SUPREME COURT OF INDIA
Ghaziabad Development Authority
Vs
Balbir Singh
C.A. No. 7173 of 2002
(S. N.Variava and H.K.Sema)
03/12/2004
JUDGMENT
ORDER
1. In this batch of matters the question is whether grant of interest at the
rate of 18% per annum by the Consumer Forums in all cases is justifiable. As
facts are varying, at this stage, this Court is only dealing with the question
of law. Thereafter this Court shall take up each case separately.
2. The National Consumer Disputes Redressal Commission considered a bunch of
matters, the lead matter being the case of Haryana Urban Development Authority
vs. Darsh Kumar 2001 CCC 455(NS). The Commission held, in those cases, that in
cases of deficiency of service by development authorities like HUDA and GDA,
interest must be awarded at the rate of 18% per annum and that this would take
into consideration the escalation in the cost of construction as well.'
3. Pursuant to this Judgment the National Commission has been disposing of all
subsequent matters with a one paragraph order which, for all practical
purposes, reads as under:-
"We have already taken a view in the .case of Haryana Urban Development
Authority vs. Darsh Kumar 2001 CCC 455(NS) (Revision Petition No... 1197 of
1998), where we >have upheld the award of interest at the rate of 18% per
annum. We have provided for certain period during which the interest would not
run. The impugned judgment is modified only to that extent. This Revision
Petition is disposed of in terms of our judgment in the case of HUDA vs. Darsh
Kumar 2001 CCC 455(NS)". *
4. It has been shown to us that the facts are varying and different. Whilst
facts of all cases cannot be set out by way of illustration it must be stated
that in some cases even though monies had been paid and allotments had been
made of flats/plots, the scheme itself got cancelled for some - reason or the
other. Possession was thus refused to be delivered of the flats/plots allotted
to the allottees. In some cases, at a much later date, possession of some other
flat/plot was offered at an increased rate. In some cases possession was
offered but not taken by the party. In some cases even though the scheme was
not cancelled and there was no refusal to deliver possession, yet possession
was not delivered for a number of years even after monies had been received. In
some cases the construction was of sub-standard quality or it was incomplete.
In some of the cases the authority has demanded extra amounts from the party.
In some cases the party had not paid the extra amounts whilst in some cases
they had paid those amounts. The question, therefore, was of refund of those
amounts wrongly collected. In some cases allotments were made and possession
offered of flats/ land which was encumbered or occupied by some other party. In
some cases the party had asked for refund of amounts paid.
5. Irrespective of the type of case, irrespective of the amount of delay, the
National Commission has been granting/ confirming interest at the rate of 18%
per annum without even going into the facts of the case. It must be mentioned
that in some of the matters before us it has been pointed out that the District
and the State Forums had granted interest at a lower rate. Appeals had been
filed only by the authority. Yet the National Commission has, in the Appeal
filed by the authority, increased the rate of interest to 18% per annum.
6. The learned Attorney General submitted that the liability to pay interest
only arises if there is any default or omission on the part of the Body which
caused damage or prejudice to the allottee of the flat / plot. This submission
requires to be accepted. However, in the context of the Consumer Protection Act
the principles laid down in the case ofLucknow Development Authority vs. M.K.
Gupta reported in' 1994(1) CCC 278 (NS) : have to be kept in mind. In
this case the question was whether a Development Authority rendered service to
bring it within the purview of the Consumer Protection Act. It has been held
that the Development Authority is rendering service. It has been also held as
follows:
"8. Having examined the wide reach of the Act and jurisdiction of the
Commission to entertain a complaint not only against business of trading
activity but even against service rendered by statutory and public authorities
the stage is now set out determining if the Commission in exercise of its
jurisdiction under the Act could award compensation and if such compensation
could be for harassment and agony to a consumer. Both these aspects specially
the latter are of vital significance in the present day context. Still more
important issue is the liability of payments. That is, should the society or
the tax payer be burdened for oppressive and capricious act of the public
officers or it be paid by those responsible for it. The administrative law of
accountability of public authorities for their arbitrary and even ultra vires
actions has taken many strides. It is now accepted both by this Court and
English Courts that the State is liable to compensate for loss or injury
suffered by a citizen due to arbitrary actions of its employees. In State of
Gujarat vs. Memon Mahomed Haji Hasam (AIR 1967 SC 1885: (1967) 3 SCR 938) the
order of the High Court directing payment of compensation for disposal of
seized vehicles without waiting for the outcome of decision in appeal was
upheld both on principle of bailee's legal obligation to preserve the property
intact and also the obligation to take reasonable care of it.. to return it in
the same condition in which it was seized' and also because the Government was,
'bound to return the said property by reason of its statutory obligation or to
pay its value if it had disabled itself from returning it either by its own act
or by act of its agents and servants'. It was extended further even to bona
fide action of the authorities if it was contrary to law in Lala Bishambar Nath
vs. Agra Nagar Mahapalika, Agra (1973) 1 SCC 788: AIR 1973 SC 1289). It was
held that where the authorities could not have taken any action against the
dealer and their order was invalid, 'it is immaterial that the respondents had
acted bona fide and in the interest of preservation of public health. Their
motive may be good but their orders are illegal. They would accordingly be
liable for any loss caused to the appellants by their action'. The theoretical
concept that King can do no wrong has been abandoned in England itself and the
State is now held responsible for tortuous act of its servants. The First Law
Commission constituted after coming into force of the Constitution on liability
of the State in tort, observed that the old distinction between sovereign and
non-sovereign functions should no longer be invoked to determine liability of
the State. Friemann observed:
"It is now increasingly necessary to abandon the lingering fiction of a
legally indivisible State and of a feudal conception of the Crown, and to
substitute for it the principle of legal liability where the State, either
directly or through incorporated public authorities, engages in activities of a
commercial, industrial or managerial character. The proper test is not an
impracticable distinction between governmental and non-governmental function,
but the nature and form of the activity in question."
