Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Del) 6571

IN THE HIGH COURT OF DELHI AT NEW DELHI
Neena Bansal Krishna, J
Delhi Development Authority – Appellant
Versus
Fresh Assets Limited – Respondent
RFA 232/2021 | CM APPL. 14752/2021 | 14753/2021 | 46719/2021

Advocates:
For the Appellants/Petitioners: Manika Tripathy, Ashutosh Kaushik, Saksham Singh
For the Respondents: Anil K. Khaware, Yogendra Kumar, Manoj Ram

Claims for interest on wrongfully retained earnest money by public authorities are not subject to special administrative limitation periods. Entities are liable to pay interest on retained funds beyond a reasonable duration to compensate for the lost investment potential of the aggrieved party.

Headnote:(A) Code of Civil Procedure, 1908 - Order XLI - Section 96 - Regulatory Act - Section 53B - Recovery of interest on earnest money - Limitation period - Applicability of local special statute - A suit for interest on money wrongfully retained by an authority does not fall under the category of acts done or purporting to have been done under the governing Act, thus the special limitation period prescribed therein does not apply to substantive restitutionary claims. (Paras 28-33)

(B) Interest - Commercial transaction - Wrongful retention of funds - Entitlement to compensation - In instances where an authority unilaterally retains earnest money for an extended duration following the cancellation of an agreement, the aggrieved party is entitled to interest for the loss of gainful investment, even where contract terms remain silent. (Paras 35-39)

Facts of the case:
A commercial entity deposited earnest money for an auction conducted by a public body. Due to active local opposition and subsequent cancellation by the authority, the auction did not conclude. The authority retained the principal amount for over four years before refunding it without interest. The entity initiated a suit for the recovery of interest, which the authority contested, alleging the suit was time-barred under the governing statute and that the contract did not stipulate the payment of interest.

Findings of Court:
The court determined that claims regarding interest on earnest money do not constitute acts done under the statutory administrative mandate, thereby precluding the application of the special six-month limitation period. It further concluded that the authority cannot rely on contractual silence to evade its obligation to pay interest on deposits held without justification for an extended period.

Issues: The main issues were whether the suit for interest was barred by the special limitation period stipulated in the governing statute, and whether the respondent was contractually or equitably entitled to interest on the earnest money retained by the appellant.

Ratio Decidendi: The court ruled that a claim for interest on retained earnest money is a substantive restitutionary claim distinct from administrative acts performed under the statute. Consequently, such claims are subject to general laws rather than special restrictive statutes. Furthermore, the authority is obligated to compensate for the lost value of money held beyond a reasonable time-frame.

Result: Appeal dismissed.

Table of Content
1. procedural background and foundational facts of the suit. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11)
2. limitation period under section 53b of dda act does not apply to claims for interest/restitution. (Para 12 , 13 , 14 , 15 , 16 , 28 , 29 , 30 , 31 , 32 , 33)
3. contractual obligation to pay interest on wrongfully retained earnest money. (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 34 , 35 , 36 , 37 , 38)
4. dismissal of cross-objections as interest cannot be claimed beyond principal refund. (Para 26 , 27 , 43 , 44 , 45 , 46)
5. equitable right to compensation for loss of commercial investment opportunity. (Para 39 , 40 , 41 , 42)

J U D G M E N T

NEENA BANSAL KRISHNA, J.

1. Regular First Appeal under Section 96 read with Order XLI Code of Civil Procedure, 1908 (CPC) has been filed against the Impugned Judgment and Decree dated 13.02.2020 whereby the Suit for the Recovery of ₹46,85,671/- as interest @ 18% per annum on a principal amount of ₹63,12,500/- from 17.12.2008 to 29.01.2013 and future and pendente lite interest @ 18% p.a. from 29.01.2013 until its realization.

2. The Plaintiff/Respondent had filed a Suit for Recovery of ₹46,85,671/- as interest on the wrongful retention of the principal amount of ₹63,12,500/- for four years.

3. The brief facts as per Plaint, are that the Plaintiff is a Company incorporated under the provisions of Companies Act, and inter alia, deals in real estate, development of properties and constructions activities. The Defendant No.1, i.e. Delhi Development Authority (DDA) had advertised for an auction of plot bearing site no. 4, near plot no. A-373 Defence Colony, New Delhi-110024 measuring about 91 sq. meters. The reserve price of the said plot in the auction was Rs. 1,29,90,614/-, and in the auction held on 17.12.2008, the Plaintiff was declared as the highest bidder. The Plaintiff deposited Rs. 63,12,500/- towards the earnest money with the Defendant No.1 authority, as under:

4. Thereafter, a Writ Petition W.P.(C) 123/2009 was filed by Sh. Rajesh Kumar Sethi & Ors., i.e. the residents of Defence Colony, for setting aside the auction, inter alia, claiming the action of DDA as arbitrary and illegal, wherein it was claimed that in the event of auction and construction in the said plot, i.e. site no.4. the width of the road around the said plot be reduced for the air and light to flow into the property A-373. Besides, the proposed auction was alleged to be contrary to stipulated norms, and hence, be held impermissible.

5. Initially, the Defendant had opposed the petition i, but later conceded that the auction of the said plot should have been carried out by the DDA. Consequently, an additional affidavit was filed by the DDA, in W.P.(C) 123/2009, stating that the auction be cancelled. The Plaintiff herein, contested the Petition and filed the Application for impleading himself as a party, which was allowed, vide order dated 15.03.2011.

6. The Plaintiff, after the acceptance of the highest bid, asked the Defendant for early culmination of the auction vide letters dated 14.02.2009, 18.12.2008, 22.12.2008, 29.12.2008, 25.02.2009, 27.08.2009 and 07.08.2018.

7. The Plaintiff, thus vide letter dated 20.09.2012 asked the Defendant No.1 to refund the earnest money of Rs.63,12,500 along with 18% interest p.a. However, the Defendant No.1, on 29.01.2013 returned the earnest money of Rs. 63,12,500/- (only the principal amount), via RTGS, back to the Plaintiff. The plaintiff asserted that the money was retained by the DDA, for more than four years, i.e. 07.12.2008 till 29.01.2013 on which no interest was paid.

8. The Plaintiff claimed commercial rate of interest @ 18% per annum from the date of amount deposited till its realization. The claim of the Plaintiff towards the interest @ 18% p.a. on the earnest money, is as under:

9. Further, the Plaintiff filed an Application CM Appl. No. 10781/2013 in the W.P. (C) No. 123/2009. The Application and the Writ Petition bearing no. W.P.

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2026 Supreme(Online)(Del) 6571

IN THE HIGH COURT OF DELHI AT NEW DELHINeena Bansal Krishna, JDelhi Development Authority – AppellantVersusFresh Assets Limited – RespondentRFA 232/2021 | CM APPL. 14752/2021 | 14753/2021 | 46719/2021

Claims for interest on wrongfully retained earnest money by public authorities are not subject to special administrative limitation periods. Entities are liable to pay interest on retained funds beyond a reasonable duration to compensate for the lost investment potential of the aggrieved party.

IN THE HIGH COURT OF DELHI AT NEW DELHI
Neena Bansal Krishna, J
Delhi Development Authority – Appellant
Versus
Fresh Assets Limited – Respondent
RFA 232/2021 | CM APPL. 14752/2021 | 14753/2021 | 46719/2021