Delhi District Court
Satish Builders vs Union Of India on 23 December, 2023
IN THE COURT OF MR. SATYABRATA PANDA, ADJ-04,
PATIALA HOUSE COURTS, NEW DELHI
CS NO.330 OF 2017
Date institution: 18.03.2017
Date of arguments: 23.11.2023
Date of judgment: 23.12.2023
M/s Satish Builders
through Mr. Satish Mittal
one of the partner & attorney
11/390, Sunder Vihar, Delhi-110087
......Plaintiff
VS
1. Union of India
through the Secretary
Ministry of Urban Developments
Nirman Bhawan, New Delhi.
2. Director General (Works)
C.P.W.D, Nirman Bhaban
New Delhi
3. Chief Engineer (NDZ-IV)
CPWD, East Block-I, Level-III
R.K Puram, New Delhi
4. The Superintending Engineer
Delhi Central Circle-V, CPWD
East Block-IV, Level-IV,
R.K Puram, New Delhi 110066
5. The Executive Engineer
Gurgaon Central, Div. II
CRPF Academy, Kadipur
Gurgaon.
......Defendants
JUDGMENT
1. The plaintiff has filed the present suit against the defendants for recovery of Rs. 3,72,438/- alongwith CS no.330 of 2017 Satish Builders Vs. Union of India page no.1 pendente lite and future interest. The case of the plaintiff as pleaded in the plaint is summarised as follows:
1.1. The plaintiff is a partnership firm registered with the registrar of firms, Delhi. The plaintiff is registered with the defendant CPWD as a class-I contractor.
1.2. The plaintiff was awarded the work contract of 62 Nos. family quarters for CRPF academy at Kadirpur, Gurgaon by the Executive Engineer, Central Div.II, CPWD, Kadirpur, Gurgaon vide letter no.54(275)GCD-II/2003-2004/167E dated 24.05.2003 for tender amount of Rs. 2,04,14,910/-.
1.3. As per the agreement, the entire work was to be completed within 15 months starting from 03.06.2023 and the stipulated date of completion was 02.09.2004. To complete the work within the stipulated period, the plaintiff made all the necessary arrangements for labour, required material, machinery, tools and plants and establishment including supervisory staff for supervision of the work.
1.4. Inspite of making all the necessary arrangements, due to various hindrances and breaches committed by the defendants, the desired progress of the work could not be achieved. The plaintiff has listed the list of following hindrances in paragraph 5 of the plaint as under:
CS no.330 of 2017 Satish Builders Vs. Union of India page no.2
(i) Copy of the layout plan was not given by the defendants in time.
(ii) Almost 50% site was occupied by the labour hutments of other agencies and the same were only cleared on 04.08.2003.
(iii) Type II quarters site was changed by defendants and decision of new site was delayed.
(iv) No clear site for type III quarters given by the defendants on award of the work.
(v) Drawing for Type II quarters was given on 23.07.2003 by defendants.
(vi) The filling work remained held up due to non availability of earth.
(vii) Plinth level of type III quarters was raised by the defendants about 1.5 meters on 05.01.2004.
(viii) Work got delayed due to errors in structural drawings of type III quarters given by the defendants.
(ix) Frequent changes of decision by the defendants.
(x) Extra and substituted items were not sanctioned in time and due payments were withheld wrongly and illegally by the defendants.
(xi) Structural drawings were not issued in time.
(xii) Delay in payment of running bills by the defendants.
CS no.330 of 2017 Satish Builders Vs. Union of India page no.3 1.5. The plaintiff continuously brought the hindrances and breaches to the notice of the defendant verbally as well as in writing, however, the defendants failed to remove the hindrances and hurdles and simply extended the contract period unilaterally.
1.6. When, inspite of repeated requests, the defendants could not remove the hindrances, the plaintiff served show-cause notice upon the defendants as to why the contract should not be repudiated. The defendants failed to reply to the show-cause notice and the plaintiff repudiated the contract vide letter dated 10.03.2005.
1.7. After the repudiation of contract by the plaintiff, the defendant no.5 issued show-cause notices under clause 3(a), (b) and (c) of the agreement threatening the rescission of the contract which the plaintiff had already repudiated.
1.8. Finally, the defendant no.5 vide letter dated 24.09.2005 rescinded the contract and forfeited the security deposit. All the notices and rescission orders were replied by the plaintiff.
1.9. The notice inviting tender provided for performance guarantee. Paragraph 20(c) reads as under:
"The engineer-in-charge shall not make a claim under the performance guarantee, except for amounts to which the President of India is CS no.330 of 2017 Satish Builders Vs. Union of India page no.4 entitled under the contract in the event of one or any of the following:
(i) Not applicable.
(ii) Failure by the contractor to pay the President of India an amount due, as either agreed by the contractor or determined under any of the clauses- conditions of agreement within 42 days after serving of notice to this effect, by the Engineer-in-charge."
1.10. In the present case neither the plaintiff had agreed to pay any amount and failed to pay the same nor the defendants had asked to pay any determined amount within 42 days and no such notice was received by the plaintiff.
1.11. Inspite of the embargo as contained in paragraph 20
(c) of the contract that the Executive Engineer shall not make a claim under performance guarantee, the defendant no.5 sent a letter dated 05.10.2005 to the Punjab and Sind Bank for encashment of bank guarantee submitted by the plaintiff for performance guarantee.
