http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12

CASE NO.:

Appeal (civil) 4512 of 2006

PETITIONER:

Yogesh Mehta

RESPONDENT:

Custodian Appointed under the Special Court & Ors

DATE OF JUDGMENT: 04/01/2007

BENCH:

S.B. Sinha & Markandey Katju

JUDGMENT:

J U D G M E N T

W I T H

CIVIL APPEAL NO. 4513 OF 2006

S.B. SINHA, J :

Introduction :

Application of terms and conditions of sale of properties in terms of

the provisions of the Special Court (Trial of Offences Relating to

Transactions in Securities) Act, 1992 (for short, 'the Act') is in question in

these appeals which arise out of the judgments and orders dated 22.06.2006,

31.07.2006 and 23.06.2006 passed by the Special Court (Trial of Offences

Relating to Transactions in Securities) at Bombay in Intervention

Application No.131 of 2006 filed in Misc. Petition No. 4 of 2001, Report

No. 12 of 2006 in Misc. Application No.131 of 2006; and Misc. Petition No.

41 of 1999 respectively.

Before adverting to the questions as also the fact involved in each of

these matters, we may at the outset notice that one Harshad Mehta was a

person notified under the Act. The private respondents herein being his

relatives were also notified (hereinafter referred to as 'the notified parties').

Apart from late Harshad S. Mehta, the Custodian had notified 29 entities in

terms of Section 3 of the said Act, inter alia, comprising three of his younger

brothers, his wife, wives of two of his younger brothers.

In the proceedings initiated before the Special Court various

applications were filed. Properties belonging to the said late Harshad S.

Mehta or other notified entities were put on auction. The auctioned

properties comprised of commercial as also the residential ones. The

residential properties, inter alia, were situate at Madhuli.

Order of this Court :

Notified parties questioned the validity and/or legality of the said

auction sales. They ultimately came to this Court. Whereas auction sales in

respect of the commercial properties were allowed to be completed by orders

passed by this Court from time to time, the auction sale in respect of the

residential properties was the subject-matter of the judgment of this Court in

Ashwin S. Mehta and Another v. Custodian and Others [(2006) 2 SCC 385]

wherein, inter alia, it was directed :

"(viii) The learned Judge, Special Court shall

allow the parties to make brief oral submissions which

pointed reference to their written submissions. Such

hearing in the peculiar facts and circumstances of this

case should continue from day to day.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12

(ix) The learned Judge, Special Court while

hearing the matter in terms of this order shall also

consider as to whether the auction sale should be

confirmed or not. It will also be open to the learned

Judge, Special Court to pass an interim order or orders,

as it may think fit and proper, in the event any occasion

arises therefor.

(x) We would, however, request the learned

Special Judge, Special Court to complete the hearings of

the matter, keeping in view of the fact that auction sale in

respect of the residential premises is being considered, as

expeditiously as possible and not later than twelve weeks

from the date of the receipt of the copy of this order.

Save and except for sufficient or cogent reasons, the

learned Judge shall not grant any adjournment to either of

the parties.

(xi) The learned Judge, Special Court shall take up

the matter relating to confirmation of the auction sale in

respect of the commercial properties immediately and

pass an appropriate order thereupon within four weeks

from the date of receipt of copy of this order. If in the

meanwhile, the orders of assessment are passed by the

Income Tax Authorities, the Custodian shall be at liberty

to bring the same to the notice of the learned Special

Court which shall also be taken into consideration by the

learned Judge, Special Court."

Order of the Special Court :

Pursuant to or in furtherance of the said directions, the question as to

whether the auction sale should be confirmed or not came up for

consideration before the learned Judge, Special Court. By reason of the

impugned order dated 22.06.2006 passed in Intervention Application No.

131 of 2006 in Misc. Petition No. 4 of 2001, it was held that the as the

auction purchaser had not deposited the balance amount within the period

stipulated under the terms and conditions of the auction, the earnest money

deposited by the bidder was to be forfeited. By reason of the impugned

order dated 23.06.2006 passed in Misc. Petition No. 41 of 1999, with the

consent of the Custodian and the notified parties, a fresh auction sale was

directed to be held.

