Supreme Court Orders 12% Interest on Coal Refund: M/S. Domco Smokeless Fuels Pvt. Ltd. vs. State of Jharkhand (22 February 2024)

Date of the Judgment: 22 February 2024
Citation: 2024 INSC 133
Judges: B.R. Gavai, J. and Sandeep Mehta, J.
Can a company be denied a refund of excess payment for coal, along with interest, despite previous court orders? The Supreme Court of India addressed this question in a case involving M/S. Domco Smokeless Fuels Pvt. Ltd. and the State of Jharkhand. The court ruled in favor of the company, directing the state to refund the excess amount with a 12% interest rate, overturning the High Court’s decision. This case highlights the importance of adhering to judicial orders and ensuring fair compensation. The judgment was delivered by a division bench comprising of Justice B.R. Gavai and Justice Sandeep Mehta.

Case Background

M/S. Domco Smokeless Fuels Pvt. Ltd. (the appellant) participated in an e-auction conducted by the State of Jharkhand (the respondent) for coal consignments. The appellant paid a higher price than the notified price. After lifting the coal, the appellant, along with other similarly situated companies, sought a refund of the excess amount paid. When the refund was not granted, the appellant filed Writ Petition (Civil) No. 3040 of 2005 before the High Court of Jharkhand, seeking a refund of the excess price.

Timeline:

Course of Proceedings

The appellant initially filed a writ petition before the Jharkhand High Court seeking a refund of the excess price paid for coal. The High Court directed the respondents to refund the excess amount. When the respondents failed to comply, the appellant filed a contempt case, which was also decided in favor of the appellant, directing refund with interest. Despite these orders, the respondents did not fully comply. Consequently, the appellant filed another contempt case, which was dismissed by the High Court. The appellant then appealed to the Supreme Court against the dismissal of the contempt case.

Legal Framework

The judgment primarily revolves around the enforcement of orders passed by the High Court and the Supreme Court. The key legal aspect is the direction for refund of excess amount paid for coal along with applicable interest. The Supreme Court also considered its earlier order in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. v Union of India & Ors. [(2006) 9 SCC 228], which had directed refund of excess amount with 12% interest per annum.

Arguments

Appellant’s Submissions:

• The appellant argued that they were entitled to a refund of the excess amount paid for coal, along with interest at 12% per annum, as per the directions of the Supreme Court in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. [(2006) 9 SCC 228].
• The appellant contended that the respondents had only refunded the principal amount for a certain period and had not paid the interest at the rate of 12% per annum as directed by the Supreme Court.
• The appellant highlighted that the respondents had paid interest at a rate of 3.5% per annum, which was the prevailing bank rate, instead of the 12% per annum as directed by the Supreme Court.
• The appellant pointed out that the High Court had previously ordered the refund of the excess amount with interest, and the respondents had failed to comply with these orders.
• The appellant submitted that the respondents were liable to refund the excess amount for the period between 1st January, 2007 to March, 2008, which was still pending.
• The appellant argued that the rejection of SLP(Civil) No. 21019 of 2010 by the Supreme Court had concluded the matter, and the respondents were bound to comply with the orders.

Respondent’s Submissions:

• The respondents admitted that the Jharkhand High Court had taken a view in favor of the appellant.
• The respondents argued that similar claims had been raised in different High Courts, including the High Court of Calcutta, where an order of refund was passed in favor of the claimant company.
• The respondents submitted that the order of the Calcutta High Court had been challenged in SLP(Civil) No. 21888 of 2012, where the Supreme Court had granted a stay.
• The respondents contended that the learned Single Judge of the Jharkhand High Court was justified in rejecting the contempt application due to the pendency of the matter before the Supreme Court in the analogous matter.
• The respondents claimed to have refunded an amount of Rs. 30,80,022 to the appellant, which included interest for the period from 1st January, 2005 to 11th December, 2005.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issues addressed by the court were:

