{"id":113275,"date":"2007-01-04T00:00:00","date_gmt":"2007-01-03T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/yogesh-mehta-vs-custodian-appointed-under-the-on-4-january-2007"},"modified":"2018-12-31T04:13:16","modified_gmt":"2018-12-30T22:43:16","slug":"yogesh-mehta-vs-custodian-appointed-under-the-on-4-january-2007","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/yogesh-mehta-vs-custodian-appointed-under-the-on-4-january-2007","title":{"rendered":"Yogesh Mehta vs Custodian Appointed Under The … on 4 January, 2007"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Yogesh Mehta vs Custodian Appointed Under The … on 4 January, 2007<\/div>\n
Author: S.B. Sinha<\/div>\n
Bench: S.B. Sinha, Markandey Katju<\/div>\n
           CASE NO.:\nAppeal (civil)  4512 of 2006\n\nPETITIONER:\nYogesh Mehta\n\nRESPONDENT:\nCustodian Appointed under the Special Court & Ors\n\nDATE OF JUDGMENT: 04\/01\/2007\n\nBENCH:\nS.B. Sinha & Markandey Katju\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T<\/p>\n
W I T H
\nCIVIL APPEAL NO. 4513 OF 2006 <\/p>\n
S.B. SINHA, J :\n<\/p>\n
Introduction :\n<\/p>\n
\tApplication of terms and conditions of sale of properties in terms of
\nthe provisions of the Special Court (Trial of Offences Relating to
\nTransactions in Securities) Act, 1992 (for short, ‘the Act’) is in question in
\nthese appeals which arise out of the judgments and orders dated 22.06.2006,
\n31.07.2006 and 23.06.2006 passed by the Special Court (Trial of Offences
\nRelating to Transactions in Securities) at Bombay in Intervention
\nApplication No.131 of 2006 filed in Misc. Petition No. 4 of 2001,  Report
\nNo. 12 of 2006 in Misc. Application No.131 of 2006; and Misc. Petition No.
\n41 of 1999 respectively.\n<\/p>\n
\tBefore adverting to the questions as also the fact involved in each of
\nthese matters, we may at the outset notice that one Harshad Mehta was a
\nperson notified under the Act.  The private respondents herein being his
\nrelatives were also notified (hereinafter referred to as ‘the notified parties’).
\nApart from late Harshad S. Mehta, the Custodian had notified 29 entities in
\nterms of Section 3 of the said Act, inter alia, comprising three of his younger
\nbrothers, his wife, wives of two of his younger brothers.\n<\/p>\n
In the proceedings initiated before the Special Court various
\napplications were filed.  Properties belonging to the said late Harshad S.
\nMehta or other notified entities were put on auction. The auctioned
\nproperties comprised of commercial as also the residential ones. The
\nresidential properties, inter alia, were situate at Madhuli.\n<\/p>\n
Order of this Court :\n<\/p>\n
Notified parties questioned the validity and\/or legality of the said
\nauction sales.  They ultimately came to this Court.  Whereas auction sales in
\nrespect of the commercial properties were allowed to be completed by orders
\npassed by this Court from time to time, the auction sale in respect of the
\nresidential properties was the subject-matter of the judgment of this Court in
\nAshwin S. Mehta and Another v. Custodian and Others<\/a> [(2006) 2 SCC 385]
\nwherein, inter alia, it was directed :\n<\/p>\n
\t“(viii) The learned Judge, Special Court shall
\nallow the parties to make brief oral submissions which
\npointed reference to their written submissions. Such
\nhearing in the peculiar facts and circumstances of this
\ncase should continue from day to day.\n<\/p>\n
\t(ix) The learned Judge, Special Court while
\nhearing the matter in terms of this order shall also
\nconsider as to whether the auction sale should be
\nconfirmed or not. It will also be open to the learned
\nJudge, Special Court to pass an interim order or orders,
\nas it may think fit and proper, in the event any occasion
\narises therefor.\n<\/p>\n
\t(x) We would, however, request the learned
\nSpecial Judge, Special Court to complete the hearings of
\nthe matter, keeping in view of the fact that auction sale in
\nrespect of the residential premises is being considered, as
\nexpeditiously as possible and not later than twelve weeks
\nfrom the date of the receipt of the copy of this order.
