Supreme Court of India
M/S TOMORROWLAND LIMITEDversusHOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED AND ANOTHER
- Citation
- 2025 INSC 207
- Decided
- 13 February 2025
- Disposal
- Disposed off
- Bench
- SURYA KANT
Holding
HUDCO breached its contractual duties, obliging it to refund the forfeited amount, but the appellant is not entitled to discretionary interest due to its unclean‑hands conduct.
Summary
M/s Tomorrowland Limited, the highest bidder for a 5‑star hotel site, paid the first instalment but argued that HUDCO (Housing and Urban Development Corporation) was obliged to obtain statutory approvals and execute a sub‑lease before demanding further payments. HUDCO failed to secure the necessary approvals and a perpetual lease, cancelled the allotment and forfeited the amount paid. The Supreme Court held that HUDCO breached its reciprocal contractual obligations, making it liable to refund the forfeited sum, but denied the appellant any discretionary interest because of its unclean‑hands conduct, forum‑shopping and failure to comply with court orders. The Court set aside the High Court judgment, decreed a refund of Rs. 28,11,31,939 without interest, and ordered HUDCO to pay 6% interest only if the refund is delayed. The appeal was allowed in part, with the refund direction and denial of interest upheld.
Issues considered
- Whether HUDCO breached its reciprocal contractual obligations under the allotment letter dated 31.10.1994
- Whether the appellant is entitled to a refund of the forfeited amount under clause 5(vi) of the allotment letter
- Whether the appellant is entitled to interest on the refunded amount, either contractually or under Section 34 of the CPC
Legislation cited
Headnote
Issue for Consideration Whether HUDCO was in breach of its reciprocal contractual obligations under the allotment letter dated 31.10.1994, and whether the appellant was entitled to refund of the forfeited amount in terms of cl.5(vi) of the allotment letter; entitled to discretionary relief of interest on refund of forfeited amount u/s.34 of the Code of Civil Procedure, 1908. Headnotes† Appellant, highest bidder, allotted land by R1/HUDCO for construction of hotel – Appellant paid first instalment in terms of allotment letter –
Subjects
Breach of contractRefund of forfeited amountMandatory clauseCommercial document interpretationOriginal intention of partiesAward of interestDiscretionary reliefS.34 CPCEquityClean hands doctrineForum shopping
Judgment
[2025] 2 S.C.R. 998 : 2025 INSC 207
M/s Tomorrowland Limited
v.
Housing and Urban Development Corporation Limited
and Another
(Civil Appeal No. 2531 of 2025)
13 February 2025
[Surya Kant* and Ujjal Bhuyan, JJ.]
Issue for Consideration
Whether HUDCO was in breach of its reciprocal contractual
obligations under the allotment letter dated 31.10.1994, and whether
the appellant was entitled to refund of the forfeited amount in terms
of cl.5(vi) of the allotment letter; further, whether Appellant entitled
to discretionary relief of interest on refund of forfeited amount
u/s.34 of the Code of Civil Procedure, 1908.
Headnotes†
Appellant, highest bidder, allotted land by R1/HUDCO for
construction of hotel – Appellant paid first instalment in terms
of allotment letter – Dispute arose as Appellant claimed further
instalments were due only after HUDCO obtained statutory
clearances and executed sub-lease in its favour – Despite
lacking perpetual lease, HUDCO insisted on instalments and
threatened cancellation – Appellant filed First Suit seeking
injunction to defer payments and restrain cancellation of
allotment – HUDCO cancelled allotment, forfeited amount,
and invited fresh bids, now disclosing perpetual lease was
not yet executed – Second Suit filed seeking declaration
that cancellation was illegal and for possession – First Suit
dismissed as withdrawn unconditionally – R2/Ministry of Urban
Development, Government of India impleaded in Second Suit,
sought rejection u/Or.VII r.11 CPC for deficient court fee –
Trial Court rejected, but High Court upheld objection and
held fee payable on market value – Appellant then dropped
relief of possession and confined suit to declaration – Civil
Court decreed suit holding HUDCO guilty of breach entitling
Appellant to declaration on account of concealment and gross
misrepresentation of fact – Affirmed by First Appellate Court –
High Court allowed second appeal holding suit suffered from
* Author
[2025] 2 S.C.R. 999
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
fatal defect of not claiming possession as further relief in
terms of proviso to s.34 Specific Relief Act – Further noting
Appellant’s conduct was inequitable and aimed at prolonging
litigation, thus disentitling discretionary relief – Hence, appeal
before Supreme Court:
Held: Clause 5(vi) of Allotment Letter imposed mandatory obligation
on HUDCO to obtain statutory approvals and to execute requisite
documents – Had this not been obligatory, the clause would not
have mandated refund in case of failure – There was also breach
of clauses requiring execution of sub-lease – Without perpetual
lease in its favour, HUDCO could not have executed sub-lease or
handed over possession – Perpetual lease was obtained only after
cancellation of appellant’s allotment – Failure to execute sub-lease
owing to lack of title amounted to breach – HUDCO, being incapable
of fulfilling its reciprocal obligations, was not entitled to demand
further instalments – HUDCO also failed to secure revised layout
plan approvals – Having found HUDCO in breach, Appellant liable
to refund as provided for in allotment letter as it is imperative to
maintain the sanctity of contractual terms – A commercial document
ought not to be interpreted in a manner that defeats the parties’
original intention. [Paras 31-40, 42, 44-47, 60(i)]
Appellant was not entitled to interest under the allotment letter –
However, interest pendente lite or post-decree may be awarded
under s.34 CPC, dehors the contract, as a discretionary relief based
on equitable considerations – Ensuring neither undue enrichment
nor unfair deprivation – Thus, court examined conduct of Appellant:
failure to deposit Rs. 15 crores under a status quo order in First Suit,
followed by unconditional withdrawal of the suit with an oblique motive
to avoid proceedings before the very Court whose order had not been
complied with amounted to forum shopping and abuse of process – In
Second Suit, Appellant abandoned relief of possession to evade court
fee, casting doubt on its bona fides – Material on record indicated
appellant lacked clean hands and sought to prolong litigation to mask
financial incapacity – A party seeking equity must come with clean
hands – ‘Clean hands’ implies absence of concealment or attempt
to secure illegitimate gains – Any contrary conduct disentitles a party
from relief – Courts cannot abet inequity; he who seeks equity must
do equity – Though as general rule in commercial disputes, interest
pendente lite or post-decree is granted to compensate for time value
of money that was due but withheld during legal process, present
case warranted deviation. [Paras 48-59, 60(ii)]
1000 [2025] 2 S.C.R.