Even Kasturi Lal Ralia Ram Jain vs. State of U.P. (AIR 1965 SC 1039 : (1965) 1
SCR 375 : (1966) 2 LLJ 583) did not provide any immunity for tortuous acts or
public servants committed in discharge of statutory function if it was not
referable to sovereign power. Since house construction or for that matter any
service hired by a consumer or facility availed by him is not a sovereign
fimction of the State the ratio of Kasturi Lal could not stand in way of the
Commission awarding compensation. We respectfully agree with Mathew, J., in
Shyam Sunder vs. State ofRajasthan (1974) 1 SCC 690 that it is not necessary,
'to consider whether there is any rational dividing line between the so-called
sovereign and proprietary or commercial functions for determining the liability
of the State' (SCC P. 695, para 20). In any case the law has always maintained
that the public authorities who are entrusted with statutory function cannot
act negligently. As far back as 1878 the law was succinctly explained in Geddis
vs. Proprietors of Bann Reservoir (1878) 3 AC 430 thus:
"I take it, without citing cases, that it is now thoroughly well
established that no action will lie for doing that which the Legislature has
authorised, if it be done without negligence, although it does occasion damage,
to anyone; but an action does lie for doing what the Legislature has
authorised, if it be done negligently."
Under our Constitution sovereignty vests in the people. Every limb of the
constitutional machinery is obliged to be people oriented. No functionary in
exercise of statutory power can claim immunity, except to the extent protected
by the statute itself. Public authorities acting in violation of constitutional
or statutory provisions oppressively are accountable for their behaviour before
authorities created under the statute like the commission or the courts
entrusted with responsibility of maintaining the rule of law. Each hierarchy in
the Act is empowered to entertain a complaint by the consumer for value of the
goods or services and compensation. The word 'compensation' is again of very
wide connotation. It has not been defined in the Act. According to dictionary
it means, 'compensating or being compensated; thing given as recompense;. In
legal sense it may constitute actual loss or expected loss and may extend to
physical mental or even emotional suffering, insult or injury or loss.
Therefore, when the Commission has been vested with the jurisdiction to award
value of goods or services and compensation it has to be construed widely
enabling the Commission to determine compensation for any loss or damage
suffered by a consumer which in law is otherwise included in wide meaning of
compensation. The provision in our opinion enables a consumer to claim and
empowers the Commission to redress any injustice done to him. Any other
construction would defeat the very purpose of the Act. The Commission or the
Forum in the Act is thus entitled to award not only value of the goods or
services but also to compensate a consumer for injustice suffered by him."
*
This Court then went on to hold as follows:
"10. Who should pay the amount determined by the Commission for harassment
and agony, the statutory authority or should it be realised from those who were
responsible for it? Compensation as explained includes both the just equivalent
for loss of goods or services and also for sufferance of injustice. For
instance in Civil Appeal No.... of 1993 arising out of SLP(C) No. 659 of 1991
the Commission directed the Bangalore Development Authority to pay Rs. 2445 to
the consumer for the expenses incurred by him in getting the lease-cum-sale
agreement registered as it was additional expenditure for alternative site
allotted to him. No misfeasance was found. The moment the authority came to
know of the mistake committed by it, it took immediate action by allotting
alternative site to the respondent. It was compensation for exact loss suffered
by the respondent. It arose in due discharge of duties. "For such acts or
omissions the loss suffered has to be made good by the authority itself. But
when the sufferance is due to mala fide or oppressive or capricious acts etc.
of a public servant, then the nature of liability changes. The Commission under
the Act could determine such amount if in its opinion the consumer suffered
injury due to what is called misfeasance of the officers by the English Courts.