Terms and Conditions of Sales :

In the aforementioned backdrop of events, we may notice the relevant

terms and conditions of sale :

"3. The offers should be submitted in a sealed

envelope superscribed with the words "Bid for

sale in respect of Residential Flats/Office

Premises (mention the name of the property)".

There shall be only one consolidated bid in respect

of each of the following properties a) Maduli; b)

Khar; c) Guru Krupa. In respect of other

properties, single bid for a particular flat / property

or combined bid for more than one flat / property

is permitted; however, in such cases, the earnest

money for consolidated bid would be 2% of the

bid amount otherwise, the earnest money to be

deposited for each property shall be as mentioned

against respective property in the schedule.

Separate tender form and Agreement will have to

be submitted for each bid property.

4. The offers should reach at the office of the

Custodian at 10th floor, Nariman Bhawan, 227

Vinay K. Shah Marg, Nariman Point, Mumbai-400

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12

021 by 2.00 p.m. on the dates specified for each

property described in the schedule written

hereunder along with Demand Draft / Banker's

cheque / Pay Order of a Public Sector Bank in

favour of the Custodian, the Special Court payable

at Mumbai towards earnest money for participating

in the said auction for purchase of Residential Flats

/ Office Premises as indicated in the schedule

written hereunder. This amount of earnest money

will not carry any interest whatsoever.

7. If any dispute arises as to the last or highest

bidding, the said property shall be again put up for

sale at the last undisputed bidding and be resold at

the discretion of the Custodian subject to the

confirmation by the Special Court.

8. The sale is subject to sanction of the Hon'ble

Special Court at Mumbai in the above case. The

Court reserves the right to accept or reject any or

all offers without assigning any reasons. The

Court shall not be responsible in any way for not

accepting any or all the offers received by the

Custodian.

9. Within 60 days from the Hon'ble Special Court

granting sanction to the sale, the Purchaser shall

pay the balance of the purchase price and he/she

will have to take possession/delivery of the said

property from the Custodian at his/her own costs

and risks.

12. If the purchaser does not pay the balance amount

of the purchase price in the manner and within the

time provided herein or the time specified by the

Custodian or in any other respect fails to perform

these conditions or any of these, the Custodian

shall be at liberty to forfeit initial deposit made as

per para 4 above and shall then proceed to resell

the said property by public auction at such time

subject to such conditions and in such manner as

the Custodian shall deem fit and proper without

previously giving any notice to the purchaser and

the deficiency in price if any, occasioned by such

resale together with all costs charges and expenses

pertaining to the resale shall be made good by the

defaulting purchaser and be recovered by the

Custodian with interest on the amount of

deficiency at the rate of 18% per annum from the

expiration of the date of the aforesaid sanction of

sale till payment and in the event of non payment

of the whole or any part or any part thereof such

sum, the same shall be recoverable by the

Custodian from the defaulting Purchaser as and by

way of liquidated damages while any excess on

such resale shall not be available to such defaulting

Purchaser as and by way of liquidated damages

while any excess on such resale shall not be

available to such defaulting purchaser. This

condition shall be without prejudice to Custodian's

right and remedies, which the Custodian shall

otherwise have in law and/or under these

conditions.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12

13. The Purchaser shall not be liable to pay outgoings

if any, in respect of the said property for the period

prior to the date of confirmation of sale and all

such outgoings shall be paid by the Custodian till

such confirmation.

16. Upon payment of the purchase price in full and all

costs, charges and expenses mentioned above,

Custodian's authorized representative shall sign

such papers and documents as may be necessary

for transfer of the said property in the name of the

Purchaser. Such documents of transfer shall be

prepared and executed by and at the cost, charges

and expenses of the Purchaser.

20. In case of sale of the said property is not

sanctioned by the Special Court in favour of the

highest bidder or is set aside, the initial deposit

made in terms of para 4 above shall be refunded to

such bidder without interest, other costs, charges

and expenses expended by him/her for the

property. Except as herein above provided, the

said initial deposit made in terms of para 4 above

shall in no event be refunded.

