M/S SEEBAAT DEVELOPERSversusSTATE OF GUJARAT

 C/SCA/12071/2025                          CAV JUDGMENT DATED: 17/07/2026




                                      Reserved On   : 29/06/2026
                                      Pronounced On : 17/07/2026

         IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

         R/SPECIAL CIVIL APPLICATION NO. 12071 of 2025

==========================================================
                    M/S SEEBAAT DEVELOPERS
                             Versus
                    STATE OF GUJARAT & ORS.
==========================================================
Appearance:
MR D K TRIVEDI(5283) for the Petitioner(s) No. 1
MS. KRISHNA DESAI, ASST. GOVERNMENT PLEADER for the
Respondent(s) No. 1
MR NANDISH Y CHUDGAR(2011) for the Respondent(s) No. 2,3
==========================================================

 CORAM:HONOURABLE MR.JUSTICE N.S.SANJAY GOWDA
       and
       HONOURABLE MR.JUSTICE J. L. ODEDRA


                       CAV JUDGMENT
       (PER : HONOURABLE MR.JUSTICE N.S.SANJAY GOWDA)



  1.       On 12.03.2024, the respondent authority floated a

  tender notification whereby, it proposed to sell various

  plots by way of an e-auction. The terms of the notification

  required that the bidders, after paying the EMD and the

  tender fee, were also required to submit a sealed bid.



  2.       Under this tender notification, the last date for

  making the Earnest Money Deposit was stipulated as



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 12.06.2024. On deposit of the EMD, the applicants were

 required          to   submit   their     sealed    bid     on     or    before

 14.06.2024 i.e., within two days thereafter.



 3.       The petitioner, admittedly, deposited the Earnest

 Money Deposit, i.e., Rs. 22,92,024/-, and also the tender

 fee.



 4.       The petitioner claims that he also submitted a

 sealed bid, but this assertion is denied by the respondent

 authority, and reliance is sought to be placed on a

 subsequent communication in which the petitioner is

 stated to have accepted that a sealed bid could not be

 made due to some technical glitch.



 5.       The respondent authority contends that since the

 petitioner had not submitted his sealed bid, he was not

 allowed to participate in the auction held on 19.06.2024.



 6.       It is not in dispute that an auction was conducted,

 in the absence of the petitioner, and the plot in which the



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 petitioner was interested and intended to purchase, was

 admittedly sold to the highest bidder from amongst a set

 of bidders.



 7.       The authority contends that since a sealed bid was

 not submitted by the petitioner, that would necessarily

 result in the forfeiture of the EMD of Rs. 29,92,024/- that

 had been submitted by the petitioner in terms of the

 auction notification. The respondent authority, therefore,

 contends that because the petitioner did not submit a

 sealed        bid   before   18.06.2024,      he      suffered         the

 consequence of forfeiture of his EMD, as stipulated under

 the terms of the tender notification.



 8.       The petitioner contends that his non-participation in

 the final bid in the auction process was due to a technical

 error and, even otherwise, since the tender auction

 process was conducted successfully and the authority had

 sold the plot to the highest bidder, the authority cannot

 take advantage of its assertion that the petitioner did not

 submit his sealed bid, and, consequently, forfeit the EMD.


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 9.       It is contended that this forfeiture of the EMD for

 non-participation in the tender is nothing but an unjust

 enrichment on the part of the respondent authority,

 which, being an instrumentality of the State, is required

 to act fairly and not in a manner which is unethical and

 immoral.



 10.      The authority, on the other hand, contends that

 since the terms of the tender notification clearly and

 categorically provided that if the sealed bid was not

 submitted by a prospective bidder his EMD would be

 forfeited, the forfeiture of the EMD was inevitable, the

 moment the petitioner chose not make a sealed bid.



 11.      It is contended that since the respondent was aware

 of this stipulation and was also conscious of the fact that

 he would stand to lose the entire EMD if he did not

 submit the sealed bid, the authority would be justified in

 forfeiting the amount, since the petitioner has conceded

 that the sealed bid could not be submitted due to a

 technical glitch.


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 12.      In the light of the above, the only question which

 would arises for our consideration in this writ petition is

 whether the respondent authority can proceed to forfeit

 the petitioner’s Earnest Money Deposit, only on the

 ground that he had not made a sealed bid, even though

 he had paid the tender fee and the Earnest Money

 Deposit.



