CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN GUJARAT MARITIME BOARD versus ASIATIC STEEL INDUSTRIES LTD AND ORS.

CHIEF EXECUTIVE OFFICER AND VICE CHAIRMANGUJARAT MARITIME BOARD

ASIATIC STEEL INDUSTRIES LTD AND ORS.

(Civil Appeal No. 3807 of 2020)NOVEMBER 24, 2020

[INDIRA BANERJEE AND S. RAVINDRA BHAT, JJ.]

Interest:

Contract for shipbreaking – By Maritime Board – To therespondent-Company – Earnest money deposited on 08.11.1994 –Upset premium paid on 22.03.1995 – Awardee of contract(respondent No. 1) sought refund of contract amount @ 10% interestper annum from the date of remittance – Board agreed for the refundbut without interest – Writ petition by the awardee seeking refundwith interest @ 12% per annum – High Court allowed the petitiondirecting the Board to pay interest @ 10% on earnest money and @6% on the principal amount from 08.11.1994 to 19.5.1998 – Appealto Supreme Court – Held: Since respondent No. 1 had paid onlyearnest money on 08.11.1994 and rest of the amount was paid later– Therefore, interest on the entire amount is directed to be paid from22.3.1995 (not from 08.11.1999) to 19.5.1998.

Dismissing the appeal, the Court

HELD: 1. The contemporaneous situation, and thecorrespondence between respondent No. 1 and the Board afterthe entire amount was deposited, reveals that other concernsapproached the court seeking refund of their principal amounts,with interest, which forced the Board to take decision andcomply. The final decision by respondent No. 1 demanding refundwas later, in May, 1998. In the meanwhile, the other concerns,which had bid successfully for three plots had approached thecourt (in 1995) and the Board had decided to refund the amountswith one years’ interest. Respondent No. 1, therefore, for reasonsbest known to it, approached the court for refund and interest,first by filing suit in 2001. [Para 31][386-D-F]

A2. It is clear from the Board’s conduct that it neverresponded to the letters written by respondent No. 1 at least, noreply has been placed on record. Even request of respondentNo. 1 for permission to carry-out the necessary clearance workat the cost of the board, was not responded to - either positivelyor negatively. Further, whenever any bidder approached the courtBcomplaining that the plot allotted was unusable, the Board decided,mostly contemporaneously, to refund the amount, even withinterest. In the case of respondent No. 1, however, when thedemand was made for refund on 19.05.1998, the Board did notact, forcing the company to approach the court, firstly through aCcivil suit which was later withdrawn, and then in writ petition.[Para 35][387-G-H; 388-A]

3. The conduct of the Board betrays callous and indifferentattitude, which in effect is that if respondent No. 1 wished for itsmoney to be returned, it had to approach the court. This wasDdespite its knowledge that at least three other identically placedentities had asked for return of money and, upon approachingthe court, were refunded the amounts given by them promptly.In view of these facts, nothing prevented the Board from decidingto refund the amount, without forcing respondent No. 1 toapproach the court. [Para 40][391-F-G]E

4. The Board’s action is entirely unacceptable. As publicbody charged to uphold the rule of law, its conduct had to be fairand not arbitrary. If it had any meaningful justification forwithholding the amount received from respondent No. 1, suchjustification has not been highlighted ever. On the other hand,Fits conduct reveals that it wished that the parties should approachthe court, before it took decision. This behavior of deliberateinaction to force citizen or commercial concern to approachthe court, rather than take decision, justified on the anvil ofreason (in the present case, decision to refund) means that theGBoard acted in discriminatory manner. [Para 37][388-D-E]

5. The High Court had directed payment of interest for theentire period (i.e. starting from 08.11.1994 and ending on

19.05.1998). However, it is evident that respondent No. 1 hadnot paid the entire amount on 08.11.1994; in fact the sum of$1,153,000 /- i.e. the principal consideration, excluding theearnest money deposit, was deposited on 24.03.1995. Therefore,the impugned judgment erred in directing payment of intereston the entire amount from 08.11.1994; instead, the direction topay interest on 3,61,20,000/- shall operate with effect from22.03.1995 to 19.05.1998. [Para 41][391-H; 392-A-B]

Dilbagh Rai Jarry v. Union of India (1974) 3 SCC 554:[1974] 2 SCR 178; Gurgaon Gramin Bank v. Khazani(2012) 8 SCC 781 : [2012] 8 SCR 225 ; State of A.P. v.Pioneer Builders (2006) 12 SCC 119 : [2006] 6 Suppl.SCR 571 – relied on.

