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CASE NO.: Appeal (civil)  4512 of 2006

PETITIONER: Yogesh Mehta

RESPONDENT: Custodian Appointed under the Special Court & Ors

DATE OF JUDGMENT: 04/01/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T

W I T H CIVIL APPEAL NO. 4513 OF 2006  

S.B. SINHA, J :  

Introduction :

       Application of terms and conditions of sale of properties in terms of  the provisions of the Special Court (Trial of Offences Relating to  Transactions in Securities) Act, 1992 (for short, ’the Act’) is in question in  these appeals which arise out of the judgments and orders dated 22.06.2006,  31.07.2006 and 23.06.2006 passed by the Special Court (Trial of Offences  Relating to Transactions in Securities) at Bombay in Intervention  Application No.131 of 2006 filed in Misc. Petition No. 4 of 2001,  Report  No. 12 of 2006 in Misc. Application No.131 of 2006; and Misc. Petition No.  41 of 1999 respectively.

       Before adverting to the questions as also the fact involved in each of  these matters, we may at the outset notice that one Harshad Mehta was a  person notified under the Act.  The private respondents herein being his  relatives were also notified (hereinafter referred to as ’the notified parties’).   Apart from late Harshad S. Mehta, the Custodian had notified 29 entities in  terms of Section 3 of the said Act, inter alia, comprising three of his younger  brothers, his wife, wives of two of his younger brothers.   

In the proceedings initiated before the Special Court various  applications were filed.  Properties belonging to the said late Harshad S.  Mehta or other notified entities were put on auction. The auctioned  properties comprised of commercial as also the residential ones. The  residential properties, inter alia, were situate at Madhuli.

Order of this Court : Notified parties questioned the validity and/or legality of the said  auction sales.  They ultimately came to this Court.  Whereas auction sales in  respect of the commercial properties were allowed to be completed by orders  passed by this Court from time to time, the auction sale in respect of the  residential properties was the subject-matter of the judgment of this Court in  Ashwin S. Mehta and Another v. Custodian and Others [(2006) 2 SCC 385]  wherein, inter alia, it was directed :         "(viii) The learned Judge, Special Court shall  allow the parties to make brief oral submissions which  pointed reference to their written submissions. Such  hearing in the peculiar facts and circumstances of this  case should continue from day to day.

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       (ix) The learned Judge, Special Court while  hearing the matter in terms of this order shall also  consider as to whether the auction sale should be  confirmed or not. It will also be open to the learned  Judge, Special Court to pass an interim order or orders,  as it may think fit and proper, in the event any occasion  arises therefor.         (x) We would, however, request the learned  Special Judge, Special Court to complete the hearings of  the matter, keeping in view of the fact that auction sale in  respect of the residential premises is being considered, as  expeditiously as possible and not later than twelve weeks  from the date of the receipt of the copy of this order.  Save and except for sufficient or cogent reasons, the  learned Judge shall not grant any adjournment to either of  the parties.         (xi) The learned Judge, Special Court shall take up  the matter relating to confirmation of the auction sale in  respect of the commercial properties immediately and  pass an appropriate order thereupon within four weeks  from the date of receipt of copy of this order. If in the  meanwhile, the orders of assessment are passed by the  Income Tax Authorities, the Custodian shall be at liberty  to bring the same to the notice of the learned Special  Court which shall also be taken into consideration by the  learned Judge, Special Court."

Order of the Special Court :

Pursuant to or in furtherance of the said directions, the question as to  whether the auction sale should be confirmed or not came up for  consideration before the learned Judge, Special Court.  By reason of the  impugned order dated 22.06.2006 passed in Intervention Application No.  131 of 2006 in Misc. Petition No. 4 of 2001, it was held that the as the  auction purchaser had not deposited the balance amount within the period  stipulated under the terms and conditions of the auction, the earnest money  deposited by the bidder was to be forfeited.  By  reason of the impugned  order dated 23.06.2006 passed in Misc. Petition No. 41 of 1999, with the  consent of the Custodian and the notified parties, a fresh auction sale was  directed to be held.