\nSave and except for sufficient or cogent reasons, the
\nlearned Judge shall not grant any adjournment to either of
\nthe parties.\n<\/p>\n
\t(xi) The learned Judge, Special Court shall take up
\nthe matter relating to confirmation of the auction sale in
\nrespect of the commercial properties immediately and
\npass an appropriate order thereupon within four weeks
\nfrom the date of receipt of copy of this order. If in the
\nmeanwhile, the orders of assessment are passed by the
\nIncome Tax Authorities, the Custodian shall be at liberty
\nto bring the same to the notice of the learned Special
\nCourt which shall also be taken into consideration by the
\nlearned Judge, Special Court.”\n<\/p>\n
Order of the Special Court :\n<\/p>\n
Pursuant to or in furtherance of the said directions, the question as to
\nwhether the auction sale should be confirmed or not came up for
\nconsideration before the learned Judge, Special Court.  By reason of the
\nimpugned order dated 22.06.2006 passed in Intervention Application No.
\n131 of 2006 in Misc. Petition No. 4 of 2001, it was held that the as the
\nauction purchaser had not deposited the balance amount within the period
\nstipulated under the terms and conditions of the auction, the earnest money
\ndeposited by the bidder was to be forfeited.  By  reason of the impugned
\norder dated 23.06.2006 passed in Misc. Petition No. 41 of 1999, with the
\nconsent of the Custodian and the notified parties, a fresh auction sale was
\ndirected to be held.\n<\/p>\n
Terms and Conditions of Sales :\n<\/p>\n
\tIn the aforementioned backdrop of events, we may notice the relevant
\nterms and conditions of sale :\n<\/p>\n
“3.\tThe offers should be submitted in a sealed
\nenvelope superscribed  with the words “Bid for
\nsale in respect of  Residential Flats\/Office
\nPremises (mention the name of the property)”.
\nThere shall be only one consolidated bid in respect
\nof each of the following properties  a) Maduli; b)
\nKhar; c) Guru Krupa.  In respect of other
\nproperties, single bid for a particular flat \/ property
\nor combined bid for more than one flat \/ property
\nis permitted; however, in such cases, the earnest
\nmoney for consolidated bid would be 2% of the
\nbid amount otherwise, the earnest money to be
\ndeposited for each property shall be as mentioned
\nagainst respective property in the schedule.
\nSeparate tender form and Agreement will have to
\nbe submitted for each bid property.\n<\/p>\n
4.\tThe offers should reach at the office of the
\nCustodian at 10th floor, Nariman Bhawan, 227
\nVinay K. Shah Marg, Nariman Point, Mumbai-400
\n021 by 2.00 p.m. on the dates specified for each
\nproperty described in the schedule written
\nhereunder along with Demand Draft \/ Banker’s
\ncheque \/ Pay Order of a Public Sector Bank in
\nfavour of the Custodian, the Special Court payable
\nat Mumbai towards earnest money for participating
\nin the said auction for purchase of Residential Flats
\n\/ Office Premises as indicated in the schedule
\nwritten hereunder.  This amount of earnest money
\nwill not carry any interest whatsoever.\n<\/p>\n
7.\tIf any dispute arises as to the last or highest
\nbidding, the said property shall be again put up for
\nsale at the last undisputed bidding and be resold at
\nthe discretion of the Custodian subject to the
\nconfirmation by the Special Court.\n<\/p>\n
8.\tThe sale is subject to sanction of the Hon’ble
\nSpecial Court at Mumbai in the above case.  The
\nCourt reserves the right to accept or reject any or
\nall offers without assigning any reasons.  The
\nCourt  shall not be responsible in any way for not
\naccepting any or all the offers received by the
\nCustodian.\n<\/p>\n
9.\tWithin 60 days from the Hon’ble Special Court
\ngranting sanction to the sale, the Purchaser shall
\npay the balance of the purchase price and he\/she
\nwill have to take possession\/delivery of the said
\nproperty from the Custodian at his\/her own costs
\nand risks.\n<\/p>\n
12.\tIf the purchaser does not pay the balance amount
\nof the purchase price in the manner and within the
\ntime provided herein or the time specified by the
\nCustodian or in any other respect fails to perform
\nthese conditions or any of these, the Custodian
\nshall be at liberty to forfeit initial deposit made as
\nper para 4 above and shall then proceed to resell
\nthe  said property by public auction at such time
\nsubject to such conditions and in such manner as
\nthe Custodian shall deem fit and proper without
\npreviously giving any notice to the purchaser and
\nthe deficiency in price if any, occasioned by such
\nresale together with all costs charges and expenses
\npertaining to the resale shall be made good by the
\ndefaulting purchaser and be recovered by the
\nCustodian with interest on the amount of
\ndeficiency at the rate of 18% per annum from the
\nexpiration of the date of the aforesaid sanction of
\nsale till payment and in the event of non payment
\nof the whole or any part or any part thereof such
\nsum, the same shall be recoverable by the
\nCustodian from the defaulting Purchaser as and by
