Forfeiture of security deposit for bona fide typographical error in bid amount constitutes arbitrary action and unjust enrichment.

The Gwalior Development Authority (GDA) invited bids for the allotment of residential plots under the Shatabdi Puram Phase-1 scheme via a notice dated 22.01.2025.

On 11.02.2025, the petitioner submitted an online bid for Plot No. J-143, depositing ₹2,99,475 as a 10% security amount on an offset price of ₹29,94,750.

Due to a typographical error and a lack of word-entry verification in the online portal, the petitioner quoted ₹3,38,55,555 instead of the intended ₹38,55,555.

Upon discovery, the petitioner applied for cancellation and refund on 28.02.2025.

However, the respondent-authority issued an order on 20.05.2025 forfeiting the security deposit, citing a lack of refund provisions under the Disposal of Property Rules, 2018.

The petitioner challenged this order under Article 226 of the Constitution.

1. Whether the respondent-authority was justified in forfeiting the petitioner’s security deposit despite the bid being vitiated by an apparent and bona fide typographical error promptly brought to its notice.

2. Whether the absence of statutory provisions for refund justifies forfeiture in cases where no financial loss is caused to the authority and the bid is commercially improbable.

Rule 7(2)(ix) of the Madhya Pradesh Vikas Pradhikaron Ki Sampattiyon Ka Prabandhan Tatha Vyayan Niyam, 2018, which empowers authorities to forfeit earnest money if a successful bidder withdraws or fails to deposit the bid amount.

Principle of Equity and Fair Play, emphasizing that administrative actions must not lead to Unjust Enrichment.

M/s Garg Rice Mills vs. Food Corporation of India & Ors. (AIRONLINE 2019 P&H 558), which established that accidental mistakes in bid amounts (e.g., extra zeros) should not result in penal consequences if no loss is caused to the public exchequer.

The Court observed that the quoted bid was more than ten times the base price, a figure that defies commercial prudence and indicates a bona fide mistake rather than a deliberate act.

It noted systemic deficiencies in the GDA’s online interface, such as the absence of a "bid in words" verification or a modification mechanism, concluding the authority cannot benefit from its own flawed system.

The Court found that while Rule 7(2)(ix) of the Vyayan Niyam, 2018, applies to conscious bids, it cannot be applied mechanically to a bid vitiated by a patent error.

Furthermore, because the plot could still be allotted to the next bidder, the GDA suffered no financial loss; thus, retaining the deposit constituted arbitrary action and unjust enrichment.

The Court allowed the petition and set aside the forfeiture order dated 20.05.2025. The respondents were directed to refund the ₹2,99,475 security deposit within eight weeks, failing which the amount would carry an interest rate of 12% per annum from the date of expiry of the period until actual payment.