 13.      In order to consider this question, it would be

 primarily required to examine the terms of the tender. The

 aspect of Earnest Money Deposit is dealt with in Clause 3

 of the tender notification. For the purpose of this writ

 petition, only Clause 3, which is relevant is extracted and

 the dame reads as follows:


       3. Earnest Money Deposit ("EMD" or "Bid Security")
       a. A Bidder/ Applicant/s shall deposit, an EMD as
       mentioned in advertisement. The Bidder/Applicant's will
       have to provide the EMD and Tender fee by RTGS/NEFT
       through (n)code web site https://e-auction.nprocure.com. In
       Case Of Failure of submission of seal bid offer, EMD will be
       forfeited. Any Bid not accompanied by the Tender fee
       and/or EMD and/or Seal Bid offer shall be summarily
       rejected by AMC as non- responsive and applicant will not

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       be entitled to participate in auction process.
       b. EMD is collected in INR (Indian Rupee) only from Indian
       as well as International bidders. Hence international
       bidders from overseas are requested to ensure that the
       exact amount of EMD to be received by AMC any less
       amount received from the bidder would not be considered.
       In case of refund sought by overseas bidders it would be
       refunded in INR only after deducting bank charges, as
       applicable, which are to be borne by the bidder. It is to be
       noted that international transactions are subject to Reserve
       bank of India/FEMA regulations.
       c. Save and except the tender fee, the EMD of unsuccessful
       Bidder/ Applicant/s will be returned by AMC, without any
       interest and all other charges for the transfer of EMD shall
       be borne by the bidder, in accordance with the terms
       contained under this RFP. The refund of EMD thereof shall
       be in INR through RTGS in the account from where EMD
       has been paid.
       d. The Preferred Bidder's Bid Security/EMD will be
       adjusted against the payment of 90% of the total
       consideration for purchase of PLOT. AMC shall be entitled
       to forfeit and appropriate the EMD as mutually agreed
       genuine pre-estimated compensation / damages to AMC in
       the event of default made by the Bidder/ Applicant/s.
       e. If AMC cannot hand over the possession of plot due
       to any reason other than reasons beyond its control
       and/or the reasons attributable to such Applicant/s/
       tenderer/ lessee, AMC will return the EMD and all the



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       money paid by the Preferred Bidder, without interest,
       after       90   (Ninety)     days         to    Bidder/       Applicant/s
       succeeded in auction.

 14.      As could be seen from Clause 3(a), if there is a

 failure on the part of the applicant to submit a sealed bid

 offer, the EMD was liable to be forfeited. The clause also

 indicates that a bid, which is not accompanied by the

 tender fee or the EMD or the sealed bid will be summarily

 rejected as being non-responsive, and the applicant would

 not be entitled to participate in the auction process.



 15.      In respect of the plot to which the petitioner

 intended to participate, i.e., plot No. 11 notified by Tender

 No. DTS/RNT/39/2024.



 Clause L reads as follows:


       “L.     For      Seal   Bid     Offer:          After    Registration,        A
       Bidder/Applicant/s must have to submit Seal Bid Offer
       within Stipulated deadline. In Case Of Failure, EMD
       will be forfeited.”

 16.      This would also indicate that the applicant would



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 have to necessarily submit a sealed bid within the

 stipulated deadline, and, in case of failure to do so, the

 EMD would stand forfeited.



 17.      Though these two clauses indicate that the non-

 submission of a sealed bid would result in the forfeiture of

 the EMD, at first blush the action of the respondent

 would appear to be in terms of the tender notification.

 However, on a deeper inspection of the other terms of the

 notification, this would not be the correct course of action

 to be adopted by the authority.



 18.      The tender notification contains a set of General

 Conditions stipulated in Clause 22 which would assume

 significance in the matter of forfeiture of EMD. This

 Clause 22.2, which specifically deals with EMD, reads as

 follows:



       “22.2 The amount of EMD shall be returned to
       unsuccessful bidder without any interest and all other
       charges for the transfer of EMD shall be borne by the
       bidder, within 45 days of completion of auction process


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       or on acceptance of the bid of the Preferred
       Bidder or when the auction process is cancelled by
       AMC.”


