The Supreme Court partly allowed the appeal, holding that HUDCO was in breach of its contractual obligations and ordered a refund of the principal amount of Rs. 28,11,31,939. However, the Appellant was denied interest on the refund due to its conduct, including forum shopping and unclean hands (Paras 60-63).

Major Acts:

• Specific Relief Act, 1963 (SR Act) – Section 34 – Declaratory Relief – Proviso to Section 34 – Consequential Relief.

• Code of Civil Procedure, 1908 (CPC) – Order II Rule 2 – Bar on Subsequent Suits – Order VII Rule 11 – Rejection of Plaint – Order XXIII Rule 1(3) – Withdrawal of Suit – Section 34 – Interest on Principal Sum.

• Urban Land (Ceiling and Regulation) Act, 1976 (ULCR Act) – Statutory Approvals.

• Income Tax Act, 1961 (IT Act) – Chapter XX C – Statutory Approvals.

Facts:

• Nature of the Litigation: The appeal arose from a dispute between M/s. Tomorrowland Limited (Appellant) and Housing and Urban Development Corporation Limited (HUDCO, Respondent No. 1) regarding the forfeiture of payments made by the Appellant for the allotment of land to construct a 5-star hotel. The Appellant challenged the cancellation of the allotment and sought a refund of the forfeited amount.

• Reason for Filing the Case: The Appellant claimed that HUDCO failed to fulfill its reciprocal contractual obligations, including executing necessary documents for statutory approvals and the sub-lease agreement, leading to the cancellation of the allotment and forfeiture of the deposited amount.

• What Has Already Been Decided: The High Court overturned the concurrent findings of the lower courts, holding that the Appellant’s suit was not maintainable due to the failure to claim possession as a consequential relief under Section 34 of the Specific Relief Act, 1963. The High Court also criticized the Appellant’s conduct, including forum shopping and unclean hands.

Issues:

1. Whether HUDCO was in breach of its reciprocal contractual obligations under the Allotment Letter? – Held: Yes, HUDCO failed to execute necessary documents for statutory approvals and the sub-lease agreement, breaching its contractual obligations (Paras 30-42).

2. Whether the Appellant is entitled to a refund of the forfeited amount? – Held: Yes, HUDCO is liable to refund the principal amount of Rs. 28,11,31,939 (Paras 43-47).

3. Whether the Appellant is entitled to interest on the refunded amount? – Held: No, the Appellant’s conduct, including forum shopping and unclean hands, barred the grant of discretionary interest under Section 34 of the CPC (Paras 48-59).

Submissions/Arguments:

• Appellant’s Contentions:
  a) HUDCO failed to disclose the lack of a perpetual lease, leading to misrepresentation.
  b) HUDCO failed to execute the sub-lease agreement and obtain statutory approvals, relieving the Appellant of the obligation to pay further instalments.
  c) The High Court erred in holding that the suit was defective for not claiming possession as a consequential relief.
  d) The Appellant was discriminated against compared to Ansals, who were granted interest-free extensions.
  e) The forfeiture of the amount was unjustified as HUDCO suffered no actual loss.
  f) Alternatively, the Appellant sought a refund of the principal amount with interest (Paras 22-24).

• Respondent’s Contentions:
  a) The Appellant defaulted on payment, leading to the cancellation of the allotment and forfeiture of the amount as per Clause 5(iii) of the Allotment Letter.
  b) The Second Suit was barred under Order II Rule 2 and Order XXIII Rule 1(3) of the CPC.
  c) The Appellant abandoned the relief of possession to avoid court fees, violating the proviso to Section 34 of the SR Act.
  d) The Appellant engaged in forum shopping and unethical conduct, including dishonouring court orders and withdrawing the First Suit without liberty to file a fresh one.
  e) The Appellant failed to secure statutory approvals, unlike Ansals, and thus could not claim parity (Paras 25-27).

Ratio:

• Breach of Contractual Obligations: A party cannot enforce contractual rights if it fails to fulfill its reciprocal obligations. HUDCO’s failure to execute necessary documents and the sub-lease agreement constituted a breach of contract (Paras 30-42).

• Refund of Forfeited Amount: Where a party breaches its contractual obligations, the other party is entitled to a refund of the amount paid, as per the terms of the agreement (Paras 43-47).

• Interest on Refund: The grant of interest under Section 34 of the CPC is discretionary and may be denied if the party seeking relief has engaged in unethical conduct, such as forum shopping or unclean hands (Paras 48-59).

• Forum Shopping and Unclean Hands Doctrine: Courts will not grant equitable relief to parties who engage in forum shopping or approach the court with unclean hands (Paras 53-57).

Subjects:

• Specific Relief Act, 1963 – Declaratory Relief – Consequential Relief – Proviso to Section 34.

• Code of Civil Procedure, 1908 – Order II Rule 2 – Order XXIII Rule 1(3) – Section 34 – Interest.

• Urban Land (Ceiling and Regulation) Act, 1976 – Statutory Approvals.

• Income Tax Act, 1961 – Chapter XX C – Statutory Approvals.

• Breach of Contract – Reciprocal Obligations – Refund – Forfeiture.

• Forum Shopping – Unclean Hands Doctrine – Equitable Relief.