The Supreme Court of India has reinforced the fundamental legal principle that when an individual is deprived of money to which they are legitimately entitled, they have the right to be compensated in the form of interest. This ruling aligns with the doctrine of restitution, ensuring that no party benefits unfairly from retaining money that rightfully belongs to another.
The doctrine of restitution is a legal principle aimed at restoring a person to the position they would have been in had they not suffered a wrongful loss. The Court elaborated that restitution means restoring to a party what has been lost due to wrongful retention of money. It is used in three senses: restoring a specific thing to its rightful owner, compensation for benefits derived from wrongful acts, and reparation for the loss caused to another. When money is unjustly withheld, interest serves as a compensation mechanism to address the wrongful enrichment of one party at the expense of another. The Court held that even in the absence of a statutory provision, the principle of justice mandates that interest should be awarded.
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Case Backgroud
In the case of Dr. Poornima Advani & Anr. v. Government of NCT & Anr., the appellants had purchased an e-stamp paper worth ₹28,10,000 for a property transaction. However, the stamp paper was misplaced by a broker, leading to an unavoidable delay in the transaction. To proceed with the purchase, the appellants had to buy another e-stamp paper. The appellants sought a refund of the lost e-stamp paper’s value from the Collector of Stamps. However, their application was rejected, prompting them to approach the High Court.
The High Court ruled in favor of the appellants and ordered the refund of the stamp duty amount. However, it denied their claim for interest on the refunded amount, stating that no arguments had been raised regarding interest during the initial proceedings. Dissatisfied with the denial of interest, the appellants approached the Supreme Court. The Court ruled in their favor, stating that interest is not a penalty or a punishment but a normal accretion on capital. When money is retained without rightful justification, it carries the right to interest.
The Court emphasized that money retained unlawfully by any entity, including the government, must be returned with interest. It cited previous judgments, including Union of India v. Tata Chemicals Ltd. (2014) 6 SCC 335, which held that the government has an obligation to refund unlawfully retained money along with accrued interest. The Supreme Court referred to multiple cases to justify the necessity of awarding interest, such as Authorized Officer Karnataka Bank v. M/s R.M.S. Granites Pvt. Ltd., which established that interest is a compensation for the deprivation of the use of money, and Secretary, Irrigation Department, Government of Orissa v. G.C. Roy (1992) 1 SCC 508, which affirmed that restitution includes interest. Another case, ONGC Ltd. v. Commissioner of Customs Mumbai, held that even in public sector cases, interest must be awarded on unlawfully retained funds.
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The Supreme Court ordered the respondents to pay ₹4,35,968 as interest on the refunded amount within two months, stating that the State cannot collect or retain money without legal authority. Obligation to refund money received without right implies and carries the right to interest.
This ruling sets a crucial precedent for individuals and businesses seeking refunds from government bodies. The Supreme Court has reaffirmed that any entity—public or private—that retains money unjustly must compensate the rightful owner with interest. This decision reinforces the doctrine of restitution as a fundamental principle of justice, ensuring that individuals are not financially disadvantaged due to procedural or administrative delays.
Case Title: DR. POORNIMA ADVANI & ANR. VERSUS GOVERNMENT OF NCT & ANR.