 19.      As could be seen from the above, the EMD is to be

 returned on the occurrence of any one of three events

 mentioned above and this is because of the use of the

 term “or” while describing the three events.



          1. The 1st event would be to an unsuccessful bidder

              i.e., an applicant who has made a bid but has not

              been successful



          2. The 2nd event would be when the bid of the

              preferred bid has been accepted.



          3. The 3rd event would be when the auction process

              is cancelled by the respondent.



 20.      The 1st and the 3rd event would not apply since even

 according to the respondent, the petitioner was not even a

 bidder and the respondent had not cancelled the bid.



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 21.      A plain reading of the 2 nd event described in the

 clause would indicate that if the bid of a preferred bidder

 is accepted, the EMD is required to be refunded. This

 would mean that when the plot is sold, the EMD of all the

 other applicants is required to be funded.



 22.      This is obviously because the respondent-authority

 had achieved its objective of selling its plot in the e-

 auction and had secured the highest possible amount and

 therefore there would be corresponding obligation to

 return the EMD to all the other participants.



 23.      If it is borne in mind that the sole objective of

 securing an EMD from a participant is to ensure that the

 auction is not stalled or disrupted by any participant,

 which        would   result   in     financial   prejudice        to     the

 respondent-authority, that participant would be visited

 with a penalty in the form of forfeiture of his EMD.



 24.      It must be also be kept in mind that the EMD is a

 percentage of the reserve price and therefore a participant


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 who has the intent of disrupting or postponing the

 auction process would be put on notice that any such

 attempt will cost him financially.



 25.      If the auction process is completed and the plot is

 sold to the satisfaction of the respondent-authority, the

 ultimate objective of the respondent-authority stands

 fulfilled and therefore the requirement of retaining the

 EMD would evaporate. It is keeping in mind this principle,

 the general condition 22.2 contemplates the refund of the

 EMD if the bid of a partipant is accepted by the

 respondent-authority.



 26.      If the ultimate intent of requiring an EMD i.e., to

 ensure a successful sale and the mandate of Clause 22.2

 to refund the EMD on the bid being accepted, is seen in

 context and the clauses conjointly read, it is obvious that

 the earlier clauses which contemplated forfeiture of the

 EMD if a sealed bid is not submitted would come into play

 only when the auction does not conclude in a successful

 sale of the plot.


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 27.      The purpose of requiring an EMD is to ensure that

 there is no impediment for the successful conclusion of

 the auction process i.e., the sale of the plot and that no

 attempt is made to derail the auction process by any

 person who simply wants to play mischief with the entire

 auction process. If the purpose of the EMD is to ensure

 that no person tries to take advantage of the auction

 process, and the clause specifically states that on

 acceptance of the bid of the preferred bidder, the EMD will

 have to be returned, it would only indicate that the

 purpose of the EMD no longer subsists and it is is

 required to be returned.



 28.      It must be understood that an e-auction by an

 authority, which is an instrumentality of the state, is not

 to make a quick buck or an undeserving financial gain.

 The processes prescribed for the conduct of an e-auction

 is    definitely   not   designed       to   unjustly       enrich       the

 Corporation and on the other hand the processes

 prescribed is to ensure that the e-auction concludes



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 successfully and the plot is indeed sol.



 29.      It is to be reiterated that the right of the Municipal

 Corporation to forfeit the EMD will arise only if the

 auction process is not concluded successfully. Any act by

 a participant, such as non-payment of the tender fee,

 non-payment of the EMD, etc., which would cause a

 direct impediment to the authority in selling its plots can

 be a ground to forfeit the EMD of any partipant.



 30.      The forfeiture of an earnest deposit is akin to the

 stipulation of liquidated damages under Section 74 of the

 Indian Contract Act, 1872. Once the contract stipulates

 that a particular predetermined and agreed sum is to be

 paid in the event of a default, the said sum will have to be

 paid on the occurrence of the breach. This is on the

 principle that a financial loss, which may be suffered by a

 contracting party as a result of a breach, is assessed and

 agreed upon and the same will have to be necessarily

 paid.




