The main legal point established in the judgment is that the enforceability of a forfeiture clause should be assessed with reference to Sections 73 and 74 of the Contract Act, 1872, and should not result in unjust enrichment for the party seeking to forfeit.

JUDGMENT

Sanjib Banerjee, J. - The issue involved is as to the enforceability of a forfeiture clause in a notice inviting tender. There is no doubt that the relevant clause provided for the forfeiture of the earnest deposit if material particulars were found to have not been disclosed by a tenderer. The legal question which has arisen is whether, upon there being a material non-disclosure or a material concealment, the forfeiture clause would become applicable irrespective of the quantum of money sought to be forfeited and without reference to the nature of inconvenience or the extent of damages suffered by the party seeking to forfeit.

2. The two matters are similar, though they pertain to different notices inviting tender. The forfeiture clause is the same. The principal parties are identical. The nature of non-disclosure or concealment is also the same. The earnest or security deposit in either case is Rs.50 lakh, which is the amount sought to be forfeited. The subsequent reference in this judgment is to one of the matters. The principles involved are the same in both cases.

3. The Damodar Valley Corporation engaged Rites Limited for the purpose of supervising the construction of a railway siding for the Koderma Thermal Power Project in Jharkhand. Clause 9 of the notice inviting tender issued in January, 2009 provided for every tender to be accompanied by an earnest deposit of Rs.50 lakh. Such earnest deposit was to be refunded to tenderers whose technical bid was not found to be acceptable and the refund was to be made as soon as the scrutiny of the technical bid was completed by Rites. In respect of the bids which did not clear the technical stage, the earnest deposits of the unsuccessful tenderers were to be refunded within 28 days of the tender validity period.

4. Clause 9.4 of Section 1 of the tender terms provided as follows:

"9.4 The Earnest Money is liable to be forfeited

a) if after bid opening during the period of bid validity or issue of Letter of Acceptance, whichever is earlier, any tenderer

i) withdraws his tender or

ii) makes any modification in the terms and conditions of the tender which are not acceptable to the Employer.

b) in case any statement / information / document furnished by the tenderer is found to be incorrect or false.

c) in the case of a successful tenderer, if the tenderer

i) fails to furnish the Performance Guarantee within the period specified under Clause 1 of "Clauses of Contract".

ii) Fails to commence the work within 15 days after the date of issue of Letter of Acceptance.

In case of forfeiture of E.M. as prescribed here in above, the tenderer shall not be allowed to participate in the retendering process of the work."

5. The tender documents also included the format of a declaration to be furnished by every bidder by way of an affidavit executed on a non-judicial stamp paper of Rs.10/- attested by a notary or magistrate. The first three clauses of the format are relevant for the present purpose:

"i) We have not made any misleading or false representation in the forms, statements and attachments in proof of the qualification requirements;

ii) We do not have records of poor performance such as abandoning the work, not properly completing the contract, inordinate delays in completion, litigation history or financial failures etc.

iii) Business has never been banned with us by any Central / State Government Department / Public Sector Undertaking or Enterprise of Central/State Government."

6. There is no dispute that when the appellant, through a joint venture with Premco Rail Engineers Limited, submitted its bid, the appellant furnished a declaration in the prescribed format by way of an affidavit affirmed on February 10, 2009. On or about July 21, 2009, Rites issued a show-cause notice to the joint venture bidder that such bidder had suppressed material facts while submitting its tender and required the bidder to show cause why action should not be taken against it in terms of Clause 9.4(c