In a recent legal case, the court analyzed the liability for interest on license fees during a period of stay imposed by the High Court. The focus was on interest payments during legal proceedings and the obligation of the respondent to pay the accrued interest. The court’s thorough legal analysis sheds light on the complexities of interest payments in such scenarios, providing valuable insights into the application of relevant laws and principles.
Facts
- Respondent filed for a license for a country liquor shop in Mohammadi No.1, Lakhimpur Kheri as per the 2002-03 Excise Policy.
- Department issued notices for license fee payment, respondent challenged but was unsuccessful.
- License was cancelled on 08.03.2003 due to non-payment of fees.
- Total due amount after cancelation was found to be Rs.6,43,562/- to be paid by the respondent.
- A writ petition was filed against the cancellation, leading to a High Court order for the respondent to file an appeal.
- Respondent failed to pay interest to the Department along with the fees, despite paying the due amount in 2017.
- Appeals and revisions filed by the respondent were dismissed, and the Department was restrained from collecting license fees due to a Commissioner’s order.
- An advertisement for the settlement of excise shops for the year 2002-03 was issued under the U.P. Excise Rules.
- Various notices were issued to the respondent regarding the outstanding balance of license fees.
- The writ petition was dismissed by the High Court for non-prosecution on 21.12.2015.
- The High Court stayed the recovery proceedings on 01.08.2003 subject to a deposit of Rs.2,75,000/- by the respondent before the District Excise Officer.
- The order dated 21.12.2015 was recalled by the High Court on 19.01.2018.
- On 10.05.2018, the High Court passed an order stating that the demand of Rs. 10,08,210.51 towards interest was not justified as the respondent was under the protection of an interim order.
- The appellants argue that the respondent was liable to pay the license fee for the shop for the year 2002-03 as per the settlement terms but failed to pay the fee from January 2003 to March 2003.
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Issue
- Question is whether the respondent is liable to pay interest during the period of stay on recovery of license fee under Section 36 of the Act by the High Court.
- Interest payment during the period of stay and after the dismissal of the writ petition is to be considered.
- The contention is focused on the liability of the respondent to pay interest during the aforementioned periods.
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Arguments
- Argument made by the petitioner states that the respondent should have paid the interest accumulated on the license fee after the writ petition was dismissed.
- Petitioner contested that the High Court’s denial of interest, citing protection from an interim court order, was unjustified.
- Learned counsel for the respondent argued that the High Court had prohibited the recovery of the license fee by the appellants through an interim order.
- The respondent made the payment for the license fee in the year 2017.
- Argued that the appellants are not justified in demanding interest for the period when the High Court granted a stay on the recovery of the license fee.
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Analysis
- Section 38-A of the Act specifies the payment of interest on arrears of excise revenue.
- Interest is payable if excise revenue is not paid within three months of becoming payable.
- The interest rate should not exceed twenty-four per cent per annum, or until a higher rate is prescribed, it will be eighteen per cent per annum.
- In this case, the respondent was liable to pay license fee for the year 2002-03 even upon surrender of the license.
- The principle of restitution entitles the successful party to be restored back to the position it would hold if there had been no adverse order/judgment.
- The High Court upheld the demand for additional charges/interest on outstanding amounts from the date of tariff revision.
- An interim order of stay granted pending a legal proceeding comes to an end with the dismissal of the substantive proceeding.
- Any unfair consequence resulting from the court’s order prejudicing a party should be corrected through restitution.
- The party who has gained from an interim court order must make restitution to undo the effects of that order.
- An order of stay granted during the pendency of a writ petition or suit ends with the dismissal of the substantive proceedings.
- The court is obligated to place the parties in the same position they would have been but for the interim order.
- There is a difference between stay of operation of an order and quashing of an order.
- Restitution principle in Section 144 of the CPC is applicable, even if interest accrued during the pendency of a case under stay.
- An interim order passed by the court merges into a final decision.
- Order 39 of the CPC provides for temporary injunction at the risk of the party obtaining it.
- The maxim actus curiae neminem gravabit applies, meaning an act of the court should not prejudice any party.
- Section 144 of the CPC covers not only decrees but also orders equivalent to decrees.
- Interest for a period under stay remains recoverable once the stay is lifted or the decision is reversed.
- The duty of the Court is to put parties in the same position as they would have been without the interim order unless specified otherwise.
- High Court’s error in holding that the respondent wasn’t liable to pay interest due to the interim stay order.
- The respondent was unsuccessful in challenging the notice demanding balance license fee.
Decision
- The respondent filed a writ petition to stay the recovery of monthly license fee.
- The High Court allowed the stay on the condition of depositing Rs.2,75,000.
- The respondent later deposited the remaining amount of Rs.3,68,562 towards license fee.
- However, the respondent did not pay the interest due to the Department.
- The appellants issued a notice for the interest amount of Rs.10,08,210.51.
- The respondent is permitted to apply under a one-time settlement scheme for interest dues within eight weeks.
- If the application is filed, the authority must consider it as per the law.
- The High Court dismissed the writ petition for non-prosecution.
- Upon dismissal of the proceedings or vacation of the interim order, interest must be paid on the amount withheld.
- The appeal was allowed, setting aside the High Court’s order.
- The respondent seeks to avail the one-time settlement scheme for interest payments as per the counsel’s submission.
Case Title: THE STATE OF UTTAR PRADESH THROUGH SECRETARY Vs. PREM CHOPRA (2022 INSC 346)
Case Number: C.A. No.-002417-002417 / 2022
