The main legal point established in the judgment is that the forfeiture of earnest money deposit must be justified by quantified loss and damage suffered by the party seeking forfeiture, and a writ petition can be maintainable despite the existence of an alternative remedy, including a clause for arbitration in a contract.

Debangsu Basak, J.

1. The petitioners seek refund of earnest money deposit from the respondent No. 1. Learned Advocate for the petitioners submits that, the first respondent is not entitled to forfeit the entire earnest money deposit. The first respondent having received opportunity to file affidavit, has not disclosed any material to suggest that, the respondents have suffered any damage. Sufferance of damage is sine qua non for the first respondent to forfeit the earnest money. The first respondent, not having suffered any damage, is not entitled to adjust any amount on account of damage from the earnest money deposit. In support of such contentions, learned Advocate for the petitioners relies upon 2015 (4) SCC 136 : (2015) 3 WBLR (SC) 412 (Kailash Nath Associates v. Delhi Development Authority & Anr.). He submits that, the existence of an arbitration clause in the contract, does not make a writ petition, not maintainable. In support of such contention, he relies upon 2011 (5) SCC 697 : (2011) 3 WBLR (SC) 772 (Union of India & Ors. v. Tantia Construction Pvt. Ltd.). Relying upon 2016 (5) WBLR(Cal) 67 (Shree Enterprises Coal Sales Pvt. Ltd. & Ors. v. Coal India Ltd. & Ors.) learned Advocate for the petitioners submits that, in similar circumstances the High Court has allowed the writ petition and has quashed the decision of the first respondent, not to return the earnest money deposit. Consequently, he submits that, similar relief should be granted to the petitioners, in the present writ petition.

2. Learned Senior Advocate appearing for the respondents submits that, the parties have entered into a written contract. The parties are governed by the terms and conditions of the written contract. The contract stipulates that, in the event of happening of the specified event the petitioners would forfeit the earnest money deposit. Such an event has happened. The first respondent is, therefore, entitled to forfeit the earnest money deposit. The respondent has done so. Whether the forfeiture is correct or not has to be looked into by an appropriate forum and not by a Writ Court. It is appropriate that the parties are relegated to arbitration for the resolution of such disputes. In the present case, the contract between the parties stipulates imposition of penalty on the happening of a certain event. The forfeiture of earnest money deposit, is a penalty which is imposed, on the failure of the first petitioner, to lift the coal. The petitioners hiving agreed to the imposition of such penalty, cannot be heard to contend otherwise. In any event, the respondents have pleaded of loss being suffered by them in the affidavit-in-opposition to the writ petition. Moreover, the petitioners have cancelled the contract. The fact scenario obtaining in the present case is different to that obtaining in Kailash Nath Associates (supra). Therefore, the ratio of Kailash Nath Associates (supra) is not attracted in the facts of the present case. He refers to Section 74 of the Contract Act, 1872 and submits that, the ratio of Kailash Nath Associates (supra) has to be understood in the context of the factual matrix obtaining in that case.

3. Whether the first respondent entitled to forfeit the earnest money, in the factual matrix of the present case, is the issue falling for consideration in the present writ petition.

4. The first petitioner participated in an auction undertaken by the first respondent. The first respondent put up coal for E-auction on April 29, 2008. The first petitioner became the successful bidder and was allowed one rake coal in such E-auction at the bid price of Rs. 882/- per metric tone. The E-auction was held in terms of the Spot E-auction Scheme, 2007. The first petitioner furnished a non-interest bearing earnest money deposit at the rate of Rs. 200/- per tone. The first petitioner also deposited the entice value of the coal on May 5, 2008 with the first respondent. The first petitioner, thereafter, took steps for receiving t