Case: Villayati Ram Mittal P.Ltd Vs. Union Of India

2. The relevant facts very briefly are that the petitioner is a private limited company carrying on inter alia the business of construction. In April 2004, respondent No.2 published a notice inviting tenders for construction of married accommodation at Shankar Vihar-II, Pocket, Delhi Cantonment, at an estimated cost of Rs.40 crores (for short "the Notice"). Clause 6 of the Notice stipulated that the tenderer shall furnish earnest money of Rs.40 lacs in the form of FDR from a nationalized bank drawn in favour of the Director General, Married Accommodation Project, Kashmir House, Rajaji Marg, New Delhi. Clause 6 also stipulated that if the firm revokes its offer during the validity period, the earnest money furnished by the firm shall be forfeited. In response to the Notice, the petitioner submitted its offer along with earnest money of Rs.40 lacs. When the tenders were opened on 05.05.2004, the offer of the petitioner was found to be the lowest at Rs.32 crores for the work. On 06.05.2004, however, the petitioner sent a letter to the respondent No.2 making a correction of a figure in its tender to read as Rs.32,76,000/- instead of Rs.23,76,000/-. As a result of this correction, the offer of the petitioner for the work increased from Rs.32 crores to Rs.41 crores. Respondent No.2 treated this correction made by the petitioner in its tender as revocation of its offer and forfeited the earnest money of Rs.40 lacs furnished by the petitioner.Aggrieved, the petitioner filed Writ Petition (C) No.14998 of 2004 under Article 226 of the Constitution before the High Court of Delhi, but by the impugned judgment the High Court dismissed the Writ Petition after holding that the correction of the bid made by the petitioner amounted to revocation of its original offer and hence the respondent No.2 was entitled to forfeit the earnest money furnished by the petitioner in terms of Clause 6 of the Notice.

Court's reasoning:
6. We find that Clause 6 of the Notice clearly stipulated that "if any firm revokes its offer during the validity period, its earnest money shall be forfeited". Hence, the question that arose before the High Court for decision was whether the petitioner by revising one of the figures in its tender from Rs.23,76,000/- to Rs.32,76,000/- revoked its offer and the High Court has taken the view in the impugned judgment that as a consequence of the change in the figures, the offer of the petitioner for the work was enhanced from Rs.32 crores to Rs.41 crores and, therefore, the original offer of Rs.32 crores for the work stood revoked. In para 12 of the counter affidavit filed in reply to the Writ Petition in the High Court the respondents have stated that after receiving the letter dated 06.05.2004 of the petitioner correcting the figures in its tender, the respondents sent letters to the petitioner giving opportunity to the petitioner to withdraw its letter dated 06.05.2004 on or before 04.06.2004 and yet the petitioner did not withdraw its letter dated 06.05.2004. These facts clearly establish that the petitioner was not willing to stand by its original offer of Rs.32 crores for the work and was willing to do the work only at the revised bid of Rs.41 crores. The High Court was thus right in coming to the conclusion that the petitioner had revoked its offer of Rs.32 crores for the work.9. It is thus clear that when earnest money is furnished by a tenderer it forms part of the price if the offer of the tenderer is accepted or it is refunded to the tenderer if someone elses offer is accepted, but if for some fault or failure on the part of the tenderer the transaction or the contract does not come through, the party inviting the tender is entitled to forfeit the earnest money furnished by that tenderer.10. In facts of the present case, the respondents have stated in their reply to the Writ Petition before the High Court that as a consequence of the failure of the petitioner to stand by its offer dated 05.05.2004 the tender for the work had to be re- invited by the respondent No.2 on revised costs of the construction and in the circumstances, the respondent No.2 had to forfeit the earnest money of the petitioner. This was thus a case where on account of failure on the part of the petitioner to stand by its offer, the transaction or the contract did not come through and therefore the respondents were entitled to forfeit the earnest money furnished by the petitioner in terms of Clause 6 of the Notice.