1.12. The defendant no.5, inspite of not being entitled for encashment of bank guarantee except under conditions mentioned under sub-clause 20 (c) and none of which existed in the case of the plaintiff as CS no.330 of 2017 Satish Builders Vs. Union of India page no.5 per the terms of agreement, illegally tried to encash the bank guarantee.
1.13. Due to such illegal acts of defendant no.5 for encashment of the bank guarantee on 14.10.2005, the plaintiff instituted a suit for declaration that the encashment of the bank guarantee amounting to Rs.10,20,750/- made vide letter dated 07.10.2005 by defendants be declared as illegal and not enforceable and for permanent injunction against the defendants from encashment of bank guarantee. The said suit was titled as M/s Satish Builder Vs. Union of India bearing suit no.173 of 2014.
1.14. The said suit no.173 of 2014 was decided in favour of the plaintiff and against the defendants vide judgment and decree dated 26.07.2014 passed by Mr. Kuldeep Narayan, Ld. ADJ-18, Central District, Tis Hazari Courts, Delhi.
1.15. The bank guarantee no.14/03, 0605-BG0027-11 dated 24.05.2003 for Rs.10,20,750/- ought to have expired on 31.10.2005 due to the rescission of the contract but due to the illegal acts of the defendants, the plaintiff had to keep alive the bank guarantee and had to pay bank charges/commission/issuance and amendment charges/service tax etc. for keeping the bank guarantee alive upto 30.10.2014 which amounted to Rs. 2,62,250/-. Therefore, the plaintiff CS no.330 of 2017 Satish Builders Vs. Union of India page no.6 is entitled to recovery of said amount alongwith interest from the defendants.
1.16. The calculation of the aforesaid amount is given in the paragraph 15 of the plaint as under:
1. BG Commission up to 2,34,776/-
30.10.2014
2. Service Tax on BG up 25,236/-
to 30.10.2014
3. BG Issue and 2000/-
Amendment Charges
4. S. Tax on BG 238/-
Issue/Amendment
Total 2,62,250/-
1.17. The plaintiff sent legal notice dated 29.12.2016 u/s.
80 CPC to the defendants on 31.12.2016 claiming this amount along with interest. The notice was duly served upon the defendants. The defendant no.5 replied vide letter dated 29.12.2016 and vaguely denied the liability and tried to shift blame on the plaintiff.
1.18. The plaintiff has claimed interest @ 18% p.a. on the aforesaid amount of 2,62,250/-. The plaintiff has claimed interest @ 18% p.a. for the period from 30.10.2014 till 31.12.2016 as Rs. 1,02,428/- and during the notice period of the notice u/s. 80 CPC as Rs. 7,760/-. On this basis, the plaintiff has claimed total sum of Rs. 3,72,438/- in the suit. The CS no.330 of 2017 Satish Builders Vs. Union of India page no.7 plaintiff has also claimed pendente lite and future interest @ 18% p.a.
2. The defendants have filed written statement in which they have denied any liability as alleged in the plaint and have sought the dismissal of the suit. The defence taken by the defendants as pleaded in the written statement is summarised as follows:
2.1. The suit is barred by limitation.
2.2. The plaintiff had approached the court for injunction against the defendants from encashment of the bank guarantee. The court had passed interim injunction restraining the defendants from encashing the bank guarantee but had directed the plaintiff to keep the bank guarantee alive till the disposal of the suit. Accordingly, as per the direction of the court, the bank guarantee was kept alive by the plaintiff. Ultimately, the suit was disposed of and court passed judgment and accordingly the bank guarantee was released in favour of the plaintiff. However, in the judgment no direction was given to the defendants for payment of bank charges paid by the plaintiff for keeping the bank guarantee till final disposal of the suit. On this basis, the defendants seek dismissal of the suit.
3. The following issues were framed in the suit:
CS no.330 of 2017 Satish Builders Vs. Union of India page no.8
(i) Whether the suit of the plaintiff is barred by limitation? OPD
(ii) Whether the suit is not maintainable as the same does not disclose any cause of action?
OPD
(iii) Whether the plaintiff is entitled to the relief claimed? OPP
(iv) Relief.
4. Both the parties have led their respective evidence, both oral as well as documentary, in support of their case.
5. In support of its case, the plaintiff firm has examined its partner and authorised representative Mr. Satish Mittal as PW-1 who has tendered his affidavit in evidence as Ex.PW1/A in which he has deposed along the lines of the plaint. He was cross-examined by the defendants. He has relied upon the documents Ex.PW-1/1 to Ex.PW1/56.
6. In support of their case, the defendants have examined Mr. Ashok Kr. Suneja, Executive Engineer, Gurgaon Central Division, CPWD, CRPF Camp, Kardarpur, Gurgaon as DW1, who has tendered his affidavit in evidence as Ex.DW1/X in which he has deposed along the lines of the written statement. He was cross-examined by the plaintiff. He has relied upon the documents Ex.DW1/R1 to Ex.DW1/R14.
7. The Ld. Counsels for both the parties have also made their respective submissions.
CS no.330 of 2017 Satish Builders Vs. Union of India page no.9
8. The Ld. Counsel for the plaintiff has submitted that there is no dispute that the plaintiff had succeeded in its suit for permanent injunction and that the court had found that the act of encashment of the bank guarantee by the defendants was illegal. It is submitted that the court had granted decree of permanent injunction in favour of the plaintiff and against the defendants restraining the defendants from encashing the bank guarantee and the bank guarantee was released. It is submitted that the plaintiff was constrained to approach the court in the suit for permanent injunction and was further constrained to keep the bank guarantee alive during the course of the suit. It is submitted that direction by the Court for keeping the bank guarantee alive during the course of the suit was upon the submissions of the defendants and that the defendants were as such liable to compensate the plaintiff for keeping the bank guarantee alive. The learned counsel has submitted that the plaintiff has proved the amount of expenditure incurred by the plaintiff in keeping the bank guarantee alive and the plaintiff would be entitled to the amounts claimed in the suit as well as interest as claimed.