\nway of liquidated damages while any excess on
\nsuch resale shall not be available to such defaulting
\nPurchaser as and by way of liquidated damages
\nwhile any excess on such resale shall not be
\navailable to such defaulting purchaser.  This
\ncondition shall be without prejudice to Custodian’s
\nright and remedies, which the Custodian shall
\notherwise have in law and\/or under these
\nconditions.\n<\/p>\n
13.\tThe Purchaser shall not be liable to pay outgoings
\nif any, in respect of the said property for the period
\nprior to the date of confirmation of sale and all
\nsuch outgoings shall be paid by the Custodian till
\nsuch confirmation.\n<\/p>\n
16.\tUpon payment of the purchase price in full and all
\ncosts, charges and expenses mentioned above,
\nCustodian’s authorized representative shall sign
\nsuch papers and documents as may be necessary
\nfor transfer of the said property in the name of the
\nPurchaser.  Such documents of transfer shall be
\nprepared and executed by and at the cost, charges
\nand expenses of the Purchaser.\n<\/p>\n
20.\tIn case of sale of the said property is not
\nsanctioned by the Special Court in favour of the
\nhighest bidder or is set aside, the initial deposit
\nmade in terms of para 4 above shall be refunded to
\nsuch bidder without interest, other costs, charges
\nand expenses expended by him\/her for the
\nproperty.  Except as herein above provided, the
\nsaid initial deposit made in terms of para 4 above
\nshall in no event be refunded.\n<\/p>\n
25.\tThe time hereunder fixed for the observance and
\nperformance by the Purchaser of any of the
\nobligations to be observed and performed by
\nhim\/her under these conditions is and shall be
\ndeemed to be of the essence of the contract and
\nany forbearance by the Custodian of strict
\nobservance and performance on the part of the
\nPurchaser thereof shall not be construed as a
\nwaiver or relinquishment on the part of the
\nCustodian who shall have the right at his option
\nthereof to exercise his right and remedies as are
\navailable to him under these conditions and under
\nlaw or in equity as arising from non-observance
\nand non-performance thereof including the right to
\nforfeit.”\n<\/p>\n
FACT:\n<\/p>\n
Re Civil Appeal No. 4512 of 2006
\nThe bids were invited on 19.11.2004.  The last date for receipt of the
\nbids was 06.01.2004.  Appeals were filed by the notified parties against the
\norder dated 17.10.2003 whereby and whereunder the Custodian was directed
\nto take all steps to sell the properties mentioned therein, which is the subject-
\nmatter of the present appeals.  This Court directed that the bids may be
\nreceived; but the same may not be opened till 05.01.2004.  On 05.01.2004,
\nthe bids were directed to be opened, but the results were to be placed before
\nthis Court.  Pursuant thereto, the bids were opened and the appellant was
\nfound to be the highest bidder in respect of Flat  Nos. 61A and 61B,
\nGulmohar, S.V. Road, Khar, Mumbai. The valuation of the flat had been
\nfixed at Rs. 60,00,000\/- (Rupees sixty  lakhs), but his bid was of
\nRs.85,00,000\/- (Rupees eighty five lakhs).  By an order dated 22.01.2004,
\nthe learned Judge, Special Court while accepting the bid, inter alia, directed :\n<\/p>\n
“Accordingly, the bid submitted by Mr. Madhu Suri
\nand Shiv Kumar Suri of Rs. 16,00,000 (Rupees sixteen
\nlakhs) is provisionally accepted, subject to final order to
\nbe passed by the Hon’ble Supreme Court.  The highest
\nbidder whose bid has been accepted shall comply with
\nthe terms and conditions on which the bid is submitted.
\nThe Highest bidder shall be at liberty to appear before the
\nHon’ble Supreme Court on the appointed date.\n<\/p>\n
The initial deposit made by all the unsuccessful
\nbidders shall be refunded to the bidders.”\n<\/p>\n
\t\t\t\t\t[Emphasis supplied]<\/p>\n
This Court thereafter by an order dated 30.01.2004 directed :\n<\/p>\n
“The learned counsel for the Custodian brings on
\nrecord the result of the bids and the order of the Special
\nCourt dated 17.12.2003 and 20.1.2004.  The learned
\ncounsel for the Appellants proposes to offer his
\ncomments on the bids and the two orders of the Special
\nCourt.  Let it be done within two weeks.\n<\/p>\n
The process of finalizing the bids according to law
\nmay be proceeded ahead by the Special Court.  However,
\nthe finalization shall be subject to the result of these
\nappeals.”\n<\/p>\n
It is, however, stated that the learned Judge, Special Court did not take
\nany further step to finalize the bids pursuant thereto or in furtherance
\nthereof.  As indicated hereinbefore, there being no serious dispute in regard
\nto auction sale of the commercial properties, this Court by an order dated
\n05.05.2004 directed that the interim order dated 31.01.2004 would not apply
\nto the sale of commercial properties.  Pursuant to the directions and\/or
\nobservations made by the learned Judge, Special Court, an application was
\nfiled for impleadment by the appellant.  An application was also filed for
\ndeposit of the amount in an interest bearing account of a Nationalized Bank.
