The Delhi High Court has directed Oil and Natural Gas Corporation Ltd. (ONGC) to pay 8% simple interest on the earnest money deposit (EMD) of nearly ₹2.95 crore wrongfully forfeited from CJ Darcl Logistics Ltd., holding that once the forfeiture was found to be illegal, the bidder was entitled to consequential interest. The Court also ruled that cross-objections under Order XLI Rule 22 of the Code of Civil Procedure are not maintainable in Letters Patent Appeals (LPAs) arising from writ proceedings.
A Division Bench of Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora was hearing appeals filed by CJ Darcl Logistics Ltd. and Transrail Logistics Ltd. against a Single Judge’s decision upholding ONGC’s six-month ban imposed on them for alleged violation of the Integrity Pact in a transportation tender, while directing refund of the forfeited EMD. ONGC, through cross-objections, challenged the refund of the EMD amount.
Before the Division Bench, the appellants did not press their challenge to the six-month banning orders, noting that the period of debarment had already expired. However, CJ Darcl sought interest on the refunded EMD, contending that it had been deprived of the money since its forfeiture in March 2018.
Accepting the plea, the Court held that the grant of interest was a natural consequence of the finding that the forfeiture itself was illegal. The Court referred to Alok Shanker Pandey v. Union of India, (2007) 3 SCC 545, which held that interest is not a penalty but the normal accretion on capital, and that a person wrongfully deprived of money is entitled to compensation in the form of interest. Accordingly, it directed ONGC to pay 8% simple interest per annum on the EMD amount from March 27, 2018, until the amount was deposited before the High Court Registry in 2021.
The Court also directed the Registry to release the interest accrued on the fixed deposit maintained by it after ONGC deposited the principal amount and to return the bank guarantee furnished by the appellant.
On ONGC’s challenge to the refund order, the Bench held that the corporation had failed to establish that it suffered any actual loss because of the appellants’ exclusion from the bidding process. It noted that the tender had already been awarded to the successful bidder before the appellants’ bids were rejected and that neither the show cause notice nor the banning orders recorded any loss suffered by ONGC. The Court further found that ONGC had failed to comply with the Integrity Pact, which required issuance of a demand notice before recovering liquidated damages by forfeiting the EMD.
Rejecting ONGC’s cross-objections as not maintainable, the Division Bench held that Order XLI Rule 22 CPC, which provides for filing cross-objections, does not apply to Letters Patent Appeals arising from writ proceedings under Article 226 of the Constitution. The Court, however, declined the appellants’ request for a declaration that they could participate in future tenders without any reference to the earlier banning orders, observing that each tendering authority is entitled to prescribe its own eligibility and disclosure conditions and assess the relevance of any previous debarment in accordance with its tender terms.
Accordingly, the appeals were disposed of with directions to ONGC to pay the interest and to the Registry to release the accrued interest lying in deposit, while ONGC’s cross-objections were dismissed.