Supreme Court Reports
Case Law Cited
Central Bank of India v. Ravindra & Ors., 2001 INSC 520 : [2001]
Supp. 4 SCR 323 : (2002) 1 SCC 367 – relied on.
List of Acts
Code of Civil Procedure, 1908.
List of Keywords
Breach of contract; Refund of forfeited amount; Mandatory clause;
Commercial document interpretation; Original intention of parties;
Award of interest; Discretionary relief; S.34 CPC; Equity; Clean hands
doctrine; Forum shopping.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2531 of 2025
From the Judgment and Order dated 03.06.2016 of the High Court
of Delhi at New Delhi in RSA No. 362 of 2014
Appearances for Parties
Advs. for the Appellant:
Tejinder Singh Dhindhsa, M.C. Dhingra, Sr. Advs., Pawan
Sachdeva, Ishan Sachdeva, Gaurav Dhingra, Ms. Niharika Dubey,
Shashank Singh, Piyush Kant Roy, K K R Dass.
Advs. for the Respondents:
Mrs. Aishwarya Bhati, A.S.G., Ms. Meenakshi Arora, Sr. Adv.,
Sonal Kumar Singh, Obhirup Ghosh, Nikilesh Ramachandran,
Mrs. Suhasini Sen, Saurabh Mishra, Mrs. Vanshaja Shukla, T.S.
Sabarish, Ishaan Sharma, Amrish Kumar.
Judgment / Order of the Supreme Court
Judgment
Surya Kant, J.
Leave granted.
2. The instant appeal preferred by M/s Tomorrowland Technologies
Exports Limited (formerly M S Shoes East Ltd.) is directed against
[2025] 2 S.C.R. 1001
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
the judgment dated 03.06.2016 (Impugned Judgment) passed by
the High Court of Delhi (High Court) in RSA No. 362/2014 whereby
the concurrent findings returned by the courts below have been set
aside. Consequently, the Appellant’s suit seeking declaratory relief
has been dismissed for being not maintainable.
3. The fulcrum of the dispute herein lies in respect of the forfeiture of
the Appellant’s payments by Respondent No. 1, namely the Housing
and Urban Development Corporation Limited (HUDCO), on account
of non-performance of contractual obligations by the Appellant. Before
adverting to the respective contentions of the parties, we deem it
appropriate to briefly narrate the factual background leading to the
present appeal.
A. Factual Background
4. The sequence of events in the instant appeal commenced with the
Ministry of Urban Development, Government of India (MUD), i.e.,
Respondent No. 2 herein, having decided in 1990 to develop an area
of 71 acres of land located at Andrew’s Ganj, New Delhi, through
Respondent No. 1. Bids were thus invited by Respondent No. 1 for
properties at Andrew’s Ganj inter alia offering:
(i) Land, which was to be leased for 99 years, in order to establish
a 5-star Hotel, along with an already-built Car Park;
(ii) Nine Guest House blocks, nine Restaurants, and 25 Shops
already constructed by Respondent No. 1;
(iii) A Shopping Arcade and;
(iv) A Cultural Centre to be built by the successful bidder(s).
We must underscore that the scope of the present appeal is restricted
only to Item No. (i) specified hereinabove, i.e. ‘land, which was to be
leased for 99 years, in order to establish a 5-star Hotel, along with
an already-built Car Park’ (Subject Property). We further clarify that
the conclusions drawn in the instant appeal will have no bearing on
the ongoing disputes in respect to the other bids.
5. Reverting to the facts, the Appellant seems to have emerged as the
highest bidder for the Subject Property after the conclusion of the
bidding process. As a result, Respondent No. 1 issued the allotment
letter dated 31.10.1994 (Allotment Letter), on such terms and
conditions as specified therein, including the following:
1002 [2025] 2 S.C.R.
Supreme Court Reports
5. “The broad terms and conditions for the allotment
are as follows:-
The 5-star hotel building shall be constructed within
the parameters of the approved overall Urban Design
Form after obtaining required approvals from the
concerned local authority and the Delhi Urban Arts
Commission. The height coverage in basement and
such related development controls shall be as per
the operative norms of the statutory authorities.