\nThe said applications were allowed.  The appeals were finally disposed of in
\nthe manner, as indicated hereinbefore, by an order dated 03.01.2006.
\nAccording to the appellant, although he had filed an application for
\nintervention and addressed several letters to the Custodian, as to when
\npayments in terms of the auction sales were required to be made, it did not
\nreceive any response thereto.\n<\/p>\n
By reason of the impugned judgment the learned Judge, Special
\nCourt, however, directed the Custodian to consider as to whether the earnest
\nmoney deposited by the appellant was to be forfeited, stating :\n<\/p>\n
“But in my opinion, this basic premise itself does not
\nexist.  The right in relation to residential properties of the
\nHarshad Mehta group would have been created in favour
\nof the Applicant, had the applicant complied with the
\nOrder passed by this Court accepting his bid.  Essential
\ncondition of that Order was that the Applicant complies
\nwith all the terms and conditions of the bid.  One of the
\nmost essential condition of the bid was that within 60
\ndays of the acceptance of the bid, he deposits the balance
\namount of consideration.  Failure of the Applicant to
\ndeposit the balance amount of consideration resulted in
\nrejection of his bid and therefore, the Applicant lost all
\nhis rights in relation to the property which could have
\nbeen created in his favour by the Order passed by this
\nCourt.  The submission of the learned Counsel appearing
\nfor the Applicant that because the Supreme Court had
\nprevented the custodian from handing over of possession,
\nthe Applicant was not obliged to deposit the balance
\namount of consideration, in my opinion, has no
\nsubstance.   For getting possession, the Applicant will
\nhave to create an entitlement in him to get possession.
\nFor creating that entitlement, he has to deposit full
\namount of consideration.  The learned Counsel for the
\nApplicant then submitted that the Supreme Court has
\nobserved that the question of confirmation of the bid
\nshould be considered by the Court after deciding the
\nmain application.  In my opinion, that question will arise
\nonly in relation to those bidders who have complied with
\nthe Order accepting their bids and not in case like the
\nApplicant, who has lost the rights that may have been
\ncreated in his favour because of his default in complying
\nwith the terms of the bid.  The Applicant, therefore, has
\nno right in relation to the property which is the subject
\nmatter of the main application filed by the custodian.
\nTherefore, the Applicant has no right to intervene.  As I
\nfind that the Applicant was liable to deposit the balance
\namount of consideration as per the terms of the bid, the
\ncustodian is directed to consider whether the amount of
\nearnest money deposited by the Applicant is to be
\nforfeited or not and submit a report to the Court seeking
\nappropriate orders.  Application disposed of.”\n<\/p>\n
Pursuant to the said order, the Custodian submitted its report on
\n21.07.2006, recommending  forfeiture of earnest money deposited by the
\nappellant, whereupon the learned Judge, Special Court by reason of the
\nimpugned order dated 31.07.2006 directed :\n<\/p>\n
“3.\tBoth submissions made on behalf of the bidder
\nYogesh Mehta have no substance.  So far as
\nbidders in relation to commercial properties are
\nconcerned, though they did not deposit the amount
\nimmediately because there was stay order from the
\nSupreme Court operating, they deposited the
\namount immediately after the Supreme Court
\nvacated the stay on sale of commercial properties.
