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SUPREME COURT OF INDIA
R.K. Agrawal, Abhay Manohar Sapre, JJ.
Suresh Kumar Wadhwa – Appellants
Versus
State of M.P. & Ors. – Respondents
Civil Appeal No. 7665 of 2009
Decided On : 25-10-2017
(a) Indian Contract Act, 1872 – Section 74 – Forfeiture of earnest money or security – Not permissible unless there is express stipulation in the contract – Further, performance of only those terms and conditions which from part of the contract can be insisted upon – still further, terms and conditions added without consent of the other party will not be binding on that party – Instantly, the public notice not stipulating forfeiture of security money – Further the special conditions not part of public notice nor communicated to bidders before auction proceedings – Held, appellant had every right to refuse to accept such conditions and wriggle out of the auction proceedings and demand refund of his security amount. (Para 23, 25, 26, 27, 28, 30, 32)
(1828) Moo. & M.189 – Referred
(b) Indian Contract Act, 1872 – Section 74 – Public notice not mentioning applicability of provisions of RBC – Cannot be applied. (Para 34)
(1969) 2 SCC 554; (1969) 3 SCC 522; (2015) 16 SCC 198 – Referred
(c) Public auction – Auction cancelled and appellant’s security money forfeited – Plot re-auctioned for a higher amount – Forfeiting appellant’s security money held unjustified – Appellant held entitled to refund of security money with interest. (Para 41)
AIR 1954 Bombay 50 – Cited with approval
Facts of the case:
The appellant was one of the participants in the public auction of some plots. The appellant, in terms of clauses 2 and 3 of the public notice, deposited his Income Tax Return for the year 1994-95 and also deposited a sum of Rs. 3 lakhs by Bank Draft with respondent No. 3 as security.
The appellant's bid was declared the highest and Respondent No. 3 accordingly accepted the appellant's bid for plot No. E-5/5.
The appellant accordingly deposited a sum of Rs. 10.45 lakhs by cheque being ¼ of the bid amount.
The appellant received a letter from respondent No. 3 informing him that his bid for plot No. E-5/5 is accepted subject to "special terms and conditions".
The appellant replied to respondent No.3 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. 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.
Respondent No. 2 forfeited the sum of Rs. 3 lakhs deposited by the appellant towards security.
The appellant’s civil suit for a declaration that the letter forfeiting the security amount of Rs. 3 lakhs be declared as bad in law and order for refund of Rs. 3 lakhs along with interest at the rate of Rs. 18% p.a. was dismissed.
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 dismissed, this appeal also deserves dismissal in the light of judgment rendered in Priyanka Builders' case. The impugned judgment, however, neither recorded any reason given in the Priyanka's case and nor mentioned the facts of Priyanka's case with a view to show similarity between both the cases and nor recorded any independent reasoning for dismissal of the appeal.
Finding of the Court:
Appellant is entitled to refund of security money with interest.
Result: Appeal allowed.
JUDGMENT
Abhay Manohar Sapre, J.
This appeal is filed by the plaintiff against the final judgment and order dated 21.11.2006 passed by the High Court of Madhya Pradesh, Bench at Jabalpur in First Appeal No.127 of 1998 whereby the Division Bench of the High Court dismissed the appeal filed by the appellant herein and affirmed the judgment and decree dated 23.12.1997 passed by the 9th Additional District Judge, Bhopal in C.S. No.2-A/97 by which the appellant's suit for declaration and refund of security amount deposited with the respondents was dismissed.
2. Facts of the case lie in a narrow compass. They, however, need mention, in brief, to appreciate 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:
| Place | Plot No. | Area |
| Arera Colony, Bhopal | E 5/5 | 2880 sq ft |
| E 5/17 | 2880 sq ft | |
| E 2/12 | 13251.03 sq ft | |
| E 2/12 | 9600 sq ft |
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 Tax Assessee and proof of Assessment for 1994-95 shall be necessary.
3. Before taking part in the bid, each bidder shall have to deposit a Bank draft of Rs. 3.00 lacs with Nuzul Officer as a security.
4. The highest bidder shall have to deposit 1/4th amount of his bid immediately after closure of auction for the plot in question.
5. Within 7 days from the date of acceptance of his bid, the bidder shall have to deposit entire amount of his bid after adjustment of security deposit and one fourth amount already deposited.
6. After receipt of full payment, the possession of plot after demarcation shall be delivered to bidder on site and he shall be granted a permanent lease for 30 years.
7. Collector, Bhopal shall have power to cancel any auction/bid without assigning any reasons."
5. The appellant was one of the participants in the auction proceedings. The appellant, accordingly, in terms of clauses 2 and 3 of the public notice deposited his Income Tax Return for the year 1994-95 and also deposited a sum of Rs. 3 lakhs vide Bank Draft No. 6858812 dated 10.01.1996 with respondent No. 3 as security.
6. The auction was held on 11.01.1996. The appellant quoted his bid at Rs. 53,80,000/- for plot No.E-5/5 situated in Mahavir Nagar, Arera Colony, Bhopal. The appellant's bid was declared the highest amongst those who participated. The Respondent No. 3 accordingly accepted the appellant's bid for plot No. E-5/5.
7. The Respondent No. 3 then asked the appellant to deposit 1/4th amount of the total amount on the same day in terms of public notice. The appellant accordingly deposited a sum of Rs. 10.45 lakhs by cheque No. 309991 dated 11.01.1996 drawn in favour of respondent No. 3.
8. On 25.01.1996, the appellant received a letter dated 24.01.1996 from respondent No. 3 informing him that his bid for plot No. E-5/5 is accepted subject to "special terms and conditions". These conditions, which are ment
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