SURESH KUMAR WADHWA versus STATE OF M.P. & ORS.

Citation: [2017] 14 S.C.R. 1 · Decided: 25-10-2017 · Supreme Court of India · Bench: R.K. AGRAWAL · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

[2017] 14 S.C.R. 1 
SURESH KUMAR WADHWA 
v. 
STATE OF M.P. & ORS. 
· (Civil Appeal No. 7665 of2009) 
OCTOBER 25, 2017 
[R. K.AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.] 
A 
B 
Contract Act, 1872 - s.74 - Public auction - Forfeiture of 
Security deposit - Legality of - Respondent No.3 islued an 
advertisement inviting participation in public auction offour nazu/ 
C 
plots of the State by following terms and conditions set out therein -
Appellant, one of the participants in the auction proceedings 
deposited a sum of Rs. 3 /akhs with respondent No.3 as security in 
terms of public notice - Appellant's bid was declared the highest 
and accordingly accepted by the Respondent No.3 subject to 
"special terms and conditions" - Appellant declined to accept the 
D 
''special terms and conditions" and requested for rejimd of the 
security amount of Rs.3 lakhs - Consequently, respondent No.2 
informed appellant that a sum of Rs.3 lakhs deposited by him 
(appellant) has been for:feited - Civil suit filed by the appellant for 
refund of security amount - Trial Court and High Court held that E 
respondents were justified in fodeiting the ·.5ecurity amount deposited 
- On appeal, held: Forfeiture of security amount deposited by 
appellant is illegal and bad in law - Public notice (advertisement) 
only stipulated a term for deposit of the security amount of Rs.3 
lakhs by the bidder (appellant) but it did not publish any stipulation 
that the security amount deposited by the bidder (appellant) is liable 
for forfeiture by the State - A stipulation for deposit of security 
amount ought to have been qualified by a specific stipulation 
providing therein a right offo1:feiture to the State - Similarly, it 
should have also provided the contingencies in which such right of 
f01:feiture could be exercised by the State against the bidder - It is 
only then the State would have got a right to foi:feit- It was, howeve1; 
not so in instant case - Furthe1; it was mandat01:v on the part of the 
respondents (State) to have published the four ''special conditions" 
at the time of inviting the bid~ itself - Bidders were entitled to know 
these material terms at the time of submitting the hid itself- Since 
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2 
A 
B 
c 
SUPREME COURT REPORTS 
[2017] 14 S.C.R. 
these four conditions were added unilaterally and communicated 
to the appellant by respondent No. 3 while accepting his bid, the 
appellant had eve1y right to refuse to accept such conditions and 
wriggle out of the auction proceedings and demand refund of his 
security amount - The State, in such circumstances, had no right lo 
insist upon the appellant to accept such conditions much less lo 
comply and nor it had a right to cancel the bid on the ground of 
non-compliance of these conditions by the appellant - Appellant 
did not commit any breach of the term(s) and condition(s) of the 
notice inviting bids and on the other hand, it was the respondents 
who committed breaches - State Had no right to fo1j'eit security 
amount - Impugned Judgment and decree of High Court and trial 
Court set aside. 
Allowing the appeal, the Court 
HELD: 1. Reading of Section 74 of the Indian Contract 
Act, 1872 would go to show that in or_der to forfeit the sum 
D ·deposited by the contracting party as "earnest money" or 
"security" for the due performance of the contract, it is necessary 
that the contract must contain a stipulation of forfeiture. In other 
words, a right to forfeit being a contractual right and penal in 
nature, the parties to a contract must agree to stipulate a term in 
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the contract in that behalf. A fortiori, if there is no stipulation in 
the contract of forfeiture, there is no such right available to the 
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· party to forfeit the sum. [Para 23) (11-D-E) 
2. Equally well settled principle of law relating to contract 
ls that a party to the contract can insist for performance of only 
those terms/conditions, which are part of the contract. Likewise, 
a party to the contract has no right to unilaterally "alter" the 
terms and conditions of the contract and nor they have a right to 
"add" any additional terms/conditions in the contract unless both 
-·the parties agree to add/alter any such terms/conditions in the 
contract. [Para 26) [12-B-C) 
3. Similarly, it is also a settled law that if any party adds any 
additional terms/conditions in the contract without the consent 
of the other contracting party then such addition is not binding 
on the other party .. Similarly, a party,

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