You shall make the payment of premium, i.e.,
consideration of Rs. 64.10 Cores (Rs. Sixty Four
Crores and ten lacs only) for the allotment of the
Hotel site and Rs. 14.00 crores for the allotment of
car parking space. The payment shall be made in
the following manner/stages:
(A) Hotel Site (Rs. 64.10 Crores)
(i) Within 4 weeks of the date of this allotment letter
(i.e. before 28.11.94) - 40%
(Rs. 25,64,00,000)
(ii) Before the end of one year of the date of this
allotment letter (i.e. before 31.10.95) - 30%
(Rs 19,23, 00,000)
(iii) Before the end of two years of the date of this
allotment letter (i.e. before 31.10.96) - 30%
(Rs. 19, 23,00,000)
------------------
Rs. 64,10,00,000
------------------
(B) Car Parking Space (Rs. 14.00 Crores)
(i) Within four weeks of the date of issue of allotment
letter (i.e. before 28.11.94) - 10%
(Rs.1,40,00,000)
[2025] 2 S.C.R. 1003
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
(ii) Before the end of one year of the date of issue
of the allotment letter (i.e. before 31.10.95) - 40%
(Rs. 5,60,00,000)
(iii) Within four weeks of issue of letter by HUDCO
intimating that the services were ready for being
handing over - 50%
(Rs.7,00,00,000)
------------------
Rs. 14,00,00,000
------------------
The above payments shall be made through demand
drafts drawn in favour of HUDCO payable at New Delhi.
(iii) No interest will be charged on payments made
before the due dates stated above. In case of
default, interest shall be charged @ 16% p.a. for
three months if the payment is made after the
due date. Additional penal interest @ 3% p.a.
shall also be charged on the interest for three
months. Any delay beyond three months would
entail cancellation of allotment and/or forfeiture
of the total amount deposited to date.
(iv) You will be required to complete the construction of
the Hotel Site within three years of the date of handing
over possession of the Hotel Site on licence basis for
construction of the Hotel building as per terms and
conditions contained in the proforma of Agreement
to Sub- lease, two copies of which are enclosed with
this allotment letter. In the event of non-completion
of construction within the stipulated time, HUDCO
may consider granting extension if exceptional and
unavoidable circumstances have prevented you to
complete construction within the stipulated time. The
decision of HUDCO regarding the existence of the
exceptional and unavoidable circumstances will be
final and binding upon you. In case the construction
is not completed within the prescribed period or the
extended period as decided by HUDCO, HUDCO
1004 [2025] 2 S.C.R.
Supreme Court Reports
will have the right to take over the land along with
the unfinished building with materials, fixtures, if any,
on the site without payment of any compensation to
you. Since the underground car parking space will be
made available to you in the adjacent building, you
may provide underground linkage from the hotel with
the parking space. However, cost of such linkages
shall be borne by you.
(v) You shall not have any right to sell, transfer, assign
or otherwise parting with the possession without the
prior permission of Lessor/ HUDCO. You may also at
the discretion of HUDCO, be permitted to raise loan
only for construction of the building and equipment,
to mortgage the premises subject to such terms
and conditions including recovery of 50% unearned
increase in the value of this land as will be laid down
in the lease documents and subject to the first charge
of HUDCO for the unpaid cost of land for the hotel
as well as other dues payable hereunder.
(vi) Hudco will execute all required documents
for obtaining approval of the competent authority
under the Urban Land (Ceiling and Regulation)
Act, 1976 and also of the Appropriate Authority
in terms of Chapter XX C of the Income Tax Act.
If these approvals are not accorded Hudco will
refund the amount paid without any interest and
you shall not be entitled to claim any compensation
for damages.
(vii) You shall pay annual ground rent at the rate of
2-1/2% of the premium for land for the Hotel site
land the proportionate cost of land underneath the
car parking space from the date of handing over of
possession of the Hotel site and the car parking space
to you. The ground rent shall be revised periodically
in accordance with the terms and conditions of the
sub lease deed.
(viii) Initially, the Hotel site will be on a licence under
an Agreement to Sub-lease and upon fulfilment of
[2025] 2 S.C.R. 1005
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
the terms of the said agreement including payment
of all dues, perpetual sub-lease will be executed.
The terms and conditions of the perpetual sub-lease
shall be as per the proforma duly approved by the
Govt. of India, a copy of which will be sent to you
in due course.
(ix) Upon the receipt of the first instalment of
the premium both for the Hotel site as well as
the car parking space as indicated in para 5(ii)
and also after receipt of approvals as indicated
in para 5(vi), the Agreement to Sub-lease will be
made available to you for execution for the Hotel
site and upon its execution, the possession of
Hotel Site will be handed over to you for raising
construction.
(x) All costs for the preparation of required documents,
stamp duty, registration charges and other levies of
any kind whatsoever will have to be borne by you.
Property taxes and other municipal levies shall borne
by you from the date of possession of the site(s)”.
[Emphasis supplied]
6. The Appellant duly deposited the first instalment of Rs. 27.04
Crores along with interest at the rate of 16.48% for three months,
amounting to Rs. 1,04,81,939, as per Clause 5(A) of the Allotment
Letter. In addition, the Appellant also deposited a sum of Rs. 2.5
Lakhs towards the maintenance corpus. As such, the total amount
paid by the Appellant was admittedly Rs. 28,11,31,939.
7. Subsequently, a dispute arose between the parties; purportedly on
account of the Appellant’s assertion: that in terms of the Allotment
Letter, Respondent No. 1 was obligated to execute certain documents
after obtaining clearances under the Income Tax Act, 1961 (IT Act)
and the Urban Land (Ceiling and Regulation) Act, 1976 (ULCR Act).
Respondent No. 1 was further obligated to execute an ‘agreement
to sub-lease’ in favour of the Appellant. The Appellant thus claimed
that as per the terms and conditions of allotment, the second and
third instalments would have become due in favour of Respondent
No. 1, only in the event that the abovementioned documents were
duly executed by the latter.
1006 [2025] 2 S.C.R.