25. The time hereunder fixed for the observance and

performance by the Purchaser of any of the

obligations to be observed and performed by

him/her under these conditions is and shall be

deemed to be of the essence of the contract and

any forbearance by the Custodian of strict

observance and performance on the part of the

Purchaser thereof shall not be construed as a

waiver or relinquishment on the part of the

Custodian who shall have the right at his option

thereof to exercise his right and remedies as are

available to him under these conditions and under

law or in equity as arising from non-observance

and non-performance thereof including the right to

forfeit."

FACT:

Re Civil Appeal No. 4512 of 2006

The bids were invited on 19.11.2004. The last date for receipt of the

bids was 06.01.2004. Appeals were filed by the notified parties against the

order dated 17.10.2003 whereby and whereunder the Custodian was directed

to take all steps to sell the properties mentioned therein, which is the subject-

matter of the present appeals. This Court directed that the bids may be

received; but the same may not be opened till 05.01.2004. On 05.01.2004,

the bids were directed to be opened, but the results were to be placed before

this Court. Pursuant thereto, the bids were opened and the appellant was

found to be the highest bidder in respect of Flat Nos. 61A and 61B,

Gulmohar, S.V. Road, Khar, Mumbai. The valuation of the flat had been

fixed at Rs. 60,00,000/- (Rupees sixty lakhs), but his bid was of

Rs.85,00,000/- (Rupees eighty five lakhs). By an order dated 22.01.2004,

the learned Judge, Special Court while accepting the bid, inter alia, directed :

"\005Accordingly, the bid submitted by Mr. Madhu Suri

and Shiv Kumar Suri of Rs. 16,00,000 (Rupees sixteen

lakhs) is provisionally accepted, subject to final order to

be passed by the Hon'ble Supreme Court. The highest

bidder whose bid has been accepted shall comply with

the terms and conditions on which the bid is submitted.

The Highest bidder shall be at liberty to appear before the

Hon'ble Supreme Court on the appointed date.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12

The initial deposit made by all the unsuccessful

bidders shall be refunded to the bidders."

[Emphasis supplied]

This Court thereafter by an order dated 30.01.2004 directed :

"The learned counsel for the Custodian brings on

record the result of the bids and the order of the Special

Court dated 17.12.2003 and 20.1.2004. The learned

counsel for the Appellants proposes to offer his

comments on the bids and the two orders of the Special

Court. Let it be done within two weeks.

The process of finalizing the bids according to law

may be proceeded ahead by the Special Court. However,

the finalization shall be subject to the result of these

appeals."

It is, however, stated that the learned Judge, Special Court did not take

any further step to finalize the bids pursuant thereto or in furtherance

thereof. As indicated hereinbefore, there being no serious dispute in regard

to auction sale of the commercial properties, this Court by an order dated

05.05.2004 directed that the interim order dated 31.01.2004 would not apply

to the sale of commercial properties. Pursuant to the directions and/or

observations made by the learned Judge, Special Court, an application was

filed for impleadment by the appellant. An application was also filed for

deposit of the amount in an interest bearing account of a Nationalized Bank.

The said applications were allowed. The appeals were finally disposed of in

the manner, as indicated hereinbefore, by an order dated 03.01.2006.

According to the appellant, although he had filed an application for

intervention and addressed several letters to the Custodian, as to when

payments in terms of the auction sales were required to be made, it did not

receive any response thereto.

By reason of the impugned judgment the learned Judge, Special

Court, however, directed the Custodian to consider as to whether the earnest

money deposited by the appellant was to be forfeited, stating :

"\005But in my opinion, this basic premise itself does not

exist. The right in relation to residential properties of the

Harshad Mehta group would have been created in favour

of the Applicant, had the applicant complied with the

Order passed by this Court accepting his bid. Essential

condition of that Order was that the Applicant complies

with all the terms and conditions of the bid. One of the

most essential condition of the bid was that within 60

days of the acceptance of the bid, he deposits the balance

amount of consideration. Failure of the Applicant to

deposit the balance amount of consideration resulted in

rejection of his bid and therefore, the Applicant lost all

his rights in relation to the property which could have

been created in his favour by the Order passed by this

Court. The submission of the learned Counsel appearing

for the Applicant that because the Supreme Court had

prevented the custodian from handing over of possession,

the Applicant was not obliged to deposit the balance

amount of consideration, in my opinion, has no

substance. For getting possession, the Applicant will

have to create an entitlement in him to get possession.