9. On the other hand, the ld. Counsel for defendants has submitted that, firstly, the suit was barred u/O. II Rule 2 CPC as the plaintiff ought to have sought the relief of claiming the bank charges and expenses for keeping the bank guarantee in the previous suit being suit no.173/2014 wherein the plaintiff had sought declaration and permanent injunction restraining the defendants from invoking and CS no.330 of 2017 Satish Builders Vs. Union of India page no.10 encashing the bank guarantee. It is submitted that the cause of action for both the suits was same and that having failed to claim the relief in the previous suit, the plaintiff is now barred from claiming the relief in the present suit in view of Order II Rule 2 CPC.
10. It is further submitted that the plaintiff had also initiated arbitration proceedings and even in the arbitration proceedings, the plaintiff had not claimed bank charges which are now claimed in the present suit and hence the plaintiff was barred from raising the said dispute by way of present suit. It is submitted that since there was an arbitration agreement, the plaintiff ought to have raised the issue of bank charges for keeping bank guarantee alive before the Ld. Arbitrator which was not done.
11. It is next submitted by the ld. Counsel for the defendants that in any case the bank guarantee was kept by the plaintiff by virtue of directions of the ld. District Judge in the suit no.173/2014 whereby the defendants were restrained from encashing bank guarantee subject to the plaintiff keeping the bank guarantee alive till final disposal of the suit. It is submitted that the plaintiff had sought ad interim injunction and had kept the bank guarantee alive under the directions of the court and the defendants could not be faulted for the same and as such the defendants would not be liable for any compensation. It is submitted that as such the suit is without cause of action against the defendants.
CS no.330 of 2017 Satish Builders Vs. Union of India page no.11
12. It is further submitted that the damages which have been sought by the plaintiff have no direct nexus with any acts of the defendants. In this regard, ld. Counsel has referred to section 73 of the Indian Contract Act and has submitted that the compensation could not be given for any remote and indirect loss. On this basis, ld. Counsel for defendant has sought dismissal of the suit.
13. Both the parties have also filed their respective written submissions.
14. I have considered the submissions of both the parties and I have perused the record including pleadings, evidence (both oral and documentary) and written submissions.
15. My issue-wise finding are as under:
Issue (i): Whether the suit of the plaintiff is barred by limitation? OPD
16. During the course of submissions, the learned counsel for the defendants did not make any submissions on the point of limitation. Even in the written submissions, the defendants have not raised any arguments on the point of limitation. The defendants have not made any submission as to which Article of the Limitation Act applied to the suit and when the limitation started running and how the suit was barred by limitation. As such, it is taken that the defendants are not pressing the issue of limitation. Even otherwise, I consider that the suit would be governed by the residual Article 113 of the Limitation Act and the CS no.330 of 2017 Satish Builders Vs. Union of India page no.12 period of limitation would start running from the date when the right to sue accrued to the plaintiff. The present suit is for recovery of amounts incurred by the plaintiff has expenditure towards keeping the bank guarantee alive. This recovery is claimed in the nature of compensation for restitution to the plaintiff. Vide the judgment dated 26/07/2014 in the suit bearing no.173/2014, it was held that the attempt of the defendants to encash the bank guarantee was illegal and permanent injunction was granted restraining the defendants from encashing the bank guarantee. The plaintiff had issued legal notice on 31/12/2016 to the defendants to make payment of the bank guarantee charges and expenses. The defendants had refuted their liability vide letter in reply dated 23/01/2017. The right to sue, in my view, would accrue to the plaintiff in the suit only upon the refusal of the defendants to make payment as compensation for the bank guarantee charges and expenses. The suit has been filed on 17/03/2017 and hence is within limitation. In any case, the right to sue could not have accrued prior to the passing of the judgment dated 26/07/2014 and even calculating 3 years from 26/07/2014, the suit is well within limitation. Accordingly, it is held that the suit is within limitation. The issue of limitation is decided accordingly.
Issue (ii): Whether the suit is not maintainable as the same does not disclose any cause of action? OPD Issue (iii): Whether the plaintiff is entitled to the relief claimed? OPP CS no.330 of 2017 Satish Builders Vs. Union of India page no.13
17. The aforesaid two issues are taken up together for discussion.
18. The learned counsel for the defendants has submitted that the suit was barred under Order II Rule 2 CPC in as much as the relief claimed in the present suit ought to have been claimed in the previous suit which was filed by the plaintiff seeking permanent injunction against the defendants from encashing the bank guarantee.
19. Firstly, an objection as to the bar of Order II Rule 2 CPC ought to have been clearly and specifically raised by the defendants in the written statement. However, no such objection was specifically raised in the written statement. Be that as it may, since the parties have addressed arguments on this point, I have considered this objection of the defendants.
