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2020 (11) TMI 790 - SC - Indian LawsRefund of contract consideration/earnest money - payment of interest for the period from 08.11.1994 to 19.05.1998 - rate of interest @ 10% p.a. or 12% p.a. - HELD THAT - In this case, 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. This court notes that the High Court 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 Asiatic Steel 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. The appeal allowed in part.
Issues Involved:
1. Calculation of interest on payment from specific dates. 2. Refund of earnest money. 3. Determination of interest rate. Detailed Analysis: 1. Calculation of Interest on Payment from Specific Dates: The primary issue was whether the interest on the payment should be calculated from 24.03.1995 to 15.04.2002, or from 19.05.1998. Asiatic Steel made the highest bid for a ship-breaking plot, which was accepted by the Board on 08.11.1994, and paid the bid amount on 22.03.1995. Due to difficulties in commencing operations, Asiatic Steel sought a refund on 19.05.1998. The High Court initially directed the Board to pay interest from 19.05.1998 to 15.04.2002. However, the Supreme Court modified this, stating that interest on ?3,61,20,000/- should be calculated from 22.03.1995 to 19.05.1998, acknowledging that the principal amount was deposited on 22.03.1995. 2. Refund of Earnest Money: The Board resolved to refund the earnest money deposit of ?5,00,000/- with interest at 10% calculated from 19.05.1998. The High Court upheld this resolution, noting that Asiatic Steel initially claimed an interest of 10% in its letter dated 19.05.1998. The Supreme Court did not alter this aspect of the High Court's decision, thus affirming the refund of the earnest money with the specified interest. 3. Determination of Interest Rate: The High Court initially directed the Board to pay interest at 10% per annum. However, considering that Indusind was a Singaporean company, and the lower interest rates in developed countries, the High Court later altered the rate to 6% per annum for the period during which the Board retained the principal amount. The Supreme Court upheld this revised interest rate, emphasizing the Board's obligation to compensate for the period the money was retained. Arguments and Analysis: - The Board argued that no breach of contract was proven and that Sections 64 and 65 of the Indian Contract Act, 1872, which contemplate return of benefit for a void/voidable contract, were inapplicable. They contended that the High Court's direction to pay interest was based on an obligation to compensate for the retention of the principal amount. - Asiatic Steel argued that the Board failed to develop the necessary infrastructure and remove rocks, making the plot unusable. They claimed interest from the date of remittance due to the Board's failure to fulfill its obligations. - The Supreme Court noted that the Board's conduct was arbitrary and discriminatory, as it refunded amounts with interest to other similarly situated bidders who approached the court earlier. The Board's indifference forced Asiatic Steel to seek judicial intervention for a refund. Conclusion: The Supreme Court dismissed the appeal, with a modification to the High Court's judgment, directing that interest on ?3,61,20,000/- should be calculated from 22.03.1995 to 19.05.1998 at the rate of 6% per annum. The decision underscored the Board's arbitrary conduct and the necessity for public bodies to act fairly and not force parties into litigation to resolve straightforward issues.
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