Interest:
Contract for shipbreaking – By Maritime Board – To the respondent-Company – Earnest money deposited on 08.11.1994 – Upset premium paid on 22.03.1995 – Awardee of contract (respondent No. 1) sought refund of contract amount @ 10% interest per annum from the date of remittance – Board agreed for the refund but without interest – Writ petition by the awardee seeking refund with interest @ 12% per annum – High Court allowed the petition directing the Board to pay interest @ 10% on earnest money and @ 6% on the principal amount from 08.11.1994 to 19.5.1998 – Appeal to Supreme Court – Held: Since respondent No. 1 had paid only earnest money on 08.11.1994 and rest of the amount was paid later – Therefore, interest on the entire amount is directed to be paid from 22.3.1995 (not from 08.11.1999) to 19.5.1998.
Dismissing the appeal, the Court
HELD: 1. The contemporaneous situation, and the correspondence between respondent No. 1 and the Board after the entire amount was deposited, reveals that other concerns approached the court seeking refund of their principal amounts, with interest, which forced the Board to take a decision and comply. The final decision by respondent No. 1 demanding refund was later, in May, 1998. In the meanwhile, the other concerns, which had bid successfully for three plots had approached the court (in 1995) and the Board had decided to refund the amounts with one years’ interest. Respondent No. 1, therefore, for reasons best known to it, approached the court for refund and interest, first by filing a suit in 2001. [Para 31][386-D-F]
2. It is clear from the Board’s conduct that it never responded to the letters written by respondent No. 1 at least, no reply has been placed on record. Even request of respondent No. 1 for permission to carry-out the necessary clearance work at the cost of the board, was not responded to - either positively or negatively. Further, whenever any bidder approached the court complaining that the plot allotted was unusable, the Board decided, mostly contemporaneously, to refund the amount, even with interest. In the case of respondent No. 1, however, when the demand was made for refund on 19.05.1998, the Board did not act, forcing the company to approach the court, firstly through a civil suit which was later withdrawn, and then in a writ petition. [Para 35][387-G-H; 388-A]
3. The conduct of the Board betrays a callous and indifferent attitude, which in effect is that if respondent No. 1 wished for its money to be returned, it had to approach the court. This was despite its knowledge that at least three other identically placed entities had asked for return of money and, upon approaching the court, were refunded the amounts given by them promptly. In view of these facts, nothing prevented the Board from deciding to refund the amount, without forcing respondent No. 1 to approach the court. [Para 40][391-F-G]
4. The Board’s action is entirely unacceptable. As a public body charged to uphold the rule of law, its conduct had to be fair and not arbitrary. If it had any meaningful justification for withholding the amount received from respondent No. 1, such justification has not been highlighted ever. On the other hand, its conduct reveals that it wished that the parties should approach the court, before it took a decision. This behavior of deliberate inaction to force a citizen or a commercial concern to approach the court, rather than take a decision, justified on the anvil of reason (in the present case, a decision to refund) means that the Board acted in a discriminatory manner. [Para 37][388-D-E]
5. The High Court had directed payment of interest for the entire period (i.e. starting from 08.11.1994 and ending on 19.05.1998). However, it is evident that respondent No. 1 had not paid the entire amount on 08.11.1994; in fact the sum of $1,153,000 /- i.e. the principal consideration, excluding the earnest money deposit, was deposited on 24.03.1995. Therefore, the impugned judgment erred in directing payment of interest on the entire amount from 08.11.1994; instead, the direction to pay interest on 3,61,20,000/- shall operate with effect from 22.03.1995 to 19.05.1998. [Para 41][391-H; 392-A-B]
Dilbagh Rai Jarry v. Union of India (1974) 3 SCC 554: [1974] 2 SCR 178; Gurgaon Gramin Bank v. Khazani (2012) 8 SCC 781 : [2012] 8 SCR 225 ; State of A.P. v. Pioneer Builders (2006) 12 SCC 119 : [2006] 6 Suppl. SCR 571 – relied on.
Union of India, Tr. Dir. of IT v. M/s Tata Chemicals Ltd. (2014) 6 SCC 335 : [2014] 3 SCR 298; P.P. Abubacker v. Union of India AIR 1972 Ker 103 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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