Even in England where award of exemplary or aggravated damages for insult etc.
to a person has now been held to be punitive, exception has been carved out if
the injury is due to, 'oppressive, arbitrary or unconstitutional action by
servants of the 'Government' (S almond and Heuston on the Law 'of Torts).
Misfesance in public office is explained by Wade in his book on Administrative
Law thus:
"Even where there is no ministerial duty as above, and even where no
recognised tort such as trespass, nuisance, or negligence is committed, public
authorities or officers may be liable in damages for malicious, deliberate or
injurious wrong- doing. There is thus a tort which has been called misfesance
in public office, and which includes malacious abuse of power, deliberate
mal-administration, and perhaps also other unlawful acts causing injury".
(P.777).
The jurisdiction and power of the courts to indemnify a citizen for injury
suffered due to abuse of power by public authorities is founded as observed by
Lord Hailsham in Cassell & Co. Ltd. vs. Broome (1972 AC 1027: (1972) 1 All
ER 801) on the principle that, 'an award of exemplary damages can serve a
useful purpose in vindicating the strength of law'. An ordinary citizen or a
common man is hardly equipped to match the might of the State or its
instrumentalities. That is provided by the rule of law. It acts as a check on
arbitrary, and capricious exercise of power. In Rookes vs. Barnard (1964 AC
1129: (1964) 1 All ER 367, 410) it was observed by Lord Devlin, 'the servants
of the governments are also the servants of the people and the use of their
power must always be subordinate to their duty of service'. A public
functionary if he acts maliciously or oppressively and the exercise of powers
results in harassment and agony then it is not an exercise of power but its
abuse. No law provides protection against it. He who is responsible for it must
suffer it. Compensation or damage as explained earlier may arise even when the
officer discharges his duty honestly and bona fide. But when it arises due to
arbitrary or capricious behaviour then it loses its individual character and
assumes social significance. Harassment of a common man by public authorities
is socially abhorring and legally impermissible. It may harm him personally but
the injury to society is far more grievous. Crime and corruption thrive and
prosper in the society due to lack of public resistance. Nothing is more
damaging than the feeling of helplessness. An ordinary citizen instead of
complaining and fighting succumbs to the pressure of undesirable functioning in
offices instead of standing against it. Therefore the award of compensation for
harassment by public authorities not only compensates the individuals ,
satisfies him personally but helps in curing social evil. It may result in
improving the work culture and help in changing the outlook. Wade in his book
Administrative Law has observed that it is to the credit of public authorities
that there are simply few reported English decisions on this form of
malpractice, namely, misfeasance in public.offices which includes malicious use
of power, deliberate mal- administration and perhaps also other unlawful acts
causing injury. One of the reasons for this appears to be development of law
which apart, from other factors succeeded in keeping a salutary check on the
functioning in the government or semi- government offices by holding the
officers personally responsible for their capricious or even ultra vires action
resulting in injury or loss to a citizen by awarding damages against them.
Various decisions rendered from time to time have been referred to by Wade on
Misfeasance by Public Authorities. We shall refer to some of them to
demonstrate how necessary it is for our society. In Ashby vs. White (1703) 2
Ld. Raym 938 the House of Lords invoked the principle of ubi jus ibi remedium
in favour of an elector who was wrongfully prevented from voting and decreed
the claim of damages. The ratio of this decision has been applied and extended
by English Courts in various situations. In Roncarelli vs. Duplesis, (1959) 16
DLR 2nd 689 the Supreme Court of Canada awarded damages against the Prime
Minister of Quebec personally for directing the cancellation of a
restaurant-owner's liquor licence solely because the licensee provided bail on
many occasions for fellow members of the sect of Jehovah's Witnesses, which was
then unpopular with the authorities. It was observed that, 'what could be more
malicious than to punish this licensee for having done what he had an absolute
right to do in a matter utterly irrelevant to the Alcoholic Liquor Act? Malice
in the proper - sense is simply acting for a reason and purpose knowingly
foreign to the administration, to which was added here the element of intentional
punishment by what was virtually vocation outlawry. In Smith vs. East Elloe
Rural District Council 1956 AC 736: (1956) 1 All ER 855), the House of Lords
held that an action for damages might proceed against the clerk of a local
authority personally on the ground that he had procured the compulsory purchase
of the plaintiff's property wrongfully and in bad faith. In Farrington vs.