Supreme Court Reports
8. Thereafter, the Appellant sent letters to Respondent No. 1 requesting
compliance with the reciprocal contractual obligations enshrined in
the Allotment Letter. That being said, it is imperative to caveat at this
juncture that Respondent No. 1 was bereft of a perpetual lease to be
executed in its favour by MUD, and as such, was not in a position
to execute the ‘agreement to sub-lease’ in favour of the Appellant.
Regardless thereto, Respondent No. 1 insisted on payment of the
second and third instalments, and further sought to threaten the
Appellant that non-compliance with the payment schedule would
result in cancellation of the allotment in its favour.
9. At this point, it is also relevant to bring on record that Ansal Properties
& Industries Limited (Ansals), who being the successful bidders for
the establishment of a Shopping Arcade (as enumerated in Item No.
(iii) of Paragraph 4), were allotted land in this regard as well as access
to utilise certain portion of the aforementioned Car Parking, which
indubitably would have to be shared with the Appellant. Pertinently,
the Ansals also delayed the payment of further instalments on the
similar ground that the Car Park was allegedly illegal/unauthorised.
Pursuant thereto, the Ansals appear to have been granted an interest-
free extension of instalment payments by Respondent No. 1.
10. In these circumstances, the Appellant filed Suit No. 275/1996 before
the High Court (First Suit), seeking mandatory injunction against
Respondent No. 1 to extend the dates for payment of the second
and third instalments until Respondent No. 1 fulfilled its reciprocal
obligations. The Appellant further sought a permanent injunction to
restrain Respondent No. 1 from cancelling its allotment.
11. The High Court passed a conditional status quo order on 31.01.1996 in
the First Suit, in terms whereof, the Appellant was directed to deposit
Rs. 15 Crores by 08.04.1996, failing which such an order would stand
automatically vacated. It is not in dispute that the Appellant failed to
deposit the aforesaid amount even within the extended period. As a
result, the status quo order stood vacated.
12. This followed an order by Respondent No. 1 issued on 02.05.1996,
whereby the allotment was cancelled and the entire amount of Rs.
28,11,31,939 was forfeited.
13. Respondent No. 1 thereafter invited fresh bids in November, 1996
for the development of the Subject Property, this time disclosing
[2025] 2 S.C.R. 1007
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
in the bid that a lease in its favour for the said land was yet to be
executed. Additionally, Respondent No. 1 also filed an application
in the pending First Suit seeking its dismissal on the ground that
the proceedings had become infructuous, owing to the cancellation
of the allotment.
14. The Appellant being aggrieved by the cancellation of their allotment
filed a fresh suit bearing Suit No. 1/1997 (Second Suit), changing the
forum from the High Court to Tis Hazari Courts, Delhi (Civil Court). In
the Second Suit, the Appellant sought a declaration that the cancellation
of allotment by Respondent No. 1 was illegal, null and void. They also
consequently sought possession of the Subject Property.
15. Interestingly, the Appellant moved an application before the High
Court for the withdrawal of their First Suit, on the plea that the Second
Suit had been filed before the Civil Court on the basis of a fresh
cause of action. The High Court rejected the aforesaid application on
22.04.1997, citing that there were several factual aversions made by
the Appellant. Eventually, the First Suit was dismissed as withdrawn
unconditionally, upon the statement made by the Appellant’s counsel
before the High Court.
16. In the meantime, Leela Hotels Limited (Leela) emerged as the highest
bidder in the fresh bid invited for the Subject Property, followed by
allotment. Leela’s allotment, however, was contingent on the outcome
of the pending suit filed by the Appellant. It is also relevant to note
that the Respondent No. 2/MUD executed the perpetual lease deed
in favour of Respondent No. 1 on 04.07.1997.
17. The Appellant, meanwhile, impleaded Respondent No. 2 as one of
the defendants in the Second Suit. The Respondent No. 2, in turn,
filed an application under Order VII Rule 11 of the Code of Civil
Procedure, 1908 (CPC), seeking rejection of the plaint based on the
assertion that the Appellant had allegedly not paid the requisite court
fee. Though the Civil Court rejected that application, the High Court
thereafter, on revision, allowed the objection raised by Respondent
No. 2, holding that the Appellant was liable to pay court fees based
on the market value of the Subject Property.
18. The Appellant, mirroring the characteristics of a chronic defaulter,
this time decided to evade the liability of paying the court fee by
abandoning the relief of delivery of possession. Resultantly, the
1008 [2025] 2 S.C.R.
Supreme Court Reports
Appellant restricted the relief in the Second Suit only to a declaration
that the cancellation of the allotment by Respondent No. 1 was null
and void.
19. The Civil Court eventually decreed the Second Suit vide judgment
dated 03.07.2010, inter alia, holding that: (i) Respondent No. 1
was guilty of committing a breach of the terms of allotment; (ii) the
Appellant was discriminated against and was denied parity with the
Ansals; and (iii) a declaration under Section 34 of the Specific Relief
Act, 1963 (SR Act) to the effect that the cancellation letter was null,
void, and inoperative is warranted on account of the concealment
and gross misrepresentation of facts by Respondent No. 1.
20. Respondent No. 1 unsuccessfully laid challenge to the judgment and
decree dated 03.07.2010, as the First Appellate Court dismissed the
Regular First Appeal vide judgment dated 18.07.2014, reiterating
the same grounds.
21. Still aggrieved, Respondent No. 1 preferred a Regular Second
Appeal before the High Court, which was allowed vide the Impugned
Judgment dated 03.06.2016. Notably, the High Court overturned the
concurrent findings of the courts below, and has inter alia observed
that the Appellant admittedly did not have sufficient funds and, thus,
wanted to prolong the litigation. The High Court further held that:
“39. … the suit filed by the Appellant suffered from a fatal
defect of not claiming possession as a further relief in
terms of proviso to Section 34 of the Specific Relief Act,
and therefore the decree seeking only declaration to the
effect that the cancellation letter dated 02.05.1996 was
bad in law could not have been passed by the courts
below”.