For creating that entitlement, he has to deposit full

amount of consideration. The learned Counsel for the

Applicant then submitted that the Supreme Court has

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12

observed that the question of confirmation of the bid

should be considered by the Court after deciding the

main application. In my opinion, that question will arise

only in relation to those bidders who have complied with

the Order accepting their bids and not in case like the

Applicant, who has lost the rights that may have been

created in his favour because of his default in complying

with the terms of the bid. The Applicant, therefore, has

no right in relation to the property which is the subject

matter of the main application filed by the custodian.

Therefore, the Applicant has no right to intervene. As I

find that the Applicant was liable to deposit the balance

amount of consideration as per the terms of the bid, the

custodian is directed to consider whether the amount of

earnest money deposited by the Applicant is to be

forfeited or not and submit a report to the Court seeking

appropriate orders. Application disposed of."

Pursuant to the said order, the Custodian submitted its report on

21.07.2006, recommending forfeiture of earnest money deposited by the

appellant, whereupon the learned Judge, Special Court by reason of the

impugned order dated 31.07.2006 directed :

"3. Both submissions made on behalf of the bidder

Yogesh Mehta have no substance. So far as

bidders in relation to commercial properties are

concerned, though they did not deposit the amount

immediately because there was stay order from the

Supreme Court operating, they deposited the

amount immediately after the Supreme Court

vacated the stay on sale of commercial properties.

Therefore, it was open to the bidder Mr. Yogesh

Mehta to deposit the amount at least immediately

after the Supreme Court decided the appeals by its

judgment dated 03.01.2006. That there was a stay

of all sale of the residential properties of Harshad

Mehta, does not appear to be correct, because the

Supreme Court in clear term has said in its

judgment dated 03.01.2006 that the Supreme Court

is concerned with those appeals only which relate

to sale of eight residential flats in a building

known as Madhuli. The flat in relation to which

the said Yogesh Mehta had submitted the bid

admittedly is not in the building called Madhuli.

4. In these circumstances, therefore, in my opinion,

the earnest money deposited by the bidder has to

be forfeited. In this view of the matter, the report

is disposed of with a direction to the Custodian to

forfeit the earnest money deposited by Mr. Yogesh

Mehta Report disposed of.

The Custodian is, directed to issue a fresh

advertisement for sale of the properties in

accordance withlaw."

Re Civil Appeal No. 4513 of 2006 :

Appellants herein are tenants of various flats in the building known as

'Gurukrupa'. They were also put on public auction. The said properties also

stood attached in terms of Section 3(3) of the Act. In response to the bids

invited for sale of the said flats, an offer was made by the appellants. By an

order dated 28.01.2004, the learned Judge, Special Court considered it

appropriate to tentatively accept the highest bid, subject to the final order

passed by this Court, stating :

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12

"\005Therefore, both the bidders increased their bids.

The highest bid is of Rs.170,00,000/- (Rupees One

crore seventy lakhs) from the occupants of the building.

The learned counsel for occupants is present and she

states that occupants are not in a position to increase the

bid. The other bidder namely West Cost Exim Pvt. Ltd.

is absent.

I have perused the valuation report dated

24.1.2004. As per the valuation report, value of the

property is about Rs.1,60,00,000/-. Considering that

the bid offered by the highest bidder is above the

valuation given in the valuation report, as also

considering that the bidders are the occupants of that

building itself, in my opinion, it would be appropriate

to accept the highest bid. The highest bid of the

occupants as per the report is therefore tentatively

accepted.

Learned Counsel for the highest bidder states that

the bid was given on behalf of the occupants, and

therefore, Conveyance should be executed in favour of

the Nominees nominated by the joint occupants/highest

bidders. The custodian is accordingly so directed.

In the Order dated 5.1.2004 passed in Civil

Application No. D. No.255575/03, D. No.25620/03, D.

No.25644/03 and D. No.25815/03, the Supreme Court

has directed this Court to open the bid and place the

result thereof before the Hon'ble Supreme Court.

Therefore, the highest bid given by the highest bidder is

tentatively accepted subject to final order to be passed

by the Hon'ble Supreme Court in the above said

proceedings."