Union of India, Tr. Dir. of IT v. M/s Tata Chemicals Ltd.(2014) 6 SCC 335 : [2014] 3 SCR 298; P.P. Abubackerv. Union of India AIR 1972 Ker 103 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3807of 2020.

From the Judgment and Order dated 24.07.2015 of the High Courtof Gujarat at Ahmedabad in SCA No. 3945 Of 2001.

Siddharth Bhatnagar, Sr. Adv., Gursharan H. V., Nakul Mohta,Ms. Misha Rohatgi Mohta, Milind Kumar, Avishkar Singhvi, Nipun Katyal,Aditya Sidhra, Dhruv Surana, Shishir Deshpande, Advs. for the appearingparties.

378SUPREME COURT REPORTS

AThe Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

1. Leave granted. With consent, the appeal was heard. This appealis directed against judgment of the High Court of Gujarat dated24.07.2015. The respondent (hereafter “Asiatic Steel”) had filed writBpetition before the High Court seeking refund of contract considerationof 3,61,20,000/- paid by them to the appellant (hereafter “the Board”).The High Court allowed the writ petition, in view of its earlier interimorder, and directed the Board to pay interest for the period from 08.11.1994to 19.05.1998. The brief facts that arise for consideration are as follows.

2. The Board issued tender notice on 02.08.1994 for allotmentof plots at Sosiya (near Bhavnagar, Gujarat) for ship-breaking of ‘verylarge crude carriers/ultra large crude carriers’ (VLCC/ULCC). AsiaticSteel made the highest bid, which was accepted and confirmed by theBoard on 08.11.1994, for 3, 61, 20,000/- (hereafter the ‘Principal’).DAsiatic Steel was allotted Plot V-10. The bid payment was made on22.03.1995 in foreign currency, to the tune of $1,153,000, while the earnestmoney deposit of 5,00,000/- was paid on 08.11.1994.

3. On 23.02.1995, Asiatic Steel and other allottees approachedthe Board citing difficulties in commencing commercial operations, onEaccount of the connectivity to the plots and the existence of rocks inhibitingbeaching of ships on the plot for the purpose of ship-breaking. Througha letter dated 19.05.1998, Asiatic steel intimated the Board that it wishedto abandon the contract and demanded that the payment be refunded(an amount of $1,153,000), with interest at 10% per annum from thedate of remittance. The Board, through notice dated 19.05.1998, statedFthat an amount of 3, 61, 20,000/- would be refunded, but without interest.The Board also clarified that the refund would be directed to the originalallottee of the plot (i.e. the second respondent, i.e. M/s Ganpatrai Jaigopal-hereafter referred to as “Ganpatrai”). Asiatic Steel then filed writpetition before the High Court, seeking (i) refund of USD $ 1,153,000Gwith interest of 12% per annum compounded quarterly, to the thirdrespondent, M/s Industeel Investment Holdings (hereafter “Industeel”,which had made the payment originally on behalf of Asiatic Steel); and(ii) refund of earnest money of 5,00,000/- with interest of 12% per annum,compounded quarterly to Asiatic Steel.

4. Through an interim order dated 26.02.2002, the High Courtheld that prima facie, Asiatic Steel was entitled to refund with interestat 10% per annum. Accordingly, the Board was directed to deposit theadmitted amount, i.e., the Principal, with interest at 10% p.a. with thecourt’s Registry on or before 15.04.2002. The interest was to becalculated from 19.05.1998 up to 15.04.2002. The amount was permittedto be withdrawn by Respondent No. 3, with the consent of the otherrespondents. The Board made this deposit, as directed by the court.

5. On 17.09.2014, the High Court determined that the followingissues survived to be determined:

(a) Whether interest on payment should be calculated from24.03.1995 to 15.04.2002, or from 19.05.1998;

(b) Whether the earnest money of 5,00,000 should berefunded;

(c) Whether interest should be calculated at 10% p.a. or 12%p.a.

