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Judgment
This writ petition under Article 226 of the Constitution of India has been preferred claiming the following reliefs:
"(i) the impugned order dated 18.08.2017 (Annexure-7) and order dated 13.10.2017 (Annexure-9) issued by the respondent RIICO may kindly be declared illegal and may kindly be quashed and set aside.
(ii) the respondent authorities may kindly be directed to allot another suitable plot to the petitioner in lieu of the existing plot allotted in the auction.
(iii) Any other order or direction which this Hon'ble Court deems just and proper may also be passed."
Brief facts of this case, as noticed by this Court, are that the petitioner, which is a partnership Firm, participated in the auction being conducted by the respondent-Rajasthan State Industrial Development & Investment Corporation Limited (in short, 'RIICO') for allotment of industrial plot E-151, Mandore Industrial Area, Jodhpur, measuring 5464 sq. meters and the reserve price for the same was Rs.4500/- per sq. meter. While the last date for submitting the bid was 18.05.2017, the earnest money was determined as Rs.12,29,400/-.
The petitioner in need of an industrial plot made necessary bid at the office of RIICO, where the auction was being conducted, and thereafter, the respondent-RIICO informed the petitioner vide communication dated 30.05.2017 that it was the successful bidder and should immediately deposit the remaining amount of Rs.61,13,726/-.
The petitioner thereafter found out that the plot in question was situated at a hilly terrain, and immediately informed the respondent-RIICO vide application dated 30.06.2017 that the rocky/hilly crust was such that the plot not fit for industrial use.
As per the pleaded case of the petitioner, rather than considering the request of the petitioner, the respondent-RIICO passed an order dated 18.08.2017, whereby the earnest money deposited by the petitioner was forfeited. The said action of the respondent-RIICO is under challenge in the present writ petition.
Learned counsel for the petitioner submitted that the hilly plot could not have been used for industrial purposes, unless it was cleared off the hill, and therefore, either the respondent-RIICO may be directed to clear the hill for the clear usage of the plot in question or an alternate plot of the same size with clear location may be provided to the petitioner, and lastly, the main prayer of the petitioner is that in case the respondent-RIICO fails to do so, then the complete amount deposited by the petitioner including the earnest money may be returned back to him with interest.
On the other hand, learned counsel for the respondent submitted that Annexure-1, which is Sealed Bid Invitation, carried the following conditions:
"10. The highest bidder has to deposit 25% of total sale amount (after adjusting amount deposited earlier i.e. earnest money) within 30 days of the date of intimation, otherwise the amount deposited earlier (on account of earnest money) shall be forfeited without any further notice.
Participants are advised to inspect the site before bidding. Allotment is being made on 'as is where is' basis."
Learned counsel for the respondent further submitted that the petitioner was under a legal obligation to make the necessary payments, and once it did not make the necessary payments being the highest bidder, the amount so deposited by it towards the earnest money was to be forfeited without any further notice and the same was strictly in accordance with law.
Learned counsel for the respondents also submitted that the participants were advised to inspect the site before bidding, and therefore, the onus was upon the petitioner to look at the site before entering into the auction, and once it has entered into the auction with open eyes and the rules do not permit any return of the earnest money, then in such circumstances, the present writ petition deserves to be dismissed.
Learned counsel for the petitioner, in his rejoinder arguments, submitted that once the E-auction Notice now published by the respondent-RIICO, in respect of the same plot, carries a specification of the plot being in the hilly region, the same could have been done earlier as well at the time of publication of the E-auction notice concerning the petitioner.
After hearing learned counsel for the parties as well as perusing the record of the case as well as looking to the small controversy, this Court finds that the plot in question is practically unusable due to its hilly terrain. Moreover, if the respondent-RIICO was to auction such plot, then it should have declared specifically that the plot in question was hilly in nature.
This Court has taken note of the fact that the E-auction notice for plot No.E-151, Mandore Industrial Area, Jodhpur, with which the petitioner was concerned, never carried any special specification, but now the E-auction notice, which was published in the newspaper on 18.12.2018, clearly makes a mention that the plot in question carries some hilly portion.
This Court has also perused the photographs, which are annexed alongwith this writ petition, and the same clearly reveal that the hill/rocks are there in the plot in question.
This Court further finds that the respondent-RIICO being a Statutory Body ought to have acted fairly, and any action, which is arbitrary and amounts to deceiving the buyer/bidder in the auction, cannot be sustained in the eye of law.
