State Cannot Retain Deposits When At Fault: Jharkhand High Court Permits Bidders To Seek Refunds Over Delayed Environmental Clearance

The Jharkhand High Court has held that where cancellation of a government auction is caused by the State's own delay in issuing mandatory environmental clearance, the bidder is entitled to seek refund of the earnest money and security deposit. The ruling affirms that no financial burden can be imposed on a party when the fault lies with administrative authorities and not the bidder.

The Division Bench comprising Justice Sujit Narayan Prasad and Justice Navneet Kumar observed, “…liberty which has been sought for by raising the issue for refund of amount of the Earnest Money and the Security Deposit is required to be given to the petitioners for its determination. Accordingly, these writ petitions are being disposed of with a liberty to the petitioners to make individual representation to the Secretary, Department of Mines and Geology, Government of Jharkhand with all details supported by relevant documents and if such representation will be filed, then the Secretary… will take a decision and pass a reasoned order in accordance with law.”

The ruling was delivered in a batch of writ petitions filed by The Mills Store Company Bombay Private Limited and others whereby the petitioners challenged the cancellation of sand ghat settlements by the Government of Jharkhand.

The background to the case involves the auction process initiated by the Department of Mines and Geology, Government of Jharkhand, for settlement of sand ghats in the districts of Palamau and Pakur. The petitioners participated in the bidding process and were issued Letters of Intent. A key condition required submission of necessary documents within 60 days of the issuance of the Letter of Intent. The petitioners deposited earnest money and security deposits as pre-conditions to participation.

However, due to the non-issuance of environmental clearance by the State Level Environment Impact Assessment Authority (SEIAA), the State later cancelled the auction proceedings by invoking departmental communications.

The petitioners originally challenged this cancellation, asserting that the 60-day deadline was arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution. They also argued that the timeline should be treated as directory, not mandatory, and sought directions for the SEIAA to process their environmental clearance applications without delay.

During the course of the hearing, however, the petitioners chose not to press their challenge to the cancellation of sand ghat settlements. Instead, they confined their plea to seeking a refund of the earnest money and security deposits. Their counsel, Mr. Indrajit Sinha, argued that the delay in securing environmental clearance was entirely on part of the SEIAA and not the petitioners, and therefore no fault could be attributed to them.

The State, represented by Mrs. Darshana Poddar Mishra (AAG-I), did not oppose this limited request. She submitted that the Department of Mines and Geology would duly consider any representations filed in that regard.

Accepting this consensus, the Bench held that the petitioners were entitled to submit individual applications to the Secretary, Department of Mines and Geology, for refund of their deposits. The Court directed the competent authority to examine such representations, accompanied by all relevant documents, and pass a reasoned order in accordance with law.

Thus, the Court concluded, “Accordingly, these writ petitions are being disposed of with a liberty to the petitioners to make individual representation to the Secretary, Department of Mines and Geology, Government of Jharkhand with all details supported by relevant documents and if such representation will be filed, then the Secretary... will take a decision and pass a reasoned order in accordance with law.”

Case Title: The Mills Store Company Bombay Private Limited vs The State Of Jharkhand and ors

LL Citation: 2025 LiveLaw (Jha) 25

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