Additionally, the High Court went on to observe that the grant of
declaration under Section 34 of the SR Act, being a discretionary
relief, cannot be bestowed upon a party who indulges in ‘sharp’
practices. Hence, this appeal.
B. Contentions on behalf of the Appellant
22. Shri Tejinder Singh Dhindsa, learned Senior Counsel, representing
the Appellant has painstakingly taken us through the voluminous
material placed on record. He contended that the High Court has
[2025] 2 S.C.R. 1009
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
committed grave error in upsetting the concurrent finding of fact
arrived at by the courts below.
23. Shri Dhindsa advanced the following submissions on behalf of the
Appellant to challenge the Impugned Judgment:
a) At the time of allotment of the Subject Property, Respondent
No. 1 failed to disclose that it had no subsisting lease in its
favour to execute the sub-lease in favour of the Appellant.
As such, it is a clear case of misrepresentation on the part of
Respondent No. 1.
b) After payment of the first instalment by the Appellant, Respondent
No. 1 was obligated to execute the ‘agreement to sub-lease’
in favour of the Appellant and further execute documents for
obtaining statutory approvals under the ULCR Act and IT Act.
However, Respondent No. 1 failed to execute these documents
in the absence of a perpetual lease in its favour. There was,
thus, no contractual obligation on the Appellant to pay further
instalments.
c) The High Court erroneously held that the Second Suit filed
by the Appellant suffered from a fatal defect of not claiming
possession as a further relief in terms of the proviso to Section
34 of the SR Act. The High Court in this regard overlooked the
fact that possession could be sought from Respondent No. 1
only after the execution of the sub-lease agreement, which was
admittedly not done at the time of filing of the Second Suit. For
this reason, the Appellant gave up the consequential relief of
possession in the Second Suit, and it would be unfair to non-
suit the Appellant on this ground.
d) After the Subject Property was allotted to Leela under the
subsequent bidding process, a dispute arose between
Respondent No. 1 and Leela on account of failure of the former
to disclose that the revised layout plan was yet to be approved
by the Competent Authority. The said dispute was adjudicated
by an Arbitrator directing refund of the entire sum paid by Leela,
along with 20% interest. That Award attained finality, except
that the rate of interest was reduced to 18% by this Court.
The Appellant being similarly placed, therefore, deserved to
be treated at par with Leela.
1010 [2025] 2 S.C.R.
Supreme Court Reports
e) The treatment meted out to the Appellant was discriminatory
when juxtaposed with the Ansals, who were granted repeated
interest-free extensions for paying the second and third
instalments, in regards to the shared Car Parking. Conversely,
the Appellant was compelled to pay instalments as per the
payment schedule and was threatened with cancellation of the
allotment in the event of default.
f) The forfeiture of the amount paid by the Appellant towards the
first instalment was done on account of misconstruction and
selective reading of the mutual obligations emanating from the
Allotment Letter and not on account of any actual loss suffered
by Respondent No. 1.
24. Alternatively, Shri Dhindsa submitted that since considerable time
has passed following the allotment and its cancellation, it would
be in the interests of justice and equity to entertain the Appellant’s
limited relief for return of Rs. 28,11,31,929 along with the applicable
rate of interest.
C. Contentions on behalf of Respondent No. 1
25. Ms. Meenakshi Arora, learned Senior Counsel appearing on behalf
of Respondent No. 1, contrarily opposed the Appellant’s prayer inter
alia and vehemently contended that not only did they fail to comply
with the terms and conditions of the Allotment Letter but that the
Appellant had disqualified itself from any relief on account of its
deceitful, unfair and unethical conduct.
26. Ms. Arora canvassed the following grounds in support of her
submissions:
a) The Appellant defaulted on the payment schedule stipulated
in the Allotment Letter, resulting in a breach of contractual
obligations. As a result, Respondent No. 1 exercised its
contractual right by cancelling the allotment in favour of the
Appellant and forfeited the deposited amount, as envisaged
in Clause 5(iii) of the Allotment Letter. The operation of the
aforementioned Clause is not interlinked or contingent on any
other clause of the Allotment Letter and therefore, non payment
of the instalment is bound to entail cancellation of the allotment
and forfeiture of the deposited amount.
[2025] 2 S.C.R. 1011
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
b) The Second Suit filed by the Appellant was barred under Order
II Rule 2 of the CPC, considering the cause of action of both the
suits was one and the same, and also because the Appellant
relinquished a portion of the claim which they could have sought
in the First Suit itself.
c) The Second Suit was also barred in view of Clause (3) of Rule
1 of Order XXIII of the CPC, since in the First Suit which was
unconditionally withdrawn by the Appellant, the High Court did
not grant any liberty therein to institute a fresh suit.
d) The Appellant in the Second Suit, while seeking declaratory relief
of the cancellation of allotment being null and void, abandoned
the consequential relief of possession in order to avoid paying
court fees. Such a recourse defies the proviso to Section 34 of
the SR Act, which mandates that consequential relief be sought
along with a declaratory decree. Hence, the High Court has
rightly held that the Second Suit was non-maintainable.
e) The Appellant brazenly attempted to overreach the judicial
process; indulge in forum shopping and finagle the judicial
process. This is writ large from: (i) the Appellant dishonouring the
High Court’s direction to deposit Rs. 15 Crores for continuation
of the order of status quo; (ii) the First Suit being withdrawn due
to forum non conveniens; (iii) the Second Suit being crafted
with a view to change the forum from the High Court to the
Civil Court; (iv) the relief of possession being abandoned to
avoid payment of court fees as the entire lis was speculative
for the Appellant; and (v) non-payment of further instalments
and failure to perform reciprocal obligations such as securing
statutory approvals.
f) Unlike the Appellant, the Ansals had secured approval from the
Income Tax authorities, whereas the Appellant did not take any
steps to do so, despite categorical assertions in the Allotment
Letter. Hence, no parity with the Ansals can be claimed when
the Appellant never demonstrated any willingness to honour
their obligations.
