VILLAYATI RAM MITTAL (PVT.) LTD. versus UNION OF INDIA & ANR.

Citation: [2010] 11 S.C.R. 578 · Decided: 21-09-2010 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
[2010] 11 S.C.R. 578 
VILLAYATI RAM MITTAL (PVT.) LTD. 
v. 
UNION OF INDIA & ANR. 
(SLP (C) No. 12144 of 2009) 
SEPTEMBER 21, 2010 
[ALTAMAS KABIR AND A.K. PATNAIK, JJ.) 
CONTRACT: 
c 
Tender - Forfeiture of earnest money -
Tender for 
construction work -
Tender notice - Clause stipulating 
forfeiture of earnest money on revocation of offer - Tenderer 
whose bid was found lowest, sending a letter to employer 
making correction of a figure in its tender - Correction treated 
0 as revocation of offer and earnest money forfeited by 
. employer - Held: When earnest money is furnished by a 
tenaerer it forms part of the price if the offer of the tenderer is 
accepted or it is refunded to the tenderer if someone else's 
offer is accepted, but if for some fault or failure on the part of 
the tenderer the transaction or the contract does not come 
E through, the party inviting the tender is entitled to forfeit the 
earnest money furnished by that tenderer - The facts, in the 
instant case, clearly establish that the tenderer was not willing 
to stand by its original offer for the work and was willing to do 
the work only at the revised bid - The High Court was thus 
F right in coming to the conclusion that the tenderer had revoked 
its offer for the work - It was, thus, a case where on account of 
failure on the part of the tenderer to stand by its offer, the 
transaction or the contract did not come through and, 
therefore, the employers were entitled to forfeit the earnest 
G money furnished by the tenderer in terms of Clause 6 of the 
Notice. 
Contract - Earnest money - Connotation of. 
H 
578 
VILLAYATI RAM MITTAL (PVT.) LTD. v. UNION OF 
579 
INDIA & ANR. 
Words and Phrases - 'Earnest money' - Connotation 
A 
of. 
Shri Hanuman Cotton Mills & Ors. v. Tata Air Craft 
Limited 1970 (3) SCR 121 = (1969) 3 sec 522; H.U.D.A. 
& Anr. v. Kewal Krishan Goel & Ors. etc. 1996 (2) Suppl. 
8 
SCR 587 = (1996) 4 sec 249, relied on. 
Chiranjit Singh v. Har Swarup AIR 1926 PC 1; Summer 
and Leivesley v. John Brown & Co. 25 Times LR 745, 
referred to. 
Case Law Reference: 
1970 (3) SCR 127 
relied on 
Para 7 
1996 (2) Suppl. SCR 587 
relied on 
Para 7 
AIR 1926 PC 1 
relied on 
Para 7 
25 Times LR 7 45 
relied on 
Para 7 
CIVIL APPELLATE JURISDICTION : SLP (Civil) No. 
12144 of 2009. 
From the Judgment & Order dated 15.10.2008 of the High 
Court of Delhi at New Delhi in WP (C) No. 14998 of 2004. 
Ambrish Kumar, Dhruv Mahta, Pankaj Bhagat, Dr. Sushil 
Balwada for the Petit;oners. 
P.P. Malhotra ASG, Purnima, Rajeev Sharma, Anil Katiyar, 
B. Krishna Prasad for the Respondents; 
The Order of the court was delivered by 
ORDER 
A. K. PATNAIK, J. 1. This Special Leave Petition under 
Article 136 of the Constitution of India has been filed against 
c 
D 
E 
F 
G 
H 
580 
SUPREME COURT REPORTS 
[2010] 11 S.C.R. 
A the judgment dated 15.10.2008 of the Division Bench of the 
High Court of Delhi in Writ Petition (C) No.14998 of 2004. 
2. The relevant facts very briefly are that the petitioner is a 
private limited company carrying on inter a/ia the business of 
8 construction. In April 2004, respondent No.2 published a notice· 
inviting tenders for construction of married accommodation at 
Shankar Vihar-11, 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· 
C 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 
D 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 
E 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 
F lacs furnished by the petitioner. 
. 3. Aggrieved, the petitioner filed Writ
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