Bombay High Court
M/S. Himalaya Cars, Yavatmal, ... vs Small Industries Devp. Bank Of ... on 20 October, 2016
Bench: V.A. Naik
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1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR
WRIT PETITION NO.6745/2015
PETITIONERS: 1. M/s. Himalaya Cars,
A partnership Firm duly registered and
incorporated under the provisions of Indian
Partnership Act and having its Operational
Office at Darwha Road, Yavatmal, through its
Partner Shri Bhagchand s/o Devidas Gopalani,
aged about 42 years, Occ. : Business,
ig r/o Arni Road, Yavatmal - 445001.
2. Shri Kishor s/o Devidas Gopalani,
aged about 42 years, Occ. : Business,
r/o Arni Road, Yavatmal - 445001.
...VERSUS...
RESPONDENTS : 1. Small Industries Development
Bank of India, First Floor, Nirmal,
7, Ramkrishna Nagar Corner, Opposite
Commissioner Bunglow of Yagnik Road,
Rajkot - 360001, Gujarat.
2. M/s. Indra Cotton Ginning & Pressing Pvt. Ltd.,
having its Office at Amdavad Road, Jasdan
Rajkot - 360050, Gujarat.
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Shri D.V. Chauhan, Advocate for petitioners
Shri P.V. Kulkarni, Advocate for respondent no.1
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CORAM : SMT. VASANTI A NAIK, AND
KUM. INDIRA JAIN, JJ.
DATE : 20.10.2016
ORAL JUDGMENT (PER : SMT. VASANTI A NAIK, J.)
Rule. Rule made returnable forthwith. The petition is heard
finally at the stage of admission with the consent of the learned Counsel
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for the parties.
By this writ petition, the petitioners seek a declaration that
the respondent - Small Industries Development Bank of India cannot
withhold the Earnest Money Deposit of the petitioners to the tune of
Rs.42.50 lacs and that the Bank is liable to return the Earnest Money
Deposit to the petitioners.
On 7.9.2015, the respondent - Bank issued a public notice
of e-Auction for sale of immovable property. According to the auction
notice, the interested bidders that would submit their Earnest Money
Deposit (EMD) not below the reserve price through online mode before
7.10.2015 were eligible for participating in the e-bidding process. The
reserve price was fixed at Rs.425 lacs. The petitioners being desirous of
participating in the e-Auction process, submitted the Earnest Money
Deposit of Rs.42.50 lacs. The petitioners submitted the bid through online
mode and offered the price of Rs.399 lacs. Since the bid of the petitioners
was lower than the reserve price, the same was not accepted by the
respondent - Bank. It is the case of the petitioners that the Bank invited
the petitioners for private negotiations and on 13.10.2015 the petitioners
revised their offer at Rs.405 lacs and after further negotiations to
Rs.415 lacs. When the petitioners offered the bid of Rs.415 lacs on
14.10.2015, the petitioners communicated that in case the petitioners' bid
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was not favourably considered till 5.11.2015, the EMD amount should be
refunded. According to the petitioners, the petitioners did not receive any
communication from the respondent - Bank in regard to the acceptance
of the offer till they received the communication by the registered post on
16.11.2015. It is stated that as per the said communication, the
respondent - Bank asked the petitioners to pay 25% of the sale price
immediately and 75% of the sale price on or before the 15 th day from the
date of the communication. According to the petitioners, the last offer of
the petitioners was also not accepted by the respondent - Bank before
5.11.2015 and the Bank was liable to refund the Earnest Money Deposit
to the petitioners. Since the Bank refused to refund the Earnest Money
Deposit amount to the petitioners, the petitioners have filed the instant
petition.