27. In essence, Ms Arora contended that the conduct of the Appellant
throughout has been to prolong the litigation and entangle Respondent
No. 1 in vexatious litigation. She thus maintained that the High
1012 [2025] 2 S.C.R.
Supreme Court Reports
Court has rightly reversed the findings of the courts below or that
the Appellant is not entitled to any discretionary relief under Section
34 of the SR Act.
28. Ms. Aishwarya Bhati, learned Additional Solicitor General of India,
on behalf of Respondent No. 2 reiterated the contentions put forth
by Ms. Arora. She further fairly submitted that if this Court fixes any
liability on Respondent No. 1 to refund the forfeited amount, it is
inter-se the Respondents to comply with such direction. Ms Bhati
maintained that Respondent No. 1 has sufficient assets to meet any
liability imposed by this Court.
D. Issues for Consideration
29. In our considered view, the salient issues that arise for our
consideration can be summed up as follows:
(a) Whether Respondent No. 1/HUDCO was in breach of its
reciprocal contractual obligations qua the Appellant?
(b) If so, whether the Appellant is entitled to a refund of the forfeited
amount under Clause 5(vi) of the Allotment Letter?
(c) If Issue (b) above is answered in the affirmative, whether the
Appellant is entitled to interest on refund of the forfeited amount?
E. Analysis
E. 1 Whether Respondent No. 1/HUDCO was in breach of its
reciprocal contractual obligations qua the Appellant?
30. We have carefully perused the terms and conditions of the Allotment
Letter and find that there are several reciprocal obligations placed
upon the Appellant and Respondent No. 1.
31. First, a bare reading of the relevant recitals in the Allotment Letter
extracted at Paragraph 5 above, leaves no room to doubt that
Clause 5(vi) obligates Respondent No. 1 to ‘execute all required
documents for obtaining approval of the competent authority under
the Urban Land (Ceiling and Regulation) Act, 1976 and also of
the Appropriate Authority in terms of Chapter XX C of the Income
Tax Act’. In fact, in the event of failure to do so this very Clause
also necessitates that Respondent No. 1 ‘will refund the amount
[2025] 2 S.C.R. 1013
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
paid without any interest and you shall not be entitled to claim any
compensation for damages’.
32. Though Respondent No. 1 has, in this regard, attempted to wriggle
out of its obligations on the premise that it could only assist the
Appellant in executing the necessary documents, we do not find
any merit in such submission. We say so for the reason that had it
not been obligatory on Respondent No. 1 to execute the necessary
documents under the first part of Clause 5(vi), the second part thereof
would not have mandated refund of the amount paid by the successful
bidder. It seems to us that since the failure to secure approval of the
Statutory Authorities and resultant execution of requisite documents
has necessary consequences of refund of the amount paid, the
first part of Clause 5(vi) is mandatory in nature. Respondent No. 1
therefore cannot be allowed to shirk its responsibility and leave the
Appellant at the mercy of the Statutory Authorities for such approvals.
33. That being the clear intent of the relevant terms and conditions of the
Allotment Letter as well as the supporting material placed on record,
we are of the considered opinion that Respondent No. 1 was in breach
of its contractual duty under Clause 5(vi) of the Allotment Letter.
34. Second, a conjoint reading of Clauses 5(viii) and (ix) of the Allotment
Letter postulates an unambiguous promise on the part of Respondent
No. 1: that upon receipt of the first instalment and on grant of
approvals by the Statutory Authorities, an ‘agreement to sub-lease’
will be executed by Respondent No. 1, followed by handing over of
possession of the Subject Property to the Appellant.
35. As held earlier, Respondent No. 1, even after the receipt of the first
instalment, did not take any tangible steps to secure the necessary
statutory approvals. It is obvious that the said failure led to breach of
Clause 5(viii) and (ix) also, as admittedly, no ‘agreement to sub-lease’
was executed in favour of the Appellant, owing to the non-execution
of a perpetual lease by Respondent No. 2 in favour of Respondent
No. 1. Nonetheless, we proceed to examine the contention of the
Appellant that Respondent No. 1 also concealed the fact that it
did not have the title and authority to execute the ‘agreement to
sub-lease’ in favour of the Appellant.
36. The Appellant’s plea to this effect is fortified by the contents of
long drawn correspondence, including letters dated 03.01.1995,
1014 [2025] 2 S.C.R.
Supreme Court Reports
24.01.1995, 03.03.1995, and 29.03.1995, whereby Respondent No. 1
had been requesting Respondent No. 2 to execute the perpetual
lease deed in its favour, in absence whereof, no sub-lease could be
executed in favour of the Appellant.
37. The other cascading effect of non-execution of perpetual lease in
favour of Respondent No. 1, or sub-lease in favour of the Appellant,
was that the possession of the Subject Property could not have been
handed over to the Appellant. Admittedly, the perpetual lease deed in
favour of Respondent No. 1 was executed only after the cancellation
of allotment in favour of the Appellant, belatedly on 04.07.1997.
