Forfeiture of earnest money deposit under contractual sale terms leads to cancellation of sale and return of other EMDs

The sale in favour of a defaulting bidder was cancelled and the bidder's earnest money deposit (EMD) forfeited pursuant to enforcement of Clause (11) of the contractual sale terms dated 14 February 2024; that forfeiture is upheld as the operative contractual consequence of bidder default. Separately, two other bidders who did not accept the Official Liquidator's offer are entitled to return of their EMDs. The Official Liquidator's report is disposed accordingly, implementing contractually prescribed remedies for default while restoring deposits to unsuccessful or non-accepting bidders.

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Issues: (i) Whether the sale in favour of the successful bidder should be cancelled and the earnest money deposit (EMD) forfeited for non-deposit of the balance bid amount; (ii) Whether the EMDs of unsuccessful bidders who did not accept the offer should be returned.

Analysis: The Court examined the terms and conditions of the sale, specifically Clause (11) of the terms dated 14th February 2024, which provides for forfeiture of the EMD and cancellation of the sale in the event of the successful bidder's failure to deposit the balance of the bid amount. The Official Liquidator reported that the successful bidder failed to deposit the remaining 25% of the bid amount and that the next bidders had not accepted the offer. The Court considered these facts in light of the contractual sale terms and the powers of the Official Liquidator to act under those terms.

Conclusion: The sale in favour of the successful bidder is cancelled and the successful bidder's EMD of Rs. 1.5 lakhs is forfeited in terms of Clause (11) of the terms and conditions dated 14th February 2024. The EMDs of the other bidders who did not accept the offer are ordered to be returned.

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