6. The Board resolved, through resolution dated 17.12.2014, torefund the earnest money deposit with interest of 10% calculated from19.05.1998. On account of this development, the High Court examinedthe issue of quantification of interest, and held that so far as the amountthat had already been refunded with interest at 10% was concerned, nogrievance could be raised by Asiatic Steel, as it had initially claimed aninterest of 10%, in the letter to the Board dated 19.05.1998. In the caseof the refund already made of the Principal and the earnest money deposit,it was held that Asiatic Steel was not justified in claiming more than 10%interest. Neither party raised any grievance against the High Court’sinterim order dated 26.02.2002 fixing the interest at 10%. The onlyquestion then left to be decided was with respect to the date from whichinterest on the Principal was to be calculated, and what the rate of interestwas to be.

7. The High Court held that the Board never claimed that itsuffered any damage or loss due to Asiatic Steel’s termination of thecontract. The reasoning of the impugned judgment was that hence, theBoard was under liability to compensate or pay reasonable interest forthe period during which the money was retained by it. The High Courttook into consideration that Indusind was Singaporean company, andthat the rate of interest was lower in developed countries. Accordingly,

Athe rate of interest was altered to 6% p.a., for the period during whichthe money was enjoyed by the Board. The Board was directed to (i)refund the earnest money of 5,00,000/- with interest at 10% p.a., inaccordance with the resolution of 17.12.2014; and (ii) pay interest of6% on the Principal from 08.11.1994 to 19.05.1998. This interest amountworks out to 76,47,544/-. The Board is, hence, aggrieved by the impugnedBjudgment.

Arguments Advanced

8. It was contended on behalf of the Board that the subject matterof the present dispute was contract. To determine whether the BoardChad to pay compensation for any benefit received under the contract, itwas imperative that breach of such contract should have been proved.Sections 64 and 65 of the Indian Contract Act, 1872 (hereinafter the‘Contract Act’), contemplate return of benefit for void/voidable contract.It was submitted that these provisions do not apply when there is noallegation as to the contract being void. In any case, the Board hadDalready refunded the entire amount to Asiatic Steel. The learned counselfor the Board went on to submit that Section 73 and 75 of the ContractAct were inapplicable, as breach was not proven or found, and neitherdid the high court make finding of rightful rescission of contract byAsiatic Steel.E9. The sole basis of the High Court’s direction to pay interest forthe period from 08.11.1994 to 19.05.1998 was the Court’s view that theBoard had an obligation to compensate Asiatic Steel for its enjoyment ofthe principal during this period, and because the Board had not shownthat it suffered any loss on account of termination of the contract. CounselFurged that Asiatic Steel accepted and provided an undertaking of theirsatisfaction of the site, in the contract entered into between the parties.They then went on to abandon the contract on grounds of the site beingrocky/ unsuitable for their commercial activities.

10. Counsel for Asiatic Steel, on the other hand, submitted thatGthe Board took about 4 years to take action on its promise to createsurrounding infrastructure and clear the rocks as well as the rocky islandnear plot V-10, which made it unviable for Asiatic Steel to commencebusiness. The Board had agreed, through its board meeting on 23.03.1995,to develop infrastructure and remove the rocks; Asiatic Steel once againappraised the Board of the importance of removing the rocks, through aHletter dated 26.04.1996. Asiatic Steel even stated that it could take up

the task of removing the rocks, if the Board so desired. The request forremoval of the rocks and the rocky formation near plot V-10 was repeatedthrough another letter dated 22.05.1996. The other successful biddersfor plots V-6 to V-9 also raised similar issues, and approached the courtsfor relief. Asiatic Steel did not join those bidders, and sought to deal withthe matter amicably. Counsel submitted that since the Board did notactually carry out the promised work, Asiatic Steel could not commencecommercial production; they were left with no option but to abandon theproject and seek refund. It was submitted that Asiatic Steel incurredheavy losses on account of interest costs from the date of remittance, aswell as losses on account of depreciation of the rupee over period ofthree years.

11. When the Board failed to make the refund or discharge itsduties, Asiatic Steel filed petition before the High Court. civil suitclaiming damages was also preferred at the City Civil Court, Ahmedabad,which was unconditionally withdrawn, after seeking permission fromthe High Court, which was granted through the order dated 26.02.2002.

