Case Note & Summary
The petitioner, M/s. Bholenath Trading Company, a partnership firm, submitted a tender in response to a tender notice dated 9.10.2004 issued by the respondent, State Bank of India, for the sale of land with industrial shed, plant and machinery of an oil extraction plant in Akola. The petitioner submitted his tender on 29.11.2004 along with a demand draft of Rs.25,00,000/- as security deposit as required by the tender conditions. The bids were opened on 12.2.2005, and the petitioner was the highest bidder. However, before the respondent finally accepted the offer, the petitioner, due to certain contingencies, decided not to continue with the offer and issued a letter dated 1.8.2005 to the respondent stating that his offer was frustrated and calling upon the Bank to return the security deposit. The respondent, by communication dated 17.8.2005, accepted the petitioner's offer for the first time and refused to return the deposit. The petitioner then filed a writ petition seeking return of the security deposit. The main legal issue was whether the Bank could forfeit the security deposit in the absence of an express condition in the tender document authorizing forfeiture upon withdrawal of the offer before acceptance. The petitioner argued that condition No.7 of the tender document did not provide for forfeiture in such circumstances. The respondent contended that the petitioner had withdrawn after the bids were opened and that the deposit was forfeited as per the tender conditions. The Court analyzed the tender conditions and found no express term allowing forfeiture upon withdrawal before acceptance. The Court held that a tender is an offer which can be withdrawn before acceptance unless there is a binding contract to keep it open. Since the petitioner withdrew before the Bank communicated acceptance, there was no concluded contract, and the Bank was not entitled to retain the deposit. The Court directed the respondent to return the security deposit of Rs.25,00,000/- to the petitioner with interest at 9% per annum from the date of refusal till payment, within four weeks.
Headnote
A) Contract Law - Tender - Security Deposit - Forfeiture - Condition No.7 of Tender Document - The petitioner submitted a tender with a security deposit of Rs.25,00,000/-. Before acceptance of his offer, he withdrew the offer and sought return of the deposit. The Bank refused to return the deposit. The Court held that in the absence of an express term in the tender conditions authorizing forfeiture upon withdrawal before acceptance, the Bank could not forfeit the deposit. The Court directed the Bank to return the deposit with interest at 9% per annum from the date of refusal till payment. (Paras 2-5) B) Contract Law - Offer and Acceptance - Withdrawal of Offer - A tender is an offer which can be withdrawn before acceptance unless there is a binding contract to keep it open. Since the petitioner withdrew his offer before the Bank communicated acceptance, there was no concluded contract, and the Bank was not entitled to retain the deposit. (Paras 2-5) C) Unjust Enrichment - Retention of Deposit Without Authority - The Bank's retention of the deposit without any contractual right amounts to unjust enrichment. The Court ordered refund with interest to prevent unjust enrichment. (Para 5)
Issue of Consideration
Whether the respondent-Bank was entitled to forfeit the security deposit of Rs.25,00,000/- deposited by the petitioner-tenderer in absence of any express condition in the tender document authorizing such forfeiture upon withdrawal of the offer before acceptance.
Final Decision
The Court allowed the writ petition and directed the respondent to return the security deposit of Rs.25,00,000/- to the petitioner with interest at 9% per annum from the date of refusal till payment, within four weeks.
Law Points
- Contract Law
- Tender Law
- Security Deposit
- Forfeiture
- Unjust Enrichment
- Condition No.7
- Interpretation of Tender Conditions
