LexM/S. KAILASH NATH ASSOCIATES versus DELHI DEVELOPMENT AUTHORITY & ANR.
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[2015] 1 S.C.R. 627 M/S. KAILASH NATH ASSOCIATES v. DELHI DEVELOPMENT AUTHORITY & ANR. (Civil Appeal No. 193 of 2015) JANUARY 09, 2015 [RANJAN GOGOi AND R.F. NARIMAN, JJ.] Contract Act, 1872 - Public auction - Earnest money - Forfeiture of - Appellant, highest bidder for plot deposited 25% A B of the bid amount-earnest money (Rs 78 lakhs) with ODA - C Balance 75% was to be deposited within three months - Extension of time for payment by DOA twice - Thereafter, several letters written by the appellant to DOA but no response - Subsequently, letter written by ODA to the appellant that his case was referred to UOI for its approval for condoning the D delay, case being one of Nazul land, which was later declared by the Central Government as non-Nazul land - On DDA's request, appellant consented to making payment of the balance amount with interest charged - After few years cancellation of allotment of the plot by ODA and consequent E forfeiture of the earnest money - Suit for specific performance and damages and recovery of earnest amount by the' appellant - Subsequently DOA re-auctioned the premises fetching Rs. 11. 78 crores - Dismissal of suit by the Single Judge of the High Court but ordered refund of the earnest F money forfeited with 9% interest p.a. - However, Division Bench upheld forfeiture of the earnest money - On appeal, held: It was arbitrary for the DOA to forfeit the earnest money - In the absence of notice to deposit the balance 75% amount within a certain stated time, there is no breach of contract on G the part of the appellant and consequently earnest money could not be forfeited - ODA not having been put to any loss, even if ODA could insist on a contractual stipulation in its favour, it would be arbitrary to allow DOA as a public authority 627 H 628 SUPREME COURT REPORTS [2015] 1 S.C.R., A to appropriate Rs. 78 lakhs without any loss being caused - Article 14 would apply - In fact, DOA made huge profit on re- auction of the plot - If damage or loss is not suffered, the law does not provide for a windfall - Thus, the judgment of the Single Judge of the High Court restored - Constitution of B India, 1950 - Article 14. s. 7 4 - Compensation for breach of contract where penalty stipulated for under - General principles - Enunciated. C Allowing the appeal, the Court HELD: 1.1. The earnest money can be forfeited under sub-clause (iv) of the conditions of auction, only in the case of default, breach, or non-compliance of any of the o terms and conditions of the auction, or on misrepresentation by the bidder. The balance 75% which had to be paid within three months of the acceptance of the bid, was not insisted upon by the DOA. On the contrary, after setting up two High Powered Committees E which were instructed to look into the grievances of the appellant, the DOA extended time at least twice. It is, therefore, very difficult to say that there was a breach of any terms and conditions of the auction, as the period of three months which the DOA could have insisted upon F had specifically been waived. It is nobody's case that there is any misrepresentation by the bidder. Therefore, under sub-clause (iv), without more, earnest money could not have been forfeited. [Para 15] [643-B-D] 1.2. Long after the Central Government informed G ODA (on 1.3.1990) that the property involved "in the instant case is not Nazul land, the ODA by its letter of 6.10.1993 cancelled the allotment of the plot because the appellant had failed to deposit the balance 75%. DDA's understanding, therefore, was that what was important H KAI LASH Nfo:TH ASSOCIATES v. DELHI DEVELOPMENT 629 AUTHORITY was payment of the balance 75% which was insisted upon by the letter and which was acceded to by the respondent immediately on the same date. Further it cannot be accepted that since the letter was "without prejudice" and since no commitmenf had been made, they were not bound by the terms of the letter. The letter was without prejudice and no commitment could have been given by the ODA because the Central Government may well not relax the Nazul Rules. On the other hand, if A B the Central Government had, later on, relaxed the Nazul Rules, DOA could not be heard to say that despite this c having been done, DOA would yet cancel the allotment of the plot. That this could not have been done is clear because of the construction of the letter and also because DO
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