Authority must refund simple bank-rate interest on deposits when allottee surrenders a plot without forfeiture.

Petitioner No. 1 and Petitioner No. 2 were allotted 500-square-yard plots by the Bathinda Development Authority under the freedom-fighter category.

In a subsequent writ petition filed by Ajit Pal Singh Mander, the present petitioners were impleaded as respondents and stated that they were willing to surrender their plots.

The Co-ordinate Bench directed that, upon surrender, no amount would be forfeited and observed that the petitioners should not suffer any loss.

Pursuant thereto, the petitioners surrendered the plots on 15 January 2016 and received refunds of the principal amounts deposited by them.

They subsequently sought simple interest at the prevailing bank rate on the amounts deposited, limited to the period from each deposit until 23 September 2015, the date of the earlier judgment.

The Authority refunded the principal but did not pay interest.

Whether the petitioners were entitled to simple interest at the prevailing bank rate on the amounts deposited with the Authority, in addition to refund of the principal, where the earlier order directed that no amount be forfeited and that the petitioners should not suffer any loss.

Whether the Authority could resist the claim for interest on the ground that the petitioners had defaulted in payment of instalments.

The Court exercised jurisdiction under Articles 226 and 227 of the Constitution of India.

It applied the binding directions in the earlier judgment in CWP-20183-2012, under which the Authority was not to forfeit any amount upon surrender of the plots and the petitioners were not to suffer any loss.

The Court further applied the principles of restitution and prevention of unjust or undue enrichment: where money deposited with a public authority earns or is capable of earning interest, and the authority is directed not to forfeit any amount, the refund must include the applicable simple interest forming part of the economic value of the deposited amount.

The Court also held that an issue already settled by the earlier judgment could not be reopened by the Authority at the stage of refund.

The earlier judgment permitted surrender of the plots without forfeiture and expressly intended to ensure that the petitioners suffered no loss.

Although the Authority refunded the principal amounts, those amounts had remained deposited with and had been utilised by it for periods extending from the respective dates of deposit until 23 September 2015.

The interest claimed was not compensation for an independent wrong, but simple interest at the normal bank rate on the petitioners’ own deposited money.

Retaining that interest, while relying on the earlier order to retain the benefit of the deposits, would amount to undue enrichment, particularly because the allotments were made by the Authority and there was no allegation of fraud, misrepresentation, or concealment by the petitioners.

The Authority’s reliance on alleged payment defaults was rejected because that controversy could not be revived after the earlier judgment and, in any event, the plots had been surrendered pursuant to that order.

The Court directed Respondent No. 2 to calculate and pay the petitioners simple interest at the bank rate prevailing in 2015 on each amount deposited, calculated from the date of each deposit until 23 September 2015.

The calculation was to be completed within one month, and payment was to be made within the succeeding month.