New Malwa Sales Corporation vs. State Of Punjab And Others

Facts

The petitioner, New Malwa Sales Corporation, participated in a tender floated by Respondent No. 3 (Municipal Corporation, S.A.S. Nagar, Mohali) for chemicals. The petitioner was declared the L1 bidder and subsequently received an order for 290 litres of Cyphenothrin 5%. The petitioner fulfilled the order and submitted the GST invoice. While payment for the supply was made, the petitioner's Earnest Money Deposit (EMD) remained unreleased. The petitioner made multiple representations for the release of the EMD, dated 19.10.2020 and 15.09.2021, but the EMD was not released. A legal notice was sent on 30.09.2022, but no action was taken. The petitioner filed a writ petition seeking the release of the EMD with interest.

Held

The Court disposed of the writ petition with the consent of the parties. It directed Respondent No. 3, the Municipal Corporation S.A.S. Nagar, Mohali, to consider and decide the legal notice dated 30.09.2022, submitted by the petitioner, by passing a reasoned and speaking order. This decision was to be made after affording an opportunity of hearing to the respective parties within a period of three months from the date of receipt of a certified copy of the order. Furthermore, if, upon considering the legal notice, the EMD was found to be refundable to the petitioner, it was to be released within a further period of three months. The Court explicitly stated that it was not commenting on the merits of the case.

Key Issues

1. Whether the petitioner is entitled to the release of the Earnest Money Deposit (EMD) along with interest, as per the terms of the tender and subsequent conduct of the parties, under the relevant provisions of contract law and the Code of Civil Procedure, 1908, concerning the withholding of security deposits? Petitioner's arguments: The petitioner contended that they successfully fulfilled the tender obligations, including the supply of chemicals and submission of GST invoices. They argued that the EMD was illegally withheld by Respondent No. 3 for an extended period, causing financial prejudice. They sought the release of the EMD and interest at 12% per annum, citing their repeated representations and the lack of any justification for withholding the EMD. Respondents' arguments: The respondents, represented by learned counsel, accepted notice and sought time to file a response. They did not oppose the petitioner's prayer for a time-bound decision on the legal notice.