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Chief Executive Officer and Vice Chairman Gujarat Maritime Board v. Asiatic Steel Industries Ltd.

Civil Appeal · 2020 INSC 654Decided 24 Nov 2020
Civil Appeal No. 3807 of 2020
Justice Indira Banerjee · Justice S. Ravindra Bhat

Background

In 1994, the Gujarat Maritime Board (a state body) allotted a ship-breaking plot to Asiatic Steel for over ₹3.6 crore, but the plot turned out to be unusable because of rocks blocking ships from beaching there: a problem the Board had agreed to fix but never did. After years of fruitless requests, Asiatic Steel abandoned the contract in 1998 and demanded a refund with interest. The Board eventually refunded the principal but refused to pay interest, even though it had paid interest (at 9-12%) to several other bidders in near-identical situations who had approached courts earlier. Asiatic Steel went to the High Court, which ordered the Board to pay 6% interest for the period the Board held the money.

Decision Breakdown

The Supreme Court found that the Board behaved with "complete arbitrariness": it never responded to Asiatic Steel's repeated requests to fix the site or its refund demand, yet had promptly refunded similarly-placed bidders who went to court first. As a public body, the Board was expected to act fairly rather than force a citizen into litigation before doing what it should have done voluntarily. The Court upheld the High Court's order that the Board must pay interest, but corrected one factual error: interest should run only from 22.03.1995 (the actual date Asiatic Steel's payment was deposited), not from 08.11.1994 as the High Court had wrongly assumed. The appeal was dismissed, subject to this correction.

Lesson Learnt

Government bodies and public authorities are held to a higher standard of fairness than private parties in contractual disputes: deliberately staying silent and forcing a citizen or company to litigate for a refund it is clearly owed can itself be treated as arbitrary conduct that attracts a court-ordered interest payment.

Official source (sci.gov.in)View Judgment (PDF)

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