In a landmark ruling, the Supreme Court has clarified that interest under Section 34 of the Civil Procedure Code (CPC) can be denied if a party misuses judicial proceedings. This judgment was delivered in the case of M/s Tomorrowland Limited vs. Housing and Urban Development Corporation Limited (HUDCO), which involved a dispute over land allotment.
Key Highlights
The Supreme Court bench, comprising Justice Surya Kant and Justice Ujjal Bhuyan, stated:
“In commercial disputes, interest is generally awarded as compensation for the time value of money. However, if a party breaches contractual obligations and attempts to manipulate judicial procedures, they may not be entitled to such benefits.”
The Court ruled that Tomorrowland Limited was entitled to a refund of the forfeited amount, but no interest was granted due to its misconduct, which included forum shopping and procedural exploitation.
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Background of the Case
The case involved a land allotment dispute between Tomorrowland Limited and HUDCO over a 5-star hotel and parking facility in Andrews Ganj, New Delhi.
Key Issues in the Dispute:
HUDCO was required to obtain necessary approvals before executing the sub-lease agreement, but it failed to do so.
Tomorrowland Limited paid the initial installment but refused to pay further, citing HUDCO’s non-compliance.
The company failed to deposit ₹15 crore, as ordered by the Delhi High Court, leading to the cancellation of the allotment.
HUDCO forfeited ₹28.11 crore, prompting Tomorrowland Limited to file lawsuits in different courts, attempting to manipulate the legal process.
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The Supreme Court ruled:
“Even though HUDCO failed to fulfill its contractual obligations, the appellant (Tomorrowland Limited) also engaged in forum shopping and misused judicial processes. Therefore, they are not entitled to interest.”
What Did the Court Say?
- Tomorrowland Limited is entitled to a refund of ₹28.11 crore.
- However, it will not receive interest due to its misconduct.
- If HUDCO fails to refund the amount within three months, an interest rate of 6% per annum will apply.
- The Court clarified that this judgment only applies to the 5-star hotel and parking dispute and does not impact any other pending cases.
Legal Impact of the Judgment
This ruling sets a strong precedent against the abuse of judicial processes. The Court emphasized that parties who manipulate the legal system for personal gain will not be rewarded with discretionary relief like interest.
Case Title: M/s. Tomorrowland Limited versus Housing and Urban Development Corporation Limited and Another