DDA Liable to Pay 18-25% Interest on Refund Where Allotment is Cancelled for Administrative Error

The Delhi Development Authority (Appellant/DDA) issued an e-auction for a built-up property (Unit No. 23, Laxmi Nagar) at a reserve price of ₹61,21,460/-

The Respondent was declared the highest bidder and deposited the total consideration of ₹1,02,64,469/-

Following a complaint that the property was undervalued due to an incorrect Circle Rate category (Category ‘F’ instead of ‘D’), the DDA cancelled the allotment on 25.12.2020 citing administrative reasons

The DDA requested the Respondent to provide bank details for a refund, which the Respondent did not provide, choosing instead to file a Writ Petition seeking possession

The learned Single Judge ordered the DDA to refund the amount with interest at 18% p.a. for the first 90 days and 25% p.a. thereafter

The DDA appealed this interest rate as being punitive and excessive

1. Whether the DDA is liable to pay interest at the rates of 18% and 25% per annum on the deposited amount following the cancellation of allotment due to its own administrative error

2. Whether the limitation of 180 days for interest computation, as stipulated in the Auction Terms, applies to refunds necessitated by the seller's default

The court applied the principle of restitution and equitable compensation, using Clause 8 of the Auction Terms as a benchmark for interest rates

Clause 8 provides that if a bidder delays payment, they must pay 18% interest for up to 90 days and 25% thereafter

The court held that while these rates typically penalize a defaulting buyer, they serve as a fair measure of compensation when the state authority retains a citizen's money without legal justification after cancelling an allotment due to its own error

The Court observed that the cancellation was due to the DDA's "administrative error" regarding Circle Rates and was not attributable to the Respondent

Although the DDA claimed it could not refund the money because the Respondent failed to provide bank details, the Court held that once the Writ Petition was filed, the DDA should have deposited the amount in an interest-bearing account with the Court instead of retaining it

The Court rejected the DDA’s argument that interest should be capped at 180 days, clarifying that the 180-day cap in Clause 8 applies to extensions sought by bidders for making payments and is irrelevant to the DDA’s obligation to refund money after a wrongful or administrative cancellation

Consequently, using the DDA’s own penalty rates (18% and 25%) as a benchmark for the refund interest was deemed appropriate to compensate the Respondent for being deprived of their funds

The Court held that the DDA is liable to refund the deposited amount with interest at 18% p.a. for the first 90 days and 25% p.a. thereafter until the date of payment

The Court affirmed that public authorities cannot retain deposits without legal basis after cancellation and must proactively seek to refund or deposit such funds in court if a dispute arises

No order as to costs was made