Supreme Court of India
STATE OF HARYANA & ORS.versusM/S JAI DURGAA FINVEST P. LTD.
- Citation
- 2026 INSC 678
- Decided
- 13 July 2026
- Disposal
- Appeal(s) allowed
- Bench
- V MOHANASURYA KANT
Holding
Clause 19 is a valid and binding term; the security deposit does not earn interest during the three‑month period after termination, but interest at 9% per annum accrues thereafter.
Summary
The State of Haryana awarded a mining contract for Yamuna sand to M/s Jai Durgaa Finvest P. Ltd., which required the contractor to deposit a security amount. The contractor defaulted on instalments and the contract was terminated on 09.03.2000, with the security forfeited. The contractor later claimed interest on the security, arguing that Clause 19 of the Form‑L contract, which states the deposit shall not carry interest, was unsustainable. The Supreme Court examined the contractual language, held that Clause 19 is a valid, binding term, and that interest is payable only after the three‑month refund period post‑termination. Consequently, the security deposit earned no interest up to 09.06.2000, but the contractor is entitled to simple interest at 9% per annum thereafter until refund or adjustment. The Court set aside the High Court’s declaration that Clause 19 was void and allowed the appeals in part.
Issues considered
- Whether Clause 19 of the Form‑L contract, which provides that the security deposit shall not carry interest, is a valid and enforceable term.
- Whether the security deposit is liable to accrue interest despite the contractual stipulation to the contrary.
- Whether the termination of the mining contract by the State was lawful and without illegality.
Legislation cited
Headnote
88 : 2026 INSC 678 State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd. (Civil Appeal No(s). 3145-3146 of 2012) 13 July 2026 [Surya Kant, CJI and V. Mohana,* J.] Issue for Consideration Whether the amount of security deposit given by the Respondent- contractor will carry interest Rules, 1964 – An auction notice was given for the extraction of Yamuna sand from Bega Murthal Sand Zone – Respondent firm was the highest bidder – The bid was accepted by the Appellant – On 30.11.1998, a contract was executed between the parties in terms of the Form-L
Subjects
AgreementValid agreementContractTermination of contractSecurity depositInterest on security depositRefundInterest freePerpetuity
Judgment
[2026] 8 S.C.R. 88 : 2026 INSC 678
State of Haryana & Ors.
v.
M/s Jai Durgaa Finvest P. Ltd.
(Civil Appeal No(s). 3145-3146 of 2012)
13 July 2026
[Surya Kant, CJI and V. Mohana,* J.]
Issue for Consideration
Whether the amount of security deposit given by the Respondent-
contractor will carry interest despite there being a contract to the
contrary between the Appellant and the Respondent.
Headnotes†
Mines & Minerals (Regulation and Development) Act, 1957 –
The Punjab Minor Minerals Concession Rules, 1964 – An
auction notice was given for the extraction of Yamuna sand
from Bega Murthal Sand Zone – Respondent firm was the
highest bidder – The bid was accepted by the Appellant –
On 30.11.1998, a contract was executed between the parties
in terms of the Form-L – As per the said contract the
Respondent was to deposit the contract money in advance
to the Government on a monthly basis – Respondent
defaulted in their installment – The contract was terminated –
The Respondent took up the matter in appeal before the
Appellate Authority – The Appellate Authority ordered that
the department shall raise the demand of contract money
and up to date interest and the contractor shall deposit the
demanded security – Then there were various rounds of
litigation before the High Court and the Supreme Court –
Now, finally the only issue that arises in these appeals is
whether the security money deposited by the contractor will
carry interest once the contract is determined:
Held: Clause 19 is a valid binding term of the agreement – The
two limbs of the Clause 19 have to be read together, and they are
interdependent – While the first portion states that “it shall not carry
any interest” and second portion of the same clause reads that
“shall be refunded to the contractor within three months from the
date of expiry or sooner determination of the contract” – The correct
* Author
[2026] 8 S.C.R. 89
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
interpretation of this Clause would mean the Respondent’s deposit