38. Our attention was also drawn towards several legal opinions and
internal documents of Respondent No. 2 and the Ministry of Law &
Justice in the context of the underlying bid dispute. While we do not
intend to delve into these documents, we cannot be ignorant of the
fact that these records tend to support the claim of the Appellant that
Respondent No. 1 could not furnish the sub-leasing arrangements
until the perpetual lease was executed in its favour.
39. As such, Respondent No. 1 being incapable of fulfilling its reciprocal
promises, was not entitled to demand payment for the second
instalment until the perpetual lease deed was executed in its favour.
We therefore hold that Respondent No. 1’s failure to execute the
sub-lease in favour of the Appellant, owing to the lack of its authority
and title, also amounts to a breach of their contractual obligations.
40. We may hasten to add that besides the breach of aforementioned
contractual obligations, it seems that Respondent No. 1 did not
have the necessary sanctions permitting construction of the 5-star
Hotel at the site. This fact came to light only after Leela succeeded
in getting an Arbitration Award in its favour, on account of alleged
failure of Respondent No. 1 to disclose that the revised layout plan
of the Subject Property was yet to be approved.
41. Furthermore, there is some merit in the Appellant’s grievance
of differential treatment when compared to the Ansals. As noted
earlier, the Ansals were granted an interest-free extension for the
pending instalments under similar circumstances, but the request of
the Appellant was declined. It is difficult to comprehend as to how
granting the same relief to the Appellant would have been detrimental
to the interest of Respondent No. 1, when such a relief was granted
to another similarly placed party.
[2025] 2 S.C.R. 1015
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
42. As an upshot of the foregoing, we have no doubt in our mind that
Respondent No. 1 was in breach of several obligations as contemplated
in the Allotment Letter, viz. failure to execute documents for securing
approval under the ULCR Act and the IT Act; failure to execute the sub
lease agreement in favour of the Appellant and; failure to secure the
approval of the revised layout plan for the construction of the hotel.
E. 2 Whether the Appellant is entitled to a refund of the forfeited
amount?
43. Having held that Respondent No. 1 has breached its contractual
obligations, we now proceed to determine the Appellant’s entitlement
to refund of the forfeited amount. We may clarify here that during
the course of oral arguments, the Appellant sought a refund of the
forfeited amount along with reasonable interest. However, in the
written submissions, the Appellant, while reiterating their stance,
has sought a refund of Rs. 28,11,31,929 along with interest from
the date of payment at the rate of 16.48%, i.e., the contractual rate
of interest charged by Respondent No. 1.
44. Clause 5 (vi) of the Allotment Letter, which deals with the monies
paid by the Appellant, provides that Respondent No. 1 will execute all
required documents to obtain approval from the Competent Authority
under the ULCR Act and also from the Appropriate Authority as
envisaged in Chapter XX C of the IT Act, failing which, Respondent
No. 1 will refund the amount paid without any interest.
45. The contents of the above clause unequivocally enumerate that the
parties had ample knowledge of the obligation cast upon Respondent
No. 1 to refund the amounts paid by the Appellant, in case statutory
approvals were not accorded. Significantly, the said clause also
provides that such a refund will be without any interest or claim of
compensation for damages.
46. We have already held in Issue No. E. 1 of this judgment that
Respondent No. 1 was in breach of several obligations as
contemplated in the Allotment Letter.
47. That being the case, it is imperative to maintain the sanctity of the terms
of the agreement between the parties. It is a settled position of law
that a commercial document ought not to be interpreted in a manner
that arrives at a complete variance with what may originally have been
the intention of the parties. As a result, we hold that Respondent No. 1
1016 [2025] 2 S.C.R.
Supreme Court Reports
is liable to refund the amount of Rs. 28,11,31,939 (First instalment of
Rs. 27.04 Crores along with interest for three months amounting to
Rs. 1,04,81,939/- and Rs. 2.5 Lakhs towards maintenance corpus)
deposited by the Appellant pursuant to the Allotment Letter.
E. 3 Whether the Appellant is entitled to interest on refund of
the forfeited amount?
48. Having held that Respondent No. 1 is liable to refund the principal
sum, we may now proceed to determine the Appellant’s claim for
interest on the amount directed to be refunded. Evidently, the Appellant
is not entitled to any interest on the amount to be refunded in terms
of the Allotment Letter. The Appellant, of course, can seek award
of interest under Section 34 of the CPC, which inter alia provides
that “the court may, in the decree, order interest at such rate as the
Court deems reasonable to be paid on the principal sum adjudged
from the date of the suit to the date of the decree.”
49. It is trite law that under Section 34 of the CPC, the award of interest
is a discretionary exercise steeped in equitable considerations. The
law in this regard has been succinctly discussed in the Constitution
Bench judgment of this Court in Central Bank of India v. Ravindra
& Ors.; (2002) 1 SCC 367, which states:
“Award of interest pendente lite or post-decree is
discretionary with the Court as it is essentially governed
by Section 34 of the CPC de hors the contract between
the parties. In a given case if the Court finds that in the
principal sum adjudged on the date of the suit, the component
of interest is disproportionate with the component of the
principal sum actually advanced, the Court may exercise
its discretion in awarding interest pendente lite and post-
decree interest at a lower rate or may even decline to award
such interest. The discretion shall be exercised fairly,
judiciously, and for not arbitrary or fanciful reasons.”
[Emphasis supplied]
50. There is no gainsaying that the power to award interest ought to be
exercised judiciously, aligning with equitable considerations and also
ensuring neither undue enrichment nor unfair deprivation. Courts are
duty-bound to assess the facts and circumstances of each case,
[2025] 2 S.C.R. 1017
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
applying the principles of fairness and justice. This discretion must
reflect a balanced approach, grounded in reason, and guided by the
overarching objective of equity.
