Salasar E-Waste LLP v. DY CMM Northern Railway & Anr.

1. The Petitioner, through the instant petition, challenges the forfeiture of the Earnest Money Deposit,[1] made in connection with an E-auction conducted on www.ireps.gov.in for the Shakur Basti Depot. This auction was conducted by Respondent No. 1 under the instructions of the Controller of Stores, Northern Railway, for the sale of “Cond and Scrap all types of secondary cells in bakelite bodies, of various sizes and makes, both broken and unbroken, on an ‘as is where is’ basis.” The Petitioner participated in the auction and emerged as the successful bidder. Pursuant thereto, a bid sheet “EMD” was issued on 10th January, 2022, outlining the terms of the transaction:

2. The total sale value of the auction was declared as INR 16,20,751.83. The Petitioner deposited INR 1,60,185 as Earnest Money Deposit, constituting 10% of the total sale value. The bid sheet explicitly provided for a 15-day interest-free period for the payment of the Balance Sale Value[2] [referred to as ‘Interest free BSV Payment time’ in the bid sheet], which was to expire on 24th January, 2022. The bid sheet also mentioned a ‘free “BSV” delivery period’ of 40 days, which was to conclude by 18th February, 2022. Assuming the ‘free delivery period,’ which was to lapse on 18th February, 2022, as the extended timeframe for the BSV Payment, the Petitioner made a request to Respondent No.1 on 15th February, 2022 seeking permission to make the payment with interest. The communication reads as follows: “Sir, I have purchased lot no. 2003191221/ 85481090 through Bid No. 39065587. Interest free BSV payment time expired on 24.1.2022. Final date to make payment is 18.2.2022. Kindly allow me to make payment with any reasonable interest and issue me challan to do the same.”

3. The request was declined by the Respondents, leading to the forfeiture of the EMD. Aggrieved by this decision, the Petitioner filed the present petition, contending that the forfeiture of the deposit is arbitrary and unlawful.

4. Counsel for the Petitioner argues that the terms of the bid are confined to those stipulated in the bid sheet, which does not clearly specify the maximum time limit for the BSV payment. The Petitioner argues that their interpretation of the ‘free delivery period’ as the timeframe for making the payment was reasonable, and their subsequent request for an extension was consistent with the terms of the auction. It is contended that the rejection of the Petitioner’s request is arbitrary, particularly when the Petitioner had expressed willingness to pay reasonable interest for the delay.

5. Counsel for the Respondents draws the Court’s attention to the ‘Conditions for Sale’ annexed to their counter-affidavit. Clause 6.[2] of these conditions stipulates that the BSV payment must be made within 15 days of the auction (24th January 2022)3 and that an extension of up to 35 days (until 13th February, 2022) is permissible with interest. Beyond this period, as per Clause 6.3, the EMD is liable to forfeiture. The Respondents contend that the Petitioner’s request, dated 15th February, 2022, was submitted beyond the permissible timeline, and therefore, the forfeiture was justified. Analysis and Findings

6. The core issue in the present case revolves around the timeframe for making the Balance Sale Value (BSV) payment. The Petitioner’s misunderstanding arose from their interpretation of the ‘free delivery period’ mentioned in the bid sheet. The Petitioner erroneously assumed that the ‘free delivery period,’ ending on 18th February, 2022, also marked the deadline for making the BSV payment. To address this ambiguity, the Court sought clarification from the Respondents regarding the term ‘free delivery period’ as specified in the bid sheet. Counsel for the Respondents explained that the ‘free delivery period’ exclusively pertains to the timeframe within which the successful bidder must lift the auctioned goods from the depot. Any delay beyond this period attracts a ground rent penalty. This interpretation is consistent with the conventional understanding of a delivery period in commercial transactions, which pertains solely to the collection of goods and bears no connection to the bidder’s payment obligations. Further, the bid sheet unambiguously specifies a 15-day interest-free period for making the BSV payment, which expired on 24th January, 2022. Beyond this, an extension could only be sought subject to interest, and within the timelines prescribed in the terms of the auction. With this understanding, the Court now proceeds to examine whether the Respondents’ decision to forfeit the “Interest free period” EMD meets the contractual terms governing the E-auction.

