2025 Supreme(All) 3966

HIGH COURT OF JUDICATURE AT ALLAHABAD
Saral Srivastava, Arun Kumar Singh Deshwal, JJ.
Rahul Panwar - Petitioner
Versus 
State Of U.P. And Others - Respondents
WRIT - C No. - 1860 of 2020
Decided On : 20-08-2025

Forfeiture of a successful bidder’s security deposit in a lease contract constitutes legal error when based on failure to execute a deed caused by external regulatory deficiencies in mandatory permits, as applicable rules permit such forfeiture strictly upon the bidder’s own default.

Headnote:(A) Mining Laws - Minor Minerals (Concession) Rules - Rule 29 - Execution of lease deed - Requirement of valid clearance - Forfeiture of security deposit and installment - Whether forfeiture justified where delay in execution is caused by defects in mandatory environmental clearance documentation - Held, no. The condition for forfeiture under the regulation is specifically predicated on a default or fault attributable to the successful bidder. Where the clearance certificate is challenged or revoked due to procedural lapses by the issuing authority, the bidder cannot be held responsible for the consequent inability to execute the lease deed. (Paras 26, 27, 29, 36)

(B) Administrative Law - Forfeiture of security - Penal consequences - Forfeiture of security without a finding of fault on the part of the party concerned is arbitrary and contrary to law - The burden lies on the authority to prove the bidder was at fault in not completing formalities. (Paras 38, 39)

Facts of the case:
The petitioner was selected as the highest bidder for a mining lease. A letter of intent was issued, and the petitioner deposited a portion of the security and the first installment. Subsequently, the environmental clearance obtained for the mining site was challenged before a specialized tribunal, which led to an investigation into its validity and an eventual inquiry where the competent authority was found to have issued the clearance without following due procedure. Consequently, the lease deed could not be executed. The district authority ordered the forfeiture of the deposited security and the first installment, alleging a failure to execute the lease.

Findings of Court:
The court found that the governing rule mandates that the forfeiture of security is dependent upon a demonstrated fault or neglect by the bidder. In this case, the inability to execute the lease deed arose from external legal challenges against the environmental clearance, not from any action or inaction by the petitioner. Given the petitioner had no role in the issuance of the clearance, the fault rested solely with the regulatory body.

Issues: Whether the forfeiture of security and the first installment of the mining lease amount was legally justified under the prevailing rules when the non-execution of the lease deed was caused by documented legal infirmities in the mandatory environmental clearance certificate and not by any fault of the bidder.

Ratio Decidendi: The court reasoned that because the rule authorizing forfeiture is strictly conditional upon the fault of the bidder, and because the impediment in executing the lease was an external legal issue regarding the validity of the environmental clearance (which is entirely within the domain of the state agency), the forfeiture was illegal and arbitrary.

Result: Petition allowed; impugned forfeiture order set aside; respondent directed to refund the amount with 6% interest.