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2014 Supreme(Mad) 3291
High Court of Judicature at Madras
N. PAUL VASANTHAKUMAR, J.
M/s. Hameed Enterprises
Versus
The Registrar, Indian Institute of Technology & Another
W.P. No. 29701 of 2012
Decided on: 18-09-2014
For the Petitioner:T.K. Kulasekaran, Advocate.
For the Respondent:R1, Karthik Mukundan, R2, C. Vijayakumar, Advocates.
The central legal point established in the judgment is the obligation of administrative authorities to act fairly, the mandatory requirement of disclosing upset/reserve price for public auctions, and the principles established in various Supreme Court decisions regarding acceptance of offers and fixing reserve price.
Headnote:
EMD Forfeiture - E-Auction - [Tamil Nadu] - [Tamil Nadu] - [Sale of Goods Act, 1930, Indian Contract Act, 1872] - The court discussed the legality of forfeiting the EMD amount paid by the petitioner for participating in the E-Auction, the obligation to act fairly by administrative authorities, and the mandatory requirement of disclosing upset/reserve price for conducting public auctions. The court also highlighted the principles established in various Supreme Court decisions regarding acceptance of offers, fixing reserve price, and unfair actions by administrative authorities.
Fact of the Case:
The petitioner participated in an E-Auction, made a typographical error in the bid amount, and promptly informed the respondents about the error. The respondents forfeited the EMD, and the petitioner challenged the forfeiture in the writ petition.
Finding of the Court:
The court found that the respondents did not follow the mandatory procedure of disclosing the upset price before the E-Auction, and the acceptance of the petitioner's bid was only provisional, subject to confirmation by the first respondent. The court also noted that the subsequent auction of the same materials fetched a significantly lower amount, indicating that the petitioner's bid was not unreasonably high.
Issues: The issues included the justification of EMD forfeiture, the obligation of administrative authorities to act fairly, and the mandatory requirement of disclosing upset/reserve price for public auctions.
Ratio Decidendi: The court established that the obligation to act fairly by administrative authorities is essential to ensure the rule of law and prevent failure of justice. It emphasized the mandatory requirement of disclosing upset/reserve price for conducting public auctions and highlighted the principles established in various Supreme Court decisions regarding acceptance of offers and fixing reserve price.
Final Decision: The writ petition was allowed, and the first respondent was directed to refund the forfeited EMD amount with 9% interest per annum, after deducting the expenses incurred for the conduct of a fresh E-Auction. The first respondent was granted four weeks to implement the order.
1. This writ petition is filed by the petitioner challenging the order of the first respondent dated 25.10.2012 forfeiting the pre-bid EMD of Rs.5 lakhs paid by the petitioner and for a direction to return the said amount with 12% interest.
2. The brief facts necessary for disposal of this writ petitioner are as follows:
(a) Petitioner Enterprises is doing business of dealing in scrap materials for over five years and its name was registered with the second respondent for the purpose of participation in E-Auction conducted by the second respondent.
(b) An advertisement was issued in the website regarding sale of condemned electrical materials lying in the premises of the first respondent under reference No.MS/3/Adyar/11-12-4660(41321). Petitioner participated in the E-Auction conducted on 13.9.2011 by the second respondent, who is the agent of the first respondent. The petitioner paid an advance amount of Rs.5 lakhs by way of demand draft drawn on Indian Overseas Bank, Chennai, dated 12.9.2011 in favour of the first respondent.
(c) According to the petitioner, while participating in the E-Auction, petitioner quoted the bid amount of Rs.12,24,202/- for the entire materials. However, while typing the figures, two zeros were added instead of one zero after the figure 2' to make it appear as Rs.1,22,42,002/-instead of Rs.12,24,202/-. The auction commenced at 11 O'Clock on 13.9.2011 and ended around 12.00 noon on the same day. Petitioner having found the typing mistake, immediately gave a representation to both the respondents at 2.00 p.m. on the same day through a letter and stated about the inadvertent error crept in typing the amount and requested the respondents to accept the petitioner's tender for Rs.12,24,202/- instead of Rs.1,22,42,002/-.
(d) As there was no response from the first respondent, petitioner requested the first respondent either to accept the tender for Rs.12,24,202/-or to return the EMD of Rs.5 lakhs. Since no reply was given with regard to acceptance of the tender or with regard to return of EMD, petitioner sent a reminder seeking return of EMD stating that its bid having not been confirmed it is entitled to get back the EMD.
(e) Petitioner's contention is that the first respondent has not informed as to whether the petitioner's bid was accepted or not. Petitioner having no other option, caused a counsel's notice on 10.10.2012 to both the respondents and called upon them to refund the EMD, which was acknowledged and after receipt of the legal notice, the impugned communication was issued by the first respondent stating that the EMD was forfeited.
(f) The said order is challenged in this writ petition contending that forfeiture of EMD by the first respondent is illegal, arbitrary, and the scrap materials having been sold through subsequent E-auction for Rs.45.52 lakhs, respondents ought to have returned petitioner's EMD as the genuine error committed by the petitioner was informed promptly.
3. The first respondent has filed counter affidavit contending that the impugned order being a reply notice issued to the counsel notice to the petitioner stating about the forfeiture of the EMD, the same cannot be challenged. Petitioner's offer being the highest, the same was accepted by the respondents, thereby the contract was concluded. Therefore petitioner is not entitled to resile from the contract. In terms of the tender conditions, EMD can be forfeited, if the highest bidder fails to pay the balance amount within seven days. As per Clause 2.0 of the agreement the first respondent is the Principal and the second respondent is the Selling Agent for a period of three years with effect from 12.10.2010 and the petitioner can trace its rights only as per the agreement. E-Auction was conducted on 13.9.2011 and the second respondent informed through the sale information letter on the same day that the pre-bid amount will be forfeited as per the terms and conditions, if the petitioner does not make the balance pay
