Seller may deduct resale loss from purchaser's deposit after notice and speaking order; purchaser can challenge decision.

SC allowed the appeal in part and set aside the unconditional refund direction. The Court held that the purchaser's deposit need not be immediately refunded; the seller could quantify loss from a resale conducted at the purchaser's cost and risk and recover shortfall after following due process. The seller must serve a detailed notice explaining the computation of loss post-second auction, consider responses, and pass a speaking order. Respondents may challenge that order in appropriate fora. If the speaking order shows loss within the deposit, adjustment may be made and any balance refunded, subject to rights of both parties and further legal challenge.

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Issues Involved:
1. Validity of the termination of the agreement by the Odisha Forest Development Corporation Ltd. (OFDC Ltd.)
2. Entitlement to the refund of the deposit made by the private Respondents.
3. Right of the OFDC Ltd. to recover losses incurred due to the re-tendering process.

Detailed Analysis:

1. Validity of the Termination of the Agreement by OFDC Ltd.:
The OFDC Ltd. issued an e-tender notification for the advance sale of phal Kendu leaf (KL) of the 2017 crop. The private Respondent, being the successful bidder, was required to execute an agreement and deposit a provisional security deposit of Rs. 5,00,000/-. The private Respondent executed the agreement and was further required to deposit an additional security amount by 31.05.2017. Upon failing to deposit the required amount, the private Respondent sought an extension, which was denied by the OFDC Ltd. Consequently, the agreement was canceled, and the lot was put to re-tender. The private Respondent challenged the cancellation and subsequent auction process in a writ petition but later withdrew the petition, leading to the High Court directing the refund of the deposit.

2. Entitlement to the Refund of the Deposit Made by the Private Respondents:
The High Court initially directed the private Respondents to deposit certain amounts as a condition for staying the finalization of the re-tender process. The High Court later ordered the refund of these deposits when the writ petitions were withdrawn. The Supreme Court examined whether the High Court's direction for the refund was justified. It was noted that the deposits were not explicitly classified as additional security deposits under the contract terms. However, the Supreme Court emphasized that the deposits were conditional and intended to protect the interests of the OFDC Ltd. The Court held that the High Court's direction to refund the amount unconditionally was not justified.

3. Right of the OFDC Ltd. to Recover Losses Incurred Due to the Re-tendering Process:
The Supreme Court acknowledged the right of the OFDC Ltd. to recover losses incurred due to the re-tendering process. The Court referred to the contractual terms, which allowed the OFDC Ltd. to recover any losses suffered due to the failure of the private Respondents to fulfill their obligations. The Court directed the OFDC Ltd. to issue notices to the private Respondents, detailing the computation of losses incurred from the re-tendering process. The private Respondents were to be given an opportunity to respond, and a speaking order was to be passed by the OFDC Ltd. detailing the losses. The Court allowed the OFDC Ltd. to retain the deposited amounts until the completion of this process and any subsequent legal proceedings.

Conclusion:
The Supreme Court set aside the High Court's direction to unconditionally refund the deposits and allowed the OFDC Ltd. to retain the amounts until a detailed assessment of the losses was conducted. The OFDC Ltd. was directed to issue notices to the private Respondents, compute the losses, and pass a speaking order. The private Respondents were given the liberty to challenge the speaking order through appropriate legal remedies. The process was to be completed within two months, and the amounts were to be retained in fixed deposits until then. The appeals were allowed in part, with no order as to costs.

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