Thompson (1959 UR 286) the Supreme Court of Victoria awarded damages for
exercising a power the authorities knew they did not possess. A licensing
inspector and a police officer ordered the plaintiff to close his hotel and
cease supplying liquor. He obeyed and filed a suit for the resultant loss. The
Court observed:
"Now I take it to be perfectly clear, that if a public officer abuses his
office, either by an act of omission or commission and the consequence of that
is an injury to an individual an action may be maintained against such public
officer."
In Wood vs. Blair (The Times, July 3, 4, 5, 1957 (Hallet J and Court of Appeal)
a dairy farmer's manageress contacted typhoid fever and the local authority
served notices forbidding him to sell milk, except under certain conditions.
These notices were void, and the farmer was awarded damages on the ground that
the notices were invalid and that the plaintiff was entitled to damages for
misfeasance. This was done even though the finding was that the officers had
acted from the best motives.
11. Today the issue thus is not only of award of compensation but who should
bear the brunt. The concept of authority and power exercised by public
functionaries has many dimensions. It has undergone tremendous change with
passage of time and change in socio- economic outlook. The authority empowered
to function under a statute while exercising power discharges public duty. It
has to act to sub-serve general welfare and common good. In discharging this
duty honestly and bona fide, loss may accrue to any person. And he may claim
compensation which may in circumstances be payable. But where the duty is
performed capriciously or the exercise of power results in harassment and agony
then the responsibility to pay the loss determined should be whose? In a modern
society no authority can arrogate to itself the power to act in a manner, which
is arbitrary. It is unfortunate that matters which require immediate attention
linger on and the man in the street is made to run from one end to other with
no result. The culture of window clearance appears to be totally dead. Even in
ordinary matters a common man who has neither the political backing nor the
financial strength to match the inaction in public oriented departments gets
frustrated and it erodes the credibility in the system. Public administration,
no doubt involves a vast amount of administrative discretion which shields the
action of administrative authority. But where it is found that exercise of
discretion was mala fide and the complainant is entitled to compensation for
mental and physical harassment then the officer can no more claim to be under
protective cover. When a citizen seeks to recover compensation from a public
authority in respect of injuries suffered by him for capricious exercises of
power and the National Commission finds it duly proved then it has a statutory
obligation to award the same. It was never more necessary than today when even
social obligations are regulated by grant of statutory powers. The test of
permissive form of grant is over, It is now imperative and implicit in the
exercise of. power that it should be for the sake of society. When the Court
directs payment of damages , or compensation against the State the ultimate
sufferer is the common man. It is the tax payer's money which is paid for
inaction of those who are entrusted under the Act to discharge their duties in
, accordance with law. It is, therefore, necessary that the Commission when it
is satisfied that a complainant is entitled to compensation 'for harassment or
mental agony or oppression, which finding of course should be accorded
carefully on material and convincing circumstances and not lightly, then it
should further direct the department concerned to pay the amount to the
complainant from the public fund immediately but to recover the same from those
who are found responsible for such unpardonable behaviour by diving it
proportionately where there are more than one functionaries." *
We are in full agreement with what is observed herein. Thus the law is that the
Consumer Protection Act has a wide reach and the Commission has jurisdiction
even in cases of service rendered by statutory and public authorities. Such
authorities become liable to compensate for misfeasance in public office i.e.
an act which is oppressive or 'capricious or arbitrary or negligent provided
loss or injury is suffered by a citizen. The word compensation is of a very
wide connotation. It may constitute actual loss or expected loss and may extend
to compensation for physical, mental or even emotional suffering, insult or
injury or loss. The provisions of the Consumer Protection Act enables a
consumer to claim and empower the Commission to redress any injustice done. The
Commission or the Forum is entitled to award not only value of goods or
services but also to compensate a consumer for injustice suffered by him. The
Commission / Forum must determine that such sufferance is due to malafide or
capricious or oppressive act. It can then determine amount for which the
authority is liable to compensate the consumer for his sufferance due to
misfeasance in public office by the officers. Such compensation is for
vindicating the strength of law. It acts as a check on arbitrary and capricious
exercise of power. It helps in curing social evil. It will hopefully result in
improving the work culture and in changing the outlook of the officer/public
servant. No authority can arrogate to itself the power to act in a manner which
is arbitrary. Matters which require immediate attention should not be allowed
to linger on. The consumer must not be made to run from pillar to post. Where
there has been capricious or arbitrary or negligent exercise or non exercise of
power by an officer of the authority, the Commission/Forum has a statutory
obligation to award compensation. If the Commission/Forum is satisfied that a
complainant is entitled to compensation for loss or for harassment or mental
agony or oppression, then after recording a finding it must direct the
authority to pay compensation and then also direct recovery from those found
responsible for such unpardonable behaviour.