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 31.      However, the basic underlying reason for this

 payment of liquidated damages is that in the event of a

 breach of the contract, the other contracting party will

 definitely suffer a financial loss, which is assessed and

 determined at the time of entering into a contract itself.

 This is also to ensure that there is no further need or

 dispute regarding ascertaining the financial loss. If, on the

 other hand, there is no financial loss to the other party,

 the liability to pay damages would not really arise.



 32.      In the context of this case i.e., in the context of an e-

 auction to sell plots by the respondent-authority, if the

 principle of liquidated damages contempted under S. 74 of

 the Contract Act is applied, it becomes rather obvious that

 the authority suffers no financial loss if the plot is sold at

 the highest possible price. In such an eventuality the

 respondent-authority, being an instrumentality of the

 state, is required to act in a fair manner and cannot take

 advantage of a lapse on the part of another partipant and

 cause him financial prejudice.



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 33.      In fact, if this is act of the authority to forfeit the

 EMD of a participant after it has sold the plot is

 permitted, it would amount to putting a seal of approval

 to an improper act on the part of the respondent-

 authority. In such an event, this would also enable the

 authority to enrich itself unjustly. Surely, the intent of the

 authority is not to make money merely because it possible

 to do so.



 34.      We are also of the view that the stand of the

 respondent authority that there was no sealed bid by the

 petitioner may not be correct. In an auction, where a

 reserve price for the sale of a plot has been fixed under

 the notification and a participant knowing this reserve

 price seeks to participate by paying the EMD and the

 tender fee, he is deemed to have made a sealed bid for the

 reserve price. This is because, a participant cannot seek

 to bid for a price lower than the reserve price. It is

 therefore clear that the moment decided to participate in

 the e-auction and submitted his EMD and the tender fee,



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 he is deemed to have submit his sealed bid, which would

 be the reserve price. We are therefore of the view that the

 authority would therefore cannot be right when it seeks to

 contend that no sealed bid had been made by the

 petitioner.



 35.      It may, no doubt, be open for the petitioner to quote

 something more than the reserved price and thereby give

 himself a better chance of buying the plot, but merely

 because the sealed bid is not stated in express terms, that

 cannot mean that no sealed bid was given at all.



 36.      To illustrate, hypothetically, if the petitioner herein

 was the only bidder and he had not made his sealed bid,

 he would nevertheless have to be assumed to have bid an

 amount equal to the reserve price. The authority could

 then accept this bid at the reserve price and could have

 called upon the petitioner to make the payment. In such a

 situation, the petitioner could not have contended that he

 had not made a sealed bid, and he would, therefore, have

 to suffer the consequence of a forfeiture.


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 37.      To put it differently and to reiterate, the moment a

 person such as the petitioner participates in the tender

 auction process, he is deemed to have submitted his final

 bid at the reserve price, if he has not otherwise made any

 express bid for a higher sum.



 38.      In the instant case, since the auction was conducted

 successfully and a higher bid of another applicant has

 been accepted, the act of the respondent authority in

 forfeiting the EMD would be incorrect.



 39.      The learned Counsel for the authority, however,

 sought to place reliance on the judgment rendered by a

 Division Bench of this Court in case of Pooja Ceratech Pvt.

 Ltd. Through Director Narendra Sundarjibhai Padiliya

 versus Oil and Natural Gas Corporation Limited, reported in

 2021 SCC Online Guj 3177. In our view, the said judgment

 would have no application since, in that case, the

 petitioner therein had requested the corporation to permit

 him to modify his price bid on the ground that he had

 committed a mistake in offering the price. In that context,


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 this Court held that the forfeiture of an EMD was

 permissible, as an attempt was being made to recede from

 the bid. That is not the factual situation in the present

 case.



 40.      An argument was also sought to be advanced that,

 though in law a person can withdraw his offer before its

 acceptance, if he has agreed upon a condition that some

 earnest money would be forfeited for not entering into the

 contract or if some act is not performed, then he would

 have      no      right   to   contend       that    the     forfeiture       was

 impermissible. The above proposition which has been laid

 down in National Highways Authority of India vs Ganga

 Enterprises & Anr. [2003] Supp. (3) SCR 114 is sought to

 be pressed into service.