51. It is against this backdrop that the contentions of Respondent No. 1
concerning the conduct of the Appellant become material. Respondent
No. 1 has contended that the Appellant’s actions demonstrate
unscrupulous and evasive conduct, apart from their financial
incapability to honour the contractual obligations, undermining the
essence of the contract.
52. It is not in dispute that in the First Suit, the High Court on 31.01.1996,
passed a status quo order against Respondent No. 1 conditionally,
obligating the Appellant to deposit Rs. 15 Crores by 08.04.1996.
It was contemplated in the order that if the Appellant fails to make
the stipulated deposit, the status quo order would stand vacated.
Admittedly, despite seeking an extension of 10 days, the Appellant
failed to deposit Rs. 15 Crores and establish their bona fides.
53. Shortly after the vacation of the status quo order and cancellation of
the allotment, the Appellant sought to withdraw the First Suit which
was pending before the High Court under its original jurisdiction,
instead of seeking amendment of the plaint and the consequential
relief(s) on the basis of subsequent events. This was done with an
oblique motive, as the Appellant did not want to take a chance before
the High Court whose order they had failed to comply with. The
Appellant thus withdrew the First Suit unconditionally even without
the liberty to file a fresh one, ostensibly with a calculated mindset.
54. We have no hesitation in holding that such conduct was nothing short
of a brazen attempt at forum shopping, as the Appellant wanted to
avoid the jurisdiction of the High Court before whom they had failed
to prove their bona fides by not depositing the stipulated sum. Such
demeanour not only raises grave suspicions on the Appellant’s
propriety, but also amounts to sheer abuse of the process of law
and a waste of precious judicial time.
55. Even in the Second Suit, upon an objection raised by the Union of
India when the High Court directed the Appellant to deposit requisite
court fees, the Appellant abandoned the relief of possession of the
suit land to avoid payment of ad-valorem court fees. This again casts
serious aspersions on the bona fides and financial capabilities of
the Appellant.
1018 [2025] 2 S.C.R.
Supreme Court Reports
56. The material on record sufficiently indicates that the Appellant did
not approach the Court with clean hands and instead attempted to
hoodwink the judicial process by creating a facade to subterfuge their
inability to meet their contractual obligations. We are constrained to
observe that the intent of the Appellant throughout appears to be
that of prolonging the litigation to cloak its impecuniousness.
57. It needs no emphasis that whosoever comes to the court claiming
equity, must come with clean hands. The expression ‘clean hands’
connotes that the suitor or the defendant have not concealed
material facts from the court and there is no attempt by them to
secure illegitimate gains. Any contrary conduct must warrant turning
down relief to such a party, owing to it not acting in good faith and
beguiling the court with a view to secure undue gain. A court of law
cannot be the abettor of inequity by siding with the party approaching
it with unclean hands. This also brings to mind the oft-quoted legal
maxim—he who seeks equity must do equity.
58. We are conscious of the fact that as a general principle, in commercial
disputes, the award of interest pendente lite or post-decree is typically
granted as a matter of course. This is because such interest serves to
compensate the aggrieved party for the time value of money that was
due but withheld during the legal process. It reflects an established
norm aimed at ensuring fairness and equity in commercial transactions.
59. Having said so, we find the instant case to be fit to justify a deviation
from the established standards. In the facts and circumstances,
though we have held Respondent No. 1 to be in breach of several
contractual obligations, the conduct of the Appellant is rife with
instances where it has also sought to undermine the authority and
integrity of the judicial process, by treating the Court with disregard,
and attempting to exploit procedural mechanisms for personal gain.
We, thus, hold that in view of the above reasons, the Appellant is not
entitled to any discretionary relief of interest under Section 34 of CPC.
F. Conclusion
60. Striking a balance between these considerations, we deem it
appropriate to allow this appeal in part, and dispose of the same in
the following terms:
(i) Respondent No. 1/HUDCO, was in breach of its reciprocal
contractual obligations, thereby disentitling them from forfeiting
[2025] 2 S.C.R. 1019
M/s Tomorrowland Limited v.
Housing and Urban Development Corporation Limited. & Another
the monies already paid by the Appellant towards the first
instalment as enshrined in Clause 5 (iii) of the Allotment Letter
dated 31.10.1994.
(ii) Given that the Appellant has blatantly engaged in forum
shopping, and considering that their overall conduct does not in
any manner reflect an approach aligning with the clean hands
doctrine, they are not entitled to grant of any discretionary relief
of interest in their favour.
(iii) The Impugned Judgement dated 03.06.2016 passed by the
High Court is set aside to the extent above.
(iv) The Second Suit filed by the Appellant is decreed in part, and
the Appellant is held entitled to a refund of the principal amount,
without any interest.
(v) As a sequel to the above, we direct Respondent No. 1/HUDCO,
to refund the amount of Rs. 28,11,31,939 to the Appellant within
three (3) months from the date of this order.
(vi) In the event Respondent No. 1 fails to refund the amount within
the stipulated time, the Appellant shall be entitled to interest at
the rate of 6% per annum till the date of realisation.
61. We find it necessary to clarify that the above-mentioned directions
pertain only to the Subject Property, i.e., land for the establishment
of a 5-star Hotel and the already built Car Park. We have not
expressed any opinion on the pending matters between the parties
insofar as the other properties are concerned. The other pending
cases shall be decided by the concerned Court on their own merit
and in accordance with law.
62. The appeal is disposed of in the above terms.
63. Pending interlocutory applications are also disposed of in the above
terms. Ordered accordingly.
Result of the case: Appeal disposed of.
†
Headnotes prepared by: Aandrita Deb, Hony. Associate Editor
(Verified by: Liz Mathew, Sr. Adv.)
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