will earn no interest and it will be returned to the Respondent
within three months of the contract coming to an end or within
three months of the termination of the contract – On a proper
reading of the Clause 19 it is clear that the Appellant cannot
retain the money which is interest free, in perpetuity – Once the
contract is determined then it is the obligation upon the State to
refund the security deposit within the period prescribed in the
agreement – If the State retains the security deposit beyond three
months the Respondent-contractor is entitled for interest which
is very clear from a proper reading of Clause 19 – Therefore,
since the contract has been determined on 09.03.2000 and the
period of three months expired on 09.06.2000, the Respondent is
entitled to interest for the period commencing from the expiry of
three months from the determination of the contract that is from
09.06.2000 till the date on which the security was so adjusted
or appropriated towards the dues payable by the Respondent to
the Appellant. [Paras 27, 28, 29]
Mines & Minerals (Regulation and Development) Act, 1957 –
The Punjab Minor Minerals Concession Rules, 1964 – An
auction notice was given for the extraction of Yamuna sand
from Bega Murthal Sand Zone – Respondent firm was the
highest bidder – The bid was accepted by the Appellant –
On 30.11.1998, a contract was executed between the parties
in terms of the Form-L – As per the said contract the
Respondent was to deposit the contract money in advance to
the Government on a monthly basis – Respondent defaulted
in their installment – On 09.03.2000, after affording due
opportunity to the Respondent and after perusing the reply,
the contract was terminated by the Director of Mines and
Geology – Whether the order of termination of the contract
suffer from any illegality:
Held: The Respondent was fully aware of the statutory Rules
and Form as per the terms of which there are certain conditions
to be fulfilled and failure thereof will entail certain consequences –
Likewise, the Respondent was also aware that the security
deposited will not carry any interest and it will be refunded within
three months from the date of the expiry of the contract or sooner
determination of the contract – When the Respondent signed the
contract/agreement on 30.11.1998 as prescribed under Form-L,
90 [2026] 8 S.C.R.
Supreme Court Reports
it was conscious of all the clauses, especially Clause 19 which
prescribed that the security deposited will not carry any interest –
The order of termination of the contract was effected due to the
failure of the Respondent in abiding by the conditions as stipulated
in the agreement – Though the Appellant had served a notice
on the Respondent calling upon them to make the payment of
monthly installment failing which contract would be cancelled,
Respondent did not abide by the same and took excuses for not
carrying out the obligation – It has been found by the courts below
that the order of termination of the contract does not suffer from
any illegality particularly when the Respondent failed to respond
even to the notice of termination – This aspect has attained
finality, especially in view of order dated 08.05.2009 passed by
a coordinate bench of this Court in SLP(C) Nos.9761-9762 of
2009. [Paras 25, 26]
Case Law Cited
Venkataraman Krishnamurthy and Another v. Lodha Crown
Buildmart Private Limited (2024) 4 SCC 230 – relied on.
National Highways Authority of India v. Ganga Enterprises and
Another [2003] Supp. 3 SCR 114 : (2003) 7 SCC 410; Shri
Hanuman Cotton Mills and Others v. Tata Aircraft Limited [1970]
3 SCR 127 : (1969) 3 SCC 522 – referred to.
List of Acts
Punjab Minor Minerals Concession Rules, 1964; Mines & Minerals
(Regulation and Development) Act, 1957.
List of Keywords
Agreement; Valid agreement; Contract; Termination of contract;
Security deposit; Interest on security deposit; Refund; Interest
free; Perpetuity.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s).
3145-3146 of 2012
From the Judgment and Order dated 21.03.2009 of the High
Court of Punjab and Haryana at Chandigarh in RA No. 5 of 2010
and LPA No. 215 of 2006
[2026] 8 S.C.R. 91
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
Appearances for Parties
Advs. for the Appellant(s):
Akshay Amritanshu, Sarthak Srivastava.
Advs. for the Respondent(s):
Lalita Kaushik, Manoj Joshi, Ms. Shikha John.
