Latest JudgementCode of Civil Procedure, 1908Indian Contract Act, 1872

M/s. Tomorrowland Limited vs. Housing and Urban Development Corporation Limited and Another, 2025

Breach of contract and denial of interest on forfeited amount refund

Supreme Court of India·15 February 2025

Court

Supreme Court of India

Date of Decision

15 February 2025

Judges

Justices Surya Kant ⦁ Ujjal Bhuyan

Citation

Acts / Provisions

Section 34 Civil Procedure Code, 1908 Section 73 of Indian Contract Act, 1872

Facts of the Case

The dispute arose out of a land allotment agreement between Tomorrowland Limited and HUDCO.
HUDCO failed to extend the lease to Tomorrowland Limited, thereby breaching its reciprocal contractual obligations.
As a result, HUDCO forfeited an amount paid by Tomorrowland Limited.
Tomorrowland filed a suit in the lower court after withdrawing its earlier suit from the High Court and was ordered to deposit ₹15 crores, which it failed to comply with.
The Supreme Court ruled that HUDCO was liable for breaching the contract and ordered the refund of the forfeited amount to Tomorrowland Limited.

Whether HUDCO was liable for breaching its contractual obligations to Tomorrowland Limited?
Whether the Appellant (Tomorrowland Limited) is entitled to interest on the refunded amount?
Whether the Appellant’s conduct, including forum shopping and non-compliance with court orders, justifies the denial of interest?

The Court found that HUDCO had indeed breached its contractual obligations by failing to extend the lease to the appellant.
However, despite the breach by HUDCO, the court found that the appellant had engaged in forum shopping by withdrawing a case from the High Court and filing it in a lower court.
The appellant also failed to comply with the court's order to deposit ₹15 crores.
While interest is typically awarded in commercial disputes, the court ruled that the appellant’s conduct disqualified it from receiving interest on the refunded amount.
The Court further held that interest could be awarded only in case of delayed payment, at the rate of 6% per annum, should HUDCO fail to refund the amount within three months.

The court emphasized that the general principle of awarding interest in commercial disputes serves to compensate the aggrieved party for the time value of money withheld.
Despite the breach by HUDCO, the appellant’s actions, including forum shopping and disregard for court orders, were seen as undermining the integrity of the judicial process.
The Court invoked the discretionary nature of interest awards under Section 34 of the CPC, concluding that the appellant was not entitled to interest due to its conduct.
The Court's decision reflects the importance of maintaining judicial authority and discouraging procedural exploitation, even in cases where the opposing party is found to have breached a contract.

The Court's ruling highlights a rare deviation from the established practice of granting interest in commercial disputes, emphasizing the principle that equitable reliefs are discretionary.
The judgment underscores that interest is not an automatic right in such cases, especially when a party's conduct undermines the judicial process.
This judgment serves as a reminder to litigants to approach courts in good faith and avoid any actions that could be seen as manipulative or detrimental to the integrity of the judicial process.
Future litigants in commercial disputes may be more cautious about forum shopping and non-compliance with court orders, knowing that such conduct could result in a denial of interest.
While the court clarified the application of Section 34 of the CPC, future challenges may arise regarding the discretion exercised by courts in cases involving breaches of contract.
The balance between procedural fairness and the need for interest to compensate for delay in payments will continue to evolve in subsequent decisions.
Legal practitioners should be aware that even in commercial disputes where there is a clear breach of contract, the conduct of the parties involved can influence the granting of discretionary reliefs like interest.
The judgment highlights the broader principle of upholding the integrity of the judicial process and preventing the abuse of procedural mechanisms for personal gain.