20. I am afraid I am unable to accept the objection of the defendants. Order II Rule 2(3) CPC provides that a person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs, but if he omits, except with the leave of the court, to sue for all such reliefs, he shall not afterwards sue for any reliefs omitted. For this provision to apply, the reliefs ought to be in respect of the same cause of action. I do not find that the cause of action of the previous suit for declaration and permanent injunction from restraining encashment of the bank guarantee is the same as the cause of action of the present suit seeking recovery of amounts towards the CS no.330 of 2017 Satish Builders Vs. Union of India page no.14 expenditure incurred by the plaintiff in keeping the bank guarantee alive as compensation/restitution. The cause of action for the suit for permanent injunction arose from the action of the defendant in attempting to encash the bank guarantee in an illegal manner. The cause of action for the present suit arose upon the judgment and decree in the suit for declaration and permanent injunction holding that the attempt to encash the bank guarantee was illegal, the consequent notice by the plaintiff to the defendants to compensate for the expenses incurred by the plaintiff in keeping the bank guarantee alive and the ultimate refusal of the defendants to make compensation as claimed by the plaintiff. Thus, the causes of action for both the suits are entirely different and there would be no application of the bar of Order II Rule 2 CPC to the present case.
21. The learned counsel for the defendants has raised another objection that the plaintiff had also initiated arbitration proceedings and that the plaintiff had not claimed the expenses for keeping the bank guarantee alive in the arbitration proceedings and the plaintiff was now precluded from claiming the same in the present suit. I have considered this objection as well and I find that even this objection is without merit.
22. The plaintiff had already filed the suit for declaration and permanent injunction in relation to the performance bank guarantee being suit no.173/2014 when the arbitration had been invoked. The said suit was still pending when the CS no.330 of 2017 Satish Builders Vs. Union of India page no.15 arbitral award dated 22/02/2011 was delivered by the sole arbitrator. In fact, the plaintiff had raised a claim for release of the performance bank guarantee and the defendants had made a counterclaim for the amount of the bank guarantee in the arbitration. Both this claim and counterclaim in respect of the bank guarantee were not adjudicated upon by the sole arbitrator in the award on the basis that the matter was sub judice in the suit. The suit for declaration and permanent injunction was ultimately decided in favour of the plaintiff vide judgment and decree dated 26/07/2014 Ex.PW-1/41. As already held, the cause of action in the present suit arose only upon passing of the judgement dated 26/07/2014, the subsequent notice by the plaintiff to the defendants for compensation and the ultimate refusal letter by the defendants. As such, the objection of the defendants that the present suit is not maintainable as the plaintiff had not raised the claims made in the present suit in the arbitration is wholly without merit and is rejected.
23. I may also note that the aforesaid objection was also never taken by the defendants in the written statement. The defendants also never objected to the suit on the ground that there was an arbitration clause.
24. The suit clearly discloses cause of action. The suit of the plaintiff is based on the principle of restitution.
25. The plaintiff had filed the suit no.1738 of 2014 before the court of the Ld. ADJ-18, Central district, Delhi for CS no.330 of 2017 Satish Builders Vs. Union of India page no.16 declaration that the demand for encashment of the bank guarantee by the defendants was illegal and not enforceable and for permanent injunction restraining the defendants from encashing the bank guarantee. The plaintiff had also filed an application for ad interim injunction. The court found that the plaintiff was able to show the triple requirements of prima facie case, balance of convenience and irreperable loss and damage, and vide order dated 18.10.2005 Ex.PW-1/39 passed interim injunction in favour of the plaintiff restraining the defendants from encashing the bank guarantee. The plaintiff was also directed to keep the bank guarantee valid till the disposal of the suit. This would have been directed at the instance of the defendants to safeguard their interest in case the plaintiff failed in the suit. Ultimately, the plaintiff succeeded in the suit and vide judgment dated 26.07.2014, the court passed decree for declaration declaring that demand for encashment of bank guarantee was illegal and was not enforceable and passed permanent injunction restraining the defendants from encashing the bank guarantee.
26. The contention of the defendants that since the bank guarantee was kept alive on the order of the court, hence the defendants would not be liable, is without merit. The direction to the plaintiff to keep the bank guarantee alive during the pendency of the suit could only have been at the instance of the defendants who were contesting the suit to safeguard the interest of the defendants in case ultimately CS no.330 of 2017 Satish Builders Vs. Union of India page no.17 the plaintiff failed. However, since the plaintiff ultimately succeeded in the suit, under the principle of restitution, the plaintiff would be entitled to receive compensation for the expenditure incurred in keeping the bank guarantee alive during the course of the suit.