Judgment / Order of the Supreme Court
Judgment
V. Mohana, J.
1. These appeals arise out of the judgement and order dated 21.03.2009
in LPA No. 215 of 2006 and subsequent order dated 19.03.2010
in Review Application No. 5 of 2010 passed by the Division Bench
of the High Court of Punjab and Haryana at Chandigarh. The only
issue that arises for consideration in these appeals is whether the
amount of security deposit given by the Respondent-contractor will
carry interest despite there being a contract to the contrary between
the Appellant and the Respondent.
BRIEF FACTS:-
2. The Punjab Minor Minerals Concession Rules, 1964 (for short “the
Rules”) were notified on 25.04.1964 under the Mines & Minerals
(Regulation and Development) Act, 1957. Rule 33 of the Rules
provides for execution of a contract. When a bid is confirmed
or a tender is accepted, the bidder or tenderer shall execute an
agreement in Form-L within one month. As per Clause 1 of Form-L
the contractors shall, during the subsistence of the contract, pay
in advance to the Government the contract money in respect of
the land given to them on a monthly basis. As per Clause 2 of the
Form-L, if the contractor fails to pay instalment of contract money
or any part thereof, under the terms and conditions of the contract,
on the due date without written permission of the Director in that
behalf, he will be liable to pay interest thereon at the rate of 24
percent per annum till such amount is paid. Clause 17 stipulates that
the contract may be terminated by the Government if considered
by it to be in public interest by giving one-month notice. Clause 16
stipulates that in case of default in the due observance of the terms
92 [2026] 8 S.C.R.
Supreme Court Reports
and conditions of the contract or in payment of the contract money
on the due date, the contract may be terminated by the Government
or by any officer authorised by the Government in this behalf, by
giving one-month notice, with forfeiture of security deposit as also
the instalment, paid in advance, if any. The contractor shall deliver
the possession of the quarry / mine to the mining officer concerned
within seven days of the receipt of order of termination of contract.
3. In the very same Form, there is a Clause 19 which stipulates that the
security deposited by the contractor(s) shall not carry any interest.
It shall be refunded to the contractor within three months from the
date of the expiry or sooner determination of the contract.
4. In the instant case, an auction notice was given for the extraction
of Yamuna sand from Bega Murthal Sand Zone on 26.03.1998.
The auction was held on 06.04.1998 for grant of contract for the
extraction of sand and the Respondent firm was the highest bidder
for Rs.1.48 crores per annum for a mining contract which was for
a period of 3 years i.e., up to 31.03.2001. The bid was accepted
by the Appellant. On 30.11.1998, a contract was executed between
the parties in terms of the aforementioned Form-L. As per the said
contract the Respondent was to deposit the contract money in
advance to the Government on a monthly basis and the amount was
also stipulated in the contract. There were also stipulations about
interest on delayed payment and penalty for default.
5. After the agreement the Respondent had also given an affidavit to
the Appellant that they will take the lands from the owners at their
own level. Subsequently, the records show that the Respondent
has been defaulting in their instalment due to the Appellant from the
month of September, 1999 and a notice was issued on 19.01.2000
for termination of the contract as prescribed in Clause 16 of the
contract and the Respondent was called upon to give possession
of the land.
6. On 09.03.2000, after affording due opportunity to the Respondent
and after perusing the reply, the contract was terminated by the
Director of Mines and Geology and the security amount was also
forfeited for non-observance of the terms of the agreement. By this
order, the Respondent was also directed to immediately handover
the possession of the Bega Murthal Sand Zone to the Mining Officer,
Sonepat as per the terms of the contract.
[2026] 8 S.C.R. 93
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
7. The Respondent took up the matter in appeal before the Appellate
Authority which is the Director of Mines and Geology, Government
of Haryana. By an order dated 10.07.2000, the Appellate Authority
disposed of the appeal by holding that ends of justice would be
met if, like in the similar cases, forfeited security money is adjusted
against the outstanding contract money and the interest. Accordingly,
the Appellate Authority ordered that the department shall raise the
demand of contract money and up to date interest within a period
of seven days of the order and the contractor shall deposit the
demanded security within a period of one month in two fortnightly
instalments. The Appellate Authority held that in case they deposit
this amount within the stipulated period then the security amount
shall be adjusted against the balance amount, but in case they fail to
adhere to the schedule of the payment then the appeal shall stand
rejected without any further notice to the Contractor.