\nTherefore, it was open to the bidder Mr. Yogesh
\nMehta to deposit the amount at least immediately
\nafter the Supreme Court decided the appeals by its
\njudgment dated 03.01.2006.  That there was a stay
\nof all sale of the residential properties of Harshad
\nMehta, does not appear to be correct, because the
\nSupreme Court in clear term has said in its
\njudgment dated 03.01.2006 that the Supreme Court
\nis concerned with those appeals only which relate
\nto sale of eight residential flats in a building
\nknown as Madhuli.  The flat in relation to which
\nthe said Yogesh Mehta had submitted the bid
\nadmittedly is not in the building called Madhuli.\n<\/p>\n
4.\tIn these circumstances, therefore, in my opinion,
\nthe earnest money deposited by the bidder has to
\nbe forfeited.  In this view of the matter, the report
\nis disposed of with a direction to the Custodian to
\nforfeit the earnest money deposited by Mr. Yogesh
\nMehta Report disposed of.\n<\/p>\n
\tThe Custodian is, directed to issue a fresh
\nadvertisement for sale of the properties in
\naccordance withlaw.”\n<\/p>\n
Re Civil Appeal No. 4513 of 2006 :\n<\/p>\n
\tAppellants herein are tenants of various flats in the building known as
\n‘Gurukrupa’.  They were also put on public auction.  The said properties also
\nstood attached in terms of Section 3(3) of the Act.  In response to the bids
\ninvited for sale of the said flats, an offer was made by the appellants.  By an
\norder dated 28.01.2004, the learned Judge, Special Court considered it
\nappropriate to tentatively accept the highest bid, subject to the final order
\npassed by this Court, stating :\n<\/p>\n
“Therefore, both the bidders increased their bids.
\nThe highest bid is of Rs.170,00,000\/- (Rupees One
\ncrore seventy lakhs) from the occupants of the building.
\nThe learned counsel for occupants is present and she
\nstates that occupants are not in a position to increase the
\nbid.  The other bidder namely West Cost Exim Pvt. Ltd.
\nis absent.\n<\/p>\n
\tI have perused the valuation report dated
\n24.1.2004.  As per the valuation report, value of the
\nproperty is about Rs.1,60,00,000\/-.  Considering that
\nthe bid offered by the highest bidder is above the
\nvaluation given in the valuation report, as also
\nconsidering that the bidders are the occupants of that
\nbuilding itself, in my opinion, it would be appropriate
\nto accept the highest bid.  The highest bid of the
\noccupants as per the report is therefore tentatively
\naccepted.\n<\/p>\n
\tLearned Counsel for the highest bidder states that
\nthe bid was given on behalf of the occupants, and
\ntherefore, Conveyance should be executed in favour of
\nthe Nominees nominated by the  joint occupants\/highest
\nbidders.  The custodian is accordingly so directed.\n<\/p>\n
\tIn the Order dated 5.1.2004 passed in Civil
\nApplication No. D. No.255575\/03, D. No.25620\/03, D.
\nNo.25644\/03 and D. No.25815\/03, the Supreme Court
\nhas directed this Court to open the bid and place the
\nresult thereof before the Hon’ble Supreme Court.
\nTherefore, the highest bid given by the highest bidder is
\ntentatively accepted subject to final order to be passed
\nby the Hon’ble Supreme Court in the above said
\nproceedings.”\n<\/p>\n
\t\t\t\t\t\t[Emphasis supplied]<\/p>\n
\tAppellants herein in that case also filed applications for intervention
\nbefore the Court.\n<\/p>\n
\tThe impugned order was passed ex parte.  Appellants were not given
\nany notice.  The fact that the building had already been put on sale by way of
\nauction and the bids had tentatively been accepted by the learned Judge,
\nSpecial Court by an order dated 28.01.2004 was not brought to its notice.\n<\/p>\n
Question :\n<\/p>\n
\tThe short question which, therefore, arises for consideration is as to
\nwhat would be the interpretation of the said terms and conditions of sale.\n<\/p>\n
Findings :\n<\/p>\n
\tThe auction was to be held at two stages : (i) submission of the bid;
\nand (ii) grant of sanction to the sale by the Special Court.\n<\/p>\n
\tThe word ‘sanction’ has been used in clause 9 as also in clause 20.\n<\/p>\n
\tEvidently, the terms and conditions set out hereinbefore did not
\ncontemplate a situation of this nature.  When the bid was accepted, it was for
\nthe Special Court to confirm the sale.  It was only when the sale is
\nconfirmed, which was to be done by way of grant of sanction thereto, the
\npurchaser was to pay the balance of the purchase price.  Only on payment of
\nsuch purchase price, the auction purchaser would have been entitled to take
\ndelivery of possession.\n<\/p>\n
\tWhether confirmation of sale and sanction of auction connote two
\ndifferent things was not in issue.   Parties also construed the terms of the
\nauction in the same manner.  As noticed hereinbefore, acceptance of auction
\nby the Special Court was a provisional one.  It was subject to the order of
\nthis Court.  It may be true that whereas in a case where the sanctioning
\nauthority is the court itself and confirmation of sale would not be subject to
\napproval from some other authority; acceptance of the sale itself would
\namount to sanction thereof.  But situation became completely different in
\nview of the orders passed by this Court.  We would deal with the matter a
\nlittle later, but we may at this juncture notice some decisions operating in the
\nfield at this juncture.\n<\/p>\n
\tIn Bishan Paul v. Mothu Ram<\/a> [AIR 1965 SC 1994], this Court laid
\ndown the law in the following terms :\n<\/p>\n
  \t“8. The rules which we have earlier reproduced
\nshow that the auction is held on a date fixed and is
\nsubject to a reserve price which is confidential. The
\nofficer conducting the sale declares at the fall of hammer
\nwho is the highest bidder. The highest bid is subject to
\nthe approval of the Settlement Commissioner or an
\nofficer appointed by him. A period of seven days must
\nelapse before the bid is approved and there is also a
\nlimitation of seven days from the acceptance of the bid
\nfor making an application to set aside the sale. If the bid
\nis approved and if no application meanwhile for setting
\naside the sale is made, the highest bidder is recognised as
\nthe auction purchaser and he is required to produce a
\ntreasury challan in respect of the balance of the purchase
\nmoney within a period of fifteen days (which period may
\nbe extended without limit of time) before the Settlement
\nCommissioner or the officer appointed by him. When the
\nfull purchase price is paid a certificate issues in Form No.
