Tomorrowland v. HUDCO: interest is discretionary, and forum shopping can cost it

On 13 February 2025, a two-judge bench held that the award of interest under Section 34 CPC is an equitable, discretionary relief and denied interest on a refunded principal because the claimant had engaged in forum shopping and procedural abuse.

Valkya Editorial· Legal Intelligence·14 June 2026·8 min read

Court: Supreme Court of India
Citation: 2025 INSC 207
Bench: Surya Kant, J., Ujjal Bhuyan, J.
Decided: 13 February 2025

Provisions discussed

Code of Civil Procedure 1908 s.34Indian Contract Act 1872 s.74

The facts in brief

The dispute arose out of a land-allotment and lease arrangement between Tomorrowland Ltd. and the Housing and Urban Development Corporation (HUDCO). Tomorrowland had paid amounts to HUDCO in connection with the allotment. The arrangement carried reciprocal obligations: HUDCO was, in turn, required to extend the lease in Tomorrowland's favour. The relationship broke down. HUDCO purported to forfeit the amounts Tomorrowland had paid; Tomorrowland sought the return of its money.

The legal questions were two. First, was HUDCO entitled to forfeit the amounts paid, or did its own failure to perform its reciprocal obligation — extending the lease — disentitle it from forfeiture? Second, if Tomorrowland was entitled to a refund of the principal, was it also entitled to interest on that principal for the period its money had been withheld?

The appeal came before a two-judge bench of Justices Surya Kant and Ujjal Bhuyan, which delivered judgment on 13 February 2025. The case is, importantly, a commercial-contract dispute decided under Section 34 of the Code of Civil Procedure — the general provision on interest in civil suits — and not an arbitration matter governed by Section 31(7) of the Arbitration and Conciliation Act. The distinction is not pedantic: the discretionary, equity-laden character of the interest power the Court applied is rooted in the CPC framework for ordinary civil litigation.

The two questions

On the first question, the Court held in Tomorrowland's favour. Forfeiture of amounts paid under a contract is not an unconditional right of the party holding the money; it is conditioned on that party's own performance. HUDCO had breached its reciprocal contractual obligation by failing to extend the lease to Tomorrowland. A party in breach of its own correlative duty cannot turn around and forfeit what the counterparty has paid. HUDCO was therefore disentitled from forfeiting the amount, and the Court ordered the refund of the forfeited principal.

The point about reciprocity is worth dwelling on, because it is the doctrinal ground of the refund. A contract that imposes correlative obligations on both sides is not performed by one party insisting on its rights while ignoring its own duties. Where the party seeking to forfeit has itself failed to perform the obligation that was the consideration for the other side's payment, the forfeiture loses its footing. HUDCO had received Tomorrowland's money on the understanding that it would extend the lease; having failed to extend the lease, it could not keep the money as forfeited. The breach of the reciprocal obligation thus did double work — it both defeated the forfeiture and entitled Tomorrowland to the return of its principal.

That should, on an ordinary reckoning, have carried interest with it. Money wrongfully withheld for a period of years normally attracts interest as compensation for the deprivation of its use. But the Court declined to award interest, and the reasoning on that second question is the heart of the case.

Interest as a discretionary, equitable relief

Section 34 of the Code of Civil Procedure empowers a court, in a decree for the payment of money, to award interest at such rate as it deems reasonable on the principal sum, for the period from the date of the suit to the date of the decree (pendente lite) and from the date of the decree to the date of payment (post-decree), in addition to any interest accrued before suit. The language — "as the Court deems reasonable" — is the language of discretion, and the Court emphasised that the discretion is genuine, not formulaic.

Award of interest is a discretionary exercise steeped in equitable considerations.

— Surya Kant, J.

The point is that interest under Section 34 is not a mechanical entitlement that follows automatically from a money decree. It is an equitable relief, and equity looks to the conduct of the party seeking it. While interest pendente lite and post-decree is ordinarily granted in commercial disputes — because parties who are kept out of their money are normally entitled to be compensated for the delay — the ordinary course is not an invariable rule. The court retains the discretion to withhold interest where granting it would reward conduct that has abused the very process through which the relief is sought.

On the facts, the Court found that the appellant had engaged in forum shopping and procedural abuse. A litigant who manoeuvres between forums, multiplies proceedings, or attempts to exploit procedural mechanisms for advantage undermines the integrity of the judicial process. Where a successful party has behaved in that way, the equity that ordinarily supports an award of interest is forfeited. The Court therefore denied interest on the refunded principal, directing HUDCO to refund the principal within three months, with interest at 6% per annum applicable only in the event of delayed payment beyond that window.

The structure of the order is telling. Interest was not awarded as compensation for the past withholding of the money — the period during which Tomorrowland's conduct had abused the process. It was held in reserve only as a sanction against HUDCO's future non-compliance: if HUDCO failed to refund within three months, interest would run to penalise that delay. The interest lever thus pointed forward, as an enforcement spur, rather than backward, as compensation the appellant had disentitled itself to claim.

Forum shopping as a conduct sanction

What makes the decision sharp is that the appellant won. It established HUDCO's breach, defeated the forfeiture, and obtained a refund. On the merits, it was the successful party. And yet it left with less than a victorious litigant would ordinarily expect, because the Court used the interest discretion as a sanction for the manner in which the litigation had been conducted.

This is a rare and instructive use of the interest power. Courts more commonly police abuse of process through costs orders, or through the dismissal of vexatious proceedings, or by declining discretionary remedies altogether. Here the Court deployed the interest discretion itself as the disciplinary instrument: a successful party that abuses the process may keep its substantive relief but lose the interest that would otherwise sweeten it.

The equity at work is intelligible once the function of interest is kept in view. Interest pendente lite compensates a claimant for being kept out of its money during the litigation. But the litigation here was prolonged, and the forums multiplied, in part because of the claimant's own manoeuvring. To award interest for that period would be to compensate the claimant for a delay it had helped to manufacture — to let it profit, in interest, from the very abuse the Court was condemning. Equity does not assist a party to be paid for the consequences of its own misconduct. Withholding the interest aligns the relief with the conduct: the claimant recovers what is rightfully its own, the principal, but not the time-value premium that its abuse of the process had inflated.

The characterisation of the conduct was uncompromising. The appellant was found to have sought to undermine the authority and integrity of the judicial process and to have attempted to exploit procedural mechanisms for personal gain. Forum shopping — the practice of choosing, abandoning and re-choosing forums to manufacture a favourable outcome — is treated not as clever advocacy but as an abuse that the court is entitled to mark in the relief it grants.

Why the decision matters

Tomorrowland v. HUDCO supplies two propositions that practitioners will find useful in tandem. First, it is a clean, citable statement that interest under Section 34 CPC is an equitable, discretionary relief — not an automatic incident of a money decree — and that the discretion is real enough to be exercised against a claimant on grounds of conduct. Second, and more pointedly, it establishes that forum shopping and procedural abuse can cost a party its interest even where it succeeds on the merits.

For commercial litigants, the practical lesson is that conduct in the proceedings is not cost-free. A party may win the substantive dispute and still pay a price — in denied interest — for how it fought. For forfeiture and contract litigation specifically, the decision reaffirms that a party in breach of its reciprocal obligations cannot forfeit what the counterparty has paid, while warning the counterparty that the fruits of victory can be trimmed by its own misconduct. And the case is a careful reminder, for drafters and advisers alike, that the interest power in an ordinary civil suit lives in Section 34 of the CPC and carries its own discretionary logic, distinct from the arbitral interest regime under the Arbitration Act.