8. The Appellant served a notice upon the Respondent for depositing
a sum of Rs.68,35,298/- out of which the Respondent seems to
have deposited a sum of Rs.26 lakhs and requested for extension
of time which was granted. However, the Respondent instead of
depositing the contract money for the period up to 31.03.2000
deposited only for the period up to 09.03.2000 on which date the
contract was terminated.
9. The Respondent then filed a Writ Petition being CWP No.12114
of 2000 before the Punjab and Haryana High Court at Chandigarh
for quashing the notice to the extent it demanded contract money
and interest thereon at the rate of 24 percent per annum and
also challenging the validity of Clause 19 of the agreement which
stipulated that there is no interest payable on the amount of security
deposited by the Respondent and further it prayed for a direction
to be issued to the State to pay interest at the rate of 24 percent
per annum on the amount of security till final adjustment of the
outstanding contract money.
10. The learned Single Judge by its judgement dated 07.10.2002 partly
allowed the writ petition. The learned Single Judge held that the
demand of a contract money after 09.03.2000 does not arise since
the contract had been terminated on 09.03.2000. However, on the
issue of entitlement of interest of security deposit as per Clause
19 of the agreement the learned Single Judge held that the firm
94 [2026] 8 S.C.R.
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has voluntarily entered into a contract with an obligation to deposit
some amount as security with full knowledge that the same would
not carry any interest. The learned Single Judge also noted that
this plea had been taken when the major period of contract had
already expired and the contractor has taken it for the first time in
the writ petition and he cannot be permitted to assail the contract
as unconscionable and oppressive.
11. The Respondent-contractor thereafter filed a Special Leave Petition
being SLP (C) No. 9491 of 2003 before this Court which was
disposed of and this Court by its order dated 05.01.2004, after
referring to various provisions of the agreement dated 30.11.1998,
held that the matter needs to be re-examined by the High Court
and remanded the same.
12. After remand by this Court the learned Single Judge of the High
Court re-examined the entire issue. There were predominantly two
issues before the learned Single Judge. The first issue being whether
the State complied with their statutory obligations when the request
was made by the contractor, and if not, what would be the effect
of non-compliance of the statutory obligation of the State insofar
as they did not comply with the contractor’s request which had a
direct bearing on the rights of the contractor. The second issue was
whether the security deposited by the Respondent-contractor would
carry any interest after the contract was terminated. The learned
Single Judge, on a detailed examination of the facts and documents,
and after analysing the contentions, came to the conclusion that the
contractor has failed to prove that State has failed to comply with
their statutory obligations. The learned Single Judge also found that
there was nothing to show that the contractor was not permitted
to carry out the mining or that the termination was as the result of
non-compliance of statutory obligations by the authorities. Finally,
the learned Single Judge held that the contractor had failed to abide
by the terms and conditions of the agreement dated 30.11.1998 and
had failed to pay monthly instalments, as stipulated, therefore the
order of termination of the contract does not suffer from any illegality.
It held that the contractor himself was responsible for not extracting
sand from the licensed land and for his failure to comply with the
provisions of Clause 27 of the agreement. However, the learned
Single Judge held that the demand for the period from 10.03.2000
to 07.04.2000 is not justified as the Respondent herein was denied
[2026] 8 S.C.R. 95
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
the right to extract sand after termination of the contract vide order
dated 09.03.2000, therefore, the claim made by the State for this
period was set aside.
13. The learned Single Judge held that Clause 19 is “unsustainable in
law” and directed the Appellant herein to refund the security amount
of Rs. 37 lakhs with interest at the rate of 9 percent per annum from
the date of its deposit.
14. The Appellants herein filed LPA No.215 of 2006 and the Respondent
herein also filed LPA No.85 of 2007 before the High Court of Punjab
and Haryana at Chandigarh. The Division Bench of the High Court
dismissed both the appeals filed by the parties and upheld the
judgement of the learned Single Judge.