27. The principle of restitution is well recognised. In this regard, it would be appropriate to refer to the decision of the Hon'ble Supreme Court in Bhupinder Singh v. Unitech Ltd., 2023 SCC OnLine SC 321, as follows:
"8. On the principle of restitution, the decision of Constitution Bench of this Court in the case of Indore Development Authority v. Manoharlal, (2020) 8 SCC 129 is required to be referred to. In paragraphs 335 to 339, it is observed and held as under:--
"335. The principle of restitution is founded on the ideal of doing complete justice at the end of litigation, and parties have to be placed in the same position but for the litigation and interim order, if any, passed in the matter. In South Eastern Coalfields Ltd. v. State of M.P. [South Eastern Coalfields Ltd. v. State of M.P., (2003) 8 SCC 648], it was held that no party could take advantage of litigation. It has to disgorge the advantage gained due to delay in case lis is lost. The interim order passed by the court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of a final order going against the party successful at the interim stage. Section 144 of the Code of Civil Procedure is not the fountain source of restitution. It is rather a statutory recognition of the rule of justice, equity and fair play. The court has inherent jurisdiction to order restitution so as to do complete justice. This is CS no.330 of 2017 Satish Builders Vs. Union of India page no.18 also on the principle that a wrong order should not be perpetuated by keeping it alive and respecting it. In exercise of such power, the courts have applied the principle of restitution to myriad situations not falling within the terms of Section 144 CPC. What attracts applicability of restitution is not the act of the court being wrongful or mistake or an error committed by the court; the test is whether, on account of an act of the party persuading the court to pass an order held at the end as not sustainable, resulting in one party gaining an advantage which it would not have otherwise earned, or the other party having suffered an impoverishment, restitution has to be made. Litigation cannot be permitted to be a productive industry. Litigation cannot be reduced to gaming where there is an element of chance in every case. If the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order. This Court observed in South Eastern Coalfields [South Eastern Coalfields Ltd. v. State of M.P., (2003) 8 SCC 648] thus : (SCC pp. 662-64, paras 26-28) "26. In our opinion, the principle of restitution takes care of this submission. The word "restitution" in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order, what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order (see Zafar Khan v. Board of Revenue, U.P. [Zafar Khan v. Board of Revenue, U.P., 1984 Supp SCC 505]). In law, the term "restitution" is used in three senses : (i) return or restoration of some specific thing to its rightful owner or status; (ii) compensation for benefits derived from a wrong done to CS no.330 of 2017 Satish Builders Vs. Union of India page no.19 another; and (iii) compensation or reparation for the loss caused to another. (See Black's Law Dictionary, 7th Edn., p. 1315). The Law of Contracts by John D. Calamari & Joseph M. Perillo has been quoted by Black to say that "restitution" is an ambiguous term, sometimes referring to the disgorging of something which has been taken and at times referring to compensation for the injury done:
'Often, the result under either meaning of the term would be the same. ... Unjust impoverishment, as well as unjust enrichment, is a ground for restitution. If the defendant is guilty of a non-tortious misrepresentation, the measure of recovery is not rigid but, as in other cases of restitution, such factors as relative fault, the agreed-upon risks, and the fairness of alternative risk allocations not agreed upon and not attributable to the fault of either party need to be weighed.' The principle of restitution has been statutorily recognised in Section 144 of the Civil Procedure Code, 1908.
Section 144 CPC speaks not only of a decree being varied, reversed, set aside or modified but also includes an order on a par with a decree. The scope of the provision is wide enough so as to include therein almost all the kinds of variation, reversal, setting aside or modification of a decree or order. The interim order passed by the court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of a final decision going against the party successful at the interim stage. ...
27. ... This is also on the principle that a wrong order should not be perpetuated by CS no.330 of 2017 Satish Builders Vs. Union of India page no.20 keeping it alive and respecting it (A. Arunagiri Nadar v. S.P. Rathinasami [A. Arunagiri Nadar v. S.P. Rathinasami, 1970 SCC OnLine Mad 63]). In the exercise of such inherent power, the courts have applied the principles of restitution to myriad situations not strictly falling within the terms of Section 144.
28. That no one shall suffer by an act of the court is not a rule confined to an erroneous act of the court; the "act of the court"
embraces within its sweep all such acts as to which the court may form an opinion in any legal proceedings that the court would not have so acted had it been correctly apprised of the facts and the law. ... the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced. We are, therefore, of the opinion that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the court withholding the release of money had remained in operation."
(emphasis supplied)
336. In State of Gujarat v. Essar Oil Ltd. [State of Gujarat v. Essar Oil Ltd., (2012) 3 SCC 522], it was observed that the principle of restitution is a remedy against unjust enrichment or unjust benefit. The Court observed : (SCC p. 542, paras 61-62) "61. The concept of restitution is virtually a common law principle, and it is a remedy CS no.330 of 2017 Satish Builders Vs. Union of India page no.21 against unjust enrichment or unjust benefit. The core of the concept lies in the conscience of the court, which prevents a party from retaining money or some benefit derived from another, which it has received by way of an erroneous decree of the court. Such remedy in English Law is generally different from a remedy in contract or in tort and falls within the third category of common law remedy, which is called quasi-contract or restitution.
62. If we analyse the concept of restitution, one thing emerges clearly that the obligation to restitute lies on the person or the authority that has received unjust enrichment or unjust benefit (see Halsbury's Laws of England, 4th Edn., Vol. 9, p. 434)."
337. In A. Shanmugam v. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam [A. Shanmugam v. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam, (2012) 6 SCC 430], it was stated that restitutionary jurisdiction is inherent in every court, to neutralise the advantage of litigation. A person on the right side of the law should not be deprived, on account of the effects of litigation; the wrongful gain of frivolous litigation has to be eliminated if the faith of people in the judiciary has to be sustained. The Court observed :
(SCC pp. 451-55, para 37) "37. This Court, in another important case in Indian Council for Enviro-Legal Action v. Union of India [Indian Council for Enviro-Legal Action v. Union of India, (2011) 8 SCC 161] (of which one of us, Dr. Bhandari, J. was the author of the judgment) had an occasion to deal with the concept of restitution. The relevant paragraphs of that CS no.330 of 2017 Satish Builders Vs. Union of India page no.22 judgment dealing with relevant judgments are reproduced hereunder : (SCC pp. 238-41 & 243, paras 171-76 & 183-84) '170.***
171. In Ram Krishna Verma v. State of U.P. [Ram Krishna Verma v. State of U.P., (1992) 2 SCC 620] this Court observed as under : (SCC p. 630, para 16) "16. The 50 operators, including the appellants/private operators, have been running their stage carriages by blatant abuse of the process of the court by delaying the hearing as directed in Jeewan Nath Wahal case [Jeewan Nath Wahal v. State of U.P., (2011) 12 SCC 769] and the High Court earlier thereto. As a fact, on the expiry of the initial period of the grant after 29-9-
1959, they lost the right to obtain renewal or to ply their vehicles, as this Court declared the scheme to be operative. However, by sheer abuse of the process of law, they are continuing to ply their vehicles pending the hearing of the objections. This Court in Grindlays Bank Ltd. v. CIT [Grindlays Bank Ltd. v. CIT, (1980) 2 SCC 191 : 1980 SCC (Tax) 230] held that the High Court, while exercising its power under Article 226, the interest of justice requires that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court must be neutralised. It was further held that the institution of the litigation by it should not be permitted to confer an unfair CS no.330 of 2017 Satish Builders Vs. Union of India page no.23 advantage on the party responsible for it. In the light of that law and in view of the power under Article 142(1) of the Constitution this Court, while exercising its jurisdiction would do complete justice and neutralise the unfair advantage gained by the 50 operators including the appellants in dragging the litigation to run the stage carriages on the approved route or area or portion thereof and forfeited their right to hearing of the objections filed by them to the draft scheme dated 26-2- 1959."