12. The learned counsel submitted that on account of the Board’sfailure to remove the rocks, Asiatic Steel could not take possession ofthe plot, and therefore, that interest is due from the date of deposit tillthe date of payment. It was argued that the very fact that the Boardagreed to refund the premium and the earnest money shows theiracceptance that they have been unable to provide the promised plots. Itwas further submitted that all the other allottees had been paid intereston the amounts deposited by them. It was urged that the Board enjoyedthe Principal amount from 08.11.1994 to 19.05.1998, and it was not acase where the possession of the plot was handed over and the contractwas concluded. Asiatic Steel was deprived of substantial amount thatcould not be utilized elsewhere during that period. It was submitted thatinterest was essentially compensation for denial of the right to utilize themoney due.

13. Reliance was placed on Union of India, Tr. Dir. of IT v.M/s Tata Chemicals Ltd.[1], where this court held that interest ‘…is akind of compensation of use and retention of money collectedunauthorizedly by the Department. When the collection is illegal,there is corresponding obligation on the revenue to refund such

Aamount with interest in as much as they have retained and enjoyedthe money deposited.’

14. With regard to the question of whether Asiatic Steel raisedobjections regarding the unsuitability of the land for the purpose for whichit had been tendered, it was contended on its behalf that objections wereBraised, prior to remitting major part of the upset premium. The firstobjection on record was immediately after payment of the earnest moneydeposit after the allotment of the plot on 08.11.1994, through letter dated23.02.1995. The payment of the premium was made on 22.03.1995. Itwas argued that no time period under the lease, was consumed for anyactivity whatsoever on the plot, and Asiatic Steel did not derive anyCbenefit at all. It was categorically acknowledged and admitted in boardmeetings and letters that the plot was unusable and the contract was tobe mutually abandoned. Considering that the Board agreed to refund theamount with interest, it was argued, that the consequence was that themoney should be returned with interest from the date when it was enjoyedDby the Board.

15. Asiatic Steel urged that the limited issue to be determined bythis court is that of interest payment from when the remittance wasmade, i.e., 22.03.1995 to 19.05.1998, when the contract was abandoned.Finally, they submitted that this amount works out to 1,32,44,729/- (atE10% interest p.a.), 1,06,95,783/- (at 8% interest p.a.), and 81,46,837 (at6% interest p.a.).

16. It was further submitted that the successful bidders of plotsV-8 (Svaminarayan Ship Breaking Pvt. Ltd.) and V-9 (M/s Mazz MarinePvt. Ltd.) who were similarly situated to Asiatic Steel, had approachedFcourts for decree, and been refunded their deposits with interest,pursuant to orders dated 14.08.1996 and 08.07.2002 respectively.

17. With this court’s permission, Asiatic Steel filed copies of RTIqueries which had sought specific information with regard to (i) amountpaid to similarly placed bidders/plot holders during settlement with theGBoard; (ii) whether interest was paid to the bidders/plot holders alongwith the principal, and from what date this was paid; and (iii) the percentageof interest paid along with principal.

18. response to the RTI query was received on 20.02.2020, inrespect of the bidders for plots V-7, V-8 and V-9. The bidder for V-7was paid an interest at 12%, amounting to 22,80,743/-, for the periodH

from 23.03.1995 – 30.11.1995. The bidder for V-8 was paid interest at12%, amounting to 3,55,068/-, for the period from 27.03.1995 –30.11.1995. The bidder for V-9 was paid interest at 9% amounting to2,12,500/-, for the period from 23.03.1995 – 30.11.1995.

19. It was urged that in accordance with tender conditions, theprimary obligation to provide suitable plot for ship breaking was that ofthe Board. Counsel for Asiatic Steel submitted that the ‘as is where is’clause cannot be interpreted to mean that the Board can allot any pieceof land that is of no utility to the bidder, and be absolved of liability.

20. In response to Asiatic Steel’s contentions that identicallysituated bidders were paid interest at 10-12% were unsustainable, itwas contended on behalf of the Board, in response, that interest wasnot payable under the terms of the contract with the present respondents.Further, Asiatic Steel had allowed the plot to remain unused for almosthalf of the license/concession period before rescinding the contract. Ithad verified the site before casting bid; it took conscious decision tomake the bid and pay the upset premium.21. It was further submitted that the Board had written to AsiaticSteel on 28.11.1995, informing them that the plot was ready in all respectsand possession was required to be taken before 30.11.1995. The biddersfor V-7 and V-8 were given interest only up till the date the plot holderswere to take possession – 30.11.1995. Asiatic Steel did not takepossession.

22. It was urged that the present case is contractual disputewhere, without breach being proved against the Board, interest wasordered as ‘compensatory measure’, that too under writ jurisdiction.

