Forfeiture of Earnest Money Deposit Without Hearing Violates Principles of Natural Justice: Patna High Court - 2026-04-03

Court Orders & Legal Analysis.

Procedural Fairness Overlooked: Court Strikes Down Arbitrary EMD Forfeiture

In a significant ruling reinforcing the necessity of due process, the Patna High Court has set aside an administrative order forfeiting a substantial Earnest Money Deposit (EMD) of over Rs. 2.34 crore. Justice Sandeep Kumar, presiding over the case, emphasized that administrative authorities cannot bypass the foundational principles of natural justice, even when dealing with strict tender conditions.

The Digital Glitch or User Error?

The dispute arose from a tender for a sand ghat in Aurangabad (Sone 14-A). The petitioner, Shailendra Prasad Singh, claimed that a technical glitch on the government’s e-procurement portal prevented him from participating in the final bidding process on September 16, 2025.

The respondent authorities, however, contended that the system was fully functional, citing the successful completion of 287 other tenders that same day. They argued that the petitioner failed because he entered incorrect credentials, only contacting technical support at 12:57 PM—mere minutes before the auction closed. Relying on Clause 19(v) of the tender notice, the authorities forfeited the petitioner's EMD of Rs. 2,34,22,500 for his failure to participate.

Legal Friction: Efficiency vs. Fairness

The petitioner challenged the forfeiture on the grounds that it was punitive and that the authority had failed to issue a show-cause notice, thereby violating the principles of audi alteram partem (the right to be heard). The respondent countered that Clause 19(v) provided for "automatic" forfeiture upon non-participation, leaving no room for administrative discretion or a need for a hearing.

The Court’s Reasoning

Justice Sandeep Kumar rejected the notion that any administrative rule can supersede the mandate of natural justice. Citing the Supreme Court judgment in Krishnadatt Awasthy vs. State of M.P. & Ors. (2025), the Court underscored that the opportunity for a hearing is a fundamental tenet of a civilized legal system.

The Court noted that even if the evidence suggested the fault lay with the petitioner, the authority could not act as both judge and jury. By failing to issue a notice or provide the petitioner an opportunity to explain their side before the forfeiture, the authorities acted in a manner contrary to legal safeguards.

Key Observations

The judgment serves as a sharp reminder of the limitations of administrative power. Key highlights from the ruling include:

• "The opportunity of hearing is considered so fundamental to any civilised legal system that the courts have read the principles of natural justice into an enactment to save it from being declared unconstitutional on procedural grounds."
• "The non-observance of natural justice is in itself prejudice caused. However, merely because facts are admitted or are undisputable it does not follow that the principles of natural justice need not be observed."
• "It is not permissible for the authority to jump over the compliance of the principles of natural justice on the ground that even if hearing had been provided it would have served no useful purpose."

The Verdict: A Case Remanded

The High Court quashed the order dated October 8, 2025, and remanded the matter back to the District Magistrate-cum-District Mining Officer of Aurangabad. The authority is now directed to conduct a fresh inquiry, grant the petitioner an opportunity to be heard, and pass a reasoned and speaking order based on its findings.

This decision serves as a beacon for transparency in public procurement, ensuring that even in automated, high-stakes auctions, the human element of fair administrative procedure remains intact.