172. This Court in Kavita Trehan v. Balsara Hygiene Products Ltd. [Kavita Trehan v. Balsara Hygiene Products Ltd., (1994) 5 SCC 380] observed as under : (SCC p. 391, para 22) "22. The jurisdiction to make restitution is inherent in every court and will be exercised whenever the justice of the case demands. It will be exercised under inherent powers, where the case did not strictly fall within the ambit of Section 144. Section 144 opens with the words:
'144. Application for restitution.--
(1) Where and insofar as a decree or an order is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose,....' The instant case may not strictly fall within the terms of Section 144, but the aggrieved party in such a case can appeal to the larger CS no.330 of 2017 Satish Builders Vs. Union of India page no.24 and general powers of restitution inherent in every court."
173. This Court in Marshall Sons & Co.
(India) Ltd. v. Sahi Oretrans (P) Ltd. [Marshall Sons & Co. (India) Ltd. v. Sahi Oretrans (P) Ltd., (1999) 2 SCC 325] observed as under : (SCC pp. 326-27, para 4) "4. From the narration of the facts, though it appears to us, prima facie, that a decree in favour of the appellant is not being executed for some reason or the other, we do not think it proper at this stage to direct the respondent to deliver the possession to the appellant since the suit filed by the respondent is still pending. It is true that proceedings are dragged on for a long time on one count or the other and, on occasion, become highly technical accompanied by unending prolixity at every stage, providing a legal trap to the unwary.
Because of the delay, unscrupulous parties to the proceedings take undue advantage, and the person who is in wrongful possession draws delight in delay in disposal of the cases by taking undue advantage of procedural complications. It is also a known fact that after obtaining a decree for possession of the immovable property, its execution takes a long time. In such a situation, for protecting the interest of the judgment-creditor, it is necessary to pass appropriate orders so that reasonable mesne profit which may be equivalent to the market rent is paid by a person who is holding over the property. In appropriate cases, the court CS no.330 of 2017 Satish Builders Vs. Union of India page no.25 may appoint a Receiver and direct the person who is holding over the property to act as an agent of the [Receiver with a direction to deposit the royalty amount fixed by the] Receiver or pass such other order which may meet the interest of justice. This may prevent further injury to the plaintiff in whose favour the decree is passed and to protect the property, including further alienation."
174. In Padmawati v. Harijan Sewak Sangh [Padmawati v. Harijan Sewak Sangh, 2008 SCC OnLine Del 1202 : (2008) 154 DLT 411] decided by the Delhi High Court on 6-11-2008, the Court held as under :
(SCC Online Del para 6) "6. The case at hand shows that frivolous defences and frivolous litigation is a calculated venture involving no risks situation. You have only to engage professionals to prolong the litigation so as to deprive the rights of a person and enjoy the fruits of illegalities. I consider that in such cases where the court finds that using the courts as a tool, a litigant has perpetuated illegalities or has perpetuated an illegal possession, the court must impose costs on such litigants which should be equal to the benefits derived by the litigant and harm and deprivation suffered by the rightful person so as to check the frivolous litigation and prevent the people from reaping a rich harvest of illegal acts through the courts. One of the aims of every judicial system has to CS no.330 of 2017 Satish Builders Vs. Union of India page no.26 be to discourage unjust enrichment using courts as a tool. The costs imposed by the courts must in all cases should be the real costs equal to deprivation suffered by the rightful person."
We approve the findings of the High Court of Delhi in the case mentioned above.
175. The High Court also stated :
(Padmawati case [Padmawati v. Harijan Sewak Sangh, 2008 SCC OnLine Del 1202 : (2008) 154 DLT 411], SCC OnLine Del para 9) "9. Before parting with this case, we consider it necessary to observe that one of the [main] reasons for overflowing of court dockets is the frivolous litigation in which the courts are engaged by the litigants and which is dragged on for as long as possible.
