Contract:
Agreement for purchase of ‘phal kendu leaf’ – As per the agreement the proposed purchaser, apart from provisional security deposit, was required to deposit additional security deposit covering 25% of the purchase price of the lot – The proposed purchaser (respondent) failed to deposit the additional security amount – Agreement cancelled – Fresh tender issued – Writ petition challenging cancellation of agreement and issuance of fresh tender – High Court by its interim order stayed the finalisation of sale, subject to the respondent depositing an amount of Rs.20,00,000/(Rupees Twenty Lakhs) – However, later the stay on finalisation of sale was vacated – The Writ Petition was disposed of as withdrawn and the High Court directed refund of Rs. twenty lakhs (deposited pursuant to interim order) – Appeal to Supreme Court – Plea of appellants that direction to refund the amount of Rs.20,00,000/(Rupees Twenty Lakhs) was not justified as the deposit was relatable to additional security amount – Held: The deposit ordered by High Court cannot be classified as additional deposit in terms of the contract, at that stage of the lis – However, even if the deposited amount is not considered as additional security amount in its true spirit, as per terms of the agreement the right of the appellant to proceed in accordance with law to assess the damage suffered and to recover the same from the private respondents, would still remain intact – The amount deposited ought to have been allowed to be retained till the procedure as contemplated in law to recover the damages suffered by the appellant was followed. Partly allowing the appeals, the Court
HELD: 1 In a circumstance of the present nature, when it is noticed that the termination of the agreement itself was for non-deposit of the additional security amount to the extent of 25% of the value, the deposit ordered by the High Court cannot be classified as additional deposit in terms of the contract, at that stage. If ultimately the writ petition was taken to its logical conclusion and the private respondents had succeeded in such proceedings, only in such event the said amount could have been considered as a belated payment towards additional security deposit and in any event, the consideration in that regard would be in terms of the directions that would have been issued by the High Court. [Para 15] [1041-G-H; 1042-A-B]
2. Since the writ petition was withdrawn unconditionally, the question is as to whether the respondents were entitled to refund of the amount as a matter of right when all future action for disposal of the subject Kendu leaves was at the ……. ‘cost and risk’ of the private respondents as per Clause of the agreement relating to termination of the agreement. Hence even if the said amount is not considered as the additional security amount in its true spirit, as per the agreement and the right of forfeiture at this stage is not accepted in its technical sense in favour of the appellant, the right of the appellant to recover the loss suffered in terms of the agreement cannot be ignored. [Para 15] [1042-B-C]
3.As the interim prayer and the very writ petition is entertained in the discretionary jurisdiction, in such circumstance, though it is not necessary that a condition is to be imposed in every case for grant of interim order, if the Court in a given case imposes the condition, the same is to be treated as being with a purpose and not as an empty formality. [Para 16] [1043-D]
4. In that regard, it is to be noticed that in the instant case in a circumstance where the private respondent had filed the writ petition, even though the High court had permitted the process of re-tender to progress, the finalization thereof had been stayed. If that be the position, the appellant was not in a position to immediately bring the Kendu leaves for re-auction by receiving the amount from the subsequent purchaser and the same is likely to have dissuaded the purchasers to offer the best price due to uncertainty looming large. Whether all these and any other factor has caused the loss to the appellant and the public exchequer is a matter to be determined based on materials and evidence but the fact remains that such resultant delay was at the instance of the private respondent. As per the terms of the agreement, any loss caused was permissible to be recovered from the respondent after adjusting the security deposit available. Therefore, even if the amount of deposit made pursuant to the order passed by the High Court is not considered as an additional security deposit, the right of the appellant to proceed in accordance with law to assess the damage suffered and to recover the same from the private respondents, would still remain intact. As such the deposit ordered will have to be considered as a conditional deposit to protect the interest of the appellant as well. [Para 17] [1043-E-H; 1044-A]
5. It is no doubt true, dehors the writ proceedings initiated by the private respondents and in the absence of such deposit, option in any event was open to the appellant to make the recovery through legal proceedings or public demand. Apart from the right available to recover the amount by forfeiting the additional security deposit, the appellant had also clearly indicated that the subsequent sale would be made at the ‘……cost and risk’ of the private respondents which would mean that the difference of the cost between the first and second auction and the resultant loss to the appellant if attributable to the private respondents, is recoverable from the private respondents. However, it is no doubt true that such recovery is to be made after quantifying the same by following due process of law. [Para 18] [1044-C-D]
6. Though at this stage the said amount of deposit as ordered by the High Court cannot be considered as additional security deposit nor the actual determination of the loss suffered, when in a circumstance the action of the appellant to re-tender was caused to be deferred, through a proceedings initiated at the instance of the private respondent, the condition to deposit the amount should have been considered by the High Court in the background of its intent to protect the interest of appellant. In that circumstance, when the contention of loss being caused was put forth, the amount ought to have been allowed to be retained till the procedure as contemplated in law is followed and a decision is taken though not directly as forfeiture. [Para 19] [1044-F-H]
7. The appellant in any event would have the right to determine the loss suffered and recover the same in accordance with law as the process to re-tender, was at the ‘…...cost and risk’ of the private respondent as stated in the notice of termination. In that circumstance, when it is prima-facie indicated that due to the delay caused at the instance of the private respondents the value of the Kendu leaves had reduced, thereby causing loss, in view of legal proceedings initiated by the private respondents, the Court will have to bear in mind the maxim actus curiae neminem gravabit, namely, no party should suffer due to the act of Court. In such event, since the interim order was at the instance of the respondent, the appellant should be permitted to retain the amount and complete the process by providing opportunity to the private respondents.[Para 20] [1045-A-C]
8. In the above circumstance, the direction to refund the amount unconditionally is not found justified and is accordingly set aside.[Para 21] [1045-D]
M/s. Atma Ram Properties (P) Ltd. v. M/s. Federal Motors Pvt. Ltd. (2005) 1 SCC 705 : [2004] 6 Suppl. SCR 843 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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