Analysis

23. The Guidelines for Permission to Utilize Ship breaking Plotsat Sosiya provided that permission shall be granted for period of tenyears from the date of issue of the permission letter, after which, thepermission shall cease. The conditions applicable for grant of permissionare provided under Clause 13; Clause 13(d) mandates that plot chargesbe paid in advance, before issuance of the permission letter, and plotcharges for the next year are to be paid before the commencement ofthe relevant year.

24. Asiatic Steel was the highest bidder in an auction for fiveshipbreaking plots, held on 08.11.1994. The Board received payment of

Athe earnest money deposit of 5,00,000/- on this day. Plot V-10 was allottedto Respondent No. 1 (Asiatic Steel Industries Ltd.). M/s Ganpatrai werethe Indian shareholders of Asiatic Steel, while M/s Industeel was foreignshareholder based in Singapore. The upset premium was remitted byIndusteel in US currency (dollars $), on 22.03.1995.

B25. The minutes of the meeting dated 23.02.1995 record that theshipbreakers (including Asiatic Steel herein), informed the Board thatcertain rocks were required to be removed along plots V-6 to V-10,which hinder the beaching of ships. The Board agreed to prepare anestimate and invite tenders for the removal of these rocks.

C26. The record shows that the notice inviting tenders issued bythe Board expressly stated in para 14 that:

“14. The tenderer may inspect the site at his own cost andshall be deemed to have acquainted himself, fully with all thesite conditions.

D15. Tenderer shall be deemed to have read and understoodthe guidelines at Annexure one and the terms and conditionsat annexure to.”

27. Such being the position, it was nobody’s case that AsiaticSteel was unaware about the site conditions. This is particularly importantEbecause it was willing to commit substantial amount in foreign exchangefor the plot which it bid for and was eventually granted. Likewise, therequisite undertaking too was furnished on its behalf. It is in thisbackground of circumstances, that the claim for interest for the period inquestion requires examination.F28. The record relied upon by Asiatic Steel is in the form of threeoffice orders issued by the Board. The first office order is dated06.05.1996. This order relates to Nyankaran Investment and LeasingPvt. Ltd. This company had successfully bid for Plot Number V-7 andpaid 2.74 crores. This company had deposited the entire amount on23.03.1995. Upon being dissatisfied with the plot, the company filed CAG8287/1995, in proceedings under Article 226 of the Constitution of India,before the Gujarat High Court. Having regard to the observations madeby the High Court, the board sanctioned refund of the entire amountalong with 12% interest, by its order dated 06.05.1996. The amount paidby the Board as interest was 22.80 lakhs. The second instance relates

to Svaminarayan Shipbreaking (P) Ltd, Surat, which had bid for plot(V-8) and paid 50 lakhs in two equal instalments. This company filedproceedings before the Gujarat High Court, (i.e. CA 3122/1995). TheBoard, therefore decided to refund the principal along with interest at12% per annum for two different periods, based on the deposit of thetwo payments of 25 lakhs. The total interest sanctioned on 08.08.1996(and later paid) was 3.55 lakhs. The last instance is of Maaz Marine (P)Ltd, Surat, which had bid for plot (V-9) and paid the instalments. Thiscompany filed proceedings before the Gujarat High Court, (i.e. CA 3211/1995). The Board, therefore decided to refund the principal along withinterest @ 9% per annum for the period, based on the deposit of thepayment of 25 lakhs. The total interest sanctioned on 08.08.1996 (andlater paid) was 2.12 lakhs. This amount was sanctioned by office orderdated 27.03.2000, even though the Board had decided to refund earlier(on 21.03.1996, due to the court proceedings and orders); however, theamount was sanctioned later, awaiting the decision of the civil court, inan inter se dispute between the directors of Mazz Marine, (i.e. in SuitNo. 1200/1997). Upon the decision in that case, the amount was released,including the interest at 9% p.a. for one year.