\nXXII and is sent to the Sub-Registrar for registration. If
\nthe balance of the price is not paid, the amount of
\nadvance in deposit is forfeited and the auction purchaser
\nhas no claim to the property.\n<\/p>\n
\t9. The passing of title thus presupposes the
\npayment of price in full and the question is at what stage
\nthis takes place. Obviously, there are several distinct
\nstages in the sale of property. These are: (a) the fall of the
\nhammer and the declaration of the highest bid; (b) the
\napproval of the highest bid by the Settlement
\nCommissioner or officer appointed by him; (c) payment
\nof the full price after approval of the highest bid; (d)
\ngrant of certificate; and (e) registration of the certificate.”\n<\/p>\n
\tYet again in State of Uttar Pradesh v. Kishori Lal Minocha<\/a> [(1980) 3
\nSCC 8], this Court held :\n<\/p>\n
\t“The question that remains to be answered is, even
\nif there was no statutory provisions, whether there was a
\nconcluded contract between the appellant and the
\nrespondent under which the respondent was liable to pay
\n20,100 which represents the difference between the
\nhighest bid at the first sale and the price fetched at the
\nresale.  The sale proclamation containing the conditions
\nof sale has not been produced.  Assuming that the
\ndifferent clauses of Rule 357 barring the last part of the
\nfifth clause embody the conditions of sale, it is clear from
\nthe second clause that in the absence of the final sanction
\nof the Excise Commissioner, the bid cannot be said to
\nhave been finally accepted.  It is not claimed by the
\nappellant that the bid offered by the respondent was
\nsanctioned by the Excise Commissioner.  There was thus
\nno concluded contract between the parties to make the
\nrespondent liable for the alleged loss”\n<\/p>\n
\tMr. Arvind Kumar Nigam, the learned counsel appearing on behalf of
\nthe notified parties has, however, placed strong reliance upon a decision of
\nthis Court in Union of India and Others v. Messrs. Bhim Sen Walaiti Ram<\/a>
\n[(1969) 3 SCC 146] wherein a distinction had been made between a situation
\nwhere auction sale is conducted by an officer lower than the authority
\ncompetent to approve the same and the acceptance of a bid by the officer
\npresiding at the auction and holding that in the event the transaction is
\ncomplete, failure on the part of the auction purchaser to deposit the
\nprescribed amount, the Collector would be entitled to resell the licence,
\nstating :\n<\/p>\n
“It is not disputed that the Chief Commissioner has
\ndisapproved the bid offered by the respondent.  If the
\nChief commissioner had granted sanction under Clause
\n33 of Ex. D-23 the auction sale in favour of the
\nrespondent would have been a completed transaction and
\nhe would have been liable for any shortfall on the re-sale.
