Interest May Be Denied To Party Who Abused Judicial Process : Supreme Court

While interest is usually granted as per Section 34 of the Civil Procedure Code in commercial disputes to account for the time value of money, the Supreme Court clarified that it may be denied in cases where a party's conduct breaches contractual obligations and undermines judicial authority.

A bench of Justices Surya Kant and Ujjal Bhuyan denied interest on the refund of the forfeited amount, observing that the appellant did not approach the Court with clean hands, engaged in forum shopping by withdrawing a suit from the High Court to file another in a lower court, and failed to comply with the Court's order to deposit ₹15 crores.

“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 aggrieved party for the time value of money that was due but withheld during the legal process. It reflects an established norm aimed at ensuring fairness and equity in commercial transactions.”, the court said.

“Having said so, we find the instant case to be fit to justify a deviation from the established standards. In the facts and circumstances, though we have held Respondent No. 1 to be in breach of several contractual obligations, the conduct of the Appellant is rife with instances where it has also sought to undermine the authority and integrity of the judicial process, by treating the Court with disregard, and attempting to exploit procedural mechanisms for personal gain. We, thus, hold that in view of the above reasons, the Appellant is not entitled to any discretionary relief of interest under Section 34 of CPC.”, the court added.

Background

The Court was hearing the case involving M/s Tomorrowland Limited and Housing and Urban Development Corporation Limited regarding a land allotment dispute.

The Court found that the Housing and Urban Development Corporation Limited (HUDCO) had breached its reciprocal contractual obligations for failing to extend the lease to the Appellant/Tomorrowland, which disentitled it from forfeiting the amount paid by the appellant, M/s Tomorrowland Limited.

Accordingly, the Court ordered the refund of the forfeited amount to the Appellant. However, the Court also held that the appellant was not entitled to interest on the refunded amount due to its conduct, including forum shopping and procedural exploitation.

The court emphasized that while interest is generally granted in commercial disputes, it is a discretionary relief under Section 34 of the CPC. Given the appellant's actions, the court denied interest but directed HUDCO to refund the principal sum within three months, with a 6% annual interest applicable only in case of delayed payment.

Case Title: M/s. Tomorrowland Limited versus Housing and Urban Development Corporation Limited and Another

Citation : 2025 LiveLaw (SC) 205

Click here to read/download the judgment

Appearance:

For Petitioner(s) Mr. Tejinder Singh Dhindhsa, Sr. Adv. Mr. M.C. Dhingra, Sr. Adv. Mr. Pawan Sachdeva, Adv. Mr. Ishan Sachdeva, Adv. Mr. Gaurav Dhingra, AOR Ms. Niharika Dubey, Adv. Mr. Shashank Singh, Adv. Mr. Piyush Kant Roy, Adv. Mr. K K R Dass, Adv.

For Respondent(s) Ms. Meenakshi Arora, Sr. Adv. Mr. Sonal Kumar Singh, Adv. Mr. Obhirup Ghosh, Adv. Mr. Nikilesh Ramachandran, AOR Mrs. Aishwarya Bhati, A.S.G. Mrs. Suhasini Sen, Adv. Mr. Saurabh Mishra, Adv. Mrs. Vanshaja Shukla, Adv. Mr. T.S. Sabarish, Adv. Mr. Ishaan Sharma, Adv. Mr. Amrish Kumar, AOR