Party attempting to hoodwink judicial process not entitled to discretionary relief: Supreme Court

New Delhi: The Supreme Court has said a party which approaches the court with unclean hands and attempts to hoodwink the judicial process can be denied the discretionary relief.

A bench of Justices Surya Kant and Ujjal Bhuyan held the Union government and the Ministry of Urban Development's Housing and Urban Development Corporation Limited in breach of several obligations as contemplated in the allotment letter issued in 1994 in respect of lease of land for constructing a five-star hotel in Delhi's Andrews Ganj.

The court said this breach would disentitle them from forfeiting over Rs 27 crore already paid by the appellant M/s Tomorrowland Limited (formerly M S Shoes East Ltd) towards the first instalment.

"Given that the appellant has blatantly engaged in forum shopping, and considering that their overall conduct does not in any manner reflect an approach aligning with the clean hands doctrine, they are not entitled to grant of any discretionary relief of interest in their favour," the bench said, in its judgment on February 13.

The court found failure on the part of HUDCO to execute documents for securing approval under the Income Tax Act and inability to execute the sub lease agreement in favour of the appellant and to secure the approval of the revised layout plan for the construction of the hotel.

Still, coming to the issue whether appellant is entitled to interest on refund of the forfeited amount, the bench said under Section 34 of the Civil Procedure Code, the award of interest is a discretionary exercise steeped in equitable consideration.

"The power to award interest ought to be exercised judiciously, aligning with equitable considerations and also ensuring neither undue enrichment nor unfair deprivation," it said.

They noted the appellant’s actions demonstrated unscrupulous and evasive conduct, apart from their financial incapability to honour the contractual obligations, undermining the essence of the contract.

The court noted the appellant first filed a suit in Delhi High Court, which resulted in a status quo order but the company filed to deposit further installment. Shortly after the vacation of the status quo order and cancellation of the allotment, the appellant withdrew the first suit even without the liberty to file a fresh one, ostensibly with a calculated mindset. It filed a second suit before a District court.

"Such conduct was nothing short of a brazen attempt at forum shopping, as the appellant wanted to avoid the jurisdiction of the High Court before whom they had failed to prove their bona fides by not depositing the stipulated sum. Such demeanour not only raises grave suspicions on the appellant’s propriety, but also amounts to sheer abuse of the process of law and a waste of precious judicial time," the bench said.

The court said it needs no emphasis that whosoever comes to the court claiming equity, must come with clean hands, which connotes that the suitor or the defendant have not concealed material facts and there is no attempt by them to secure illegitimate gains.

"Any contrary conduct must warrant turning down relief to such a party, owing to it not acting in good faith and beguiling the court with a view to secure undue gain. A court of law cannot be the abettor of inequity by siding with the party approaching it with unclean hands," the bench said.

Though as a general principle, in commercial disputes, the award of interest pendente lite or post decree is typically granted as a matter of course, however, the instant case to be fit to justify a deviation from the established standards, the bench said.

The court directed HUDCO to refund the amount of Rs 28,11,31,939 to the appellant within three months, while setting aside the Delhi High Court's 2016 order. The High Court had allowed the HUDCO's appeal against the civil court's decree holding it guilty of breach of contract.