Failure to Pay Statutory Interest Despite Court Order Leads to Contempt Proceedings at Jharkhand High Court - 2024-12-13

Jharkhand High Court Initiates Contempt Proceedings Over 'Absurd' Delay in Interest Payments

In a sharp rebuke to state authorities, the High Court of Jharkhand at Ranchi has initiated contempt proceedings against the Secretary of the Excise and Prohibition Department , Government of Jharkhand , for the failure to comply with a previous judicial directive to pay "statutory interest" on a refunded amount.

Presided over by Hon’ble Mr. Justice Sujit Narayan Prasad, the court termed the state's repeated requests for clarification regarding the term "statutory interest" an "absurd" attempt to evade the majesty of the law.

The "Absurd" Excuse for Non-Compliance

The dispute originated from a Writ Court order directing the Excise and Prohibition Department to refund money to petitioner Spencer Distilleries and Breweries (Pvt. Ltd.) along with statutory interest. While the principal amount was disbursed, the state withheld interest payments, filing a show-cause notice claiming that Excise Laws do not define "statutory interest."

Instead of executing the order, state officials engaged in a bureaucratic shuffle, seeking opinions from the Finance Department , the Law Department , and eventually the Advocate General. The court found this circular displacement of files to be a deliberate attempt to ignore its binding order.

Legal Precedents and the Court’s Analysis

Justice Sujit Narayan Prasad highlighted that the lack of a specific definition in the Excise Act does not grant the state immunity from paying interest. Delivering a firm reminder on judicial powers, the court cited the following legal principles:

• Discretionary Interest: Under Section 3 of the Interest Act, 1978 , and Section 34 of the Civil Procedure Code , courts are vested with the discretion to award interest in any proceeding for the recovery of a debt or damages, even when the underlying statute is silent.
• Settled Law: Referencing Thazhathe Purayil Sarabi v. Union of India (2009) and Union of India v. Willowood Chemicals (P) Ltd. (2022) , the court emphasized that interest acts as compensation for the loss of utility of the money held back by the authority.
• Defining "Statutory": The court clarified that the term reflects the application of RBI norms, rejecting the state's argument that a specific statutory clause is required to define the rate of interest before it can be paid.

Key Observations

The judgment underscores the court's commitment to the sanctity of its orders, stating:

> "This Court is constrained to make an observation that how such statement can be made that the Excise Law does not provide as to what shall constitute the statutory interest."

> "The court... is entitled to grant interest in its discretion, under the provisions of Section 3 of the Interest Act and Section 34 of the Civil Procedure Code ."

> "The word 'statutory interest' means that as per the RBI norms, the statutory interest along with the principal amount is to be paid."

> "The contempt is the proceeding between the Court and the Contemnor and the Contempt Court is to see regarding the majesty of the order passed by the Court of law."

The Road Ahead

Convinced that the delay is both "willful and deliberate," the High Court has rejected the state's show-cause response. The court has now ordered the Secretary, Excise and Prohibition Department , to appear in person on January 10, 2025, for the framing of charges.

This case serves as a stern warning that administrative departments cannot use bureaucratic ambiguity—real or manufactured—to circumvent clear judicial mandates. For legal practitioners, it reinforces the principle that the authority to award interest is an inherent power of the court, safeguarding the financial interests of parties engaged in long-standing legal disputes with the state.