Winning Bidder Cannot Challenge Tender Cancellation After Accepting Refund Of Deposit: Bombay High Court

A division bench of acting Chief Justice SV Gangapurwala and Justice Sandeep V Marne upheld the cancellation of Central Government’s tender for sale of property observing –

“Encashing the cheque of the amount refunded by the Respondents (Government of India) is not compatible with the plea of the Petitioner (winning bidder) to proceed ahead with the alleged contract. Accepting the amount of earnest money of 25% deposited by the Petitioner from the Respondents would be a death knell for the Petitioner. Accepting the refund of the amount from the Respondents would demonstrate that if at all there is a contract, the parties have rescinded the same.”

The Central Government forfeited agricultural property in Akola District. The petitioner participated in the tender process initiated by the Competent Authority under the NDPS Act for auction of the land and was declared the highest bidder at Rs 66,00,000/-. Petitioner deposited earnest money of Rs. 6,63,000/- and a further Rs. 9,75,000/-. Subsequently, the auction was cancelled due to technical reasons and the money was refunded to the petitioner. The petitioner challenged the cancellation of the tender.

Petitioner contended that the contract was complete between the parties and hence the respondents could not rescind from it. It would amount to breach of contract. Petitioner further submitted that the cancellation is arbitrary and perverse.

The court reiterated that tender is an invitation to offer pursuant to which the petitioner made an offer to the respondents.

The court noted that the respondents accepted the offer of the petitioner without any qualification and the bid acceptance form was also signed. After this both parties are bound by the promise, and the petitioner had to deposit the amount by September 2, 2022, said the court.

The tender was cancelled before that date and the respondents issued a cheque of the amount that petitioners deposited, court noted adding that though the petitioner requested the respondents to reconsider their decision of cancelling the auction, he encashed the cheque on the same day.

Therefore, the court said that once the refund of amount was accepted by the petitioner he cannot claim that the contract of sale subsists between the parties. The unqualified acceptance of refund by the petitioner negates any relief to him, the court held.

The court said that encashing of refund cheque is not compatible with petitioner’s plea that he is ready to perform his part of the contract.

The court noted that the title of the property was never passed to the petitioner, and he only got the right to purchase it. Sale would be complete once the entire amount has been deposited with the Central Government as per Rule 19 of the Smugglers and Foreign Exchange Manipulators (Receipt, Management and Disposal of Forfeited Property) Rules, 2006, the court added.

Thus, the petitioner forfeited his right once he encashed the cheque and the contract between the parties stood rescinded, the court held. 

The court further noted that in the new auction, the highest bid is more than three times the amount offered by the petitioner. Thus, the court accepted the government’s contention that the market value of property is higher than the amount for which it was being sold to the petitioner.

Senior Advocate Venkatesh Dhond represented the Petitioner while Advocate Advait M. Sethna represented the Respondents.

Case no. – Writ Petition (L) No. 31918 of 2022

Case Title – Ram Omprakash Patil v. Secretary, Government of India and Ors.

Citation: 2023 LiveLaw (Bom) 158