7. At this stage itself it must be mentioned that learned Attorney General had
relied upon the case of Ghaziabad Development Authority vs. Union of India
reported in 1986-2002 Consumer 6036 : (NS) : wherein, whilst
considering a case of breach of contract under Section 73 of the Contract Act,
it has been held that no damages are payable for mental agony in cases of
breach of ordinary commercial contracts. This Court considered the case
ofLucknow Development Authority (supra) and held that liability for mental
agony had been fixed not within the realms of contract but under principles of
administrative law. In this case the award towards mental agony was deleted on
the ground that these were no pleadings to that effect and no finding on that
point. This authority does not take a contrary view to the principles laid down
in Lucknow Development Authority's case but merely differentiates it on facts.
Thus where there is a specific finding of misfeasance in public office
compensation for mental agony can be granted. If there are findings of
misfeasance in public office then the principles set out in this authority will
have no application and the principles set out in Lucknow Development
Authority's case (supra) would apply. In such cases it would be open for the
Commission/Forums to grant compensation for mental agony.
8. However, the power and duty to award compensation does not mean that
irrespective of facts of the case compensation can be awarded in all matters at
a uniform rate of 18% per annum. As seen above what is being awarded is
compensation i.e. a recompense for the loss or injury. It therefore necessarily
has to be based on a finding of loss or injury and has to correlate with the
amount of loss or injury. Thus the Forum or the Commission must determine, that
there has been deficiency in service and/ or misfeasance in public office which
has resulted in loss or injury. No hard and fast rule can be laid down, however
a few examples would be where an allotment is made, price is received/paid but
possession is not given within the period set out in the brochure. The
Commission/Forum would then need to determine the loss. Loss could be
determined on basis of loss of rent which could have been earned if possession
was given and the premises let out or if the consumer has had to stay in rented
premises then on basis of rent actually paid by him. Along with recompensing
the loss the Commission/Forum may also compensate for harassment/ injury both
mental and physical. Similar compensation can be given if after allotment is
made and there has been cancellation of scheme without any justifiable cause.
9. That compensation cannot be uniform and can best of illustrated by
considering cases where possession is being directed to be delivered and cases
where only monies are directed to be returned. In cases where possession is
being directed to be delivered the compensation for harassment will necessarily
have to be less because in a way that party is being compensated by increase in
the value of the property he is getting. But in cases where monies are being
simply returned then the party is suffering a loss inasmuch as he had deposited
the money in the hope of getting a flat/ plot. He is being deprived of that
flat/plot. He has been deprived of the benefit of escalation of the price of
that flat/ plot. Therefore the compensation in such cases would necessarily
have to be higher. Further if the construction is not of good quality or not
complete, the compensation would be the cost of putting it in good shape or
completing it along with some compensation for harassment. Similarly, if at the
time of giving possession a higher price or other amounts is collected
unjustifiably and without there being any provision for the same the direction
would be to refund it with a reasonable rate of interest. If possession is
refused or not given tbecause the consumer has refused to pay the amount, then
on the finding that the demand was unjustified the consumer can be compensated
for harassment and a direction to deliver possession can be given. If a party
who has paid the amount is told by the authority that they are not in a
position to ascertain whether he had paid the amount and that party is made to
run "from pillar to post in order to show that he has paid the amount,
there would be deficiency of service for which compensation for harassment must
be awarded depending on the extent of harassment. Similarly, if after delivery
of possession, the sale deeds or title deeds are not executed without any
justifiable reasons, the compensation would depend on the amount of harassment
suffered. We clarify that the above are mere examples. They are not exhaustive.
The above shows that compensation cannot be the same in all cases irrespective
of the type of loss or injury suffered by the consumer.
10. As has been set out hereinabcve, the National Forums has been awarding
interest at a flat rate of 18% per annum irrespective of the facts of each
case. This, in our view, is unsustainable. Award of compensation must be under
different separate heads and must vary from case to case depending on the facts
of each case.
11. At this stage, it must be mentioned that the National Forums, has, in its
judgment in Darsh Kumar's case (supra) .stated that the interest at the rate of
18% per annum takes into consideration the escalation in the cost of
construction as well. Even if that be so the compensation cannot be at a
uniform rate. If the delay is only of one or two years the escalation in the
cost of construction will not be as much as in a case where the delay is of
five years or more. Therefore, if compensation has to be awarded for escalation
in the costs of construction, it must be done under that head after taking into
consideration the amount of delay. Such compensation can be fixed on the basis
of indexes of bodies like CPWD or PWD. Further, it must be noted that where a
flat is allotted and possession given even though it is given belatedly there
will be no question of escalation in the cost of construction. Yet, even in such
cases interest at the rate 18% per annum including escalation in the cost of
construction has been granted. Further in cases where the Commission / Forum
has directed delivery of possession the party has to a certain extent has
already got a benefit. The cost of the land/ flat would have gone up in the
meantime. Of course, even in cases where delivery of possession has been
directed there could be compensation for the harassment/ loss. But such
compensation has to be worked out after looking into the facts of each case and
after determining what is the amount of harassment loss which had been caused
to the consumer.