29. The correspondence on the record reveals that the last paymenttowards the plot was tendered by Asiatic Steel under cover of letterdated 22.03.1995 for an amount of US$ 1,153,000/-. The other lettersplaced on record are the one dated 23.04.1995, to the Board indicatingthat the full payment for the consideration of 3,61,20,000/- had beenmade towards plot. Other than this, in the writ petition, Asiatic Steelargued that it made efforts several times to ask the board to clear thebeachfront rocks to make the plot functional. It was also argued thatthree other entities which had bid for and secured different plots weredissatisfied by the Board’s inaction and had approached the High Court.As result, the High Court passed orders which led to refund of theamounts deposited by those concerns, with some interest. On the record,the minutes of discussion presided over by the Chief Minister of thestate regarding outstanding amounts of premium payable by plot holdersin the shipbreaking yard, dated 29.04.1998, would show that the stateauthorities were pressing for payment of overdue premium instalments.It is after these events, that Asiatic Steel claimed refund of the amountthrough letter dated 19.05.1998. In that letter, Asiatic Steel stated asfollows:

A“..there were 4 other successful bidders for plots V- 6 to V-9.These 4 bidders similarly complained of non-availability ofbasic infrastructure. They subsequently approached the HighCourt of Gujarat for interim relief and for directions to GMBto develop basic infrastructure and to remove rocks in frontof lots V-6 to V-9. They approach the High Court to directBGMB to fulfil all these obligations before asking for paymentof upset premium. We understand that the Hon’ble High Courtgranted them some relief. We may point out that we did notjoin the actions of these 4 bidders in the High Court. Insteadprefer to deal with the matter amicably via discussions directlyCwith GMB.”

30. Asiatic Steel’s letter dated 26.04.1996, copy of which hasbeen placed on the record, shows that it expressed willingness to removethe beachfront rocks, provided the Board bore the expenses. The Board,however, was silent.D

31. The contemporaneous situation, and the correspondencebetween Asiatic Steel and the Board after the entire amount wasdeposited, reveals that other concerns approached the court seekingrefund of their principal amounts, with interest, which forced the Boardto take decision and comply. The final decision by Asiatic SteelEdemanding refund was later, in May, 1998. In the meanwhile, the otherconcerns, which had bid successfully for three plots had approached thecourt (in 1995) and the Board had decided to refund the amounts withone years’ interest. Asiatic Steel, therefore, for reasons best known to it,approached the court for refund (which it was undoubtedly entitled) toand interest, first by filing suit in 2001.F

32. In this court’s opinion, the claim for interest by Asiatic Steel –and the response of the Board, on that issue, is to be judged in the light ofboth parties’ conduct and what was expected of the Board as stateinstrumentality. The claim in this case is essentially monetary one, andwould ordinarily be premised upon breach of contract. Asiatic Steel,Gtherefore, correctly approached the civil court by filing suit[2]. Later,apparently it was advised to resort to proceedings under Article 226 ofthe Constitution of India. When its writ petition was considered, the suitwas permitted to be withdrawn; the High Court directed the Board to

deposit the entire principal amount, with interest at 10% per annum.[3] Bythe final impugned judgment, that order was confirmed. In an earlierorder, the court had in fact crystallized the precise issue, to be whetherinterest was payable from 24.03.1995 or from 19.05.1998, or whether itwas payable from the latter date, till the date of deposit in court, i.e.,15.04.2002.

33. Two important aspects need to be noticed at this stage: first,on the one hand, that Asiatic Steel was aware of the condition of theplot, at an early stage, when it bid for it. In this regard, its conduct is tobe judged in the light of the Board’s inaction in regard to the unfitness ofthe allotted site, as in the case of the other concerns. Two, Asiatic Steelwas no better and no worse than the other plot lessees, who demandedrefund of their amounts. The difference between them, and Asiatic Steelwas that the latter chose to demand refund on 19.05.1998. Asiatic Steel’sfinal letter discloses its awareness that the other concerns approachedthe court earlier, but that it waited as it wished to have the issue resolvedamicably, rather than moving the court for relief.

34. In the opinion of this court, that fact that Asiatic Steel andother concerns bid for the plots knowing the state they were in, cannotbe disputed. However, the conduct of all the successful biddersconsistently suggests that they expected that the plots would be given inusable condition, within reasonable time. Clearly, the Board could notand most certainly did not rectify the conditions by removing thebeachfront rocks. The Board is not forthcoming about the reasons forits inaction. It urged two defences in its reply to the writ petition: one,that the dispute was in the realm of contract and two, that even thoughlike in other cases, the Board was prepared to consider refund, AsiaticSteel was joint venture company. These, in the opinion of this court arewholly insubstantial reasons.35. It is clear from the Board’s conduct that it never responded tothe letters written by Asiatic Steel; at least, no reply has been placed onrecord. Even Asiatic Steel’s request for permission to carry-out thenecessary clearance work at the cost of the board, was not respondedto - either positively or negatively. Further, whenever any bidderapproached the court complaining that the plot allotted was unusable,the Board decided, mostly contemporaneously, to refund the amount,even with interest. In the case of Asiatic Steel, however, when the demand

3 By its order dated 26.02.2002

Awas made for refund on 19.05.1998, the Board did not act, forcing thecompany to approach the court, firstly through civil suit which waslater withdrawn, and then in writ petition.

