Mr. Joshi, you say the contract was unconscionable. But your client is a commercial entity, not an individual. It participated in an open auction and bid voluntarily. How can it now claim unequal bargaining power?

My Lord, while my client is a commercial entity, the contract was a standard statutory form prescribed under the Rules. There was no room for negotiation. My client had to accept Clause 19 as a condition for obtaining the contract. The State is a monopolist in the mining sector; it dictates the terms. This is a classic case of unequal bargaining power, and the principles laid down in Brojo Nath Ganguly apply even to commercial entities when they are faced with take-it-or-leave-it contracts. Moreover, the clause is not merely one-sided; it is unconscionable because it allows the State to retain a large sum without any compensation while charging penal interest on the contractor.

The courts below found that the termination was due to your client's defaults, not the State's failure. Your client did not submit monthly returns and did not report obstructions. How can you now say the contract was frustrated?

My Lord, my client did report the obstruction, though perhaps not in the precise form required. The State was aware of the difficulties faced by my client. Clause 27 required the State to procure the land for the contractor. The State failed to do so. My client was prevented from extracting sand by landowners. The State did not take any action to remove those obstructions. The defaults were a consequence of the State's failure. The courts below erred in placing the entire blame on my client. The contract was frustrated, and the termination was unjust.

You ask for interest from the date of deposit. But Clause 19 expressly says the security deposit shall carry no interest. How do you get around that express term?

My Lord, Clause 19 is unsustainable in law and against public policy. This Court in Brojo Nath Ganguly held that contracts which are unconscionable and one-sided can be set aside. The State cannot enforce a clause that is manifestly unfair. Moreover, Clause 19 must be read as a whole. It says the deposit shall carry no interest AND shall be refunded within three months. The State retained the deposit for years, far beyond three months, without any justification. Even if the 'no interest' stipulation is valid during the contract, it cannot justify retention of the money in perpetuity. At the very least, interest should be paid from the date of termination or from the expiry of the three-month period.

The State says the deposit was adjusted against your client's outstanding dues. If your client owed money to the State, why should the State pay interest on the deposit when it was appropriated towards those dues?

My Lord, the State cannot use my client's own money to pay my client's dues and then claim that no interest is payable. The deposit was my client's money. The State held it for years without any compensation. The dues arose because my client was prevented from extracting sand due to the State's failure. In any event, even if the deposit was adjusted against dues, the State had the use of that money for years. The State was enriched at my client's expense. Equity demands that the State pay interest on the deposit from the date it was deposited or at least from the date the State became unjustly enriched.

For RespondentCommercial Premium

Clause 19 Unconscionable State Must Pay Interest — (2026) INSC 678

Clause 19 is unconscionable and against public policy because it allows the State to retain the contractor's security deposit without any interest while charging 24% interest on delayed payments.

State of Haryana & Ors. v. M/s. Jai Durgaa Finvest P. Ltd. — (2026) INSC 678

Core Argument

Clause 19 is unconscionable and against public policy because it allows the State to retain the contractor's security deposit without any interest while charging 24% interest on delayed payments. The State's failure to procure the land frustrated the contract, and the security deposit should carry interest from the date of deposit.

Key Precedents

Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986) 3 SCC 156 — Held that unconscionable and one-sided contracts can be set aside.
M/s. Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay (1989) 3 SCC 293 — Held that the State cannot act arbitrarily in contractual matters.

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