Bombay High Court: Highest Bidder Cannot Challenge Cancellation of Tender after accepting Refund of Deposit

Bombay High Court: Highest Bidder Cannot Challenge Cancellation of Tender after accepting Refund of Deposit

The Bombay High Court observed that once the highest bidder of a tender has accepted the refund of deposit paid to confirm the contract without any reservation, he cannot challenge the cancellation of the tender as the contract would stand rescinded.

In the present case, the petitioner- Ram Omprakash Patil participated in the tender process initiated by the Competent Authority under the Narcotic Drugs and Psychotropic Substances, 1985 (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.

The Central Government forfeited agricultural property in Akola District. Later, the auction was cancelled due to technical reasons and the money was refunded to the petitioner. The petitioner challenged the cancellation of the tender.

It was the petitioner’s contention 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.

A division bench of Acting Chief Justice SV Gangapurwala and Justice Sandeep V Marne at the outset remarked that it is trite that in matters of tender the Courts would be loath in interfering with the decision of the employer unless the decision exhibits manifest, arbitrariness, perversity and/or illegality. The Courts would step-in if the decision was arbitrary or if actuated by mala fides and bias, so also if the decision-making process is actuated with malice or is illegal.

The Court stated that tender is an invitation to offer pursuant to which the petitioner made an offer to the respondents.

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

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

In this regard, the bench observed, “once having accepted the refund of the amount deposited by him pursuant to the auction, it will not be open for the Petitioner to turn around and say that the contract of sale subsists between the parties. The fact that a part consideration amount paid by the Petitioner towards purchase of the property under auction is refunded by the Respondents and the Petitioner accepted it without demur is sufficient to negate the relief to the Petitioner.”

The Court was of the considered view that encashing of refund cheque is not a valid argument forwarded by the petitioner which shows his readiness to perform his part of the contract.

The bench asserted that in the present case, the stage for depositing the complete sale proceeds had not yet arrived and prior to that auction sale was cancelled. Sale would have been completed 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. Hence, the title of the property was never passed to the petitioner.

Therefore, the Court held that the petitioner forfeited his right once he encashed the cheque and the contract between the parties stood rescinded.

Lastly, the Court stated that according to Section 62 of the Indian Contract, 1872 it deals with ‘contracts which need not be performed’. If the parties to contract agree to rescind it, the original contract need not be performed. The rescission can be express or implied. Once the contract is rescinded, no rights and liabilities would flow from the same. Rescission can be by accepting the refund of the consideration amount, stated the bench.

Hence, the bench opined that in the aforesaid facts and circumstances taken into consideration in entirety, the petitioner was dis-entitle to any relief and accordingly, dismissed the writ petition.