7. Clause 6 of the ‘Conditions for Sale,’ annexed with the counteraffidavit of Respondents, stipulates ‘payment and delivery time.’ Clauses 6.[2] and 6.[3] deal with extension of time for depositing BSV payment after the auction and the actions that follow its non-payment. The said clauses read as follows: “6.[2] Extension of time for depositing balance payment after the auction beyond free period of 10/15 days (as applicable) with interest maximum up to 35 day for depot lots and 40 days for P-Way scrap and other line lots from the date of auction can be given by Auction conducting officer (DY.CMM/NR/SSB). [RLY BD.

LETTER NO. 2015/RS(S)/709/5 DT. 29.01.2016]. 6.[3] Earnest money shall stand forfeited if balance sale value is not deposited within 50, 40 on 15 days (for p-way scrap and other line lots) and within 35 or 15 days (for depot scrap) as the case may be from the date of auction.”

8. Under the afore-noted clauses, the bidders were provided with options to make the BSV payment. Firstly, an interest-free period of 10/15 days (as applicable) was granted for making the payment. Beyond this, the conditions permitted payment with interest, provided the payment was made within an extended timeline capped at 35 days for depot lots and 40 days for P-Way scrap and other line lots. In the present case, it is undisputed that the items auctioned were depot lots, thereby applying the condition of 35 days from the date of auction as the deadline for making the BSV payment, with or without interest. Even though the Respondents have urged that the 35 days period lapses on 13th February, 2022, the terms and conditions do not explicitly stipulate that the day of auction would be the 1st day of making the payment. Thus, going by general principles, this timeline, calculated from the day following the auction, which is 11th January, 2022 expired on 14th February, 2022. The Petitioner’s request to make the payment was dated 15th February, 2022, one day beyond the maximum permissible timeline. Pertinently, even on 15th February, 2022, the Petitioner did not actually deposit the balance amount but merely sought permission and details for making the payment. In fact, on 14th February, 2022 the petitioner had written to Respondent No.1 seeking further extension of 20 days for making the payment, making it clear that they were in no position to make the payment within the permissible timeline. This failure to comply with the contractual deadlines triggered Clause 6.3, which stipulates that failure to make the payment within the prescribed time results in the automatic forfeiture of the Earnest Money Deposit.

9. It is also pertinent to note that the auction was conducted electronically, and the terms and conditions of the sale, including Clause 6, were readily accessible on the auction platform (www.ireps.gov.in). The Petitioner’s argument that they were unaware of the ‘Conditions for Sale’ lacks merit. By participating in the auction and placing the bid, the Petitioner was deemed to have accepted these terms. Bidders are expected to acquaint themselves with the contractual terms governing the auction. Any claim of ignorance of these terms reflects a lack of due diligence on the Petitioner’s part and cannot form the basis for invalidating the decision of forfeiture.

10. The Petitioner contends that the interest rate applicable after the 15day interest-free period was not specified either in the bid sheet or the conditions for sale, which purportedly impeded them from making the payment on time. However, this argument is unconvincing. The responsibility to clarify any ambiguity regarding the applicable interest rate squarely rested on the Petitioner. Their ability to communicate is evident from their representation dated 15th February, 2022—albeit submitted after the permissible timeframe. This lack of timely inquiry does not absolve the Petitioner of their obligation to comply with the terms governing the auction.

11. In light of the foregoing, the Petitioner’s arguments lack merit. The terms and conditions governing the auction explicitly delineated the consequences of delayed payment, leaving no room for ambiguity or misinterpretation. The Petitioner’s inability to adhere to the prescribed timeline cannot be excused as a mere oversight or attributed to insufficient knowledge of the terms. The final date for the BSV payment, calculated as 14th February, 2022, was clearly defined, and no payment was made even by this extended deadline. Consequently, the Respondents were well within their contractual rights to forfeit the Earnest Money Deposit. This Court, therefore, finds no basis to interfere with the impugned action.

12. Dismissed, along with pending application.

SANJEEV NARULA, J DECEMBER 6, 2024 d.negi