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2020 Supreme(SC) 669
SUPREME COURT OF INDIA
INDIRA BANERJEE, S. RAVINDRA BHAT, JJ.
CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN GUJARAT MARITIME BOARD – APPELLANT(S)
Versus
ASIATIC STEEL INDUSTRIES LTD AND ORS. – RESPONDENT(S)
Civil Appeal No. 3807 of 2020 (Arising Out of SLP (C) No(s). 28244 of 2015)
Decided on : 24-11-2020
For the Appellant :Gursharan H. Virk, Nakul Mohta, Simranjit H. Virk, Misha Rohatgi Mohta, Advocates
For the Respondent:Mr. Milind Kumar, Advocate and Mr. Shishir Deshpande, Advocates
IMPORTANT POINT
Termination of Contract – Interest has to be paid on refund of earnest money.
Headnote:
Indian Contract Act, 1872 – Sections 64 and 65 – Termination of Contract – Refund of Earnest Money – Direction to pay interest – Since it is a monetary claim premised upon breach of contract, Asiatic Steel correctly approached civil court by filing a suit – Later, apparently it was advised to resort to proceedings under Article 226 of Constitution of India – When its writ petition was considered, suit was permitted to be withdrawn – High Court directed Board to deposit entire principal amount, with interest at 10% per annum – By final impugned judgment that order was confirmed – Conduct of all successful bidders consistently suggests that they expected that plots would be given in usable condition, within reasonable time – Board could not and most certainly did not rectify conditions by removing beachfront rocks – Board is not forthcoming about reasons for its inaction – Board’s complete silence in responding to Asiatic Steel’s demand for refund, coupled with absence of any material placed on record by it suggesting that complaints had no substance leaves it vulnerable to charge of complete arbitrariness – Board’s action is entirely unacceptable – As a public body charged to uphold rule of law, its conduct had to be fair and not arbitrary – Nothing prevented Board from deciding to refund amount, without forcing Asiatic Steel to approach court – Impugned judgment erred in directing payment of interest on entire amount from 08.11.1994; instead, direction to pay interest on Rs. 3,61,20,000/- shall operate with effect from 22.03.1995 to 19.05.1998 – Appeal dismissed. (Paras 32, 34, 35, 36, 37, 40, 41 and 42)
Facts of the case:
Present appeal is directed against a judgment of the High Court of Gujarat dated 24.07.2015. The respondent (Asiatic Steel) had filed a writ petition before High Court seeking refund of contract consideration of Rs.3,61,20,000/- paid by them to the appellant (Board). The High Court allowed writ petition, in view of its earlier interim order, and directed the Board to pay interest for the period from 08.11.1994 to 19.05.1998. Sole basis of the High Court’s direction to pay interest for the period from 08.11.1994 to 19.05.1998 was the Court’s view that the Board had an obligation to compensate Asiatic Steel for its enjoyment of the principal during this period, and because the Board had not shown that it suffered any loss on account of termination of the contract.
Findings of Court:
Conduct of the Board betrays a callous and indifferent attitude, which in effect is that if Asiatic Steel 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 Asiatic Steel to approach the court.
Result : Appeal dismissed.
JUDGMENT
S. Ravindra Bhat, J.
Leave granted. With consent, the appeal was heard. This appeal is directed against a judgment of the High Court of Gujarat dated 24.07.2015. The respondent (hereafter "Asiatic Steel") had filed a writ petition before the High Court seeking refund of contract consideration of Rs. 3,61,20,000/- paid by them to the appellant (hereafter "the Board"). The High Court allowed the writ petition, in view of its earlier interim order, and directed the Board to pay interest for the period from 08.11.1994 to 19.05.1998. The brief facts that arise for consideration are as follows.
2. The Board issued a tender notice on 02.08.1994 for allotment of plots at Sosiya (near Bhavnagar, Gujarat) for ship-breaking of 'very large crude carriers/ultra large crude carriers' (VLCC/ULCC). Asiatic Steel made the highest bid, which was accepted and confirmed by the Board on 08.11.1994, for Rs. 3,61, 20,000/- (hereafter the 'Principal'). Asiatic Steel was allotted Plot V-10. The bid payment was made on 22.03.1995 in foreign currency, to the tune of $1,153,000, while the earnest money deposit of Rs. 5,00,000/- was paid on 08.11.1994.
3. On 23.02.1995, Asiatic Steel and other allottees approached the Board citing difficulties in commencing commercial operations, on account of the connectivity to the plots and the existence of rocks inhibiting beaching of ships on the plot for the purpose of ship-breaking. Through a letter dated 19.05.1998, Asiatic steel intimated the Board that it wished to abandon the contract and demanded that the payment be refunded (an amount of $1,153,000), with interest at 10% per annum from the date of remittance. The Board, through a notice dated 19.05.1998, stated that an amount of Rs. 3,61, 20,000/- would be refunded, but without interest. The Board also clarified that the refund would be directed to the original allottee of the plot (i.e. the second respondent, i.e. M/s Ganpatrai Jaigopal- hereafter referred to as "Ganpatrai"). Asiatic Steel then filed a writ petition before the High Court, seeking (i) refund of USD $ 1,153,000 with interest of 12% per annum compounded quarterly, to the third respondent, M/s Industeel Investment Holdings (hereafter "Industeel", which had made the payment originally on behalf of Asiatic Steel); and (ii) refund of earnest money of Rs. 5,00,000/- with interest of 12% per annum, compounded quarterly to Asiatic Steel.
4. Through an interim order dated 26.02.2002, the High Court held that prima facie, Asiatic Steel was entitled to a refund with interest at 10% per annum. Accordingly, the Board was directed to deposit the admitted amount, i.e., the Principal, with interest at 10% p.a. with the court's Registry on or before 15.04.2002. The interest was to be calculated from 19.05.1998 up to 15.04.2002. The amount was permitted to be withdrawn by Respondent No. 3, with the consent of the other respondents. The Board made this deposit, as directed by the court.
5. On 17.09.2014, the High Court determined that the following issues survived to be determined:
(a) Whether interest on payment should be calculated from 24.03.1995 to 15.04.2002, or from 19.05.1998;
(b) Whether the earnest money of Rs. 5,00,000 should be refunded;
(c) Whether interest should be calculated at 10% p.a. or 12% p.a.
6. The Board resolved, through a resolution dated 17.12.2014, to refund the earnest money deposit with interest of 10% calculated from 19.05.1998. On account of this development, the High Court examined the issue of quantification of interest, and held that so far as the amount that had already been refunded with interest at 10% was concerned, no grievance could be raised by Asiatic Steel, as it had initially claimed an interest of 10%, in the letter to the Board dated 19.05.1998. In the case of the refund already made of the Principal and the earnest money deposit, it was held that Asiatic Steel was not justified in claiming more than 10% interest. Neither party raised any grievance against the High