In Haryana Financial Corporation & Ors. Vs. Rajesh Gupta, reported in (2010) 1 SCC 655, the Hon'ble Supreme Court has laid down the following precedent law:-
"17. We see no reason to take any different view. We are also of the opinion that the Division Bench was justified in further concluding that in law the appellants/Corporation undoubtedly has the power to forfeit the earnest money provided there was a failure on the part of the respondent to make the deposit. The Division Bench, however, observed that the respondent was dealing with an instrumentality of state. He was entitled to legitimately proceed on the assumption that the appellants, a Statutory Corporation, an instrumentality of the State, shall act fairly. The respondent could not have suspected that he would be called upon to pay the amount of Rs. 50 lakhs without being given even a proper passage to the Unit that he was buying. We are of considered opinion that the respondent had deposited the sum of Rs. 2.5 lakhs on the clear understanding that there would be an independent approach road to the Unit. This is understandable. Without any independent passage the plot of land would be not more than an agricultural plot, not suitable for development as a manufacturing unit. We therefore don't find any substance in the submission made by the learned Counsel for the appellants/Corporation.
In our opinion, the appellants cannot be given the benefit of Clause 5 of the advertisement. The appellants /Corporation cannot be permitted to take advantage of their own wrong. Clause 5 undoubtedly permits the forfeiture of the earnest money deposited. But this can only be, if the auction purchaser fails to comply with the conditions of sale. In our opinion the respondent has not failed to comply with the conditions of sale. Rather, it is the appellants/Corporation which has acted unfairly, and is trying to take advantage of its own wrong.
In view of the aforesaid, we are of the considered opinion that the appellants/Corporation cannot be permitted to rely upon Section 55 of The Transfer of Property Act, 1882. The appellants/Corporation failed to disclose to the respondent the material defect about the non-existence of the independent 3 `Karam' passage to the property. Therefore, the appellants/ Corporation clearly acted in breach of Section 55(1)(a) and (b) of The Transfer of Property Act, 1882. The aforesaid Section provides as under:
(1) The seller is bound-
(a) to disclose to the buyer any material defect in the property [or in the seller's title thereto] of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover;
(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power;
A mere perusal of the aforesaid provision will show that it was incumbent upon the appellants/Corporation to disclose to the respondent about the non-existence of the independent passage to the Unit. It was also the duty of the appellants/Corporation to inform the respondent that the passage mentioned in the revenue record was not fit for movement of vehicles. The appellant also failed to produce to the buyer the entire documentation as required by Section 55(1)(b) of the aforesaid Section.
We are therefore satisfied that the appellants/Corporation cannot seek to rely on the aforesaid provision of The Transfer of Property Act, 1882."
In M/s.Metro Machinery Traders Vs. Union of India & Ors. (W.P. No.43497 of 2006 decided on 26. 10.2007), the Hon'ble Madras High Court held as under:-
"30.A reading of the above provision would make it abundantly clear that not only the representations either oral or written, but also the active concealment of a fact by one having knowledge or belief of the fact, would constitute fraud. In the instant case, the Officials of the NLC should have got the clear knowledge of the transactions, and therefore, a duty was cast upon them to bring to the notice of the auction purchasers including the petitioner, but not done so. Now, the contention put forth by the learned Counsel for the second respondent that they addressed a communication to the department; that they were waiting for the reply; that they presumed that there was no duty payable, and under the circumstances, the auction notice was issued and that too, it has been bonafide done cannot be accepted. It is a Public Sector Undertaking. As could be seen from the materials, the auction notice is the collective action from the lower most Official upto the top most Official. If to be so, while all the machineries, which were imported for a particular use following the notifications, were to be sold, clearance from the department first was a must; but, it was not done. If these material facts in respect of concealment, were expressed in terms by the second respondent, then the petitioner would not have opted to purchase the property. Needless to say, no one would have ventured to purchase when the auctioned property was under the clutches of law. Under the circumstances, there was concealment which is evident. Therefore, it is a case where NLC has actually concealed all the relevant facts which they were duty bound to bring to the notice, but have not done so."
Thus, it was the duty of the respondent-RIICO to have pointed out any material defect in the property auctioned by it, and not doing so, amounts to concealment and fraudulent action, and clearly with ordinary care and the trust that a citizen reposes in a Statutory Body like the respondent-RIICO, the petitioner could not come to know about the hill in the plot. The conduct of the respondent-RIICO is writ large on the face of the two auction notices for the same plot, as the auction notice, pursuant whereto the petitioner has submitted its bid, did not contain a remark of hill in the plot, whereas on the cancellation of the bid of the petitioner in respect of the said plot, another auction notice, whereby the same plot has been sought to be re-auctioned, contained a clear remark of hilly existence.
In light of the aforesaid observations and the aforementioned precedent law, the present writ petition is allowed, and while quashing and setting aside the impugned orders dated 18.08.2017 and 13.10.2017, the respondent-RIICO is directed to return the earnest amount so deposited by the petitioner to the tune of Rs.12,29,400/- alongwith interest @ 4% p.a. from the date of forfeiture thereof till today. Stay Application No.15034/2017 and Second Stay Application No.19306/2018 stand disposed of accordingly.