Delhi High Court
In The Matter Of Utility Engg. (I) Ltd. vs ------ on 18 May, 2012
Author: Manmohan
Bench: 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: Co.Appl.1017/2012 in Co. Pet. 26/1997 Page 1 of 5
"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.
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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 Co.Appl.1017/2012 in Co. Pet. 26/1997 Page 2 of 5 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 Co.Appl.1017/2012 in Co. Pet. 26/1997 Page 3 of 5 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.
Co.Appl.1017/2012 in Co. Pet. 26/1997 Page 4 of 5
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 Co.Appl.1017/2012 in Co. Pet. 26/1997 Page 5 of 5