Terms and Conditions of Sales :         In the aforementioned backdrop of events, we may notice the relevant  terms and conditions of sale :

"3.     The offers should be submitted in a sealed  envelope superscribed  with the words "Bid for  sale in respect of  Residential Flats/Office  Premises (mention the name of the property)".   There shall be only one consolidated bid in respect  of each of the following properties  a) Maduli; b)  Khar; c) Guru Krupa.  In respect of other  properties, single bid for a particular flat / property  or combined bid for more than one flat / property  is permitted; however, in such cases, the earnest  money for consolidated bid would be 2% of the  bid amount otherwise, the earnest money to be  deposited for each property shall be as mentioned  against respective property in the schedule.   Separate tender form and Agreement will have to  be submitted for each bid property.

4.      The offers should reach at the office of the  Custodian at 10th floor, Nariman Bhawan, 227  Vinay K. Shah Marg, Nariman Point, Mumbai-400

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021 by 2.00 p.m. on the dates specified for each  property described in the schedule written  hereunder along with Demand Draft / Banker’s  cheque / Pay Order of a Public Sector Bank in  favour of the Custodian, the Special Court payable  at Mumbai towards earnest money for participating  in the said auction for purchase of Residential Flats  / Office Premises as indicated in the schedule  written hereunder.  This amount of earnest money  will not carry any interest whatsoever.

7.      If any dispute arises as to the last or highest  bidding, the said property shall be again put up for  sale at the last undisputed bidding and be resold at  the discretion of the Custodian subject to the  confirmation by the Special Court.

 8.      The sale is subject to sanction of the Hon’ble  Special Court at Mumbai in the above case.  The  Court reserves the right to accept or reject any or  all offers without assigning any reasons.  The  Court  shall not be responsible in any way for not  accepting any or all the offers received by the  Custodian.

9.      Within 60 days from the Hon’ble Special Court  granting sanction to the sale, the Purchaser shall  pay the balance of the purchase price and he/she  will have to take possession/delivery of the said  property from the Custodian at his/her own costs  and risks.

12.     If the purchaser does not pay the balance amount  of the purchase price in the manner and within the  time provided herein or the time specified by the  Custodian or in any other respect fails to perform  these conditions or any of these, the Custodian  shall be at liberty to forfeit initial deposit made as  per para 4 above and shall then proceed to resell  the  said property by public auction at such time  subject to such conditions and in such manner as  the Custodian shall deem fit and proper without  previously giving any notice to the purchaser and  the deficiency in price if any, occasioned by such  resale together with all costs charges and expenses  pertaining to the resale shall be made good by the  defaulting purchaser and be recovered by the  Custodian with interest on the amount of  deficiency at the rate of 18% per annum from the  expiration of the date of the aforesaid sanction of  sale till payment and in the event of non payment  of the whole or any part or any part thereof such  sum, the same shall be recoverable by the  Custodian from the defaulting Purchaser as and by  way of liquidated damages while any excess on  such resale shall not be available to such defaulting  Purchaser as and by way of liquidated damages  while any excess on such resale shall not be  available to such defaulting purchaser.  This  condition shall be without prejudice to Custodian’s  right and remedies, which the Custodian shall  otherwise have in law and/or under these  conditions.

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13.     The Purchaser shall not be liable to pay outgoings  if any, in respect of the said property for the period  prior to the date of confirmation of sale and all  such outgoings shall be paid by the Custodian till  such confirmation.

16.     Upon payment of the purchase price in full and all  costs, charges and expenses mentioned above,  Custodian’s authorized representative shall sign  such papers and documents as may be necessary  for transfer of the said property in the name of the  Purchaser.  Such documents of transfer shall be  prepared and executed by and at the cost, charges  and expenses of the Purchaser.   20.     In case of sale of the said property is not  sanctioned by the Special Court in favour of the  highest bidder or is set aside, the initial deposit  made in terms of para 4 above shall be refunded to  such bidder without interest, other costs, charges  and expenses expended by him/her for the  property.  Except as herein above provided, the  said initial deposit made in terms of para 4 above  shall in no event be refunded.

25.     The time hereunder fixed for the observance and  performance by the Purchaser of any of the  obligations to be observed and performed by  him/her under these conditions is and shall be  deemed to be of the essence of the contract and  any forbearance by the Custodian of strict  observance and performance on the part of the  Purchaser thereof shall not be construed as a  waiver or relinquishment on the part of the  Custodian who shall have the right at his option  thereof to exercise his right and remedies as are  available to him under these conditions and under  law or in equity as arising from non-observance  and non-performance thereof including the right to  forfeit."

