In a landmark ruling, the Supreme Court has affirmed that the government must pay interest on money retained without legal justification, emphasizing that the right to interest accrues even if the government is the party at fault. The judgment, delivered on February 18 by Justices JB Pardiwala and R Mahadevan, clarifies the obligations of state entities in cases of undue money retention.
The court’s decision came in response to a legal battle initiated by Poornima Advani, a former National Commission for Women chairperson, and her husband Shailesh K Hathi. The couple had purchased an e-stamp paper worth ₹28.1 lakh in 2016 for a property transaction that ultimately went awry due to the loss of the stamp paper. Following Advani’s death in April 2023, her husband continued the fight to reclaim not only the principal amount but also the accrued interest.
The Delhi government was ordered to refund the amount with an additional interest of ₹4.35 lakh, recognizing the undue delay and the financial burden borne by the couple due to the government’s retention of their money. This ruling reinforces the principle that the retention of money without right leads inherently to an obligation to pay interest, regardless of explicit statutory provisions to that effect.
Advocate Abhishek Gupta hailed the decision as a “watershed,” likely to influence not only taxation disputes but also other legal conflicts involving government entities and private individuals. The Supreme Court applied the doctrine of restitution, asserting that interest should be awarded as compensation for the time during which the funds were wrongfully held.
In 2016, after a series of misfortunes including a lost stamp paper and the subsequent denial of a refund by the Delhi revenue department, Advani and Hathi faced significant hurdles. Their initial plea for a refund was rebuffed by the Collector of Stamps, and although the Delhi High Court ordered a refund in 2018, it did not allow for the payment of interest. The division bench of the high court also dismissed their appeal, which led them to the Supreme Court.