12. The National Forum in the lead judgment has considered the authorities'of
this Court in the case of Ghaziabad Development Authority vs. Dhanesh Chand
Goel (SLP (Civil) No. 11315/2000) decided on 12th January, 2001 arising from
the order of the MRTP Commission dated 22nd February, 2000) and the case of
Haryana Urban Development Authority vs. Rajnish Chander Sharde reported in
2000 (2) CCC 17 (NS) : 2000 (8) JT 154. From these decisions, the
National Forum has concluded that award of interest at the rate of 18% per
annum on amount deposited by the allottee where there is a delay in handing
over possession is reasonable and could be awarded on equitable grounds. In our
view, this conclusion of the National Forum is not correct. In Dhanesh Chand
Goel's case (supra) the facts were gross. Those facts have been set out in the
order of the National Forum itself. Those facts show that GDA started a scheme
for allotment of houses in Governdpuram. Dhanesh Chand had applied for
allotment. He had paid the amount. He had been intimated on 16th November, 1993
that he had been allotted a house, as per the draw held on 20th October, 1993.
Thereafter in 1996 he was informed that there was an increase in the price. He
did not pay the increased amount and therefore possession was not given to him.
It appears that the flat which had been allotted to him was thereafter allotted
to one Shanti Suraksha Bal. Shri Dhanesh Chand was asked to give his option for
allotment in some other scheme at a different place. It is under those
circumstances that refund was directed with interest at the rate of 18% per
annum. This Court while dismissing the Special Leave Petition was careful
enough to record that the rate of 18% interest per annum was reasonable given
the facts recorded by the lower authority. Thus, this case shows that if the
facts are gross then 18% interest could be given but the Forum must first
conclude that the facts justified grant of interest at such a rate. Similarly,
in Rajnish Chander Sharde's case (supra), the facts were such that they
justified a grant of interest at the rate of 18% per annum. This Court has
noted that there was delay in delivery of possession and in the meantime the
complainant had been compelled to live in rented accommodation and pay Rs. 1600
per month. This Court has noted that interest at 18% was given instead of
directing the body to compensate for the loss caused i.e. at the rate of Rs.
1600 per month. It is on those facts this Court upheld the grant of interest @
18% per annum. Far from showing that these authorities justified grant of
interest at 18% in all cases irrespective of the facts, the authorities of this
Court clearly indicate that interest at such rate is to be granted only when
the facts so justify.
13. The learned Attorney General submitted that interest is to be awarded
taking into consideration the rates of interest which would be payable by
Financial Institutions if amounts are deposited with them. He submitted that
the Interest Act, 1978 is applicable even to a
Tribunal. He pointed out that under the Interest Act the 'current rate of
interest' would mean the highest of the maximum rates at which interest may be
paid on different classes^f deposits by different classes of scheduled banks in
accordance with the directions given or issued by the Reserve Bank of India
under the Banking Regulations Act, 1949. He relied on Section 3 of the Interest
Act which provides that in any proceedings for the recovery of any debt or
damages or in any proceedings in which a claim for interest in respect of any
debt or damages already paid is made, the Court may, if it thinks fit, allow
interest to the person entitled to the debt or damages or to the person making
such claim, as the case may be, at a rate not exceeding the current rate of
interest. He submitted that the Commission whilst awarding interest has to
follow the provisions of the Interest Act. He submitted that the same principles
apply under Section 34 of the Code of Civil Procedure.