FACT: Re Civil Appeal No. 4512 of 2006 The bids were invited on 19.11.2004.  The last date for receipt of the  bids was 06.01.2004.  Appeals were filed by the notified parties against the  order dated 17.10.2003 whereby and whereunder the Custodian was directed  to take all steps to sell the properties mentioned therein, which is the subject- matter of the present appeals.  This Court directed that the bids may be  received; but the same may not be opened till 05.01.2004.  On 05.01.2004,  the bids were directed to be opened, but the results were to be placed before  this Court.  Pursuant thereto, the bids were opened and the appellant was  found to be the highest bidder in respect of Flat  Nos. 61A and 61B,  Gulmohar, S.V. Road, Khar, Mumbai. The valuation of the flat had been   fixed at Rs. 60,00,000/- (Rupees sixty  lakhs), but his bid was of  Rs.85,00,000/- (Rupees eighty five lakhs).  By an order dated 22.01.2004,  the learned Judge, Special Court while accepting the bid, inter alia, directed :

"\005Accordingly, the bid submitted by Mr. Madhu Suri  and Shiv Kumar Suri of Rs. 16,00,000 (Rupees sixteen  lakhs) is provisionally accepted, subject to final order to  be passed by the Hon’ble Supreme Court.  The highest  bidder whose bid has been accepted shall comply with  the terms and conditions on which the bid is submitted.   The Highest bidder shall be at liberty to appear before the  Hon’ble Supreme Court on the appointed date.

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The initial deposit made by all the unsuccessful  bidders shall be refunded to the bidders."  

                                       [Emphasis supplied]

This Court thereafter by an order dated 30.01.2004 directed :

"The learned counsel for the Custodian brings on  record the result of the bids and the order of the Special  Court dated 17.12.2003 and 20.1.2004.  The learned  counsel for the Appellants proposes to offer his  comments on the bids and the two orders of the Special  Court.  Let it be done within two weeks.

The process of finalizing the bids according to law  may be proceeded ahead by the Special Court.  However,  the finalization shall be subject to the result of these  appeals."                     It is, however, stated that the learned Judge, Special Court did not take  any further step to finalize the bids pursuant thereto or in furtherance  thereof.  As indicated hereinbefore, there being no serious dispute in regard  to auction sale of the commercial properties, this Court by an order dated  05.05.2004 directed that the interim order dated 31.01.2004 would not apply  to the sale of commercial properties.  Pursuant to the directions and/or  observations made by the learned Judge, Special Court, an application was  filed for impleadment by the appellant.  An application was also filed for  deposit of the amount in an interest bearing account of a Nationalized Bank.  The said applications were allowed.  The appeals were finally disposed of in  the manner, as indicated hereinbefore, by an order dated 03.01.2006.   According to the appellant, although he had filed an application for  intervention and addressed several letters to the Custodian, as to when  payments in terms of the auction sales were required to be made, it did not  receive any response thereto.   

By reason of the impugned judgment the learned Judge, Special  Court, however, directed the Custodian to consider as to whether the earnest  money deposited by the appellant was to be forfeited, stating :

"\005But in my opinion, this basic premise itself does not  exist.  The right in relation to residential properties of the  Harshad Mehta group would have been created in favour  of the Applicant, had the applicant complied with the  Order passed by this Court accepting his bid.  Essential  condition of that Order was that the Applicant complies  with all the terms and conditions of the bid.  One of the  most essential condition of the bid was that within 60  days of the acceptance of the bid, he deposits the balance  amount of consideration.  Failure of the Applicant to  deposit the balance amount of consideration resulted in  rejection of his bid and therefore, the Applicant lost all  his rights in relation to the property which could have  been created in his favour by the Order passed by this  Court.  The submission of the learned Counsel appearing  for the Applicant that because the Supreme Court had  prevented the custodian from handing over of possession,  the Applicant was not obliged to deposit the balance  amount of consideration, in my opinion, has no  substance.   For getting possession, the Applicant will  have to create an entitlement in him to get possession.   For creating that entitlement, he has to deposit full  amount of consideration.  The learned Counsel for the  Applicant then submitted that the Supreme Court has