15. The Respondent subsequently filed SLP(C) Nos.9761-9762 of 2009
which were dismissed by this Court by its order dated 08.05.2009.
Subsequent Review Petition and Curative Petition have also
been dismissed by this Court by its orders dated 22.07.2009 and
08.12.2009, respectively.
16. A subsequent SLP was filed by the Appellant herein which was
disposed of by this Court by an order dated 14.12.2009 granting
liberty to the Appellant to file a Review Petition before the High
Court. It appears that the Appellant had filed a Review Petition in
the High Court which was also dismissed by the second impugned
order. The Appellant is before us challenging both the orders.
17. Initially this Court had issued notice on 07.03.2011 and stayed the
operation of the impugned orders. Subsequently, by an order dated
16.03.2012 this Court granted leave and made the interim order
absolute till the disposal of the appeal.
18. The only issue that arises in these appeals is whether the security
money deposited by the contractor will carry interest once the
contract is determined.
19. Heard Mr. Akshay Amritanshu, ably assisted by Mr. Sarthak
Srivastava, learned counsel for the Appellants, and Mr. Manoj Joshi
ably assisted by Ms. Shikha John and Mrs. Lalita Kaushik, learned
counsel for the Respondent, and perused the documents on record.
20. The Appellant submitted that the High Court could not have rewritten
the contract between the parties nor it could have substituted its
96 [2026] 8 S.C.R.
Supreme Court Reports
own terms in the agreement that the parties have arrived at. It
was further submitted that Clause 19 was an express term which
was unambiguous and it was standard statutory form accepted by
the Respondent in an open commercial tender which was never
challenged by the Respondent during the currency of the agreement
or even when the Respondent filed statutory appeal before the
authorities and the challenge was raised for the first time in the
writ petition. It was further submitted that the security deposit paid
by the contractor is always kept in a non-interest bearing Treasury
Head (8443-Civil Deposit and Advances) and that the department is
not doing any banking business and it does not earn anything from
out of the security deposit. The purpose of the security works as a
deterrent for securing performance and finally it was submitted that
the reasoning of the High Court that the interest should be paid on
the security because the State charges interest on instalments is not
correct as the interest charged under Clause 2 of the agreement is
only as a compensation for the default of the contractor.
21. Learned Counsel for the Respondent supported the impugned
judgment and he submitted that contract was unconscionable, one
sided and in favor of the State, and that while on the one hand the
State is charging interest on the contractor for delay in payments
and for non-performance, it is denying the contractor interest on his
own security. He submitted that the judgment of the High Court is
founded on equity, justice and good conscience and ought not to
be disturbed on technical reasons and that the contract had been
frustrated by failure of the State in procuring the land under Clause 27.
ANALYSIS AND CONCLUSION:-
22. Form-L, prescribed under Rules 28A and 33 of the Rules, prescribes
the form in which a contract will be executed when a bid is confirmed
or a tender is accepted. The relevant clauses in Form-L, which is
prescribed under the Rules, are mentioned below:-
“1. Amount and mode of payment of contract money:
The contractor/contractors shall during the subsistance
of the contract pay in advance to the Government the
following contract money in respect of the said land
given to him on contract for the period from _____ to
_____ on the dates mentioned below:-
[2026] 8 S.C.R. 97
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
Number of Instalments Amount of The date
instalments on which
instalments is
to be paid
1 2 3
(a) In case of contract where the Rs. ______ 1.4.19____
annual contract money does not (annual
exceed Rs. 1000/- in annual instalment contract 1.4.19____
after adjusting Rs. ______ as contract money) 1.4.19____
money for the period from ____ to
31.03.19 _____ remaining amount of 1.4.19____
Rs. _____ out Rs. _____ (deposited
And so on
at the time of auction) is adjustable
against the annual instalment falling
due from 1.4.19__
(b) In case of contract where the annual Rs. ______ 1.4.19____
contract money exceed Rs. 1000/- and (quarterly
does not exceed Rs. 5 lacs in quarterly instalment 1.7.19____
instalments after adjusting Rs. _____ of contract 1.10.19____
as contract money for the period from money)
_____ to ____ remaining amount of 1.1.19_____
Rs. _____ out of Rs. ____ (Advance
And so on
quarterly instalment deposited at the
time of auction) is adjustable against
the quarterly instalment falling due
from 1st of ______
(c) In case of contract where the Rs. ______ 1.1.19____
annual contract money exceeds (monthly
Rs. 5 lacs in monthly instalments instalment 1.2.19____
after adjusting Rs. ____ as contract of contract 1.3.19____
money for the period from _____ to money)
