Delhi High Court
In The Matter Of Utility Engg. (I) ... vs ------ on 18 May, 2012
Author: Manmohan
$~26
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CO.PET. 26/1997
IN THE MATTER OF
UTILITY ENGG. (I) LTD. ..... Petitioner
Through Mr. Mayank Kumar, Advocate for
applicant.
% Date of Decision: 18th May, 2012
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
JUDGMENT
MANMOHAN, J (Oral)
CO. APPL.1017/2012
Present application has been filed by the applicant, who was the
second highest bidder in the auction conducted by this Court on 13 th
October, 2011, for refund of its earnest money.
The facts of the present application are that on 13th October, 2011 this
Court after conducting an auction had accepted the highest bid of
Rs.42,00,000/- of M/s Manasvi Realtors Pvt. Ltd. whereas the applicant,
being the second highest bidder with a bid of Rs.40,60,000/-, was directed to
comply with the terms of the auction as mentioned in the sale notice. The
relevant terms of the sale notice are reproduced hereinbelow:
"7. That the tenderers whose tender / bid is accepted shall
have to deposit with the Official Liquidator a sum of 25%
(excluding earnest money) of the bid amount by pay order /
demand draft within seven days from the date of acceptance
of tender / bid failing which the entire earnest money shall
stand forfeited. The balance of the tender / bid amount shall
be paid within 60 days from the date of acceptance of the bid
failing which the entire money deposited by tenderers shall
stand forfeited.
xxxx xxxx xxxx
12. That after the submission of the tender, the tenderer
will not be permitted to withdraw the offer until the sale is
finalized by the Hon'ble Court. In case he withdraws from
the sale, the entire earnest money shall stand forfeited.
13. That the earnest money deposited by the unsuccessful
tenders shall be returned to them by the Official Liquidator
without any interest. However, the earnest money deposited
by the 2nd highest bidder shall be refunded only after the 25%
of the tender / bid amount (excluding earnest money) is
deposited by the highest bidder.
14. That in case the successful tenderer/bidder makes any
default in depositing the sale amount with the Official
Liquidator, the 2nd highest bidder may be offered by the
Hon'ble Court to deposit the amount of his offer. If he fails to
deposit the amount within the time, as may be allowed by the
Court, his earnest money shall also be forfeited."
(emphasis supplied)
On 3rd November, 2011 when this Court was informed that the highest
bidder had defaulted in deposit of 25% of the bid amount within the
prescribed time of seven days, it directed the Official Liquidator to forfeit
the deposit of M/s Manasvi Realtors Pvt. Ltd. and permitted the Official
Liquidator to invite the second highest bidder i.e. the applicant for
depositing the bid amount as per the terms of the sale notice.
On 22nd December, 2011, when this Court was informed by the
Official Liquidator that even the applicant had defaulted in making payment
of the bid amount, the applicant's earnest money was directed to be forfeited
in terms of Clause 14 of terms and conditions of sale notice.
Mr. Mayank Kumar, learned counsel for the applicant stated that the
applicant prior to being informed of the order dated 3rd November, 2011 had
vide its letter dated 7th November, 2011 withdrawn its offer and demanded
refund of its earnest money. He submitted that by virtue of the terms and
conditions of the sale notice, in particular, the clauses reproduced
hereinabove, the applicant was at liberty to withdraw its bid at any stage
prior to its acceptance by the Official Liquidator. In this connection, Mr.
Mayank Kumar relied upon Section 5 of the Contract Act, 1872 which is
reproduced hereinbelow:
"5. Revocation of Proposals and acceptance - A proposal
may be revoked at any time before the communication of its
acceptance is complete as against the proposer, but not
afterwards.
An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards."
Mr. Mayank also submitted that by virtue of Section 457(2E) of the
Company Act, 1956 the applicant was at liberty to withdraw its bid three
days prior to the date of the closing of the bid.
However, this Court is unable to accept the submissions advanced by
learned counsel for the applicant.
Undoubtedly, Section 5 of the Contract Act referred to hereinabove
clearly states that a party to a contract can revoke it anytime before its
acceptance is complete. However, in the present case, the contract was
completed on 13th October, 2011 when this Court had conducted the auction
and declared the applicant to be the second highest bidder and bound him to
comply with the terms and conditions of the auction.
Moreover, as Section 457(2E) has not been notified till date, it is
inapplicable. In any event, this Court is of the view that the said Section
only permits a party to a contract to withdraw its bid before the date of the
closing of the bid. As pointed out hereinabove, in the present case, the bids
had been closed and accepted on 13th October, 2011. In any case, the
applicant had participated in sale/auction proceedings knowing fully well the
terms and conditions of the sale and therefore, the applicant is bound by
terms and conditions and cannot be permitted to contend to the contrary at
this stage.
This Court is also of the view that, in the event submissions advanced
by the learned counsel for the applicant are accepted then the intent of
binding down the second highest bidder in the event of default by the
auction purchaser would be rendered futile. Consequently, the present
application is dismissed with costs of Rs.25,000/-. Costs to be paid to the
Official Liquidator within a period of four weeks.
MANMOHAN, J.
MAY 18, 2012
dk
