Read Time: 10 minutes

Synopsis

The Supreme Court has said that when a person is deprived of the use of his money to which he is legitimately entitled, he has a right to be compensated for the deprivation, which may be called interest or compensation.

The court held that interest is a normal accretion on capital.

A bench of Justices J.B. Pardiwala and R. Mahadevan said interest is paid for the deprivation of the use of money, which, in general terms, is a return or compensation for the use or retention by a person of a sum of money belonging to another.

"If on facts of a case, the doctrine of restitution is attracted, interest should follow," the bench said.

The court explained that restitution, in its etymological sense, means restoring to a party—on the modification, variation, or reversal of a decree or order—what has been lost to him in the execution of a decree or order of the court or in direct consequence of such a decree or order.

The term “restitution” is used in three senses: firstly, the return or restoration of some specific thing to its rightful owner or status; secondly, compensation for benefits derived from a wrong done to another; and thirdly, compensation or reparation for the loss caused to another, it said.

The court directed the respondents, the Delhi government and others, to pay the appellant Dr. Poornima Advani and another an amount of Rs 4,35,968 towards interest within a period of two months without fail.

The appeal arose from the judgment and order passed by the High Court of Delhi on September 27, 2019, in a Letters Patent Appeal, by which the appeal filed by the appellants against the judgment and order passed by the single judge of the high court—partly allowing their writ petition—was dismissed.

As per the facts of the matter, the appellants were desirous of purchasing an immovable property in New Delhi. For that purpose, they had purchased an e-stamp paper dated July 6, 2016, valued at Rs 28,10,000. The money was paid from the joint bank account of the appellants, being husband and wife, respectively.

There was a delay in finalising the deal, and meanwhile, the e-stamp paper was lost. The appellants got an FIR registered and issued a public notice. Subsequently, they approached the SDM office for a refund of the money after deducting the cancellation charges.

They approached the high court, wherein the single judge partly allowed their plea by directing the respondents to refund a sum of Rs 28,10,000 within a period of two weeks from the date of pronouncement of the judgment.

Only the principal amount was ordered to be refunded, whereas interest on the same was declined.

The appellants, being dissatisfied with the non-grant of interest, preferred a Letters Patent Appeal. The appellate court dismissed the Letters Patent Appeal, observing that the payment of interest was sought to be raised for the first time in appeal and had not been seriously raised before the single judge.

Before the apex court, the respondents' counsel argued that there was no provision in the statute for the payment of interest on the refund of the amount of the e-stamp paper that was lost by the appellants herein.

The court, however, said the argument was without merit.

"The concept of awarding interest on delayed payment has been explained by this court in the case of Authorised Officer Karnataka Bank Vs M/s R.M.S. Granites Pvt. Ltd. & Ors (2024)," the bench said.

In the case of Secretary, Irrigation Department, Government of Orissa Vs G.C. Roy (1992), a Constitution Bench of this court opined that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation, or damages. This is also the principle of Section 34 of the Civil Procedure Code, the bench pointed out.

The court further said that the essence of interest, as held in the case of Lord Wright in Riches Vs Westminster Bank Ltd (1947), is that it is a payment that becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money or, conversely, the loss he suffered because he did not have that use.

The court thus held that the appellants were entitled to interest, considering the reasons assigned by the single judge while taking the view that the respondents could not have declined to refund the amount, the fact that the retention of the said amount was for a long time, and that the appellants were left with no other option but to approach the high court.

Case Title: Dr Poornima Advani & Anr Vs Government of NCT & Anr