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observed that the question of confirmation of the bid  should be considered by the Court after deciding the  main application.  In my opinion, that question will arise  only in relation to those bidders who have complied with  the Order accepting their bids and not in case like the  Applicant, who has lost the rights that may have been  created in his favour because of his default in complying  with the terms of the bid.  The Applicant, therefore, has  no right in relation to the property which is the subject  matter of the main application filed by the custodian.   Therefore, the Applicant has no right to intervene.  As I  find that the Applicant was liable to deposit the balance  amount of consideration as per the terms of the bid, the  custodian is directed to consider whether the amount of  earnest money deposited by the Applicant is to be  forfeited or not and submit a report to the Court seeking  appropriate orders.  Application disposed of."

Pursuant to the said order, the Custodian submitted its report on  21.07.2006, recommending  forfeiture of earnest money deposited by the  appellant, whereupon the learned Judge, Special Court by reason of the  impugned order dated 31.07.2006 directed :   

"3.     Both submissions made on behalf of the bidder  Yogesh Mehta have no substance.  So far as  bidders in relation to commercial properties are  concerned, though they did not deposit the amount  immediately because there was stay order from the  Supreme Court operating, they deposited the  amount immediately after the Supreme Court  vacated the stay on sale of commercial properties.   Therefore, it was open to the bidder Mr. Yogesh  Mehta to deposit the amount at least immediately  after the Supreme Court decided the appeals by its  judgment dated 03.01.2006.  That there was a stay  of all sale of the residential properties of Harshad  Mehta, does not appear to be correct, because the  Supreme Court in clear term has said in its  judgment dated 03.01.2006 that the Supreme Court  is concerned with those appeals only which relate  to sale of eight residential flats in a building  known as Madhuli.  The flat in relation to which  the said Yogesh Mehta had submitted the bid  admittedly is not in the building called Madhuli.    

4.      In these circumstances, therefore, in my opinion,  the earnest money deposited by the bidder has to  be forfeited.  In this view of the matter, the report  is disposed of with a direction to the Custodian to  forfeit the earnest money deposited by Mr. Yogesh  Mehta Report disposed of.

       The Custodian is, directed to issue a fresh  advertisement for sale of the properties in  accordance withlaw."          Re Civil Appeal No. 4513 of 2006 :         Appellants herein are tenants of various flats in the building known as  ’Gurukrupa’.  They were also put on public auction.  The said properties also  stood attached in terms of Section 3(3) of the Act.  In response to the bids  invited for sale of the said flats, an offer was made by the appellants.  By an  order dated 28.01.2004, the learned Judge, Special Court considered it  appropriate to tentatively accept the highest bid, subject to the final order  passed by this Court, stating :

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                "\005Therefore, both the bidders increased their bids.   The highest bid is of Rs.170,00,000/- (Rupees One  crore seventy lakhs) from the occupants of the building.   The learned counsel for occupants is present and she  states that occupants are not in a position to increase the  bid.  The other bidder namely West Cost Exim Pvt. Ltd.  is absent.  

       I have perused the valuation report dated  24.1.2004.  As per the valuation report, value of the  property is about Rs.1,60,00,000/-.  Considering that  the bid offered by the highest bidder is above the  valuation given in the valuation report, as also  considering that the bidders are the occupants of that  building itself, in my opinion, it would be appropriate  to accept the highest bid.  The highest bid of the  occupants as per the report is therefore tentatively  accepted.   

       Learned Counsel for the highest bidder states that  the bid was given on behalf of the occupants, and  therefore, Conveyance should be executed in favour of  the Nominees nominated by the  joint occupants/highest  bidders.  The custodian is accordingly so directed.

       In the Order dated 5.1.2004 passed in Civil  Application No. D. No.255575/03, D. No.25620/03, D.  No.25644/03 and D. No.25815/03, the Supreme Court  has directed this Court to open the bid and place the  result thereof before the Hon’ble Supreme Court.   Therefore, the highest bid given by the highest bidder is  tentatively accepted subject to final order to be passed  by the Hon’ble Supreme Court in the above said  proceedings."    

                                               [Emphasis supplied]

       Appellants herein in that case also filed applications for intervention  before the Court.   

