J&K High Court finds nothing amiss in UT decision to raise earnest money deposit

The Jammu and Kashmir High Court has found nothing amiss in the state government’s decision to enhance the earnest money deposit for mining of minor minerals. The government had, through an order dated May 20, raised the deposit to Rs 5 lakh, or 50% of the reserve bid price, whichever was higher, for auction of the minor minerals. The court’s observation came in response to a petition by Dheeraj Sharma, who had challenged the government's decision, arguing that the increase was “quite stringent” from Rs 1.5 lakh, or 15% of the minimum bid amount, earlier. Sharma had contended that the sudden increase from 15% to 50% was “totally unreasonable”.
The government told the High Court last month that “there were a lot of dummy fake bidders earlier and they used to form a cartel on account of which the State used to suffer huge loss. For example, earlier for some blocks, the bid amount received was Rs 60 crores, which may now increase to more than Rs 300 crores”. Justifying the increase, the state added that “the idea is not to allot all the sites to one person. Let there be a healthy competition. It is a contractual matter. The terms and conditions cannot be said to be unreasonable”.

The state further submitted that till 2016, “the system being followed by the State was open auction for conferment of rights for extraction of minor minerals. Now, this system has been changed to e-auction”. It further argued that “there is nothing wrong in fixation of the amount of earnest money once the power has been conferred on the State under the Act, validity of which is not in dispute”. The petitioner had argued that the enhancement would “oust a number of small bidders from the bidding process and rights of mining minerals will be available only to the rich and mighty”. He further submitted that the government order affects the rights of the petitioner since he wanted to bid for all the 30 blocks offered by e-auction notice issued last month.

However, finding no merit in the petition, the High Court held that “these are contractual matters in which the State has large discretion unless the same shakes the conscious of the Court that the conditions are so arbitrary that these require interference by the Court". According to its order, “earnest money is only to see the seriousness of the bidders. It is a temporary measure. The amount is required to be deposited. In case allotment of the site is made, the amount deposited by the unsuccessful bidder is refunded.”