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TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 1553
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....ever, need mention, in brief, to appreciate the controversy involved in the appeal. 3. The Appellant is the Plaintiff whereas the Respondents (State of M.P. and its officials) are the Defendants in a civil suit out of which this appeal arises. 4. Respondent No. 3 (Defendant No. 3)-a Nazul Officer, Bhopal issued an advertisement on 07.01.1996 in daily newspaper for and on behalf of State of M.P. wherein it was published that four nazul plots of the State would be sold in public auction on 11.01.1996 on the terms and conditions set out therein. Anyone interested could participate in the public auction by following the terms and conditions mentioned in the public notice. It is apposite to reproduce the public notice including its terms/conditions hereinbelow: All are hereby informed that the public auction of Government nazul plots of situated at Mahavir Nagar, Arera Colony, Bhopal is to be carried out. The description of the nazul plots is as follows: The public auction of the aforesaid plots will done on 11.01.1996 starting at 11 A.M. in the court of the nazul officer capital city scheme Bhopal and the conditions of the auction will be as follows: 1.....
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.... 4. All the conditions of auction will be binding on the bidders. 9. The Appellant, on receipt of aforesaid letter, replied to Respondent No. 3 on 29.01.1996 stating that the "special terms and conditions" mentioned in the letter were neither published nor informed to him at any point of time earlier and nor was he ever made aware of any such terms and conditions till he received the letter dated 25.01.1996. The Appellant, therefore, declined to accept the "special terms and conditions" and requested Respondent No. 3 to return the security amount of Rs. 3 lakhs, which he had deposited at the time of submission of the bid. 10. On 08.02.1996, Respondent No. 2 issued a show cause notice to the Appellant stating therein as to why the amount of Rs. 3 lakhs be not "forfeited" and the plot in question is re-auctioned. The Appellant, vide his reply dated 12.02.1996 replied that since he has not accepted the "special terms and condition" offered by Respondent No. 3 in their acceptance letter, the Appellant is entitled to ask for refund of the security amount of Rs. 3 lakhs from Respondent No. 3 and that Respondent No. 2 has no right to forfeit such amount. 11. Respondent No. 2....
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....ssentially the grounds taken in the written statement to justify the forfeiture as being legal and proper. 15. The Trial Court framed issues. Parties led evidence. By judgment/decree-dated 23.12.1997, the Trial Court dismissed the suit. It was held that the Appellant failed to deposit the 1/4th amount immediately as per the terms of the public notice inasmuch as the Appellant deposited the amount by cheque and later stopped its payment, which constituted a breach on his part of the terms of the public notice. It was also held that the demand of certain money by way of "special terms and conditions" mentioned in the acceptance letter dated 24.01.1996 was in accordance with the Rules of RBC and, therefore, such terms and conditions were binding on the Appellant for ensuring its compliance and lastly, in the light of the two breaches committed by the Appellant, the Respondents were justified in forfeiting the security amount deposited by the Appellant. 16. The Appellant, felt aggrieved, filed first appeal before the High Court. The Division Bench, by impugned order, dismissed the appeal and upheld the judgment/decree of the Trial Court. The High Court held that since the similar....
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....s the case may be, the penalty stipulated for. Explanation-A stipulation for increased interest from the date of default may be a stipulation by way of penalty. Exception-When any person enters into any bail-bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under t he orders of the Central Government or of any State Government gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. Explanation-A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested. 23. Reading of Section 74 would go to show that in order to forfeit the sum deposited by the contracting party as "earnest money" or "security" for the due performance of the contract, it is necessary that the contract must contain a stipulation of forfeiture. In other words, a right to forfeit being a contractual right and penal in nature, the parties to a contract must agree to stipulate a term in ....
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....ulated a term for deposit of the security amount of Rs. 3 lakhs by the bidder (Appellant) but it did not publish any stipulation that the security amount deposited by the bidder (Appellant herein) is liable for forfeiture by the State and, if so, in what contingencies. 29. In our opinion, a stipulation for deposit of security amount ought to have been qualified by a specific stipulation providing therein a right of forfeiture to the State. Similarly, it should have also provided the contingencies in which such right of forfeiture could be exercised by the State against the bidder. It is only then the State would have got a right to forfeit. It was, however, not so in this case. 30. So far as the four special conditions are concerned, these conditions were also not part of the public notice and nor they were ever communicated to the bidders before auction proceedings. There is no whisper of such conditions being ever considered as a part of the auction proceedings enabling the bidders to make their compliance, in case, their bid is accepted. 31. In our considered opinion, it was mandatory on the part of the Respondents(State) to have published the four special conditions at....
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....Air Craft Ltd. 1969 (3) SCC 522, we find that there was a specific Clause of forfeiture in the contract in both the cases. Such Clause empowered one party to forfeit the earnest money/security deposit in the event of non-performance of the terms of the contract. It is in the light of such facts, Their Lordships examined the question of forfeiture in the context of Section 74 of the Contract Act. Such is not the case here. 37. Our reasoning is supported by a recent decision of this Court in Union of India v. Vertex Broadcasting Company Private Limited and Ors. (2015) 16 SCC 198 wherein Their Lordships held inter alia that in the absence of any power in the contract to forfeit the license money deposited by the licensee, the action of the Union to forfeit the license fees is held illegal. This is what was held: 10. Coming to the aforesaid question of availability of a power to order forfeiture, a reading of the relevant clauses i.e. Clauses 8(f), 10(d) and 12 extracted above would go to show that the Union had not protected/empowered itself to forfeit the licence fee. The forfeiture contemplated by the aforesaid clauses are altogether in different contexts and situations.....