       The impugned order was passed ex parte.  Appellants were not given  any notice.  The fact that the building had already been put on sale by way of  auction and the bids had tentatively been accepted by the learned Judge,  Special Court by an order dated 28.01.2004 was not brought to its notice.   

Question :         The short question which, therefore, arises for consideration is as to  what would be the interpretation of the said terms and conditions of sale.

Findings :

       The auction was to be held at two stages : (i) submission of the bid;  and (ii) grant of sanction to the sale by the Special Court.   

       The word ’sanction’ has been used in clause 9 as also in clause 20.  

       Evidently, the terms and conditions set out hereinbefore did not  contemplate a situation of this nature.  When the bid was accepted, it was for  the Special Court to confirm the sale.  It was only when the sale is  confirmed, which was to be done by way of grant of sanction thereto, the  purchaser was to pay the balance of the purchase price.  Only on payment of  such purchase price, the auction purchaser would have been entitled to take  delivery of possession.

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       Whether confirmation of sale and sanction of auction connote two  different things was not in issue.   Parties also construed the terms of the  auction in the same manner.  As noticed hereinbefore, acceptance of auction  by the Special Court was a provisional one.  It was subject to the order of  this Court.  It may be true that whereas in a case where the sanctioning  authority is the court itself and confirmation of sale would not be subject to  approval from some other authority; acceptance of the sale itself would  amount to sanction thereof.  But situation became completely different in  view of the orders passed by this Court.  We would deal with the matter a  little later, but we may at this juncture notice some decisions operating in the  field at this juncture.  

       In Bishan Paul v. Mothu Ram [AIR 1965 SC 1994], this Court laid  down the law in the following terms :         "8. The rules which we have earlier reproduced  show that the auction is held on a date fixed and is  subject to a reserve price which is confidential. The  officer conducting the sale declares at the fall of hammer  who is the highest bidder. The highest bid is subject to  the approval of the Settlement Commissioner or an  officer appointed by him. A period of seven days must  elapse before the bid is approved and there is also a  limitation of seven days from the acceptance of the bid  for making an application to set aside the sale. If the bid  is approved and if no application meanwhile for setting  aside the sale is made, the highest bidder is recognised as  the auction purchaser and he is required to produce a  treasury challan in respect of the balance of the purchase  money within a period of fifteen days (which period may  be extended without limit of time) before the Settlement  Commissioner or the officer appointed by him. When the  full purchase price is paid a certificate issues in Form No.  XXII and is sent to the Sub-Registrar for registration. If  the balance of the price is not paid, the amount of  advance in deposit is forfeited and the auction purchaser  has no claim to the property.         9. The passing of title thus presupposes the  payment of price in full and the question is at what stage  this takes place. Obviously, there are several distinct  stages in the sale of property. These are: (a) the fall of the  hammer and the declaration of the highest bid; (b) the  approval of the highest bid by the Settlement  Commissioner or officer appointed by him; (c) payment  of the full price after approval of the highest bid; (d)  grant of certificate; and (e) registration of the certificate."

       Yet again in State of Uttar Pradesh v. Kishori Lal Minocha [(1980) 3  SCC 8], this Court held :                  "The question that remains to be answered is, even  if there was no statutory provisions, whether there was a  concluded contract between the appellant and the  respondent under which the respondent was liable to pay  20,100 which represents the difference between the  highest bid at the first sale and the price fetched at the  resale.  The sale proclamation containing the conditions  of sale has not been produced.  Assuming that the  different clauses of Rule 357 barring the last part of the  fifth clause embody the conditions of sale, it is clear from  the second clause that in the absence of the final sanction  of the Excise Commissioner, the bid cannot be said to  have been finally accepted.  It is not claimed by the  appellant that the bid offered by the respondent was  sanctioned by the Excise Commissioner.  There was thus

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no concluded contract between the parties to make the  respondent liable for the alleged loss\005"

