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M/S Hornbill Consultants vs State of Punjab and Others

SLP(C) · 2023 INSC 195Decided 2 Mar 2023
SLP(C) No. 8755 of 2018
Sanjiv Khanna · M.M. Sundresh

Background

Hornbill Consultants won an e-auction bid of about Rs. 1.85 crore for a mining lease in Amritsar, Punjab, and deposited earnest money. It was required to pay a security deposit of 25% of the annual contract amount by 10 July 2017. Due to a technical glitch at its bank, two online transfers totalling about Rs. 68.46 lakh could not reach the government's account by the deadline (RTGS/NEFT cut-off times), even though the money left the appellant's account on time. The appellant immediately arranged a demand draft for the same amount and submitted it the very next day, but the mining department rejected it as late, cancelled the provisional acceptance, and forfeited the earnest money. The Punjab and Haryana High Court, despite recording these facts favourably for the appellant, dismissed its writ petition and left it to file a civil suit for recovery.

Decision Breakdown

The Supreme Court found the facts completely undisputed: the delay was caused entirely by a bank server problem beyond the appellant's control, the appellant acted promptly by preparing a demand draft the same day, and the department itself retained that draft for three months before returning it. The Court noted that while writ courts are usually reluctant to intervene in contractual disputes involving disputed facts, this reluctance is not an absolute rule, especially where government action is arbitrary or unreasonable and the facts are not in dispute. Given nearly six years had already passed in litigation, and the facts were clear enough not to need further factual inquiry, the Court held it would serve no purpose to send the appellant back to file a fresh civil suit. It also noted that the government's own conduct, insisting on litigating a clear-cut case, caused the eventual loss to the public exchequer through re-auction at a lower price. The Court allowed the appeal, set aside the High Court's judgment, and directed the state to refund the forfeited earnest money of Rs. 31,40,634 within eight weeks, with 8% annual interest if delayed.

Lesson Learnt

When facts in a government-contract dispute are undisputed and clearly show the citizen was not at fault (such as a bank's technical failure beyond the bidder's control), courts should decide the matter directly rather than forcing years of additional litigation through a fresh civil suit: writ jurisdiction can and should step in against arbitrary government forfeiture even in contractual matters.

Official source (sci.gov.in)View Judgment (PDF)

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