Even if these litigants ultimately lose the lis, they become the real victors and have the last laugh. This class of people who perpetuate illegal acts by obtaining stays and injunctions from the courts must be made to pay the sufferer not only the entire illegal gains made by them as costs to the person deprived of his right but also must be burdened with exemplary costs. The faith of people in judiciary can only be sustained if the persons on the right side of the law do not feel that even if they keep fighting for justice in the court and ultimately win, they would turn out to be a fool since winning a case after 20 or 30 years would make the wrongdoer as CS no.330 of 2017 Satish Builders Vs. Union of India page no.27 real gainer, who had reaped the benefits for all those years. Thus, it becomes the duty of the courts to see that such wrongdoers are discouraged at every step, and even if they succeed in prolonging the litigation due to their money power, ultimately, they must suffer the costs of all these years' long litigation. Despite the settled legal positions, the obvious wrongdoers, use one after another tier of judicial review mechanism as a gamble, knowing fully well that dice is always loaded in their favour since even if they lose, the time gained is the real gain. This situation must be redeemed by the courts."
176. Against this judgment of the Delhi High Court, Special Leave to Appeal (Civil) No. 29197 of 2008 was preferred to this Court. The Court passed the following order [Padmawati v. Harijan Sewak Sangh, (2012) 6 SCC 460 : (2012) 3 SCC (Civ) 765] : (SCC p. 460, para 1) "1. We have heard the learned counsel appearing for the parties. We find no ground to interfere with the well-considered judgment passed by the High Court. The special leave petition is, accordingly, dismissed."
***
183. In Marshall Sons & Co. (India) Ltd. v. Sahi Oretrans (P) Ltd. [Marshall Sons & Co. (India) Ltd. v. Sahi Oretrans (P) Ltd., (1999) 2 SCC 325] this Court in para 4 of the judgment observed as under : (SCC pp. 326-27) CS no.330 of 2017 Satish Builders Vs. Union of India page no.28 "4. ... It is true that proceedings are dragged on for a long time on one count or the other and, on occasion, become highly technical accompanied by unending prolixity at every stage, providing a legal trap to the unwary.
Because of the delay, unscrupulous parties to the proceedings take undue advantage, and a person who is in wrongful possession draws delight in delay in disposal of the cases by taking undue advantage of procedural complications. It is also a known fact that after obtaining a decree for possession of immovable property, its execution takes a long time. In such a situation, for protecting the interest of the judgment-creditor, it is necessary to pass appropriate orders so that reasonable mesne profit which may be equivalent to the market rent is paid by a person who is holding over the property. In appropriate cases, the court may appoint a Receiver and direct the person who is holding over the property to act as an agent of the Receiver with a direction to deposit the royalty amount fixed by the Receiver or pass such other order which may meet the interest of justice. This may prevent further injury to the plaintiff in whose favour the decree is passed and to protect the property, including further alienation."
184. In Ouseph Mathai v. M. Abdul Khadir [Ouseph Mathai v. M. Abdul Khadir, (2002) 1 SCC 319] this Court reiterated the legal position that : (SCC p. 328, para 13) CS no.330 of 2017 Satish Builders Vs. Union of India page no.29 "13. ... [the] stay granted by the court does not confer a right upon a party and it is granted always subject to the final result of the matter in the court and at the risks and costs of the party obtaining the stay. After the dismissal, of the lis, the party concerned is relegated to the position which existed prior to the filing of the petition in the court which had granted the stay. Grant of stay does not automatically amount to extension of a statutory protection."'"
There are other decisions as well, which iterate and apply the same principle. [Indian Council for Enviro-Legal Action v. Union of India, (2011) 8 SCC 161; Grindlays Bank Ltd. v. CIT, (1980) 2 SCC 191 : 1980 SCC (Tax) 230; Ram Krishna Verma v. State of U.P., (1992) 2 SCC 620. Also Marshall Sons & Co. (India) Ltd. v. Sahi Oretrans (P) Ltd., (1999) 2 SCC 325.]
338. A wrongdoer or in the present context, a litigant who takes his chances, cannot be permitted to gain by delaying tactics. It is the duty of the judicial system to discourage undue enrichment or drawing of undue advantage, by using the court as a tool. In Kalabharati Advertising v. Hemant Vimalnath Narichania [Kalabharati Advertising v. Hemant Vimalnath Narichania, (2010) 9 SCC 437 : (2010) 3 SCC (Civ) 808], it was observed that courts should be careful in neutralizing the effect of consequential orders passed pursuant to interim orders. Such directions are necessary to check the rising trend among the litigants to secure reliefs as an interim measure and avoid adjudication of the case on merits. Thus, the restitutionary principle recognizes and gives shape CS no.330 of 2017 Satish Builders Vs. Union of India page no.30 to the idea that advantages secured by a litigant, on account of orders of court, at his behest, should not be perpetuated; this would encourage the prolific or serial litigant, to approach courts time and again and defeat rights of others -- including undermining of public purposes underlying acquisition proceedings. A different approach would mean that, for instance, where two landowners (sought to be displaced from their lands by the same notification) are awarded compensation, of whom one allows the issue to attain finality -- and moves on, the other obdurately seeks to stall the public purpose underlying the acquisition, by filing one or series of litigation, during the pendency of which interim orders might inure and bind the parties, the latter would profit and be rewarded, with the deemed lapse condition under Section 24(2). Such a consequence, in the opinion of this Court, was never intended by Parliament; furthermore, the restitutionary principle requires that the advantage gained by the litigant should be suitably offset, in favour of the other party.
339. In Krishnaswamy S. Pd. v. Union of India [Krishnaswamy S. Pd. v. Union of India, (2006) 3 SCC 286], it was observed that an unintentional mistake of the Court, which may prejudice the cause of any party, must and alone could be rectified. Thus, in our opinion, the period for which the interim order has operated under Section 24 has to be excluded for counting the period of 5 years under Section 24(2) for the various reasons mentioned above."