14. The learned Attorney General relied upon the case of Central Bank of India
vs. Ravindra reported in 30, wherein interest
has been defined as follows:
"37. Black's Law Dictionary (7th Edn.) defines 'interest' inter alia as
the compensation fixed by agreement or allowed by law for the use or detention
of money, or for the loss of money by one who is entitled to its use;
especially, the amount owed to a lender in return for the use of the borrowed
money. According to Stroud's Judicial Dictionary of Words And Phrases (5th
Edn.) interest means, inter alia, compensation paid by the borrower to the
lender for deprivation of the use of his money. In Secy, Irrigation Deptt,
Govt. of Orissa vs. G.C. Roy (1992) 1 SCC 508) the constitution Bench opined
that a person deprived of the use of money to which he is legitimately entitled
has a right to be compensated for the deprivation, call it by any name. It may
be called interest, compensation or damages... this is the principles of
section 34 of the Civil Procedure Code. In Sham Lal Narula (Dr) vs. CIT (AIR
1964 SC 1878 : (1964) 5 CR 668) this Court held that interest is paid for the
deprivation of the use of the money. The essence of interest in the opinion of
Lord Wright, in Riches vs. Westminster Bank Ltd. (1947) 1 All ER 469 : 1947 AC
390 (HL) All ER at p. 472 is that it is a payment which becomes due because the
creditor has not had his money at the due date. It may be regarded either as
representing the profit he might have made if he had had the use of the money,
or, conversely, the loss he suffered because he had not that use. The general
idea is that he is entitled to compensation for the deprivation; the money due
to the creditor was not paid, or, in other words, was withheld from him by the
debtor after the time when payment should have been made, in breach of his
legal rights, and interest was a compensation whether the compensation was
liquidated under an agreement or statute. A Division Bench of the High Court of
Punjab speaking through Tek Chand, J. In CIT vs. Dr. Sham Lal Narula (AIR 1963
Punj 411: (1963) 50 ITR 513) thus articulated the concept of interest: (AIR p.
414, para 8).
"8. The word 'interest' and 'compensation' are sometimes used interchangeably
and on other occasions they have distinct connotation. 'Interest' in general
terms is the return or compensation for the use of retention by one person of a
sum of money belonging to or owed to another. In its narrow sense, 'interest'
is understood to mean the amount which one has contracted to pay for use of
borrowed money. In whatever category 'interest' in a particular case may be
put, it is a consideration paid either for the use of money or for forbearance
in demanding it, after it has fallen due, and thus, it is a charge for the use
or forbearance of money. In this sense, it is a compensation allowed by law or
fixed by parties, or permitted by custom or usage, for use of money, belonging
to another, or for the delay in paying money after it has become payable."
*
In this case it is has observed that the Reserve Bank of India has supervisory
role over banking. It is observed that Reserve Bank of India has been issuing
directions/ circulars dealing with rates of interest. It is held that the Reserve
Bank of India circulars can be treated as standards regarding rates of
interest.
15. The learned Attorney General then referred to the case of In Defence of
Arnit Das vs. State of Bihar reported in 18,
wherein, in the context of a claim under the Motor Vehicles Act, this Court has
noted that with the change in economy and policy of Reserve Bank of India the
interest rates are lowered. Interest at the rate of 9% was granted on the
footing that nationalised banks now grant interest at that rate on fixed
deposits for one year. It'was pointed out that this reasoning was approved by
this Court in the case of United India Insurance Co. Ltd. vs. Patricia Jean
Mahajan reported in 6.
16. The learned Attorney General also relied on the case of Bihar State Housing
Board vs. Prio Ranjan Roy reported in 1986-96 Consumer 2067 (NS) : (NS)
: 7) wherein it is held that where damages
are awarded there must be assessment thereof. It is held that the Order
awarding damages must contain an indication of the basis upon which the amount
awarded is arrived at. It was held that in the Order there must be some
statement about the relationship between the amount awarded and the default and
unjustifiable delay and harassment found to have been caused. This Court then
remitted the matter back to National Commission for consideration of the aspect
of compensation de-hors. It was directed that if damages are awarded reasons
must be set out.
17. The learned Attorney General also relied upon the case of Prashant Kumar
Shahi vs. Ghaziabad Development Authority reported in 1986-2002 CONSUMER 6000
(NS) : 2000(1) CCC 84(NS) : . In this case it had been held that facts
would have to be looked into to ascertain whether the authority or the allottee
was responsible for the alleged delay.
18. There can be no dispute to the principles laid down in Prashant Kumar
Shahi's case and Bihar State Housing Board's case (supra). It is on these
principles that it is already held that awarding interest at a flat rate of 18%
is not justified. It is clear that in all these cases interest is being awarded
as and by way of compensation/ damages. Whilst so awarding it must be shown
that there is relationship between the amount awarded and the default/
unjustifiable delay/ harassment. It is thus necessary that there be separate
awards under each such head with reasons why such award is justified. However,
the principles that interest must be granted at the current rate of interest is
only applicable where the proceeding are for recovery of debt or damages. They
apply where a refund of amount is being claimed and the direction is to refund
amounts with interest. The principles which govern grant of interest do not
apply to grant of compensation. For this reason also it becomes necessary to
consider facts and award damage/ compensation under various heads.
19. That brings to the question as to the date from which interest would be
payable. Normally in cases of refund interest will be payable from the date the
monies were deposited with the body till they are returned either by payment to
that party or deposited in a Court. In cases where compensation is directed to
be paid, the Commission/Forum must direct payment within a particular period
and further direct that if payment is not made within the that time the
authority will also pay interest. Such interest must be based on the current
rate of interest.