[Emphasis supplied]

Appellants herein in that case also filed applications for intervention

before the Court.

The impugned order was passed ex parte. Appellants were not given

any notice. The fact that the building had already been put on sale by way of

auction and the bids had tentatively been accepted by the learned Judge,

Special Court by an order dated 28.01.2004 was not brought to its notice.

Question :

The short question which, therefore, arises for consideration is as to

what would be the interpretation of the said terms and conditions of sale.

Findings :

The auction was to be held at two stages : (i) submission of the bid;

and (ii) grant of sanction to the sale by the Special Court.

The word 'sanction' has been used in clause 9 as also in clause 20.

Evidently, the terms and conditions set out hereinbefore did not

contemplate a situation of this nature. When the bid was accepted, it was for

the Special Court to confirm the sale. It was only when the sale is

confirmed, which was to be done by way of grant of sanction thereto, the

purchaser was to pay the balance of the purchase price. Only on payment of

such purchase price, the auction purchaser would have been entitled to take

delivery of possession.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12

Whether confirmation of sale and sanction of auction connote two

different things was not in issue. Parties also construed the terms of the

auction in the same manner. As noticed hereinbefore, acceptance of auction

by the Special Court was a provisional one. It was subject to the order of

this Court. It may be true that whereas in a case where the sanctioning

authority is the court itself and confirmation of sale would not be subject to

approval from some other authority; acceptance of the sale itself would

amount to sanction thereof. But situation became completely different in

view of the orders passed by this Court. We would deal with the matter a

little later, but we may at this juncture notice some decisions operating in the

field at this juncture.

In Bishan Paul v. Mothu Ram [AIR 1965 SC 1994], this Court laid

down the law in the following terms :

"8. The rules which we have earlier reproduced

show that the auction is held on a date fixed and is

subject to a reserve price which is confidential. The

officer conducting the sale declares at the fall of hammer

who is the highest bidder. The highest bid is subject to

the approval of the Settlement Commissioner or an

officer appointed by him. A period of seven days must

elapse before the bid is approved and there is also a

limitation of seven days from the acceptance of the bid

for making an application to set aside the sale. If the bid

is approved and if no application meanwhile for setting

aside the sale is made, the highest bidder is recognised as

the auction purchaser and he is required to produce a

treasury challan in respect of the balance of the purchase

money within a period of fifteen days (which period may

be extended without limit of time) before the Settlement

Commissioner or the officer appointed by him. When the

full purchase price is paid a certificate issues in Form No.

XXII and is sent to the Sub-Registrar for registration. If

the balance of the price is not paid, the amount of

advance in deposit is forfeited and the auction purchaser

has no claim to the property.

9. The passing of title thus presupposes the

payment of price in full and the question is at what stage

this takes place. Obviously, there are several distinct

stages in the sale of property. These are: (a) the fall of the

hammer and the declaration of the highest bid; (b) the

approval of the highest bid by the Settlement

Commissioner or officer appointed by him; (c) payment

of the full price after approval of the highest bid; (d)

grant of certificate; and (e) registration of the certificate."

Yet again in State of Uttar Pradesh v. Kishori Lal Minocha [(1980) 3

SCC 8], this Court held :

"The question that remains to be answered is, even

if there was no statutory provisions, whether there was a

concluded contract between the appellant and the

respondent under which the respondent was liable to pay

20,100 which represents the difference between the

highest bid at the first sale and the price fetched at the

resale. The sale proclamation containing the conditions

of sale has not been produced. Assuming that the

different clauses of Rule 357 barring the last part of the

fifth clause embody the conditions of sale, it is clear from

the second clause that in the absence of the final sanction

of the Excise Commissioner, the bid cannot be said to

have been finally accepted. It is not claimed by the

appellant that the bid offered by the respondent was

sanctioned by the Excise Commissioner. There was thus

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12

no concluded contract between the parties to make the

respondent liable for the alleged loss\005"

Mr. Arvind Kumar Nigam, the learned counsel appearing on behalf of

the notified parties has, however, placed strong reliance upon a decision of

this Court in Union of India and Others v. Messrs. Bhim Sen Walaiti Ram

[(1969) 3 SCC 146] wherein a distinction had been made between a situation

where auction sale is conducted by an officer lower than the authority

competent to approve the same and the acceptance of a bid by the officer

presiding at the auction and holding that in the event the transaction is

complete, failure on the part of the auction purchaser to deposit the

prescribed amount, the Collector would be entitled to resell the licence,

stating :

"\005It is not disputed that the Chief Commissioner has

disapproved the bid offered by the respondent. If the

Chief commissioner had granted sanction under Clause

33 of Ex. D-23 the auction sale in favour of the

respondent would have been a completed transaction and

he would have been liable for any shortfall on the re-sale.