       Mr. Arvind Kumar Nigam, the learned counsel appearing on behalf of  the notified parties has, however, placed strong reliance upon a decision of  this Court in Union of India and Others v. Messrs. Bhim Sen Walaiti Ram  [(1969) 3 SCC 146] wherein a distinction had been made between a situation  where auction sale is conducted by an officer lower than the authority  competent to approve the same and the acceptance of a bid by the officer  presiding at the auction and holding that in the event the transaction is  complete, failure on the part of the auction purchaser to deposit the  prescribed amount, the Collector would be entitled to resell the licence,  stating :          "\005It is not disputed that the Chief Commissioner has  disapproved the bid offered by the respondent.  If the  Chief commissioner had granted sanction under Clause  33 of Ex. D-23 the auction sale in favour of the  respondent would have been a completed transaction and  he would have been liable for any shortfall on the re-sale.   As the essential pre-requisites of a completed sale are  missing in this case there is no liability imposed on the  respondent for payment of the deficiency in the price."   

       When a sale would be held to be completed would, thus, depend upon  the fact of each case.  Indisputably, it will primarily depend upon the terms  and conditions of the contract.  But herein there was another supervening  circumstance i.e. the interim orders passed by this Court.  The core question  in this case would, thus, be whether having regard to the interim orders  passed by this Court, the learned Judge, Special Court could confirm the  sale.  The answer thereto must be rendered in the negative.  It is true that the  learned Judge, Special Court, in its order dated 22.01.2004 directed the  highest bidder to comply with the conditions, but what escaped the notice of  the learned Judge was that sanction could not have been granted on a  provisional basis.  If there could be only one order of sanction, the same  would mean the final one and not the provisional one.  That is how the  parties including the Custodian understood the same.  It his report the  Custodian stated :

       "The Supreme Court has further directed at page  50 that "the learned Special Court shall proceed to pass  appropriate orders as regard confirmation of the auction  sales in respect of commercial properties". The  Custodian states that commercial properties are reflected  at Serial Nos. 1 to 13 of Exhibit ’A’.  In respect of these  properties, where sale had been sanctioned by this  Hon’ble Court subject to the orders of the Hon’ble  Supreme Court, full payments have been received and  possession of the properties has also been handed over to  the purchasers.

       The Custodian therefore prays that this Hon’ble  Court may be pleased to confirm the sale of commercial  properties as listed at Sl. Nos.1 to 13 in the table annexed  hereto as Exhibit ’A’.

       The Custodian also states that this Hon’ble Court  had also confirmed sale of the properties at Serial Nos.  14 to 17 which were not described as commercial  properties, subject to orders of the Hon’ble Supreme  Court.  However, in these cases only earnest money was  received from the successful purchasers and possession  could not be handed over in view of orders of the  Hon’ble Supreme Court.  No bids were, however,  received in respect of properties at Serial Nos. 18 to 25

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(various flats at Madhuli), Separate proceedings in  respect of properties at S. No. 26 are being adopted."

                  Before us a chart has been submitted, from a perusal whereof it  appears that even the purchasers of commercial properties made final  payments within the period 14.07.2004 and 05.01.2005.  No payment,  therefore, was said to have been made within a period of sixty days from the  date of auction i.e. 05.04.2005.

       If there had been a stay in regard to acceptance of the bid, it could not  have been sanctioned.  It could be sanctioned subject to the final order of  this Court.  Moreover, when this Court issued direction in regard to  confirmation of sale, the matter ought to have been considered afresh.

In the peculiar facts and circumstances of this case, it is difficult to  accept the submission of the learned counsel for the respondents that the bid  was accepted finally, but only possession was to be taken by the purchasers  at their own risk.

Strong reliance has been placed by Mr. Nigam upon a decision of this  Court in State of Maharashtra and Others v. A.P. Paper Mills Ltd. [(2006) 4  SCC 209], wherein this Court in a case where the bidder had withdrawn its  offer before the expiry of the period itself during which the bid was to  remain operative, held : "\005Stand of the learned Counsel for the respondent that  another request was made after the expiry of the 45 days  period does not change the situation. Clause 5(v) clearly  spells that once a tender is tendered the offer shall be  considered valid for a period of 45 days from the date of  tender sale in case of tenders which are under  consideration. If this clause is read with Clause 5(iv) the  position is clear that once a tender is tendered no changes  can be made and no tender can be withdrawn. We are not  concerned with a case of consequences after acceptance  of the tender by the successful bidder. In such a situation  loss sustained in the re-sale and the amount realized less,  shall be recovered from the bidder while adjusting the  amount paid by him towards earnest money deposit. In  this case the acceptance of the tender was after the  validity of the period. Therefore, this is not a case which  could authorize the Government to recover the loss from  the respondent. But it is a case of withdrawal of tender  and the effect of it is to be considered. Since the tender is  valid for a period of 45 days and withdrawal is before  expiry of the period the earnest money is to be forfeited.  The stand of the respondent that because of delay in  declaration of the final sale results there was no bar on  withdrawal of the tender is clearly untenable. Once the  tender is withdrawn the result is that the tenderer who  withdraws the tender cannot take the stand that since the  final sale result has not been declared there is no bar on  the withdrawal."