Shri Chauhan, the learned Counsel for the petitioners
submitted that in view of Clause Nos.C (2) and C (3) of the auction
notice, dated 7.9.2015 only the bidder who would submit the bid that
was not below the reserve price on or before 7.10.2015, was eligible for
participation in the e-bidding process. It is stated that only the bidder
who submits the highest bid amount, that was not below the reserve
price, on the date of closure of e-Auction process, could have been
declared as a successful bidder. It is submitted that the Earnest Money
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Deposit of a successful bidder could have been retained by the Bank
towards part sale consideration and the EMD of an unsuccessful bidder
was liable to be refunded. It is submitted that as the petitioners did not
submit a bid that was equal to or above the reserve price, the respondent
- Bank could not have retained the Earnest Money Deposit of the
petitioners. It is submitted that since the petitioners were not eligible
bidders, much less, successful bidders, the Earnest Money Deposit of the
petitioners could not have been forfeited. It is submitted that it was not
permissible for the respondent - Bank to further negotiate with the
petitioners after the closure of the e-Auction process. It is submitted that
there is nothing in the auction notice that permits the respondent - Bank
to forfeit the Earnest Money Deposit. It is submitted that if the Earnest
Money Deposit was to be adjusted towards the part sale consideration in
the case of a successful bidder, the Earnest Money Deposit in the case of
the petitioners could not have been forfeited as the petitioners were
neither successful bidders nor eligible bidders.
Shri Kulkarni, the learned Counsel for the respondent -
Bank has opposed the prayer made by the petitioners. It is submitted that
since the dispute relates to the terms of the tender document, i.e., auction
notice dated 7.9.2015 and the dispute is a contractual dispute, the writ
petition may not be maintainable. The learned Counsel relied on the
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judgment of the Hon'ble Supreme Court, reported in AIR 2003 SC 3823
(1) to canvass that a writ petition would not be tenable in contractual
matters. Reliance is also placed on an unreported judgment of the Hon'ble
Supreme Court, dated 17.2.2016 in Special Leave Petition (C)
No.9170/2012. It is admitted that as per Condition Nos.C (2) and C (3)
of the auction notice, an eligible bidder was one that had submitted a bid
that was not below the reserve price and the bidder who submits the
highest bid amount that is not below the reserve price, before the closure
of the e-Auction process would be declared as a successful bidder and the
Earnest Money Deposit of a successful bidder could be retained by the
Bank towards part sale consideration and the EMD of an unsuccessful
bidder was liable to be refunded. It is stated that however after the
closure of the e-Auction process, the petitioners had revised their offer
and had lastly offered the consideration of Rs.415 lacs on 14.10.2015
with a condition that the offer would survive till 5.11.2015 and the Bank
has, before 5.11.2015, vide communication, i.e., e-mail dated 3.11.2015,
accepted the revised offer of the petitioners.
To consider the claim of the petitioners, it would be
necessary to consider the relevant terms and conditions in the auction
notice, dated 7.9.2015, which read thus : -
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"Condition No.C (2). The interested bidders who
have submitted their EMD not below the Reserve Price
through online mode before October 07, 2015 up to 5.45 PM,
shall be eligible for participating the e-bidding process. The
e-Auction of above properties would be conducted exactly on
the scheduled Date & time as mentioned against each property
by way of inter-se bidding amongst the bidders. The bidder
shall improve their offer in multiple of the amount mentioned
under the column "Bid increase amount" against each
property. In case bid is placed in the last 5 minutes of the
closing time of the e-Auction, the closing time will
automatically get extended for 5 minutes (subject to
maximum of unlimited extensions of 5 minutes each). The
bidder who submits the highest bid amount (not below the
Reserve Price) on closure of e-Auction process shall be declared
as Successful Bidder and a communication to that effect will
be issued which shall be subject to approval by the Authorized
Officer/Secured Creditor.
C (3). The Earnest Money Deposit (EMD) of the
successful bidder shall be retained towards part sale
consideration and the EMD of unsuccessful bidders shall be
refunded. The Earnest Money Deposit by way of NEFT/RTGS
shall not bear any interest. The successful bidder shall have to
deposit 25% of the sale price, adjusting the EMD already paid
immediately after the acceptance of bid price by the
Authorised Officer and the balance 75% of the sale price on or
before 15th day of sale or within such extended period as
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agreed upon in writing by and solely at the discretion of the
Authorised Officer. In case of default in payment by the
successful bidder, the amount already deposited by the offer
shall be liable to be forfeited and property shall be put to
re-auction and the defaulting borrower shall have no
claim/right in respect of property/amount. As the sale is
subject to confirmation by SIDBI, the offers would be treated
as open. The purchaser shall satisfy itself as to existence of
any encumbrances or any dues to Government or anybody in
respect of these assets and also bear expenses of transfer of
assets."
