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TMI Blog2025 (4) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... ration Limited (HUDCO), on account of non-performance of contractual obligations by the Appellant. Before adverting to the respective contentions of the parties, we deem it appropriate to briefly narrate the factual background leading to the present appeal. A. FACTUAL BACKGROUND 4. The sequence of events in the instant appeal commenced with the Ministry of Urban Development, Government of India (MUD), i.e., Respondent No. 2 herein, having decided in 1990 to develop an area of 71 acres of land located at Andrew's Ganj, New Delhi, through Respondent No. 1. Bids were thus invited by Respondent No. 1 for properties at Andrew's Ganj inter alia offering: (i) Land, which was to be leased for 99 years, in order to establish a 5-star Hotel, along with an already-built Car Park; (ii) Nine Guest House blocks, nine Restaurants, and 25 Shops already constructed by Respondent No. 1; (iii) A Shopping Arcade and; (iv) A Cultural Centre to be built by the successful bidder(s). We must underscore that the scope of the present appeal is restricted only to Item No. (i) specified hereinabove, i.e. 'land, which was to be leased for 99 years, in order to establish a 5-star Hotel, along wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date. Additional penal interest @ 3% p.a. shall also be charged on the interest for three months. Any delay beyond three months would entail cancellation of allotment and/or forfeiture of the total amount deposited to date. (iv) You will be required to complete the construction of the Hotel Site within three years of the date of handing over possession of the Hotel Site on licence basis for construction of the Hotel building as per terms and conditions contained in the proforma of Agreement to Sub- lease, two copies of which are enclosed with this allotment letter. In the event of noncompletion of construction within the stipulated time, HUDCO may consider granting extension if exceptional and unavoidable circumstances have prevented you to complete construction within the stipulated time. The decision of HUDCO regarding the existence of the exceptional and unavoidable circumstances will be final and binding upon you. In case the construction is not completed within the prescribed period or the extended period as decided by HUDCO, HUDCO will have the right to take over the land along with the unfinished building with materials, fixtures, if any, on the site without payment of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs for the preparation of required documents, stamp duty, registration charges and other levies of any kind whatsoever will have to be borne by you. Property taxes and other municipal levies shall borne by you from the date of possession of the site(s)". [Emphasis supplied] 6. The Appellant duly deposited the first instalment of Rs. 27.04 Crores along with interest at the rate of 16.48% for three months, amounting to Rs. 1,04,81,939, as per Clause 5(A) of the Allotment Letter. In addition, the Appellant also deposited a sum of Rs. 2.5 Lakhs towards the maintenance corpus. As such, the total amount paid by the Appellant was admittedly Rs. 28,11,31,939. 7. Subsequently, a dispute arose between the parties; purportedly on account of the Appellant's assertion: that in terms of the Allotment Letter, Respondent No. 1 was obligated to execute certain documents after obtaining clearances under the Income Tax Act, 1961 (IT Act) and the Urban Land (Ceiling and Regulation) Act, 1976 (ULCR Act). Respondent No. 1 was further obligated to execute an 'agreement to sub-lease' in favour of the Appellant. The Appellant thus claimed that as per the terms and conditions of allotment, the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment was cancelled and the entire amount of Rs. 28,11,31,939 was forfeited. 13. Respondent No. 1 thereafter invited fresh bids in November, 1996 for the development of the Subject Property, this time disclosing in the bid that a lease in its favour for the said land was yet to be executed. Additionally, Respondent No. 1 also filed an application in the pending First Suit seeking its dismissal on the ground that the proceedings had become infructuous, owing to the cancellation of the allotment. 14. The Appellant being aggrieved by the cancellation of their allotment filed a fresh suit bearing Suit No. 1/1997 (Second Suit), changing the forum from the High Court to Tis Hazari Courts, Delhi (Civil Court). In the Second Suit, the Appellant sought a declaration that the cancellation of allotment by Respondent No. 1 was illegal, null and void. They also consequently sought possession of the Subject Property. 15. Interestingly, the Appellant moved an application before the High Court for the withdrawal of their First Suit, on the plea that the Second Suit had been filed before the Civil Court on the basis of a fresh cause of action. The High Court rejected the aforesaid application on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Appeal before the High Court, which was allowed vide the Impugned Judgment dated 03.06.2016. Notably, the High Court overturned the concurrent findings of the courts below, and has inter alia observed that the Appellant admittedly did not have sufficient funds and, thus, wanted to prolong the litigation. The High Court further held that: "39. ... the suit filed by the Appellant suffered from a fatal defect of not claiming possession as a further relief in terms of proviso to Section 34 of the Specific Relief Act, and therefore the decree seeking only declaration to the effect that the cancellation letter dated 02.05.1996 was bad in law could not have been passed by the courts below". Additionally, the High Court went on to observe that the grant of declaration under Section 34 of the SR Act, being a discretionary relief, cannot be bestowed upon a party who indulges in 'sharp' practices. Hence, this appeal. B. CONTENTIONS ON BEHALF OF THE APPELLANT 22. Shri Tejinder Singh Dhindsa, learned Senior Counsel, representing the Appellant has painstakingly taken us through the voluminous material placed on record. He contended that the High Court has committed grave error in upsetti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t schedule and was threatened with cancellation of the allotment in the event of default. f) The forfeiture of the amount paid by the Appellant towards the first instalment was done on account of misconstruction and selective reading of the mutual obligations emanating from the Allotment Letter and not on account of any actual loss suffered by Respondent No. 1. 