Pay interest on wrongly-kept money: Supreme Court to Delhi government | Latest News India

Money received and retained without legal authority carries with it the right to interest — even for the government — the Supreme Court has ruled, stressing that undue retention of any money warrants proper compensation to its owner by the state and its departments.

“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 department of the Government cannot shrug off its apparent obligation to reimburse the deductor’s lawful monies with accrued interest for the period of undue retention of such monies,” a bench of justices JB Pardiwala and R Mahadevan stated in its February 18 judgment, released this month.

The ruling came as the court directed the Delhi government to pay interest on the refund of ₹28.1 lakh to a couple — former National Commission for Women chairperson and lawyer Poornima Advani and her husband Shailesh K Hathi — who lost an e-stamp paper meant for purchasing a house in 2016.

While the judgment reinforces the principle that individuals must be compensated when the state unduly retains their money, experts believe this ruling could have broader implications for cases involving delayed refunds by government agencies, including tax authorities.

Advocate Abhishek Gupta said: “This is truly a watershed decision that will not only be cited in taxation cases but also likely to be invoked in other realms of disputes between the government and private individuals.” He added that the application of doctrine of restitution by the SC to award interest even without any statutory backing shall serve as a guiding principle in interpretation of similarly worded legislations that are silent on the aspect of interest.

In July 2016, Advani and Hathi purchased an e-stamp paper worth ₹28.1 lakh for a property transaction in Delhi. However, due to a delay in finalising their loan, the execution of the sale deed was postponed. In August 2016, their broker informed that the crucial stamp paper had been misplaced.

Taking note of the prolonged delay in refunding the amount, the SC awarded interest of ₹4.35 lakh on the principal sum of ₹28.1 lakh, directing the Delhi government to pay the interest amount within two months.