• Whether the appellant was entitled to a refund of the excess amount paid for coal, along with interest, as per previous court orders.
• Whether the respondents had complied with the orders of the High Court and the Supreme Court regarding the refund of the excess amount and the payment of interest.
• Whether the High Court was justified in dismissing the contempt case filed by the appellant.
• Whether the appellant was entitled to interest at 12% per annum on the refund amount for the period from 1st January, 2005 to 11th December, 2005, as directed by the Supreme Court in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. [(2006) 9 SCC 228].
• Whether the appellant was entitled to a refund of the excess amount paid for the period from 1st January, 2007 to March, 2008, with interest.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• Somal Pipes Pvt. Ltd. v. Coal India Ltd. & Ors.: The Court noted the statement made by the Solicitor General in this case regarding the refund of excess price.
• Ashoka Smokeless Coal Industries(P) Ltd. and Ors. [(2006) 9 SCC 228]: The Court relied heavily on this case, which directed a 12% per annum interest rate on refunds, and held that the same rate should be applied in the present case.
• Order dated 29th May, 2010 in Contempt Case (Civil) No. 247 of 2010: The Court acknowledged this order, which directed the refund of excess amount with interest, and noted that the respondents had failed to comply with it.
• Order dated 9th September, 2010 in SLP(Civil) No. 21019 of 2010: The Court noted that the rejection of this SLP had concluded the matter, and the respondents were bound to comply with the orders.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the need to ensure compliance with its own previous orders and those of the High Court. The Court emphasized that once an issue is settled by a judicial order, it must be followed faithfully. The Court was also influenced by the fact that the respondents had not provided a valid reason for not complying with the orders. The Court also took into account the principle of fairness and equity, ensuring that the appellant received the full amount of refund with the appropriate interest rate. The court noted that the respondents had failed to comply with the orders of the Jharkhand High Court as well as the Supreme Court.

Logical Reasoning

The Supreme Court rejected the respondents’ argument that the pendency of a similar matter in the Supreme Court arising from the Calcutta High Court justified the non-compliance. The Court emphasized that the issue between the parties in this case had already been concluded by the rejection of SLP(Civil) No. 21019 of 2010.

The Court noted that the respondents had failed to comply with the orders of the Jharkhand High Court and this Court. The Court also noted that the respondents had only paid interest at the bank rate of 3.5% per annum instead of the 12% per annum as directed in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. [(2006) 9 SCC 228].

The Supreme Court’s reasoning was based on the following points:

• The respondents had failed to comply with the orders of the High Court and the Supreme Court.
• The respondents had not provided a valid reason for non-compliance.
• The appellant was entitled to the refund with interest as per the directions of the Supreme Court in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. [(2006) 9 SCC 228].
• The issue between the parties had already been concluded by the rejection of SLP(Civil) No. 21019 of 2010.

The Court quoted the following from the judgment:

“Suffice it to say that the claim of the appellant for refund pertaining to the third period, i.e. 1st January, 2007 till March, 2008 stands concluded with the rejection of SLP(Civil) No. 21019 of 2010 vide order dated 9th September, 2010 passed by this Court (supra).”

“Regarding the issue of interest on the refund for the period running from 1st January, 2005 to 11th December, 2005, the learned Single Judge rejected the claim of the appellant herein holding the said demand to be exaggerated. While drawing such inference, the learned Single Judge completely ignored the judgment rendered by this Court in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. (supra) wherein a pertinent direction had been given to make the refund of the excess amount with interest @ 12% per annum.”

“Evidently thus, the respondents have failed to faithfully comply with the orders passed by the Jharkhand High Court as well as this Court.”

Key Takeaways

• Companies are entitled to refunds of excess payments made, along with interest, as per court orders.
• Judicial orders must be faithfully complied with, and non-compliance can lead to contempt proceedings.
• The Supreme Court’s directions regarding interest rates must be followed, and deviations will not be tolerated.
• Rejection of a Special Leave Petition (SLP) concludes the matter, and parties are bound to comply with the orders.
• The principle of fairness and equity will be upheld to ensure that parties receive the full compensation they are entitled to.

Directions

The Supreme Court directed that:

• The appellant shall be entitled to interest at 12% per annum on the refund amount for the period from 1st January, 2005 to 11th December, 2005. The 3.5% per annum interest already paid shall be deducted from the differential amount.
• The appellant shall receive a refund of the excess amount paid for the period between 1st January, 2007 till March, 2008, with interest at 12% per annum.
• The amount as directed above shall be paid to the appellant within two months, failing which the officers concerned shall be personally liable to pay the interest amount to the appellant.

Development of Law

The ratio decidendi of the case is that once a court has ordered a refund with a specific interest rate, that order must be complied with faithfully. The Supreme Court reinforced its previous position of 12% interest on refunds in cases of excess payments for coal, as established in Ashoka Smokeless Coal Industries(P) Ltd. and Ors. [(2006) 9 SCC 228]. This case clarifies that non-compliance with court orders, especially those involving financial obligations, will not be tolerated, and the courts will ensure that parties receive their due compensation.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s order. The court directed the respondents to refund the excess amount paid by the appellant for coal, along with interest at 12% per annum. This judgment reaffirms the importance of adhering to judicial orders and ensures that companies are fairly compensated for excess payments. The decision underscores the principle that court orders must be complied with, and any deviation will be addressed by the judiciary.