As the essential pre-requisites of a completed sale are

missing in this case there is no liability imposed on the

respondent for payment of the deficiency in the price."

When a sale would be held to be completed would, thus, depend upon

the fact of each case. Indisputably, it will primarily depend upon the terms

and conditions of the contract. But herein there was another supervening

circumstance i.e. the interim orders passed by this Court. The core question

in this case would, thus, be whether having regard to the interim orders

passed by this Court, the learned Judge, Special Court could confirm the

sale. The answer thereto must be rendered in the negative. It is true that the

learned Judge, Special Court, in its order dated 22.01.2004 directed the

highest bidder to comply with the conditions, but what escaped the notice of

the learned Judge was that sanction could not have been granted on a

provisional basis. If there could be only one order of sanction, the same

would mean the final one and not the provisional one. That is how the

parties including the Custodian understood the same. It his report the

Custodian stated :

"The Supreme Court has further directed at page

50 that "the learned Special Court shall proceed to pass

appropriate orders as regard confirmation of the auction

sales in respect of commercial properties". The

Custodian states that commercial properties are reflected

at Serial Nos. 1 to 13 of Exhibit 'A'. In respect of these

properties, where sale had been sanctioned by this

Hon'ble Court subject to the orders of the Hon'ble

Supreme Court, full payments have been received and

possession of the properties has also been handed over to

the purchasers.

The Custodian therefore prays that this Hon'ble

Court may be pleased to confirm the sale of commercial

properties as listed at Sl. Nos.1 to 13 in the table annexed

hereto as Exhibit 'A'.

The Custodian also states that this Hon'ble Court

had also confirmed sale of the properties at Serial Nos.

14 to 17 which were not described as commercial

properties, subject to orders of the Hon'ble Supreme

Court. However, in these cases only earnest money was

received from the successful purchasers and possession

could not be handed over in view of orders of the

Hon'ble Supreme Court. No bids were, however,

received in respect of properties at Serial Nos. 18 to 25

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12

(various flats at Madhuli), Separate proceedings in

respect of properties at S. No. 26 are being adopted."

Before us a chart has been submitted, from a perusal whereof it

appears that even the purchasers of commercial properties made final

payments within the period 14.07.2004 and 05.01.2005. No payment,

therefore, was said to have been made within a period of sixty days from the

date of auction i.e. 05.04.2005.

If there had been a stay in regard to acceptance of the bid, it could not

have been sanctioned. It could be sanctioned subject to the final order of

this Court. Moreover, when this Court issued direction in regard to

confirmation of sale, the matter ought to have been considered afresh.

In the peculiar facts and circumstances of this case, it is difficult to

accept the submission of the learned counsel for the respondents that the bid

was accepted finally, but only possession was to be taken by the purchasers

at their own risk.

Strong reliance has been placed by Mr. Nigam upon a decision of this

Court in State of Maharashtra and Others v. A.P. Paper Mills Ltd. [(2006) 4

SCC 209], wherein this Court in a case where the bidder had withdrawn its

offer before the expiry of the period itself during which the bid was to

remain operative, held :

"\005Stand of the learned Counsel for the respondent that

another request was made after the expiry of the 45 days

period does not change the situation. Clause 5(v) clearly

spells that once a tender is tendered the offer shall be

considered valid for a period of 45 days from the date of

tender sale in case of tenders which are under

consideration. If this clause is read with Clause 5(iv) the

position is clear that once a tender is tendered no changes

can be made and no tender can be withdrawn. We are not

concerned with a case of consequences after acceptance

of the tender by the successful bidder. In such a situation

loss sustained in the re-sale and the amount realized less,

shall be recovered from the bidder while adjusting the

amount paid by him towards earnest money deposit. In

this case the acceptance of the tender was after the

validity of the period. Therefore, this is not a case which

could authorize the Government to recover the loss from

the respondent. But it is a case of withdrawal of tender

and the effect of it is to be considered. Since the tender is

valid for a period of 45 days and withdrawal is before

expiry of the period the earnest money is to be forfeited.