_____ remaining amount of Rs. _____ 1.4.19____
out of Rs. _____ (advance monthly
1.5.19____
instalment) is adjustable against the
monthly instalment falling due from 1.6.19____
____ 19 _____.
1.7.19____
1.8.19____
1.9.19____
1.10.19____
1.11.19____
1.12.19____
And so on
Money for the subsequent years of the contract shall be
paid by the contractor/contractors in advance in equal
monthly/quarterly/yearly instalments.]
98 [2026] 8 S.C.R.
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2. Interest for delayed payment:- If the contractor (s)
fails to pay instalment of contract money or any part
thereof due to the Government under the terms of the
conditions of the contract on the due date without written
permission of the Director in that behalf, he/they will be
liable to pay interest thereon at the rate of *[twenty four
percent] per annum till such amount is paid: Provided
that no interest shall be payable if the amount is paid
within three days in case the annual contract money
does not exceed five lacs and within 7 days in case the
annual contract money exceed Rs. 5 lacs.
16. Penalty for default:- In case of default in the due
observance of the terms and conditions of the contract
or in payment of the contract money on the due date,
the contract may be terminated by the Government or
by any officer authorised by Government in this behalf,
by giving one month’s notice, with forfeiture of security
deposit as also the instalment, paid in advance, if any.
18. Recovery of contract money as arrears of land
revenue:- Any sum due from the Contractor/Contractors
on account of contract money in respect of the contract,
shall be recovered from him/them as arrears of land
revenue.
19. Security deposit shall carry no interest:- The
security deposited by the Contractor/Contractors shall not
carry any interest. It shall be refunded to the Contractor
within three months from the date of expiry or sooner
determination of the contract.”
23. It is well settled that in matters of contract between the parties the
function of a Court is to interpret and enforce the terms as has
been agreed between parties. The Court will not re-write the terms
howsoever reasonable the substituted term may appear to be. In
matters of commercial contracts where the parties stand on equal
footing and have committed to certain unambiguous terms, the
language of the contract is to be clearly looked into and parties are
bound by the same. Once the parties with their eyes open without
any protest whatsoever and with free will accept certain terms of a
contract they cannot afterwards be permitted to go back on the same
[2026] 8 S.C.R. 99
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
merely because at a later point of time the stipulation proves to be
onerous. The agreed forfeiture/security stipulation is to be enforced
according to the terms of the contract as held in National Highways
Authority of India v. Ganga Enterprises And Another1, and Shri
Hanuman Cotton Mills and Others Vs. Tata Aircraft Limited2.
24. In Venkataraman Krishnamurthy And Another v. Lodha Crown
Buildmart Private Limited 3 this Court held as under:-
“21. In this regard, we may refer to the Constitution
Bench decision in General Assurance Society Ltd. v.
Chandumull Jain , wherein it was observed that, in
interpreting documents relating to a contract of insurance,
the duty of the court is to interpret the words in which the
contract is expressed by the parties because it is not for
the court to make a new contract, however reasonable,
if the parties have not made it themselves. Thereafter,
in Rajasthan State Industrial Development & Investment
Corpn. v. Diamond & Gem Development Corporation Ltd,
this Court reiterated that a contract, being a creature
of an agreement between two or more parties, is to
be interpreted giving the actual meaning to the words
contained in the contract and it is not permissible for the
court to make a new contract, however reasonable, if
the parties have not made it themselves.