9. As per the settled position of law, the act of the Court shall prejudice no one and in such a fact situation, the Court is under an obligation to undo the wrong done to a party by the act of the Court. The maxim actus curiae neminem gravabit shall be applicable. As per the settled law, any undeserved or unfair advantage gained by a party invoking the CS no.330 of 2017 Satish Builders Vs. Union of India page no.31 jurisdiction of the court must be neutralized, as the institution of litigation cannot be permitted to confer any advantage on a suitor by the act of the Court."
(Emphasis supplied by me)
28. From the aforesaid judgment in Bhupinder Singh (supra), it is clear that what attracts applicability of restitution is not the act of the court being wrongful or mistake or an error committed by the court. The test is whether, on account of an act of the party persuading the court to pass an order held at the end as not sustainable, resulting in one party gaining an advantage which it would not have otherwise earned, or the other party having suffered an impoverishment, restitution has to be made.
29. In the present case, as already observed, the direction by the court to the plaintiff to keep the bank guarantee alive during the pendency of the suit could only have been at the instance of the defendants who were contesting the suit and to safeguard the interest of the defendants in case ultimately the plaintiff failed. However, the plaintiff ultimately succeeded in the suit and it was held by the court that the demand for encashment of the bank guarantee by the defendants was unjustified. The court passed final judgment and decree dated 26.07.2014 Ex.PW-1/41 declaring the demand for encashment of the bank guarantee as illegal and for permanent injunction against the defendants from encashing the bank guarantee. The interim order merged with the final decree. Since the order to keep the bank guarantee alive was made at the CS no.330 of 2017 Satish Builders Vs. Union of India page no.32 persuasion of the defendants, since the plaintiff ultimately succeeded in the suit wherein it was held that the demand for encashment of the bank guarantee was unjustified, under the principle of restitution, the plaintiff would be entitled to receive compensation from the defendants for the expenditure incurred in keeping the bank guarantee alive during the course of the suit.
30. As held in Bhupinder Singh (supra), section 144 CPC is not exhaustive of all cases of restitution. As per section 144(1) CPC where any decree or order is varied or reversed in any appeal or revision or other proceedings or is set aside or modified in any suit, the court which passed the decree or order shall on application of any party entitled to any benefit by way of restitution cause such restitution to be made as will so far as may be place the parties in the position which they would have occupied but for such decree or order. Section 144(2) CPC provides that no suit shall be instituted for the purpose of obtaining any restitution or other relief which could be obtained u/s. 144(1) CPC. The present case would not strictly fall u/s. 144(1) CPC, and, hence, there would be no bar u/s. 144 (2) to the institution of the present suit. The present suit is based on the principle of restitution de hors section 144 CPC, and is very much maintainable.
31. In so far as the argument of ld. Counsel for the defendants with respect to sections 73 and 74 of the Contract Act that no loss was caused due to any breach of contract is CS no.330 of 2017 Satish Builders Vs. Union of India page no.33 concerned, the same is without merit. This is not a case where the plaintiff is seeking damages for breach of contract. In the present suit, the plaintiff is seeking restitution for keeping the bank guarantee alive during the course of the suit, which was done upon the order of the court at the instance of the defendants, and the plaintiff ultimately succeeded in the suit.
32. In the result, I would hold that the plaintiff would be entitled as restitution to compensation from the defendants of the amount of expenditure incurred in keeping the bank guarantee alive during the course of the suit for declaration and permanent injunction.
33. Now, coming to the quantum of restitution. The plaintiff has pleaded in the plaint that the plaintiff incurred expenses of Rs. 2,62,250/- in keeping the bank guarantee alive during the course of the suit for declaration and permanent injunction. The defendants have not disputed the amount in the written statement. Even during the course of arguments, no submissions were made by the learned counsel for the defendants disputing the quantum of the bank expenses which the plaintiff claimed to have incurred. Even in the written submissions, there is no dispute to the same. The reason would be perhaps that the amount of expenses towards bank charges were on the basis of the bank records and documents to which there could be no serious dispute. Even otherwise, the plaintiff has through its documentary evidence in the form of bank CS no.330 of 2017 Satish Builders Vs. Union of India page no.34 account statement Ex.PW-1/42 shown that the plaintiff had incurred expenditure of Rs. 2,62,250/- towards keeping the bank guarantee alive.
34. Accordingly, I would hold that the plaintiff would be entitled to decree against the defendants for sum of Rs. 2,62,250/- as restitution for the bank expenses incurred by the plaintiff in keeping the bank guarantee alive in the suit for declaration and permanent injunction. Insofar as the interest is concerned, I would consider that the interest would be payable from the date of the notice from the plaintiff to the defendants i.e. 31/12/2016. The rate of interest @ 9% p.a. would be reasonable.
35. Accordingly, decree is passed in favour of the plaintiff and against the defendants for sum of Rs. 2,62,250/- along with interest @ 9% p.a. from 31/12/2016 till the date of actual realisation. Costs are decreed in favour of the plaintiff and against the defendants. The pleader's fee is computed as Rs. 30,000/-. The costs shall also include the fees of the local Commissioner of Rs. 20,000/-. Let the decree sheet be drawn up accordingly.
File be consigned to record room after necessary compliance.
Judgment pronounced in open court.
(SATYABRATA PANDA) Additional District Judge-04 Judge Code- DL01057 PHC/New Delhi/23.12.2023 CS no.330 of 2017 Satish Builders Vs. Union of India page no.35