Summary
The Supreme Court held that HUDCO, which allotted a 5-star hotel site and car park, was in breach of its reciprocal obligations: it did not execute documents for statutory approvals, could not execute the agreement to sub-lease because it held no perpetual lease, and lacked layout approval. It therefore could not forfeit the allottee's first instalment, and was directed to refund it. Because the allottee had engaged in forum shopping and did not come with clean hands, it was denied interest under Section 34 CPC.
Issues
- Whether HUDCO was in breach of its reciprocal contractual obligations under the allotment letter towards the allottee.
- Whether the allottee was entitled to a refund of the amount forfeited on cancellation of the allotment.
- Whether the allottee was entitled to interest on the refund.
Provisions considered
- Section 34, Code of Civil Procedure, 1908The Court held that, the allotment letter excluding interest on refund, the allottee could seek interest only under Section 34, which is discretionary and governed by equitable considerations (Central Bank of India v. Ravindra). Although interest is ordinarily granted in commercial disputes, the Court declined it because of the allottee's conduct. (¶¶ 48, 49, 50, 58, 59)
Held
- Clause 5(vi) of the allotment letter obliged HUDCO itself to execute the documents needed for approvals under the Urban Land (Ceiling and Regulation) Act, 1976 and Chapter XX-C of the Income Tax Act. Because failure to secure approvals carried the consequence of refund, the obligation was mandatory and not merely one of assistance, and HUDCO breached it. (¶¶ 31, 32, 33)
- Clauses 5(viii) and 5(ix) promised execution of an agreement to sub-lease and delivery of possession after the first instalment and the approvals. Since HUDCO had no perpetual lease in its favour until after the cancellation, it could not perform these promises and was not entitled to demand the second instalment until the lease was executed; its failure to execute the sub-lease for want of title and authority was a further breach. (¶¶ 34, 35, 36, 37, 38, 39)
- HUDCO also appeared to lack sanction of the revised layout plan for the hotel, and the allottee's complaint of discrimination had some merit, since another allottee in similar circumstances was given an interest-free extension for instalments while the allottee's request was refused. (¶¶ 40, 41, 42)
- Having breached its reciprocal obligations, HUDCO was not entitled to forfeit the first instalment under Clause 5(iii). Upholding the sanctity of the contract, which provided for refund without interest or damages where approvals were not obtained, the Court held the allottee entitled to refund of the principal amount it had deposited. (¶¶ 44, 45, 46, 47, 60)
- A party seeking equity must come with clean hands. The allottee failed to make the deposit ordered as a condition of status quo, withdrew its first suit unconditionally to escape the High Court's jurisdiction, which was a brazen act of forum shopping and abuse of process, and gave up the relief of possession in the second suit to avoid ad valorem court fee. This conduct justified departing from the usual grant of interest in commercial matters, and interest under Section 34 CPC was refused. (¶¶ 52, 53, 54, 55, 56, 57, 58, 59)
Result
Appeal partly allowed; High Court judgment set aside to that extent and the second suit decreed in part; HUDCO to refund the principal amount deposited, without interest, within three months, failing which interest at 6% per annum runs until realisation. The directions are confined to the hotel site and car park and express no opinion on disputes about the other properties.