Forfeiture of Earnest Money Deposit for non-submission of sealed bid constitutes illegal unjust enrichment if auction concludes successfully.

The respondent authority issued a tender notification on 12.03.2024 for the e-auction of various plots

The petitioner deposited the Earnest Money Deposit (EMD) of ₹22,92,024/- and the tender fee

However, the petitioner failed to submit a "sealed bid" by the deadline of 14.06.2024, allegedly due to a technical glitch

As a result, the petitioner was barred from the auction held on 19.06.2024, where the plot was successfully sold to another bidder

The respondent authority forfeited the petitioner’s EMD, citing tender clauses that mandated forfeiture for failure to submit a sealed bid

The petitioner challenged this forfeiture as unjust enrichment

Interpretation of Clause 3(a) and Clause L of the tender, which stipulated EMD forfeiture for failure to submit a sealed bid

General Condition Clause 22.2, which mandated the refund of EMD to all other participants once the bid of a "Preferred Bidder" is accepted

Section 74 of the Indian Contract Act, 1872, regarding liquidated damages, establishing that forfeiture is a pre-estimate of loss and is not permissible in the absence of actual financial damage

Distinction of the precedents of Pooja Ceratech Pvt. Ltd. v. ONGC and NHAI v. Ganga Enterprises; reliance on the principle against unjust enrichment as discussed in the Madras High Court decision in Rubina v. Authorized Officer

The Court reasoned that the primary objective of an EMD is to ensure the auction is not stalled or disrupted to the financial prejudice of the authority

Since the auction was concluded successfully and the plot was sold to a higher bidder, the authority achieved its objective and suffered no financial loss

The Court found that Clause 22.2 (mandating refund upon acceptance of a preferred bid) overrides the forfeiture clauses when the sale is finalized

The Court held that by paying the EMD and tender fee based on a fixed reserve price, a participant is "deemed" to have made a bid at least equal to that reserve price; therefore, the claim that no bid was made is technically incorrect

Forfeiting the EMD in a successful auction would constitute unjust enrichment and an unethical act by an instrumentality of the State

The Court quashed the forfeiture of ₹29,92,040/- and directed the respondent authority to refund the EMD amount to the petitioner within four weeks

The Writ Petition was allowed