24. Alternatively, Shri Dhindsa submitted that since considerable time has passed following the allotment and its cancellation, it would be in the interests of justice and equity to entertain the Appellant's limited relief for return of Rs. 28,11,31,929 along with the applicable rate of interest. C. CONTENTIONS ON BEHALF OF RESPONDENT NO. 1 25. Ms. Meenakshi Arora, learned Senior Counsel appearing on behalf of Respondent No. 1, contrarily opposed the Appellant's prayer inter alia and vehemently contended that not only did they fail to comply with the terms and conditions of the Allotment Letter but that the Appellant had disqualified itself from any relief on account of its deceitful, unfair and unethical conduct. 26. Ms. Arora canvassed the following grounds in support of her submissions: a) The Appellant defaulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o do so, despite categorical assertions in the Allotment Letter. Hence, no parity with the Ansals can be claimed when the Appellant never demonstrated any willingness to honour their obligations. 27. In essence, Ms Arora contended that the conduct of the Appellant throughout has been to prolong the litigation and entangle Respondent No. 1 in vexatious litigation. She thus maintained that the High Court has rightly reversed the findings of the courts below or that the Appellant is not entitled to any discretionary relief under Section 34 of the SR Act. 28. Ms. Aishwarya Bhati, learned Additional Solicitor General of India, on behalf of Respondent No. 2 reiterated the contentions put forth by Ms. Arora. She further fairly submitted that if this Court fixes any liability on Respondent No. 1 to refund the forfeited amount, it is inter-se the Respondents to comply with such direction. Ms Bhati maintained that Respondent No. 1 has sufficient assets to meet any liability imposed by this Court. D. ISSUES FOR CONSIDERATION 29. In our considered view, the salient issues that arise for our consideration can be summed up as follows: (a) Whether Respondent No. 1/HUDCO was in breach of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Allotment Letter. 34. Second, a conjoint reading of Clauses 5(viii) and (ix) of the Allotment Letter postulates an unambiguous promise on the part of Respondent No. 1: that upon receipt of the first instalment and on grant of approvals by the Statutory Authorities, an 'agreement to sub-lease' will be executed by Respondent No. 1, followed by handing over of possession of the Subject Property to the Appellant. 35. As held earlier, Respondent No. 1, even after the receipt of the first instalment, did not take any tangible steps to secure the necessary statutory approvals. It is obvious that the said failure led to breach of Clause 5(viii) and (ix) also, as admittedly, no 'agreement to sublease' was executed in favour of the Appellant, owing to the nonexecution of a perpetual lease by Respondent No. 2 in favour of Respondent No. 1. Nonetheless, we proceed to examine the contention of the Appellant that Respondent No. 1 also concealed the fact that it did not have the title and authority to execute the 'agreement to sub-lease' in favour of the Appellant. 36. The Appellant's plea to this effect is fortified by the contents of long drawn correspondence, including letters dated 03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of Respondent No. 1, when such a relief was granted to another similarly placed party. 42. As an upshot of the foregoing, we have no doubt in our mind that Respondent No. 1 was in breach of several obligations as contemplated in the Allotment Letter, viz. failure to execute documents for securing approval under the ULCR Act and the IT Act; failure to execute the sub lease agreement in favour of the Appellant and; failure to secure the approval of the revised layout plan for the construction of the hotel. E. 2 Whether the Appellant is entitled to a refund of the forfeited amount? 43. Having held that Respondent No. 1 has breached its contractual obligations, we now proceed to determine the Appellant's entitlement to refund of the forfeited amount. We may clarify here that during the course of oral arguments, the Appellant sought a refund of the forfeited amount along with reasonable interest. However, in the written submissions, the Appellant, while reiterating their stance, has sought a refund of Rs. 28,11,31,929 along with interest from the date of payment at the rate of 16.48%, i.e., the contractual rate of interest charged by Respondent No. 1. 44. Clause 5 (vi) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y discussed in the Constitution Bench judgment of this Court in Central Bank of India v. Ravindra & Ors.; (2002) 1 SCC 367, which states: "Award of interest pendente lite or post-decree is discretionary with the Court as it is essentially governed by Section 34 of the CPC de hors the contract between the parties. In a given case if the Court finds that in the principal sum adjudged on the date of the suit, the component of interest is disproportionate with the component of the principal sum actually advanced, the Court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline to award such interest. The discretion shall be exercised fairly, judiciously, and for not arbitrary or fanciful reasons." [Emphasis supplied] 50. There is no gainsaying that the power to award interest ought to be exercised judiciously, aligning with equitable considerations and also ensuring neither undue enrichment nor unfair deprivation. Courts are duty-bound to assess the facts and circumstances of each case, applying the principles of fairness and justice. This discretion must reflect a balanced approach, grounded in reason, and guided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean hands and instead attempted to hoodwink the judicial process by creating a facade to subterfuge their inability to meet their contractual obligations. We are constrained to observe that the intent of the Appellant throughout appears to be that of prolonging the litigation to cloak its impecuniousness. 57. It needs no emphasis that whosoever comes to the court claiming equity, must come with clean hands. The expression 'clean hands' connotes that the suitor or the defendant have not concealed material facts from the court and there is no attempt by them to secure illegitimate gains. Any contrary conduct must warrant turning down relief to such a party, owing to it not acting in good faith and beguiling the court with a view to secure undue gain. A court of law cannot be the abettor of inequity by siding with the party approaching it with unclean hands. This also brings to mind the oft-quoted legal maxim-he who seeks equity must do equity. 58. We are conscious of the fact that as a general principle, in commercial disputes, the award of interest pendente lite or post-decree is typically granted as a matter of course. This is because such interest serves to compensate the aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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