Entitlement to Interest on Refund of Sale Consideration Despite Rejection of Initial Settlement Offer

The Plaintiff (Respondent), a real estate company, entered into an Agreement to Sell dated 03.11.2009 with the Defendant (Appellant) for a first-floor property in Greater Kailash-II for Rs. 1.70 Crores

The Plaintiff paid Rs. 1.30 Crores but alleged that the Defendant failed to execute the Sale Deed and instead gifted the property to his daughter to avoid the obligation

The Defendant contended that there were actually two agreements totaling a consideration of Rs. 2.70 Crores and that the Plaintiff had concealed the second document

During trial, the Plaintiff made an oral prayer for the alternate relief of refund

The Trial Court, exercising powers under Order XII Rule 6 of the CPC, passed a judgment on admissions, decreeing the refund of Rs. 1.30 Crores with interest

The Appellant challenged this decree primarily on the grounds of the Plaintiff’s alleged fraud and the inequity of paying interest when he had offered a refund earlier

1. Whether a decree on admissions under Order XII Rule 6 CPC was sustainable given the allegations of concealment and fraud regarding a second agreement?

2. Whether the Appellant was liable to pay interest on the refunded amount despite the Respondent initially refusing a refund in favor of seeking specific performance?

3. Whether the status quo order obtained by the Respondent barred the accrual of interest?

The Court applied Order XII Rule 6 of the Code of Civil Procedure (CPC), 1908, which empowers a court to deliver a judgment at any stage of a suit based on admissions of fact made in pleadings or otherwise

Section 96 and Order XLI Rule 1 regarding the maintainability of appeals against original decrees

The principles of equity were applied regarding the Award of interest, asserting that a party who retains and utilizes another’s money is liable to compensate the owner through interest, regardless of the litigation's trajectory

The Court reasoned that while the Defendant alleged a second agreement for an additional Rs. 1 Crore, the payment of Rs. 1.30 Crores under the first agreement was an admitted fact

The Court held that the Plaintiff’s non-disclosure of the second agreement did not extinguish the right to recover the admitted sum paid

Regarding interest, the Court rejected the Appellant’s argument that his prior offer of refund should stop interest accrual; it noted that the Plaintiff had a legal right to pursue specific performance rather than accepting a refund immediately

Furthermore, the Court found that the Appellant had "enjoyed" and "utilized" the funds since 2011; thus, the status quo order on the property did not excuse the Appellant from paying interest on the cash liquidity he retained

The Court found the Trial Court’s tiered interest rates (12% pre-suit, 6% pendente-lite, 9% future) to be an equitable balance

It held that the Plaintiff was entitled to the refund of the admitted amount of Rs. 1,30,00,000/- based on the Defendant's own admissions

The Court affirmed that interest is due for the period the funds were retained by the Defendant, notwithstanding the pendency of a claim for specific performance or the existence of an injunction

All pending applications were disposed of