22. More recently, in Shree Ambica Medical Stores v.
Surat People’s Coop. Bank Ltd., it was observed that,
through its interpretative process, the court cannot rewrite
or create a new contract between the parties and has to
simply apply the terms and conditions of the agreement
as agreed between the parties. Again, in GMR Warora
Energy Ltd. v. CERC, it was observed that courts cannot
substitute their own view of the presumed understanding
of commercial terms by the parties, if the terms are
explicitly expressed. It was held that the explicit terms
of a contract are always the final word with regard to
the intention of the parties.”
1 (2003) 7 SCC 410
2 (1969) 3 SCC 522
3 (2024) 4 SCC 230
100 [2026] 8 S.C.R.
Supreme Court Reports
25. The Respondent was fully aware of the statutory Rules and Form
as per the terms of which there are certain conditions to be fulfilled
and failure thereof will entail certain consequences. Likewise, the
Respondent was also aware that the security deposited will not
carry any interest and it will be refunded within three months from
the date of the expiry of the contract or sooner determination of
the contract. The Respondent had at least two opportunities of
perusing the terms and conditions. Despite knowing the existence
of the clause, the Respondent applied for the bid and became
a successful bidder. Secondly when the Respondent signed the
contract/agreement on 30.11.1998 as prescribed under Form-L,
it was conscious of all the clauses, especially Clause 19 which
prescribed that the security deposited will not carry any interest.
It is not the case of the Respondent that it had been coerced into
signing the contract nor is it the case that when the contract was
signed it was under some mistake or undue influence. Respondent
has voluntarily entered into the contract by which they were obliged to
deposit the amount as prescribed therein and the failure would result
in termination. It has been consistently held by the learned Single
Judge and the Division Bench of the High Court that the termination
of the contract was purely by the conduct of the Respondent and it
was the Respondent who is to be blamed for non-performance and
for not depositing the monthly payments on time. The courts below
have clearly examined the conditions and the exchange of letters and
notices between the parties and have finally concluded that there
was no failure on the part of the Appellant for non-performance of
the contract by the Respondent.
26. It has been consistently found that the order of termination of
the contract was effected due to the failure of the Respondent in
abiding by the conditions as stipulated in the agreement. It has been
noticed that after one year of the execution of the agreement the
Respondent-company sent a letter to the Appellant stating that they
have been obstructed by the land owners and, therefore, they are
unable to carry out the mining. However, it has been found that the
Respondent did not carry out the mining on their own and they have
had made up a false plea with regard to the issuance of a notice in
order to secure benefits from the Department. The Respondent was
also required to submit a monthly return about sand extracted and if
it was not extracting any sand due to problems created by the land
owners then it would certainly submit a monthly report to that effect
[2026] 8 S.C.R. 101
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
mentioning therein that extraction of the sand is Nil. It was clearly
found by the High Court that the Respondent was negligent in not
reporting the matter though they were working in other villages and
carrying out mining. Though the Appellant had served a notice on
the Respondent calling upon them to make the payment of monthly
instalment failing which contract would be cancelled, Respondent
did not abide by the same and took excuses for not carrying out
the obligation. Therefore, it has been found by the courts below that
the order of termination of the contract does not suffer from any
illegality particularly when the Respondent failed to respond even
to the notice of termination. This aspect has also attained finality,
especially in view of order dated 08.05.2009 passed by a coordinate
bench of this Court in SLP(C) Nos.9761-9762 of 2009.
27. The High Court fell into error in declaring Clause 19 as unsustainable
in law and against public policy. The public policy cannot be pressed
into service to set at naught the commercial contract which expressly
denies interest on security deposit. Such a stipulation is neither
immoral nor unlawful nor can it be classified as unsustainable in the
legal sense. The Respondent as a commercial entity had participated
in open auction and emerged as the highest bidder and executed
the standard statutory Form-L with full knowledge and furnished an
undertaking to abide by the same. Once parties have voluntarily
accepted a contract they cannot turn around and assail the same as
oppressive after major part of the contract period has gotten over.
The reasoning of the High Court that when State charges interest on
belated instalment they should pay interest on the security does not
stand scrutiny. The stipulations in Clause 2 and in Clause 19 operate
in different fields and they serve different purposes. While Clause 2
provides for liquidated damages or compensation which is payable
or referable to the contractor’s default on the timely payment which
is a consequence of the contractor’s own breach, the security deposit
in Clause 19 is a performance guarantee held by the State and the
parties have clearly agreed that it would carry no interest. There is
no reciprocal obligation upon the State to pay interest on the security.
