Case Note & Summary
The Petitioner, M/s. API Civilcon Private Limited, filed a Writ Petition seeking a writ of mandamus against the Municipal Corporation of Greater Mumbai (MCGM) and its officers for refund of Rs.1.20 crores paid as Earnest Money Deposit (EMD) in respect of a tender issued in 2016 for construction of animal exhibits at VJB Udyan Zoo, Byculla. During the pendency of the petition, the Respondents refunded 90% of the EMD (Rs.1.08 crores) based on a statement made on 20th December 2018, leaving only Rs.12 lakhs in dispute. The Petitioner had deposited 1% of the tender amount as EMD. On 28th April 2017, the Respondents informed the Petitioner that its bid was non-responsive due to non-fulfillment of tender condition No.3 (a & b) regarding the certificate for previous work experience. The Petitioner argued that the tender conditions did not provide for forfeiture of EMD in such circumstances, and the retention of 10% was arbitrary and without legal basis. The Respondents contended that the forfeiture was justified as per tender conditions. The Court examined the tender conditions and found no clause permitting forfeiture of EMD when the bidder is not awarded the contract. The Court held that the retention of Rs.12 lakhs would amount to unjust enrichment and directed the Respondents to refund the balance amount within four weeks. The Court also noted that the Respondents had already refunded 90% without any condition, indicating that the forfeiture was not justified.
Headnote
A) Contract Law - Earnest Money Deposit - Forfeiture - Tender - Forfeiture of EMD without specific contractual clause is impermissible - The Court held that where the tender conditions do not provide for forfeiture of EMD upon non-award of contract, the Respondent cannot retain any portion of the EMD. The Petitioner was not awarded the contract due to alleged non-fulfillment of conditions, but the tender did not specify forfeiture in such circumstances. The Court directed refund of the balance 10% EMD of Rs.12 lakhs, as retention would amount to unjust enrichment. (Paras 1-10)
Issue of Consideration
Whether the Respondent is entitled to forfeit 10% of the Earnest Money Deposit (EMD) when the tender conditions do not provide for such forfeiture and the Petitioner was not awarded the contract.
Final Decision
The Court allowed the petition and directed the Respondents to refund the balance amount of Rs.12 lakhs (10% of EMD) to the Petitioner within four weeks from the date of the order.
Law Points
- Earnest Money Deposit
- Forfeiture
- Tender
- Unjust Enrichment
- Contractual Interpretation