36. In the opinion of this court, the Board’s complete silence inresponding to Asiatic Steel’s demand for refund, coupled with the absenceBof any material placed on record by it suggesting that the complaints hadno substance leaves it vulnerable to the charge of complete arbitrariness.The Board’s conduct or indifference in regard to the refund sought (inrespect of which there was no meaningful argument on its part beforethe High Court) can be only on the premise that it wished the parties toapproach the court, till decision could be taken to refund the amountsCreceived by it.

37. In this court’s considered view, the Board’s action is entirelyunacceptable. As public body charged to uphold the rule of law, itsconduct had to be fair and not arbitrary. If it had any meaningfuljustification for withholding the amount received from Asiatic Steel, suchDjustification has not been highlighted ever. On the other hand, its conductreveals that it wished that the parties should approach the court, beforeit took decision. This behavior of deliberate inaction to force citizenor commercial concern to approach the court, rather than take decision,justified on the anvil of reason (in the present case, decision to refund)Emeans that the Board acted in discriminatory manner.38. Long ago, in Dilbagh Rai Jarry v. Union of India[4] this courthad quoted from decision of the Kerala High Court, approvingly[5]:

“25. … But it must be remembered that the State is no ordinaryparty trying to win case against one of its own citizens byFhook or by crook; for the State’s interest is to meet honestclaims, vindicate substantial defence and never to score atechnical point or overreach weaker party to avoid justliability or secure an unfair advantage, simply because legaldevices provide such an opportunity. The State is virtuousGlitigant and looks with unconcern on immoral forensicsuccesses so that if on the merits the case is weak, Governmentshows willingness to settle the dispute regardless of prestigeand other lesser motivations which move private parties to

4 (1974) 3 SCC 554H5 P.P. Abubacker v. Union of India, AIR 1972 Ker 103

fight in court. The layout on litigation costs and executivetime by the State and its agencies is so staggering these daysbecause of the large amount of litigation in which it is involvedthat positive and wholesome policy of cutting back on thevolume of law suits by the twin methods of not being temptedinto forensic showdowns where reasonable adjustment isfeasible and ever offering to extinguish pending proceedingon just terms, giving the legal mentors of Government someinitiative and authority in this behalf.”

Again, in Gurgaon Gramin Bank v. Khazani[6] this court statedthat:

“2. The number of litigations in our country is on the rise, forsmall and trivial matters, people and sometimes the Centraland the State Governments and their instrumentalities likebanks, nationalised or private, come to courts may be due toego clash or to save the officers’ skin. The judicial system isoverburdened which naturally causes delay in adjudicationof disputes. Mediation Centres opened in various parts ofour country have, to some extent, eased the burden of thecourts but we are still in the tunnel and the light is far away.On more than one occasion, this Court has reminded theCentral Government, the State Governments and otherinstrumentalities as well as to the various banking institutionsto take earnest efforts to resolve the disputes at their end. Attimes, some give-and-take attitude should be adopted or bothwill sink. Unless serious questions of law of generalimportance arise for consideration or question which affectsa large number of persons or the stakes are very high, thecourts’ jurisdiction cannot be invoked for resolution of smalland trivial matters. We are really disturbed by the manner inwhich those types of matters are being brought to courts evenat the level of the Supreme Court of India and this case fallsin that category.”