The said decision cannot be said to have any application whatsoever  to the fact of the present case.  The acceptance of the bid herein was subject  to order of this Court which, in our opinion, thus,  by reason of  the order of  the Special Court or otherwise did not result in a concluded contract.  The  deposit was to be made within sixty days from the date of grant of sanction  which would mean final acceptance of the bid, which was to depend upon  the ultimate order which was to be passed by this Court.     We, therefore, are of the opinion that the impugned order cannot be  sustained.  

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In Misc. Petition No. 41 of 1999, evidently a consent order had been  passed behind the back of the appellants.  The said order, therefore, cannot  also be sustained.

There is another aspect of the matter which also cannot be lost sight  of.  Forfeiture of the earnest money, in our opinion,  in the aforementioned  situation,  could not have been directed.   

       In Chairman of the Bankura Municipality, Bankura v. Lalji Raja &  Sons [(1953 SC 248 at 250], this Court noticed the definition of the word  ’forfeiture’ in the following terms :

"The word ’forfeiture’ is defined in Murray’s Oxford  Dictionary The fact of losing or becoming liable to  deprivation of goods in consequence of a crime, offence,  or breach of engagement"\005.."the penalty of the  transgression" or a "punishment for an offence".    

While directing forfeiture of the ’earnest money’ the provisions of the  Indian Contract Act, 1872 are to be kept in mind.  Forfeiture is permissible  only when a concluded contract has come into being and not prior thereto.   [See Maula Bux  v. Union of India  [AIR 1970 SC 1955 : (1969) 2 SCC 554  & Saurabh Prakash v. DLF Universal Ltd. \026 2006 (12) SCALE 531] .

The learned counsel appearing for the Custodian submitted that the  time was of the essence of contract.   It may or may not be so.  This question  is required to be considered having regard to the fact situation obtaining in  each case.  If the deposit was to be made from the date of final sanction of  the offer, question of applicability of the said proposition of law could not  arise.  

We may, however, notice that in Mcdermott International Inc. v. Burn  Standard Co. Ltd. & Ors. [2006 (6) SCALE 220], this Court observed that in  a case of this nature, time was not of the essence and, therefore, Section 55  of the Contract Act was not attracted,  noticing :                  "This Court in Hind Construction v. State of  Maharashtra [(1979) 2 SCC 70] stated:

"7.     The question whether or not time was of the  essence of the contract would essentially be a  question of the intention of the parties to be  gathered from the terms of the contract. [See  Halsbury’s Laws of England, 4th ed., Vol.4, para  1179]."

"8.     Even where the parties have expressly  proided that time is of the essence of the contract  such a stipulation will have to be read along with  other provisions of the contract and such other  provisions may, on construction of the contract,  exclude the inference that the completion of the  work by a particular date was intended to be  fundamental. [See Lamprell v. Billericay Union  (19849) 3 Exch 283, 308; Webbv. Hughes (1870)  LR 10 Eq 281; Charles Rickards Ltd. v.  Oppenheim (1950) 1 KB 616].""

Conclusion : For the reasons aforementioned, the impugned judgments cannot be  sustained.  They are set aside accordingly and the matter is remitted to the  learned Judge, Special Court for consideration of the matter afresh in the  light of the observations made hereinbefore.  The appeals are allowed.  We  may, however, hasten to add that it will be open to the learned Judge,  Special Court,  to pass an appropriate order in accordance with law.  We

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must also observe that we have not gone into the question in regard to the  validity or otherwise of the auction sale.  In the facts and circumstances of  the case, there shall be no order as to costs.