\nAs the essential pre-requisites of a completed sale are
\nmissing in this case there is no liability imposed on the
\nrespondent for payment of the deficiency in the price.”\n<\/p>\n
\tWhen a sale would be held to be completed would, thus, depend upon
\nthe fact of each case.  Indisputably, it will primarily depend upon the terms
\nand conditions of the contract.  But herein there was another supervening
\ncircumstance i.e. the interim orders passed by this Court.  The core question
\nin this case would, thus, be whether having regard to the interim orders
\npassed by this Court, the learned Judge, Special Court could confirm the
\nsale.  The answer thereto must be rendered in the negative.  It is true that the
\nlearned Judge, Special Court, in its order dated 22.01.2004 directed the
\nhighest bidder to comply with the conditions, but what escaped the notice of
\nthe learned Judge was that sanction could not have been granted on a
\nprovisional basis.  If there could be only one order of sanction, the same
\nwould mean the final one and not the provisional one.  That is how the
\nparties including the Custodian understood the same.  It his report the
\nCustodian stated :\n<\/p>\n
\t“The Supreme Court has further directed at page
\n50 that “the learned Special Court shall proceed to pass
\nappropriate orders as regard confirmation of the auction
\nsales in respect of commercial properties”. The
\nCustodian states that commercial properties are reflected
\nat Serial Nos. 1 to 13 of Exhibit ‘A’.  In respect of these
\nproperties, where sale had been sanctioned by this
\nHon’ble Court subject to the orders of the Hon’ble
\nSupreme Court, full payments have been received and
\npossession of the properties has also been handed over to
\nthe purchasers.\n<\/p>\n
\tThe Custodian therefore prays that this Hon’ble
\nCourt may be pleased to confirm the sale of commercial
\nproperties as listed at Sl. Nos.1 to 13 in the table annexed
\nhereto as Exhibit ‘A’.\n<\/p>\n
\tThe Custodian also states that this Hon’ble Court
\nhad also confirmed sale of the properties at Serial Nos.
\n14 to 17 which were not described as commercial
\nproperties, subject to orders of the Hon’ble Supreme
\nCourt.  However, in these cases only earnest money was
\nreceived from the successful purchasers and possession
\ncould not be handed over in view of orders of the
\nHon’ble Supreme Court.  No bids were, however,
\nreceived in respect of properties at Serial Nos. 18 to 25
\n(various flats at Madhuli), Separate proceedings in
\nrespect of properties at S. No. 26 are being adopted.”\n<\/p>\n
\tBefore us a chart has been submitted, from a perusal whereof it
\nappears that even the purchasers of commercial properties made final
\npayments within the period 14.07.2004 and 05.01.2005.  No payment,
\ntherefore, was said to have been made within a period of sixty days from the
\ndate of auction i.e. 05.04.2005.\n<\/p>\n
\tIf there had been a stay in regard to acceptance of the bid, it could not
\nhave been sanctioned.  It could be sanctioned subject to the final order of
\nthis Court.  Moreover, when this Court issued direction in regard to
\nconfirmation of sale, the matter ought to have been considered afresh.\n<\/p>\n
In the peculiar facts and circumstances of this case, it is difficult to
\naccept the submission of the learned counsel for the respondents that the bid
\nwas accepted finally, but only possession was to be taken by the purchasers
\nat their own risk.\n<\/p>\n
Strong reliance has been placed by Mr. Nigam upon a decision of this
\nCourt in State of Maharashtra and Others v. A.P. Paper Mills Ltd.<\/a> [(2006) 4
\nSCC 209], wherein this Court in a case where the bidder had withdrawn its
\noffer before the expiry of the period itself during which the bid was to
\nremain operative, held :\n<\/p>\n
“Stand of the learned Counsel for the respondent that
\nanother request was made after the expiry of the 45 days
\nperiod does not change the situation. Clause 5(v) clearly
\nspells that once a tender is tendered the offer shall be
\nconsidered valid for a period of 45 days from the date of
\ntender sale in case of tenders which are under
\nconsideration. If this clause is read with Clause 5(iv) the
\nposition is clear that once a tender is tendered no changes
\ncan be made and no tender can be withdrawn. We are not
\nconcerned with a case of consequences after acceptance
\nof the tender by the successful bidder. In such a situation
\nloss sustained in the re-sale and the amount realized less,
\nshall be recovered from the bidder while adjusting the
\namount paid by him towards earnest money deposit. In
\nthis case the acceptance of the tender was after the
\nvalidity of the period. Therefore, this is not a case which
\ncould authorize the Government to recover the loss from
\nthe respondent. But it is a case of withdrawal of tender
\nand the effect of it is to be considered. Since the tender is
\nvalid for a period of 45 days and withdrawal is before
\nexpiry of the period the earnest money is to be forfeited.
