Participants in an auction must adhere strictly to payment timelines; forfeiture of the Earnest Money Deposit is justified for failure to comply with clearly defined contractual terms.

JUDGMENT :

SANJEEV NARULA, J.

1. The Petitioner, through the instant petition, challenges the forfeiture of the Earnest Money Deposit,, [“EMD”] made in connection with an E-auction conducted on www.ireps.gov.in for the Shakur Basti Depot. This auction was conducted by Respondent No. 1 under the instructions of the Controller of Stores, Northern Railway, for the sale of “Cond and Scrap all types of secondary cells in bakelite bodies, of various sizes and makes, both broken and unbroken, on an ‘as is where is’ basis.” The Petitioner participated in the auction and emerged as the successful bidder. Pursuant thereto, a bid sheet was issued on 10^th January, 2022, outlining the terms of the transaction:

2. The total sale value of the auction was declared as INR 16,20,751.83. The Petitioner deposited INR 1,60,185 as Earnest Money Deposit, constituting 10% of the total sale value. The bid sheet explicitly provided for a 15-day interest-free period for the payment of the Balance Sale Value[“BSV”] [referred to as ‘Interest free BSV Payment time’ in the bid sheet], which was to expire on 24^th January, 2022. The bid sheet also mentioned a ‘free delivery period’ of 40 days, which was to conclude by 18^th February, 2022. Assuming the ‘free delivery period,’ which was to lapse on 18^th February, 2022, as the extended timeframe for the BSV Payment, the Petitioner made a request to Respondent No.1 on 15^th February, 2022 seeking permission to make the payment with interest. The communication reads as follows:

“Sir, I have purchased lot no. 2003191221/ 85481090 through Bid No. 39065587. Interest free BSV payment time expired on 24.1.2022. Final date to make payment is 18.2.2022. Kindly allow me to make payment with any reasonable interest and issue me challan to do the same.”

3. The request was declined by the Respondents, leading to the forfeiture of the EMD. Aggrieved by this decision, the Petitioner filed the present petition, contending that the forfeiture of the deposit is arbitrary and unlawful.

4. Counsel for the Petitioner argues that the terms of the bid are confined to those stipulated in the bid sheet, which does not clearly specify the maximum time limit for the BSV payment. The Petitioner argues that their interpretation of the ‘free delivery period’ as the timeframe for making the payment was reasonable, and their subsequent request for an extension was consistent with the terms of the auction. It is contended that the rejection of the Petitioner’s request is arbitrary, particularly when the Petitioner had expressed willingness to pay reasonable interest for the delay.

5. Counsel for the Respondents draws the Court’s attention to the ‘Conditions for Sale’ annexed to their counter-affidavit. Clause 6.2 of these conditions stipulates that the BSV payment must be made within 15 days of the auction (24^th January 2022), [“Interest free period”] and that an extension of up to 35 days (until 13^th February, 2022) is permissible with interest. Beyond this period, as per Clause 6.3, the EMD is liable to forfeiture. The Respondents contend that the Petitioner’s request, dated 15^th February, 2022, was submitted beyond the permissible timeline, and therefore, the forfeiture was justified.

Analysis and Findings

6. The core issue in the present case revolves around the timeframe for making the Balance Sale Value (BSV) payment. The Petitioner’s misunderstanding arose from their interpretation of the ‘free delivery period’ mentioned in the bid sheet. The Petitioner erroneously assumed that the ‘free delivery period,’ ending on 18^th February, 2022, also marked the deadline for making