M/S Bhanu Metal Industries And Ors vs. Union Of INDIA And Ors

Facts

The petitioners participated in an e-auction floated by Respondent No. 3 through Respondent No. 2 for the sale of scrap and e-waste. Petitioner No. 1 was declared the successful bidder and deposited Rs. 70,92,750/- on December 18, 2023. A delivery order was issued on December 19, 2023. Upon attempting to lift the materials on December 22, 2023, the petitioners discovered that a significant portion of the materials had been damaged by fire and were missing. They informed the respondents on December 28, 2023, stating their inability to lift the materials. Respondent No. 2 advised Respondent No. 3 to cancel the tender and re-auction the available materials, but Respondent No. 3 did not act on this advice. The petitioners requested a refund of the deposited amount via email on January 8, 2024, which was not considered. A fire incident had occurred on November 10, 2023, prior to the deposit of the tender amount, but this was not disclosed to the petitioners or Respondent No. 2.

Held

The Court held that Respondent No. 3 ought to have informed the petitioners about the fire incident before accepting the tender amount and that an inspection should have been carried out in the presence of the petitioners to ascertain the damage. The Court found that the procedure of forming committees and conducting inspections was not followed with notice to the petitioners, and the reports were not served upon them. Furthermore, the Court noted that the reports relied upon by the respondents were contradictory. Given these circumstances, the Court found no purpose in allowing a joint inspection of the materials, as significant time had passed since the fire incident. Therefore, the Court directed Respondent No. 3 to refund the entire amount of Rs. 70,92,500/- to the petitioners with simple interest at the rate of 5% per annum from December 19, 2023, within two months. The writ petition was allowed.

Key Issues

1. Whether the auction proceedings are vitiated due to the non-disclosure of the fire incident that occurred on November 10, 2023, prior to the deposit of the tender amount by the petitioners, thereby constituting suppression of facts by Respondent No. 3? The petitioners argued that Respondent No. 3 had knowledge of the fire incident before accepting the full tender amount but failed to inform the petitioners or Respondent No. 2, amounting to suppression of facts. They contended that an inspection should have been conducted in their presence before accepting the payment. The petitioners also argued that the inspection reports relied upon by the respondents were prepared without their knowledge or presence and were not served upon them, rendering them invalid. They further argued that the reports were contradictory. The respondents contended that committees were formed to assess the damage, and their reports indicated minimal damage, with no shortage of materials except for some burnt/damaged items. They argued that the petitioners avoided lifting the materials.