The power of a statutory authority to forfeit earnest money in an auction is limited by the terms of the regulations governing the auction, and any terms and conditions of the auction that are inconsistent with the regulations are invalid and unenforceable.

( 1 ) THE short point which needs to be decided in this appeal is whether the appellant DDA (for short the "authority ) is entitled to forfeit the entire amount of Rs. 3,71,250. 00 deposited by the respondents at the time of auction or would it be only entitled to forfeit 20% of the disposal price of the flat No. A- 32, Asian Games Village Complex.-

( 2 ) THE aforesaid question arises on these undisputed facts: By an advertisement published in newspapers, the appellant Authority offered residential flats constructed by it in the Asian Games Village for sale by auction At an auction held on 29. 8. 1986, the respondents made the highest bid of Rs. 14,85,000. 00 for the flat No. A-32, which was accepted and the respondents paid 25% of the bid amount i. e. Rs. 3,71,250. 00 to the appellant. The respondents failed to pay the balance amount despite receipt of the demand letter dated 8. 9. 86 as a result whereof their bid was cancelled by the appellant. Thereafter, respondents demanded refund of the amount paid by them, which was refused by the appellant treating it as forfeited for breach on the contract. On 12. 10. 1988, the respondents filed a suit for recovery of Rs. 2,98,000. 00 with interest on the ground that the appellant could forfeit only an amount equal to 20% of the disposal price of the flat in question. The appellant contested the suit on the plea inter alia, that the respondents having participated in the auction under the terms and conditions as notified, are bound by the terms and conditions and they cannot now be permitted to wriggle out the consequences flowing from the terms of the contract. It was further averred that entire amount of earnest money i. e. Rs. 3,71,250. 00 paid by the respondents was forfeited in accordance with the terms and conditions of the contract.

( 3 ) ON a consideration of the rival contentions of the parties, learned Single Judge came to the conclusion that the dispute is governed by the Regulation 8 of the Delhi Development Authority (Management and Disposal of Housing Estate s Regulations, 1968 (for short the Regulations ) and according to Regulation 8 (3) of the Regulations, appellant was not entitled to forfeit an amount exceeding 20% of the disposal price of the flat, which comes to Rs. 59. 400. 00 only , and. after deducting the said amount from the amount of Rs. 3,71,250. 00 paid by the respondents, the appellant was under obligation to refund the balance amount of Rs. 3,11,850. 00 to the respondents. However, the respondents having confined their claim to recovery of Rs. 2,98,000. 00 only the same was decreed along with interest.

( 4 ) FEELING aggrieved, the appellant Delhi Development Authority, has now come up in appeal.

( 5 ) THE nub of the points stressed by the learned counsel of the appellant is that the respondents, having participated in the auction under the terms and conditions ofauction (Ex. D-2) are bound by them and they cannot be permitted to challenge entitlement of the Authority to forfeit the whole amount of earnest money deposited by them in accordance with sub-para (vi) of para 4 of the term,s and conditions of the auction,and Regulation 8 of the Regulations, which permits a deposit of 20% of the disposal price and its forfeiture, in case of default, is not applicable in this case. Alternatively, he submitted that the earnest money deposited in this case is 25% of the bid amount and this is referable to 25% amount mentioned in Rule 29 of the Delhi Development Authority (Disposal of Developed Nuzul Land) Rules, 1981 (hereinafter referred to as the Rules) and if that be so. Rule 32 thereof permits the forfeiture of the entire earnest money. He also pointed out that the deposit in this case has been made by the respondents pursuant to an application (Ex. D. 1) for allotment consequent to the highest bid at the auction. The application (Ex. D. 1) states that it is being made under the Rules and it mentions that the earnest money is Rs. 3,71,250. 00 an