearly spells that once a tender is tendered the offer shall be considered valid for a period of 45 days from the date of tender sale in case of tenders which are under consideration. If this clause is read with clause 5(iv) the position is clear that once a tender is tendered no changes can be made and no tender can be withdrawn. We are not concerned with a case of consequences after acceptance of the tender by the successful bidder. In such a situation loss sustained in the re-sale and the amount realized less, shall be recovered from the bidder while adjusting the amount paid by him towards earnest money deposit. In this case the acceptance of the tender was after the validity of the period. Therefore, this is not a case which could authorize the Government to recover the loss from the respondent. But it is a case of withdrawal of tender and the effect of it is to be considered. Since the tender is valid for a period of 45 days and withdrawal is before expiry of the period the earnest money is to be forfeited. The stand of the respondent that because of delay in declaration of the final sale results there was no bar on withdrawal of the tender is clearly untenable. Once the tender is withdrawn the result is that the tenderer who withdraws the tender cannot take the stand that since the final sale result has not been declared there is no bar on the withdrawal.(Para 11)
A reading of the clause makes it clear that the provisional sale result has to be declared as early as possible. But the same is not to be declared which is not to be considered as final sale result and the final sale result can be declared within 30 days on getting approval of the competent authority. It had not done in the present case because withdrawal was done while the tender was under consideration. That being so, the interpretation put by the High Court is clearly erroneous and deserves to be set aside. The order of the High Court is accordingly set aside. (Para 13)

JUDGMENT

Arijit Pasayat, J.—Challenge in this appeal is to the judgment of a Division Bench of the Bombay High Court, Nagpur Bench, directing the appellant to refund the earnest money which was forfeited along with interest @ 6% from the date on which the respondent had withdrawn its offer till actual date of payment. Further direction was given to refund the amount within a period of 8 weeks from the date of judgment.

2. Factual background in a nutshell is as follows :

Appellant no.2 had issued a Tender Notice dated 8.6.1987 for sale of Bamboo Units in Vadasa (Unit No. 7) and Gadchiroli (Unit Nos. 10, 11, 12 and 14). The appellant no.3 had also issued a Tender Sale notice in respect of Bhamragarh (Unit No.5) 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 i.e. 10% of the total royalty to be worked out on the basis of the total estimated yield of that Bamboo Unit. It was mentioned in the Tender Notice that the sealed tender should be accompanied by the treasury challan or demand draft indicating that earnest money has been deposited. It was further stated in the Tender Notice that in case of successful tenderers, the earnest money deposit would automatically stand appropriated towards the security deposit which is required to be furnished. It is the case of the respondent that as per the conditions stipulated in the tender after the submission of the tender, the offer would be considered valid for a period of 45 days from the date of the Tender Sale. Pursuant to the Tender Notices issued by the appellants 2 and 3, the respondent submitted tenders on 15.7.1987 and before submitting the Tender Notice the respondent had deposited the earnest money as required by the Tender Notice. As per the clause 7 of the Tender, the final sale result was to be declared within 30 days for getting approval of the competent authority and since appellants 2 and 3 did not declare the final sale result even after the expiry of 30 days from the date of opening of the Tender i.e. 15.7.1987, the respondent sent a telegram on 15.8.1987 to appellant nos. 2 and 3 in which it was stated that since the final sale had not been declared within 30 days as per Clause 7 of the Tender Notice, the respondent had withdrawn its offer and requested for return of the earnest money deposit. The respondent also addressed letters to the appellants 2 and 3 on the same date, in which reference was made to the message and telegram which had been sent earlier. On 17.8.1987 the respondent addressed another communication reiterating its stand of withdrawing their offer and requesting for refund of the earnest money. But it did not receive any reply to the telegram which was sent on 15.8.1987 or to the letters sent on the same day addressed to the appellant nos. 2 and 3 and also to the communication dated 17.8.1987 which was addressed to appellants 2 and 3. Therefore, on 2.9.1987 a letter was addressed to the appellant no. 2 stating therein that even after expiry of 45 days on 29.8.1987 the final results had not been declared and, therefore, earnest money deposited by the respondent should be refunded. Again on 16.9.1987 it addressed letters to appellants 2 and 3 stating therein that final sale result had not been declared even after the expiry of 45 days and the respondent had already withdrawn the offer and, therefore, the respondent was entitled to the refund of the earnest money deposit.

3. It is an admitted position that the final sale result in respect of the tender opened on 15.7.1987 was declared on 17.9.1987 which was communicated to the respondent on 21.9.1987, in which it was mentioned that the highest offer of the respondent was accepted.

4. Request of the respondent for refund of the earnest money deposit was r

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