It is not in dispute that the Earnest Money Deposit, that was
liable to be deposited by a bidder desirous of participating in the auction
process, was Rs.42.50 lacs and the reserve price for the property was
Rs.425 lacs. As per Condition No. C (2), only interested bidders that had
submitted their bid, that was not below the reserve price, before
7.10.2015 were eligible for participating in the e-bidding process. At this
stage, it would be necessary to note that though the petitioners had
deposited the Earnest Money Deposit of Rs.42.50 lacs, their bid being for
Rs.399 lacs, was lower than the reserve price. As the bid was below the
reserve price, as per Condition No.C (2) the petitioners were not eligible
for participating in the e-bidding process. As the petitioners had not
submitted a bid for an amount that was equal to or more than
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Rs.425 lacs, the petitioners were out of the competition, in fact, the
petitioners were not eligible for participating in the e-bidding process, at
all. No sooner than the petitioners failed to submit a bid that was equal to
or above the reserve price, the respondent - Bank was duty bound to
refund the Earnest Money Deposit to the petitioners as they were not
eligible bidders at all. The Earnest Money Deposit of only a successful
bidder could have been retained towards part sale consideration and the
EMD of an unsuccessful bidder was liable to be refunded as per Condition
No.C (3). It is clear from the opening words of Condition No.C (3) that
the said clause refers to only eligible successful bidder and the other
eligible bidders that are unsuccessful. Even in respect of an eligible
unsuccessful bidder, it is necessary for the Bank to refund the EMD at the
earliest as per Condition No.C (3). If that is so, the respondent - Bank
could not have retained the EMD of the ineligible bidder.
On a combined reading of Condition Nos. C (2) and C (3), it
is clear that as per the auction notice it was not permissible for the
respondent - Bank to retain the EMD of the petitioners as the petitioners
were not the eligible bidders, much less, the successful bidders. There is
nothing in the conditions in the auction notice that permit the respondent
- Bank to retain the Earnest Money Deposit of an ineligible bidder or a
bidder that was eligible but not successful. It is apparent from a reading
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of the conditions of the auction notice that the respondent - Bank was
bound to refund the EMD of the petitioners immediately on the closure of
the e-Auction process. Merely because the petitioners were called for
negotiations and the attempts to negotiate failed, the respondent - Bank
cannot forfeit the Earnest Money Deposit of the petitioners. It would not
be necessary for us to consider the development subsequent to the closure
of the e-Auction process as it was necessary for the respondent - Bank to
refund the EMD to the petitioners at the closure of the e-Auction process.
There is nothing in the auction notice that permits the Bank to forfeit the
EMD of an ineligible bidder or an eligible unsuccessful bidder. In fact, on
a combined reading of the conditions of eligibility, it appears that the
respondent - Bank is cast with a duty of refunding the Earnest Money
Deposit to all the bidders except the successful bidder. While holding so,
we are not inclined to uphold the objection raised on behalf of the
respondent- Bank in regard to the tenability of the writ petition. We do
not find that this is a case arising out of a breach of contract and that
there is a dispute relating to the terms of the offer. There is no dispute
relating to the terms of the offer and the parties to this writ petition are
ad idem on the import of the terms in Condition Nos. C (2) and C (3). The
judgment, reported in AIR 2003 SC 3823 (1) and the unreported
judgment of the Hon'ble Supreme Court and relied on by the Counsel for
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the respondent - Bank cannot be made applicable to the facts of this case.
Hence, for the reasons aforesaid, the writ petition is
allowed. The respondent - Bank is directed to refund the Earnest Money
Deposit amount to the petitioners within two weeks.
Rule is made absolute in the aforesaid terms with no order
as to costs.
JUDGE JUDGE
Wadkar