The stand of the respondent that because of delay in

declaration of the final sale results there was no bar on

withdrawal of the tender is clearly untenable. Once the

tender is withdrawn the result is that the tenderer who

withdraws the tender cannot take the stand that since the

final sale result has not been declared there is no bar on

the withdrawal."

The said decision cannot be said to have any application whatsoever

to the fact of the present case. The acceptance of the bid herein was subject

to order of this Court which, in our opinion, thus, by reason of the order of

the Special Court or otherwise did not result in a concluded contract. The

deposit was to be made within sixty days from the date of grant of sanction

which would mean final acceptance of the bid, which was to depend upon

the ultimate order which was to be passed by this Court.

We, therefore, are of the opinion that the impugned order cannot be

sustained.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12

In Misc. Petition No. 41 of 1999, evidently a consent order had been

passed behind the back of the appellants. The said order, therefore, cannot

also be sustained.

There is another aspect of the matter which also cannot be lost sight

of. Forfeiture of the earnest money, in our opinion, in the aforementioned

situation, could not have been directed.

In Chairman of the Bankura Municipality, Bankura v. Lalji Raja &

Sons [(1953 SC 248 at 250], this Court noticed the definition of the word

'forfeiture' in the following terms :

"The word 'forfeiture' is defined in Murray's Oxford

Dictionary The fact of losing or becoming liable to

deprivation of goods in consequence of a crime, offence,

or breach of engagement"\005.."the penalty of the

transgression" or a "punishment for an offence".

While directing forfeiture of the 'earnest money' the provisions of the

Indian Contract Act, 1872 are to be kept in mind. Forfeiture is permissible

only when a concluded contract has come into being and not prior thereto.

[See Maula Bux v. Union of India [AIR 1970 SC 1955 : (1969) 2 SCC 554

& Saurabh Prakash v. DLF Universal Ltd. \026 2006 (12) SCALE 531] .

The learned counsel appearing for the Custodian submitted that the

time was of the essence of contract. It may or may not be so. This question

is required to be considered having regard to the fact situation obtaining in

each case. If the deposit was to be made from the date of final sanction of

the offer, question of applicability of the said proposition of law could not

arise.

We may, however, notice that in Mcdermott International Inc. v. Burn

Standard Co. Ltd. & Ors. [2006 (6) SCALE 220], this Court observed that in

a case of this nature, time was not of the essence and, therefore, Section 55

of the Contract Act was not attracted, noticing :

"This Court in Hind Construction v. State of

Maharashtra [(1979) 2 SCC 70] stated:

"7. The question whether or not time was of the

essence of the contract would essentially be a

question of the intention of the parties to be

gathered from the terms of the contract. [See

Halsbury's Laws of England, 4th ed., Vol.4, para

1179]."

"8. Even where the parties have expressly

proided that time is of the essence of the contract

such a stipulation will have to be read along with

other provisions of the contract and such other

provisions may, on construction of the contract,

exclude the inference that the completion of the

work by a particular date was intended to be

fundamental. [See Lamprell v. Billericay Union

(19849) 3 Exch 283, 308; Webbv. Hughes (1870)

LR 10 Eq 281; Charles Rickards Ltd. v.

Oppenheim (1950) 1 KB 616].""

Conclusion :

For the reasons aforementioned, the impugned judgments cannot be

sustained. They are set aside accordingly and the matter is remitted to the

learned Judge, Special Court for consideration of the matter afresh in the

light of the observations made hereinbefore. The appeals are allowed. We

may, however, hasten to add that it will be open to the learned Judge,

Special Court, to pass an appropriate order in accordance with law. We

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12

must also observe that we have not gone into the question in regard to the

validity or otherwise of the auction sale. In the facts and circumstances of

the case, there shall be no order as to costs.