 41.      It may be pertinent to state here that, in the said

 judgment          also,    the    Hon’ble        Supreme         Court        was

 considering a case wherein the applicant therein sought

 to withdraw his bid before the expiry of the validity period

 and, in that context, the Hon’ble Supreme Court held that


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 the right to forfeiture would be available.



 42.      It may be pertinent to state here that, in both the

 cases referred to above, the auction of a plot was not

 involved. In both the cases, a clause similar to Clause

 22.2 of the general conditions was not involved.



 43.      As noticed above, since the entire intent of the

 authority was to ensure that the auction was successfully

 conducted and the sale of the plot was achieved, the right

 of the Corporation to resort to forfeiture in respect of the

 other unsuccessful bidders would not subsist and cannot

 be tenable.



 44.      In fact, in the Division Bench ruling relied upon, the

 Division Bench has considered the judgment rendered by

 the Madras High Court in the case of Rubina verses

 Authorized Officer, wherein it has been held as follows:


       7. The right to forfeit has, ordinarily, to be balanced against
       the rule against unjust enrichment. Merely because there is
       a forfeiture clause does not imply that the entire amount
       deposited has to be forfeited. The forfeiture clause, like an

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       earnest money deposit clause or a liquidated damages
       clause, has to be regarded as a genuine pre-estimate of the
       loss that may have been incurred, but when a forfeiture
       clause does not indicate an amount but provides that the
       entire amount tendered would be forfeited, it may not be
       permissible to forfeit, say 99% of the payment made for the
       default in depositing the balance 1%. Thus, the quantum
       that can be forfeited will depend on the extent of the loss or
       damage suffered by the party not in breach and this is,
       essentially, a question of fact that has to be adjudicated by
       an appropriate forum. The High Court, in exercise of the
       jurisdiction under Article 226 of the Constitution, is not
       such forum.

 45.      As could be seen from the above, a coordinate

 Division Bench has accepted the principle that a forfeiture

 clause, such as an Earnest Money Deposit clause or a

 liquidated damages clause, is to be regarded as a genuine

 pre-estimate of the loss that may have been incurred.

 This, therefore, indicates that forfeiture would come into

 operation only when the opposite party has suffered a

 financial loss. If there is no financial loss, and if the

 ultimate objective of the auction or selling the property

 was achieved, the respondent-authority cannot be said to

 still possess the right of forfeiture.


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 46.      So far as the precedent relied upon by the Division

 Bench of the Hon’ble Supreme Court in NTPC Ltd. v.

 Ashok Kumar Singh & Ors., reported in (2015) 4 SCC 252,

 is concerned, in our view, the said judgment would also

 be of no avail, since that was also a case where a party

 sought to withdraw an offer before it was accepted, which

 had resulted in the forfeiture of the earnest money. Since,

 in the instant case, the question of the petitioner

 withdrawing his offer does not arise, the said decision will

 have no application.



 47.      It is to be stated here that, in an auction, a person,

 though intending to participate in the auction, may also

 choose not to make a bid, probably because he cannot

 match the bid that has been submitted by another bidder.

 A person who intends to participate in an auction cannot

 be forced to make a bid, and, as a consequence, failure to

 submit a bid cannot result in the forfeiture of the Earnest

 Money Deposit.



 48.      As already held above, in our view, when a


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    minimum reserve price has been fixed, and a person

    intends to participate in such an auction, it is deemed

    that he has agreed to make a bid at least equal to the

    reserve price and cannot, therefore, contend that no bid at

    all was made. Consequently, in our view, the action of the

    respondent authority in forfeiting the EMD of Rs.

    29,92,040/- would be illegal, and the same is quashed.

    Accordingly, we direct the authority to refund the EMD

    amount deposited by the petitioner within a period of four

    weeks from the date of receipt of a copy of this order.



    49.           Accordingly, the writ petition is allowed.



                                                                                         (N.S.SANJAY GOWDA,J)



                                                                                                     (J. L. ODEDRA, J)
Mehul Desai
Original copy of this order has been signed by the Hon'ble Judges.
Digitally signed by: MEHULKUMAR BHIMABHAI DESAI(HCD0075), ENGLISH STENOGRAPHER GRADE TWO CLASS TWO, at High Court of Gujarat on 17/07/2026 18:00:19




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