Mr. Amritanshu, you say the contract is binding. But Clause 19 says no interest on the security deposit, while Clause 2 charges 24% interest on delayed payment. Isn't this one-sided and unconscionable? Shouldn't there be some reciprocity?

My Lord, the clauses operate in different fields. Clause 2 is a liquidated damages provision for the contractor's default in paying the contract money on time. Clause 19 is a performance guarantee held by the State. The State does not earn any interest on these deposits, which are kept in non-interest-bearing treasury heads. There is no principle of law that requires reciprocity in every clause of a contract. The parties voluntarily agreed to these terms with open eyes, and the Respondent was a commercial entity that calculated its bid accordingly. This Court has repeatedly held that courts will not rewrite commercial contracts.

But the Respondent says the contract was frustrated because the State failed to procure the land under Clause 27. The High Court found the termination was due to the Respondent's default. Are you saying that finding is correct?

My Lord, the courts below have consistently found that the Respondent failed to prove that the State failed to comply with its obligations. The Respondent did not carry out mining on its own, did not submit monthly returns, and did not report any obstruction by landowners until much later. The termination was due to the Respondent's failure to pay monthly instalments. This finding has attained finality, as the Respondent's earlier SLP against the High Court's judgment was dismissed by this Court. We are not re-agitating that issue; the only issue before this Court is whether the security deposit carries interest.

You say Clause 19 is valid. But the High Court declared it 'unsustainable in law'. What is your response to that? Is a clause that says 'no interest' on a large deposit of Rs. 37 lakhs for several years really sustainable in law?

My Lord, there is nothing unlawful or immoral about a clause that says security deposit will carry no interest. Such clauses are standard in government contracts. The deposit is not a loan to the State; it is a performance guarantee. The Respondent voluntarily deposited the amount knowing it would not earn interest. If the Respondent found the term unacceptable, it could have chosen not to bid. Having bid and accepted the contract, it cannot later turn around and assail the clause merely because the contract proved to be unprofitable. This Court has consistently held that parties are bound by the terms they have agreed to.

Assuming Clause 19 is valid, what about the period after termination? The contract ended on 09.03.2000. The State retained the deposit for several years. Even if no interest was payable during the contract, is it fair that the State can retain the deposit indefinitely without paying interest?

My Lord, the State did not retain the deposit indefinitely. Under Clause 19, the deposit is to be refunded within three months from the date of expiry or sooner determination. In this case, the deposit was adjusted against the outstanding dues owed by the Respondent. The Respondent was a defaulter. The State was entitled to appropriate the deposit towards the amounts due. The question of interest during the period of retention arises only if the State retained the deposit without any justification. Here, the adjustment was in accordance with the contract. Therefore, no interest is payable even for the post-termination period.

For PetitionerCommercial Premium

Clause 19 Valid Binding Contract Term No Interest — (2026) INSC 678

Clause 19 of Form-L, which stipulates that the security deposit shall carry no interest, is a valid and binding contractual term voluntarily accepted by the Respondent.

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

Core Argument

Clause 19 of Form-L, which stipulates that the security deposit shall carry no interest, is a valid and binding contractual term voluntarily accepted by the Respondent. Courts cannot rewrite contracts or substitute their own terms merely because a stipulation appears onerous.

Key Precedents

National Highways Authority of India v. Ganga Enterprises (2003) 7 SCC 410 — Held that agreed forfeiture/security stipulations are to be enforced according to the terms of the contract.
Shri Hanuman Cotton Mills v. Tata Aircraft Ltd. (1969) 3 SCC 522 — Held that parties are bound by unambiguous terms of contract.
Venkataraman Krishnamurthy v. Lodha Crown Buildmart Pvt. Ltd. (2024) 4 SCC 230 — Held courts cannot make a new contract for the parties.

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