In fact, both the Clauses are seen in the same contract which has
been agreed between both the parties with their eyes open. To reason
otherwise and without interpreting the contract as agreed but to add
new terms which were not admittedly written therein amounts to re-
writing the contract which a Writ Court is not entitled to do.
102 [2026] 8 S.C.R.
Supreme Court Reports
28. Hence, it is held that Clause 19 is a valid binding term of the
agreement and the finding of the learned Single Judge as affirmed
by the Division Bench that Clause 19 is unsustainable in law and
opposed to public policy is set-aside.
29. Having held as above, it is to be seen that Clause 19 of the agreement
is in two parts. Clause 19 is extracted hereinbelow:-
“19. Security deposit shall carry no interest:- The
security deposited by the Contractor/Contractors shall not
carry any interest. It shall be refunded to the Contractor
within three months from the date of expiry or sooner
determination of the contract.”
The two limbs of the Clause 19 have to be read together, and they
are interdependent. While the first portion states that “it shall not
carry any interest” and second portion of the same clause reads that
“shall be refunded to the contractor within three months from the
date of expiry or sooner determination of the contract.” The correct
interpretation of this Clause would mean the Respondent’s deposit
will earn no interest and it will be returned to the Respondent within
three months of the contract coming to an end or within three months
of the termination of the contract. On a proper reading of the Clause
19 it is clear that the Appellant cannot retain the money which is
interest free, in perpetuity. It does not clothe the Appellant with the
power to read the first portion of the Clause in isolation without
any limitation on time, therefore, while the first portion states that
security deposited will carry no interest, the same clause would read
further that it shall be refunded within three months from the date
of expiry or sooner determination of the contract. Once the contract
is determined then it is the obligation upon the State to refund the
security deposit within the period prescribed in the agreement. If
the State retains the security deposit beyond three months the
Respondent-contractor is entitled for interest which is very clear
from a proper reading of Clause 19. While the Clause 19 states
that there is no interest from the date of deposit while securing it,
once it is determined, the amount cannot be withheld by the State
beyond three months as provided in the clause itself.
30. Therefore, since the contract has been determined on 09.03.2000 and
the period of three months expired on 09.06.2000, the Respondent
is entitled to interest for the period commencing from the expiry of
[2026] 8 S.C.R. 103
State of Haryana & Ors. v. M/s Jai Durgaa Finvest P. Ltd.
three months from the determination of the contract that is from
09.06.2000 till the date on which the security was so adjusted or
appropriated towards the dues payable by the Respondent to the
Appellant. The direction of the High Court that the security deposit
will carry interest from the date of deposit is erroneous and is
contrary to the agreed terms of the contract and therefore, the said
direction is set aside.
31. Having regard to the above, the rate of interest as fixed by the High
Court at 9 percent per annum is reasonable and we see no reason
to disturb the same.
32. In the result the Appeals are partly allowed in the following terms:-
A. The judgment of the learned single Judge dated 04.08.2006
as affirmed by the Division Bench on 21.03.2009 and the
order dated 19.03.2010 dismissing the review insofar as they
declare Clause 19 of the Form-L to be unsustainable in law
and granting interest at 9 percent per annum on the security
amount from the date of its deposit is set aside;
B. Clause 19 is declared to be valid and binding in term of the
contract and no interest is payable on security deposit of Rs.37
lakhs for the period up to expiry of three months from the
date of determination of the contract, i.e., up to 09.06.2000;
C. The Respondent shall be entitled to simple interest at the
rate of 9 percent per annum on the security deposit for the
period commencing from 09.06.2000 and ending on the date
on which the said amount was appropriated towards the dues
or refunded to the Respondent; and
D. There shall be no order as to cost.
33. The Appeals are allowed and disposed of accordingly.
Result of the case: Appeals allowed.
†
Headnotes prepared by: Ankit Gyan
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