Paragraph numbers below are the court’s original numbering, recovered from the source text.
11. The appeal Court seems to have taken the view that the issue as regards payment of interest was sought to be raised for the first time in appeal and had not been seriously raised before the learned Single Judge.
12. In such circumstances, referred to above, the appellants are here before this Court with the present appeal.
13. We heard Mr. Abhishek Puri, the learned counsel appearing for the appellants and Ms. Jyoti Mehandiratta, the learned counsel appearing for the respondents.
14. The short point that falls for our consideration is whether in the facts and circumstances of the case, the appellants herein are entitled to claim interest on the refunded amount of Rs.28,10,000/- referred to above.
15. The submission of the learned counsel appearing for the respondents that there is no provision in the statute for the payment of interest on refund of the amount of the e-stamp paper that was lost by the appellants herein, is without any merit. The subject General Mandamus is a salutary advancement of the law, calculated to insulate and protect a citizen from unfair treatment by the State. [2025] 2 S.C.R. Dr. Poornima Advani & Anr. v. Government of NCT & Anr.
16. The concept of awarding interest on delayed payment has been explained by this Court in the case of Authorised Officer Karnataka Bank v. M/s R.M.S. Granites Pvt. Ltd. & Ors. in Civil Appeal No. 12294 of 2024, we quote the following observations:- “It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital. For example if A had to pay B a certain amount, say ten years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to B ten years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned interest on it for this period. Hence equity demands that A should not only pay back the principal amount but also the interest thereon to B. [See: Alok Shanker Pandey v. Union of India : AIR 2007 SC 1198.]”
17. Thus, when a person is deprived of the use of his money to which he is legitimately entitled, he has a right to be compensated for the deprivation which may be called interest or compensation. Interest is paid for the deprivation of the use of money in general terms which has returned or compensation for the use or retention by a person of a sum of money belonging to other.
18. As per Black’s Law Dictionary (7th Edn.): “interest” is the compensation fixed by agreement or allowed by law for use or detention of money or for the loss of money of one who is entitled to its use, especially, the amount owned to a lender in return for the use of the borrowed money.
19. As per Stroud’s Judicial Dictionary of Words and Phrases (5th edn.): interest means, inter alia, compensation paid by the borrower to the lender for deprivation of the use of his money.
20. In the case of Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508, a Constitution Bench of this Court opined that a person deprived of use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This is also the principle of Section 34 of the Civil Procedure Code. 1200
21. The essence of interest as held in the case of Lord Wright in Riches v. Westminister Bank Ltd., 1947 (1) ALL ER 469, at page 472, is that it is a payment, which becomes due because the creditor has not had his money at the due date. It may be recorded either as representing the profit he might have made if he had had the use of the money, or, conversely, the loss he suffered because he had not that use.
22. In the case of Commissioner of Income Tax v. Dr. Sham Lal Narula, AIR 1963 Punjab 411, a Division Bench of the High Court of Punjab articulated the concept of interest as under:- “The words ‘interest’ and ‘compensation’ are sometimes used interchangeably and on other occasions they have distinct connotation. “Interest” in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, ‘interest’ is understood to mean the amount which one has contracted to pay for use of borrowed money. ……… In whatever category “interest” in a particular case may be put, it is a consideration paid either for the use of money or for forbearance in demanding it, after it has fallen due, and thus, it is a charge for the use or forbearance of money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage, for use of money belonging to another, or for the delay in paying money after it has become payable.” (Emphasis supplied)
23. The appeal filed against aforesaid decision was dismissed by this Court in Sham Lal Narula Dr. v. CIT, AIR 1964 SC 1878.
24. In the case of Hello Minerals Water (P) Ltd. v. Union of India, (2004) 174 ELT 422, (paras 15 and 16), a Division Bench of the Allahabad High Court explained the concept of interest as under:- “15. We may mention that we are passing the direction for interest since interest is the normal accretion on capital. Often there is misconception about interest. Interest is not a penalty or punishment at all. 16. For instance, if A had to pay a certain sum of money to B at a particular time, but he pays it after a delay of several [2025] 2 S.C.R. Dr. Poornima Advani & Anr. v. Government of NCT & Anr. years, the result will be that the money remained with A and he would have earned interest thereon by investing it somewhere. Had he paid that amount at the time when it was payable then B would have invested it somewhere, and earned interest thereon. Hence, if a person has illegally retained some amount of money then he should ordinarily be directed to pay not only the principal amount but also the interest earned thereon. Money doubles every six years (because of compound interest). Rs. hundred in the year 1990 would become Rs. two hundred in the year 1996 and it will become Rs. 400 in the year 2002. Hence, if A had to pay B a sum of rupees 100 in the year 1990 and he pays that amount only in the year 2002, the result will be that A has pocketed Rs. 300 with himself. This clearly cannot be justified because had he paid that amount to B in the year 1990, B would be having Rs. 400 in the year 2002 instead of having only Rs. 100/-. Hence, ordinarily interest should always be awarded whenever any amount is detained or realized by someone, otherwise the person receiving the amount after considerable delay would be losing the entire interest thereon which will be pocketed by the person who managed the delay, it is for this reason that we have ordered for payment of interest alongwith the amount realized as export pass fee.” INTEREST IS NORMAL ACCRETION ON CAPITAL 25. If on facts of a case, the doctrine of restitution is attracted, interest should follow. Restitution in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order what has been lost to him in execution of decree or order of the Court or in direct consequence of a decree or order. The term “restitution” is used in three senses, firstly, return or restoration of some specific thing to its rightful owner or status, secondly, the compensation for benefits derived from wrong done to another and, thirdly, compensation or reparation for the loss caused to another. 