15 February 2025 - Legal Updates

1. Interest May Be Denied to Party Who Abused Judicial Process: Supreme Court

Case- M/s Tomorrowland Limited vs. Housing and Urban Development Corporation Limited and Another

Date of Order-February 13, 2025

Bench- Justice Surya Kant and Justice Ujjal Bhuyan

The Supreme Court recently ruled on the discretionary nature of awarding interest under Section 34 of the Civil Procedure Code (CPC) in commercial disputes, emphasizing that it may be denied if a party's conduct undermines judicial authority and breaches contractual obligations.

Key Facts:

Case Background: The ruling involved M/s Tomorrowland Limited and the Housing and Urban Development Corporation Limited (HUDCO) in a land allotment dispute.

Court Findings:

HUDCO was found to have breached its contractual obligations by failing to extend the lease to Tomorrowland, which invalidated its right to forfeit the amount paid by Tomorrowland.

The Court ordered HUDCO to refund the forfeited amount to Tomorrowland.

Denial of Interest:

The Supreme Court denied interest on the refunded amount due to the appellant's misconduct, which included:

1. Engaging in forum shopping by withdrawing a suit from the High Court to file another in a lower court.
2. Failing to comply with a court order requiring a deposit of ₹15 crores.

The Court stated that while interest is typically granted in commercial disputes, it is a discretionary relief under Section 34 of the CPC.

Judicial Commentary:

The Court highlighted that interest serves to compensate for the time value of money withheld during legal proceedings, reflecting fairness in commercial transactions.

However, it justified a deviation from this norm due to the appellant's attempts to undermine judicial integrity and exploit procedural mechanisms for personal gain.

Refund Order:

HUDCO was directed to refund the principal sum within three months, with a 6% annual interest applicable only if there was a delay in payment.

This ruling underscores the importance of maintaining integrity in judicial proceedings and illustrates that misconduct can lead to significant consequences, including the denial of financial remedies typically available in commercial disputes.

2. Principle of ‘Functus Officio’ Does Not Apply to Executive Rule-Making Authority: Supreme Court

Case- P. Rammohan Rao vs. K. Srinivas

Date of Order- February 13, 2025

Bench- Justice P.S. Narsimha and Justice Sandeep Mehta

The Supreme Court ruled that the principle of functus officio does not apply to rule-making authorities but is relevant to judicial and quasi-judicial bodies. The Court emphasized that the rule-making power of the legislature cannot be limited by this principle.

Key Facts:

Context of the Ruling: The case involved appellants who were appointed as Assistant Executive Engineers (AEEs) on a temporary basis after being transferredfrom a Corporation. After nearly 13 years of service, their demand for seniority was denied by the State.

Legal Background: The appellants filed several representations, leading the State to partially modify its previous memorandum. However, this modification was challenged in the High Court, which quashed it, prompting the appellants to appeal to the Supreme Court.

Supreme Court's Findings:

The Court stated that applying functus officio to rule-making authorities would effectively paralyze executive power, preventing necessary policy changes.

It referenced previous judgments, including Orissa Administrative Tribunal Bar Association v. Union of India, asserting that if functus officio were applied to state rule-making power, it would cripple governance.

The Court disagreed with the High Court's reasoning that the State Government became functus officio after issuing an initial memorandum and could not issue a revised one.

Judicial Review and Hearing:

The Supreme Court asserted that while administrative actions affecting citizens' rights are subject to judicial review, requiring prior hearings for every affected individual during rule-making is flawed.

The Court warned that imposing such requirements would create procedural obstacles, hindering efficient governance and policy implementation.

Outcome: The Supreme Court set aside the High Court's judgment, allowing the appeal and affirming that the period of officiating service for the appellants should be counted as regular service for seniority purposes.

This ruling underscores the balance between administrative authority and judicial oversight, reinforcing the need for effective governance without unnecessary procedural impediments.

3. Adoption of Hindu Child in Hindu Family Can be Done Without Registered Deed: Punjab & Haryana High Court

Case- Union of India and Another vs. Sukhpreet Kaur and Another

Date of Order- February 13, 2025

Bench- Justice Sanjeev Prakash Sharma and Justice Meenakshi Mehta

The Punjab & Haryana High Court ruled on Thursday that under the Hindu Adoptions and Maintenance Act, 1956, a Hindu child can be adopted by a Hindu family even without a registered deed. The ruling was made in a case involving the compassionate appointment in Railways of an adoptive daughter, whose application was denied because her Class 10th certificate listed her biological parents instead of her adoptive parents.

Key points of the ruling:

Observation: The court observed that the Hindu Adoptions and Maintenance Act, 1956 provides the methods in which a Hindu child can be adopted in a Hindu family, with or without a registered deed. The act of giving and taking in adoption must be performed by both the biological and adoptive parents and can be documented in writing later.

Government Argument: The Union Government challenged the Central Administrative Tribunal's (CAT) order to consider the deceased employee's adopted daughter for appointment on compassionate grounds, arguing that the adoption deed registered in 2017, when the adoptee was an adult, was invalid.

Court's Response: The court noted that there was no registered adoption deed when Sukhpreet Kaur was in Class 10th, which explained why her biological parents were listed on her certificate. The court also stated that school boards would only recognize biological parents unless a registered adoption deed is presented.

Section 16 of the Act: Justice Sharma highlighted that once an adoption deed is registered, it would be presumed that a valid adoption has occurred, with the right to rebut this presumption. Such a presumption is provided under Section 16 of the Hindu Adoptions and Maintenance Act.

Decision: The court dismissed the Union's plea, stating that compassionate appointment cannot be denied solely because the Class 10th certificate lacks the adoptive daughter's name. The Hindu Adoptions and Maintenance Act, 1956 does not mandate that an adoption deed must be registered for the adoption to be valid.