20. Now we come to the question as to what is to be done in all these matters
where the Commission/Forum has already passed the stereo-type order set out above.
To remit all matters back to the Commission would cause undue hardship and
unnecessary costs to the Consumer, many of whom are appearing in person as they
cannot afford a lawyer. In all future matters the Commission/ Forum must now
award compensation under various heads if it concludes that there has been
deficiency of service or misfeasance in public office. So far as this bunch of
matters is concerned instead of remitting them back we consider it expedient to
take up each matter ourselves. If we find that the Forum/ Commission has on
facts found deficiency of service or misfeasance in public office, then
depending on facts of that case we may not interfere with the award of
interest. We will then treat it to be in lieu of compensation. We may however vary
the rate of interest depending on facts of each case. Just by way of example we
take two instances set out below.
21. In a Scheme known as 'Karpuripuram Scheme' plots were allotted, monies
collected. However thereafter the scheme was cancelled. In some of the matters
we have seen that the District Forum has recorded that the authority could give
no explanation as to why the Scheme was cancelled. Before us some sort of
explanation is sought to be given. In our view, irrespective of whether there
was genuine reason to cancel or not, the monies must be returned with interest
at the rate of 18%. We say so because it is clear that even if the body has not
already floated another scheme on the same land it is clear that the body is
going to derive great profit from this land and therefore compensating the
allottee with interest at, 18% per annum is just and fair.
22. In Civil Appeal No. 724 of 2002 the Respondent had applied for a house in a
Scheme floated in 1992. He had paid the entire cost. He had been allotted a
flat and issued a reservation letter. Yet no possession was .given. Thereafter,
in 1996 the respondent was informed that for unavoidable reasons the house has
been allotted to somebody else and if he desires, he can obtain an alternate
flat at a much higher price. This therefore is also a case where absolutely no
justifiable reason why the party has not been delivered possession of the flat
which had been allotted to him nor has any offer been made to return his money
with interest. Instead the body was asked the party to apply for an alternate
flat at a higher rate. In our view, on these facts the award of interest at the
rate 18% is justified. It is not just interest on the amount invested but is
also compensation for the harassment and agony caused to the allottee. We have
given these two instances only by way of illustrations.
23. As stated above the interest, in both these cases, will be payable from the
date the monies were paid till they are retained or deposited in
Court/Tribunal. We however, clarify that merely because we are maintaining
awards of interest it must not be taken to mean that in future the
Commission/Forum must not work out compensation under various heads and that
they can continue to grant interest only by way of damage/compensation.
24. We clarify that in all cases where interest has already been paid @ 18%
irrespective of the above order, the authority will not be entitled to call
upon the party to refund the amount which have already been paid.
25. Another point also requires consideration at this stage. In the lead
judgment the National Commission has held that no interest is payable for the
period 24/ 4/1991 to 16/12/1993 as during that that period there was a stay
order passed by the Allahabad High Court in operation. Some of the allottees
have filed Appeals challenging that portion of the Order. It is contended, on
their behalf that there was no stay order in respect of the plots allotted to
them. It was contended that the authority cannot justify non-delivery to them.
As against this it is pointed out that this Court has already in the case of
G.D.A. vs. Sanchar Vihar Sahkari Avas Samiti Ltd. 1986-99 Consumer 5032 (NS) :
(NS) reported in upheld the view of the National Commission in
refusing interest or damages for the period during which the stay operated. It
is also pointed out that the Commission had deputed the Vice- Chairman to
enquire and report whether the authority was prevented from delivering
possession to all due to the stay order. It is pointed out that the
Vice-Chairman had submitted a Report pointing out that even though the stay
Order was not in respect of all plots, yet the authority could not deliver
possession of any plot as well the pipelines and other infrastructural work had
to be taken through the plots in respect of which the stay order operated. As
per the Report of the Vice Chairman the authority was prevented, by the stay
order, from delivering possession to anybody. The National Commission has
accepted this Report. We see no reason to take a different view, particularly
when another Bench has already refused to interfere on this aspect.
26. Before we part with this Order, we have to mention that many parties
complained to us that even the undisputed amounts had not been paid to them.
This was disputed on behalf of the authorities. However, it is clear that the
amounts were paid/deposited belatedly. We therefore, clarify that unless there
is a stay obtained from a higher forum, the mere fact of filing of an Appeal/
Revision will not entitled the authority to not comply with the Order of the
Forum. Even though the authority may have filed an Appeal/ Revision, if no stay
is obtained or if stay is refused, the Order must be complied with. In such
cases the higher forum should, before entertaining the Appeal/Revision, ensure
that the Order is first complied with.
27. The matters are adjourned for two weeks.