26. In Hari Chand v. State of U.P., 2012 (1) AWC 316, the Allahabad High Court dealing with similar controversy in a stamp matter held that 1202 the payment of interest is a necessary corollary to the retention of the money to be returned under order of the appellate or revisional authority. The High Court directed the State to pay interest @ 8% for the period, the money was so retained i.e. from the date of deposit till the date of actual repayment/refund. 27. In the case of O.N.G.C. Ltd. v. Commissioner of Customs Mumbai, JT 2007 (10) SC 76, (para 6), the facts were that the assessment orders passed in the Customs Act creating huge demands were ultimately set aside by this Court. However, during pendency of appeals, a sum of Rs. 54,72,87,536/- was realized by way of custom duties and interest thereon. In such circumstances, an application was filed before this Court to direct the respondent to pay interest on the aforesaid amount w.e.f. the date of recovery till the date of payment. The appellants relied upon the judgment in the case of South Eastern Coal Field Ltd. v. State of M.P., (2003) 8 SCC 648. This Court explained the principles of restitution in the case of O.N.G.C. Ltd. (supra) as under:- “Appellant is a public sector undertaking. Respondent is the Central Government. We agree that in principle as also in equity the appellant is entitled to interest on the amount deposited on application of principle of restitution. In the facts and circumstances of this case and particularly having regard to the fact that the amount paid by the appellant has already been refunded, we direct that the amount deposited by the appellant shall carry interest at the rate of 6% per annum. Reference in this connection may be made to Pure Helium Indian (P) Ltd. v. Oil & Natural Gas Commission, JT 2003 (Suppl. 2) SC 596 and Mcdermott International Inc. v. Burn Standard Co. Ltd. JT 2006 (11) SC 376.” (Emphasis supplied) COMPENSATION: 28. The word ‘Compensation’ has been defined in P. Ramanatha Aiyar’s Advanced Law Lexicon, 3rd Edition 2005, page 918 as follows:- “An act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order [2025] 2 S.C.R. Dr. Poornima Advani & Anr. v. Government of NCT & Anr. that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; the consideration or price of a privilege purchased some thing given or obtained as an equivalent the rendering of an equivalent in value or amount; an equivalent given for property taken or for an injury done to another; the giving back an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value a recompense given for a thing received recompense for the whole injury suffered remuneration or satisfaction for injury or damage of every description remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly, and proximately caused by at breach of contract or duty; remuneration or wages given to an employee or officer.” 29. In the case of Union of India through Director of Income Tax v. Tata Chemicals Ltd., (2014) 6 SCC 335, this Court held that when the collection is illegal, the Revenue is obliged to refund such amount with interest as money so deposited was retained and enjoyed by it. No discrimination can be shown between the assessee and Revenue in paying interest on the refund of tax. Money received and retained without right, carries with it the right to interest. There being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, the Government cannot shrug off its apparent obligation to reimburse the deductors lawful monies with accrued interest for the period of undue retention of such monies. Obligation to refund money received and retained without right implies and carries with in the right to interest. The relevant observations are as under:- “Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt- owed and payable by the Revenue. The Government, there being no express statutory provision for payment 1204 of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course.” (Emphasis supplied) 30. Considering the reasons assigned by the learned Single Judge while taking the view that the respondents could not have declined to refund the amount and the fact that the retention of the said amount was for a long time and further the appellants were left with no other option but to approach the High Court, we are of the view that the appellants are entitled to have interest on Rs.28,10,000/- as under:- Breakup of the Amount received and accrued interest Principal Amount : Rs. 28,10,000/- (Rupees Twenty Eight Lakh Ten Thousand Only) Period No. of days Amounts due Rate of Interest Interest amount 20.08.2018 (date of Judgment passed by Ld. Single Judge of the Delhi High Court) till 29.02.2020 (Receipt of part payment of Rs. 25,29,000/-) days Rs. 28,10,000/- 8% p.a. Rs. 3,43,666.85 [2025] 2 S.C.R. Dr. Poornima Advani & Anr. v. Government of NCT & Anr. 30.02.2020 till 08.03.2024 (Date of Fixed Deposit @ 6.5% p.a. created by the Delhi High Court Registry upon deposit of DD by Respondent) days Rs. 2,81,000/- 8% p.a. Rs. 90,535.89 09.03.2024 till 09.08.2024 (Date of dismissal of Application for modification and direction for release of balance amount deposited days Rs. 2,81,000/- 1.5% p.a. (after subtracting interest rate of the FD created by Delhi High Court Registry) Rs. 1,766.84 Total interest amount Rs. 4,35,968.58/- (Rs. Four Lakh Thirty Five Thousand Nine Hundred Sixty Eight and Paise Fifty Eight Only) 31. The respondents are directed to pay an amount of Rs. 4,35,968/- (Rs. Four Lakh Thirty Five Thousand Nine Hundred Sixty Eight Only) towards interest within a period of two months from today without fail. 32. The appeal stands disposed of in the aforesaid terms. Pending application(s), if any, shall also stand disposed of. Result of the case: Appeal disposed of. †Headnotes prepared by: Mukund P Unny, Hony. Associate Editor (Verified by: Liz Mathew, Sr. Adv.)