IMPORTANT POINT
Forfeiture of earnest money must be reasonable, just, and based on actual loss suffered. The manner of cancellation and forfeiture should be fair and equitable.

JUDGMENT :

Heard, learned counsel for the parties.

1. The instant Writ Petition has been filed against the forfeiture of the earnest money Rs.23,80,000/- towards earnest money deposited by the petitioner.

2. Petitioner’s company is engaged in manufacturing of sponge iron and had participated in E. Auction conducted by Respondents-CCL in the Month of October, 2011. He was declared successful bidder and letter with respect to the aforesaid auction was communicated to the petitioner by ‘e-mail’ on 31.10.2011.

3. As per the stipulation of the bid notice, the payment had to be made by two designated accounts of the petitioner. However, the petitioner deposited the value of coal amounting to Rs.1,33,67,700/- through RTGS mode on 09.11.2011 by the account which was not one of the non-designated accounts by which the said payment was required to be made. Since payment was made from non-designated account, as such, the coal was not supplied nor the amount was refunded.

4. Consequently, the petitioner moved this Court vide W.P.(C) No.124 of 2012 for the supply of coal to the petitioner. The respondents-CCL took a specific stand that non-payment from the designated account was a breach of the term and condition of the contract, therefore, coal was not supplied and the earnest money was forfeited. Later, refund of coal value to the tune of Rs.1,33,67,700/- was made whereas Rs.23,80,000/- was forfeited as earnest money by invoking the forfeiture clause and being aggrieved by that, the instant Writ Petition (Civil) has been filed before this Court.

ARGUMENT ON BEHALF OF THE PETITIONER

5. Plea for refund of the earnest amount is premised on the ground that there was no material breach in the essential terms of the agreement. The new scheme requiring payment to be made from designated account was introduced in 2011 shortly before the e-tender, resulting in some confusion regarding the mode in which the payment had to be made. This breach was not to the essential part of the agreement but to its trivial term which did not result in loss to the Respondent Company.

6. Further, in terms of Clause 6.2 of the E-Auction Scheme, the EMD was not to be treated as earnest money but the sum was security deposit for performance of the bidders towards completion of the said transaction. Under clause 6.3, the security deposit (as converted from the EMD) could be adjusted as coal value only after completion of lifting of coal covered under coal value paid, excluding security deposit. However, in the events of default in the performance of the bidder, the provision of forfeiture of the security deposit, as stipulated, would be applicable.

7. Rs.1,33,67,700/-deposited by the petitioner through the non-designated account has been refunded in compliance to the order of this court dated 10.02.2012 passed in W.P.(C)No. 124 of 2012.

ARGUMENT ON BEHALF OF CCL

8. It is submitted by learned counsel for the Respondents-CCL that earlier coal value used to be deposited by coal consumers only through Demand-Draft/pay orders. Subsequently, the system of deposit of coal value was converted to RTGS/NEFT Mode only. This was notified to all the consumers that the payment shall be received only through this mode. The petitioner’s company gave two designated accounts along with the undertaking that the payments would be made by these accounts and not from any other account. The payments of coal value were not made through the designated account(s), therefore, contract was not finally concluded and the coal value was returned, but the earnest money was forfeited in terms of the conditions stipulated in Spot E. Auction Scheme, 2007.

9. Considering this aspect of the matter, the Co-ordinate Bench of this Court in Cont. Case (Civil) No.257 of 2012 vide order dated 11.05.2012 dropped the contempt proceeding with a liberty to the petitioner to address its grievance regarding non-payment of earnest money by approaching appropriate forum.

ANALYSIS

10. After considering the rival submissions advanced