\nThe stand of the respondent that because of delay in
\ndeclaration of the final sale results there was no bar on
\nwithdrawal of the tender is clearly untenable. Once the
\ntender is withdrawn the result is that the tenderer who
\nwithdraws the tender cannot take the stand that since the
\nfinal sale result has not been declared there is no bar on
\nthe withdrawal.”\n<\/p>\n
The said decision cannot be said to have any application whatsoever
\nto the fact of the present case.  The acceptance of the bid herein was subject
\nto order of this Court which, in our opinion, thus,  by reason of  the order of
\nthe Special Court or otherwise did not result in a concluded contract.  The
\ndeposit was to be made within sixty days from the date of grant of sanction
\nwhich would mean final acceptance of the bid, which was to depend upon
\nthe ultimate order which was to be passed by this Court.\n<\/p>\n
We, therefore, are of the opinion that the impugned order cannot be
\nsustained.\n<\/p>\n
In Misc. Petition No. 41 of 1999, evidently a consent order had been
\npassed behind the back of the appellants.  The said order, therefore, cannot
\nalso be sustained.\n<\/p>\n
There is another aspect of the matter which also cannot be lost sight
\nof.  Forfeiture of the earnest money, in our opinion,  in the aforementioned
\nsituation,  could not have been directed.\n<\/p>\n
\tIn Chairman of the Bankura Municipality, Bankura v. Lalji Raja &
\nSons<\/a> [(1953 SC 248 at 250], this Court noticed the definition of the word
\n‘forfeiture’ in the following terms :\n<\/p>\n
“The word ‘forfeiture’ is defined in Murray’s Oxford
\nDictionary The fact of losing or becoming liable to
\ndeprivation of goods in consequence of a crime, offence,
\nor breach of engagement”..”the penalty of the
\ntransgression” or a “punishment for an offence”.\n<\/p>\n
While directing forfeiture of the ‘earnest money’ the provisions of the
\nIndian Contract Act, 1872 are to be kept in mind.  Forfeiture is permissible
\nonly when a concluded contract has come into being and not prior thereto.
\n[See Maula Bux  v. Union of India<\/a>  [AIR 1970 SC 1955 : (1969) 2 SCC 554
\n& Saurabh Prakash v. DLF Universal Ltd.<\/a>  2006 (12) SCALE 531] .\n<\/p>\n
 The learned counsel appearing for the Custodian submitted that the
\ntime was of the essence of contract.   It may or may not be so.  This question
\nis required to be considered having regard to the fact situation obtaining in
\neach case.  If the deposit was to be made from the date of final sanction of
\nthe offer, question of applicability of the said proposition of law could not
\narise.\n<\/p>\n
We may, however, notice that in Mcdermott International Inc. v. Burn
\nStandard Co. Ltd. & Ors.<\/a> [2006 (6) SCALE 220], this Court observed that in
\na case of this nature, time was not of the essence and, therefore, Section 55
\nof the Contract Act was not attracted,  noticing :\n<\/p>\n
\t“This Court in Hind Construction v. State of
\nMaharashtra<\/a> [(1979) 2 SCC 70] stated:\n<\/p>\n
“7. \tThe question whether or not time was of the
\nessence of the contract would essentially be a
\nquestion of the intention of the parties to be
\ngathered from the terms of the contract. [See
\nHalsbury’s Laws of England, 4th ed., Vol.4, para
\n1179].”\n<\/p>\n
“8.\tEven where the parties have expressly
\nproided that time is of the essence of the contract
\nsuch a stipulation will have to be read along with
\nother provisions of the contract and such other
\nprovisions may, on construction of the contract,
\nexclude the inference that the completion of the
\nwork by a particular date was intended to be
\nfundamental. [See Lamprell v. Billericay Union
\n(19849) 3 Exch 283, 308; Webbv. Hughes (1870)
\nLR 10 Eq 281; Charles Rickards Ltd. v.\n<\/p>\n
Oppenheim (1950) 1 KB 616].””\n<\/p>\n
Conclusion :\n<\/p>\n
For the reasons aforementioned, the impugned judgments cannot be
\nsustained.  They are set aside accordingly and the matter is remitted to the
\nlearned Judge, Special Court for consideration of the matter afresh in the
\nlight of the observations made hereinbefore.  The appeals are allowed.  We
\nmay, however, hasten to add that it will be open to the learned Judge,
\nSpecial Court,  to pass an appropriate order in accordance with law.  We
\nmust also observe that we have not gone into the question in regard to the
\nvalidity or otherwise of the auction sale.  In the facts and circumstances of
\nthe case, there shall be no order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Yogesh Mehta vs Custodian Appointed Under The … on 4 January, 2007 Author: S.B. Sinha Bench: S.B. Sinha, Markandey Katju CASE NO.: Appeal (civil) 4512 of 2006 PETITIONER: Yogesh Mehta RESPONDENT: Custodian Appointed under the Special Court & Ors DATE OF JUDGMENT: 04\/01\/2007 BENCH: S.B. Sinha & Markandey Katju JUDGMENT: J […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-113275","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nYogesh Mehta vs Custodian Appointed Under The ... on 4 January, 2007 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/yogesh-mehta-vs-custodian-appointed-under-the-on-4-january-2007\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Yogesh Mehta vs Custodian Appointed Under The ... on 4 January, 2007 - 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