39. In State of A.P. v. Pioneer Builders[7]this Court referred tothe 27[th] Report of the Law Commission on the Code of Civil Procedure,and held as follows:

6 2012 (8) SCC 781

7 (2006) 12 SCC 119

DEF

A“14. From bare reading of sub-section (1) of Section 80, itis plain that subject to what is provided in sub-section (2)thereof, no suit can be filed against the Government or apublic officer unless requisite notice under the said provisionhas been served on such Government or public officer, as thecase may be. It is well settled that before the amendment ofBSection 80 the provisions of unamended Section 80 admittedof no implications and exceptions whatsoever and are express,explicit and mandatory. The section imposes statutory andunqualified obligation upon the court and in the absence ofcompliance with Section 80, the suit is not maintainable. (SeeCBhagchand Dagadusa v. Secy. of State for India in Council[Bhagchand Dagadusa v. Secy. of State for India in Council,1927 SCC OnLine PC 48 : (1926-27) 54 IA 338 : AIR 1927PC 176] ; Sawai Singhai Nirmal Chand v. Union of India[Sawai Singhai Nirmal Chand v. Union of India, (1966) 1SCR 986 : AIR 1966 SC 1068] and Bihari Chowdhary v. StateDof Bihar [Bihari Chowdhary v. State of Bihar, (1984) 2 SCC627] .) The service of notice under Section 80 is, thus, acondition precedent for the institution of suit against theGovernment or public officer. The legislative intent of theSection is to give the Government sufficient notice of the suit,Ewhich is proposed to be filed against it so that it may reconsiderthe decision and decide for itself whether the claim madecould be accepted or not. As observed in Bihari Chowdhary[Bihari Chowdhary v. State of Bihar, (1984) 2 SCC 627], theobject of the Section is the advancement of justice and thesecuring of public good by avoidance of unnecessaryFlitigation.

15. It seems that the provision did not achieve the desiredresults inasmuch as it is matter of common experience thathardly any matter is settled by the Government or the publicofficer concerned by making use of the opportunity affordedby the said provisions. In most of the cases, notice given underSection 80 remains unanswered. In its 14th Report (reiteratedin the 27th and 54th Reports), the Law Commission, whilenoting that the provisions of this section had worked greathardship in large number of cases where immediate reliefby way of injunction against the Government or public

officer was necessary in the interests of justice, hadrecommended omission of the Section. However, the JointCommittee of Parliament, to which the Amendment Bill, 1974was referred, did not agree with the Law Commission andrecommended retention of Section 80 with necessarymodifications/relaxations.

16. Thus, in conformity therewith, by the Code of CivilProcedure (Amendment) Act, 1976 the existing Section 80 wasrenumbered as Section 80(1) and sub-sections (2) and (3)were inserted with effect from 1-2-1977. Sub-section (2) carvedout an exception to the mandatory rule that no suit can befiled against the Government or public officer unless twomonths’ notice has been served on such Government or publicofficer. The provision mitigates the rigours of sub-section (1)and empowers the court to allow person to institute suitwithout serving any notice under sub-section (1) in case itfinds that the suit is for the purpose of obtaining an urgentand immediate relief against the Government or public officer.But, the court cannot grant relief under the sub-section unlessa reasonable opportunity is given to the Government or publicofficer to show cause in respect of the relief prayed for. Theproviso to the said sub-section enjoins that in case the courtis of the opinion that no urgent and immediate relief shouldbe granted, it shall return the plaint for presentation to itafter complying with the requirements of sub-section (1). Sub-section (3), though not relevant for the present case, seeks tobring in the rule of substantial compliance and tends to relaxthe rigour of sub-section (1).”

40. In this case, conduct of the Board betrays callous andindifferent attitude, which in effect is that if Asiatic Steel wished for itsmoney to be returned, it had to approach the court. This was despite itsknowledge that at least three other identically placed entities had askedfor return of money and, upon approaching the court, were refunded theamounts given by them promptly. In view of these facts, nothing preventedthe Board from deciding to refund the amount, without forcing AsiaticSteel to approach the court.

41. This court notes that the High Court directed payment of interestfor the entire period (i.e. starting from 08.11.1994 and ending on

ABC

A19.05.1998). However, it is evident that Asiatic Steel had not paid theentire amount on 08.11.1994; in fact the sum of $1,153,000 /- i.e. theprincipal consideration, excluding the earnest money deposit, wasdeposited on 24.03.1995. Therefore, the impugned judgment erred indirecting payment of interest on the entire amount from 08.11.1994;instead, the direction to pay interest on 3,61,20,000/- shall operate withBeffect from 22.03.1995 to 19.05.1998.

42. The appeal is dismissed, subject to the modification indicatedabove, to the impugned judgment of the High Court.

CKalpana K. Tripathy

Appeal dismissed.