Ghaziabad Development Authority Vs. Balbir
Singh  Insc 175 (17
Variava & H. K. Sema.
O R D
WITH Civil Appeal No.
7391/2002, C.A.No.7793/2002, C.A.No.8400/2002, C.A.No.7700/2002, C.A.No. 7288/2002,
C.A.No.7792/2002, C.A. No.7788/2002, C.A.No.7396/2002, C.A.No.
7685/2002, C.A.No.8408/2002, C.A.
No.8415/2002, C.A.No.7786/2002, C.A.No. 7790/2002, C.A.No.7672/2002, C.A. No.7289/2002, C.A.No.7723/2002, C.A.No. 8418/2002,
C.A.No.7690/2002, C.A. No.8407/2002, C.A.No.7782/2002, C.A.No.
7725/2002, C.A.No.7695/2002, C.A.
No.8404/2002, C.A.No.7662/2002, C.A.No. 7676/2002, C.A.No.7693/2002, C.A. No.7724/2002, C.A.No.7286/2002, C.A.No. 7670/2002,
C.A.No.7688/2002, C.A. No.8405/2002, C.A.No.7787/2002, C.A.No.
7789/2002, C.A.No.8530/2002, C.A. No.8527/2002,
C.A.No.8588/2002, C.A.No. 7776/2002, C.A.No.7667/2002, C.A. No.7783/2002, C.A.No.7224/2002, C.A.No. 7699/2002,
C.A.No.7698/2002, C.A. No.7120/2002, C.A.No.390/2003, C.A.No.
394/2003, C.A.No.397/2003, C.A.No. 399/2003, C.A.No.400/2003, C.A.No.413/2003,
C.A.No.414/2003, C.A.No.415/2003, C.A.No.416/2003, C.A.No.417/2003,
C.A.No.1493/2003,C.A.No.1494/2003, C.A.No.1495/2003, C.A.No.1499/2003,C.A.No.3256/2003,
C.A.No.3910/2003, SLP(C)No.8758/2003, SLP(C)No.8760/2003, SLP(C)No.8764/2003,
C.A.No.3955/2003 C.A.No.4068/2003,SLP(C)No.6079/2003, SLP(C)No.6081/2003,
SLP(C)No.6083/2003, SLP(C)No.6084/2003, SLP(C)No.6085/2003, SLP(C)No.9600/2003,
SLP(C)No.9663/2003 SLP(C)No.9666/2003, SLP(C)No.9669/2003, SLP(C)No.9060/2003,
SLP(C)No.9061/2003,SLP(C)No.9062/2003, C.A.No.3657/2003, C.A.No.8417/2002,
C.A.No.2692/2003, C.A.No.4082/2003, SLP(C)No.11676/2003, SLP(C)No.12592/2003,
C.A.No.5473/2003, C.A.No.1010/2003, SLP(C)No.6082/2003, SLP(C)No.12594/2003,
SLP(C)No.20285/2003, SLP(C)No.6299/2003, SLP(C)No.6302/2003
SLP(C)No.6303/2003,SLP(C)No.6304/2003, SLP(C)No.6305/2003 SLP(C)No.6306/2003,
SLP(C)No.6307/2003, SLP(C)No.9715/2003 SLP(C)No.20289/2003, C.A.No.8504/2003,
SLP(C)No.22189/2003, C.A.No.549/2003, SLP(C)No.23127/2003, C.A.No.8402/2002,
C.A.No.392/2003, C.A.No.404/2003, C.A.No.405/2003, C.A.No.410/2003,
C.A.No.1014/2003, C.A.No.1491/2003, C.A.No.1498/2003,
SLP(C)No.12604/2003,SLP(C)No.14905/2003, SLP(C)No.12593/2003 C.A.No.8529/2002,
C.A.No.7395/2002, C.A.No.7388/2002, C.A.No.407/2003, SLP(C) No.8765/2003,
SLP(C) No.8766/2003, SLP(C) No.8763/2003,SLP(C) No.9190/2003, SLP(C)
No.9670/2003, SLP(C) No.9665/2003, SLP(C) No.9662/2003, SLP(C) No.12583/2003,
SLP(C) No.12587/2003,SLP(C) o.l2588/2003, SLP(C) No.l2589/2003, SLP(C) No.l2591/2003,
SLP(C) No.l2599/2003 SLP(C) No.l2603/2003, SLP(C) No.l2605/2003, SLP(C)
No.l2606/2003 SLP(C) No.l2607/2003, SLP(C) Nos.l2608-12609/2003, SLP(C)
No.l3785/2003 SLP(C) No.l2585/2003, SLP(C) No.l2586/2003, SLP(C) No.l4905/2003
SLP(C) No.l5139/2003, SLP(C) no.l7803/2003, SLP(C) Nos.l7805- 17806/2003,
SLP(C) No.l6414/2003, C.A. No.7397/2002, C.A. No.7385/2002, C.A. No.7390/2002,
C.A. No.7875/2002, C.A. No.7778/2002, C.A. No.8399/2002, C.A. No.7774/2002,
C.A.No.7879/2002, C.A. No.8398/2002, C.A.No.7232/2002, C.A. No.7236/2002, C.A.
No.8401/2002, C.A. No.8586/2002, C.A.No.8528/2002, C.A.No.7287/2002, C.A.
No.7779/2002, C.A. No.389/2003, C.A.No.391/2003, CA.No.395/2003
C.A.No.401/2003, C.A. No.403/2003, C.A. No.408/2003, C.A. No.1011/2003,
CA.No.1016/2003, C.A.No.1015/2003, C.A.No.1017/2003, C.A. No.1020/2003,
C.A.No.1490/2003, C.A. No.1496/2003, C.A. No.1961/2003, C.A. No.1962/2003, C.A.
No.1963/2003, C.A. No.1966-1967/2003, C.A.No.1965/2003,
C.A.No.3956/2003,C.A.No.3957/2003, C.A. No.3958/2003, C.A. No.3959/2003, C.A.
No.3658/2003, C.A. Nos.411-412/2003, C.A.No.7386/2002, C.A. No.1021/2003,
R.P.(C) No.1649/2003 in SLP(C) No.18369/2003, SLP (C) No. 4275/2004 Not ready
matters - listed for directions C.A.No.7225/2002 , C.A. No.7285/2002, C.A.
No.8589/2002, C.A. No.8587/2002, C.A. No.398/2003, C.A.No.1500/2003, C.A.
No.1501/2003, SLP(C) No.8755/2003, SLP(C) No.6078/2003, SLP(C) No.6080/2003,
SLP(C) No.9059/2003, SLP(C) No.9063/2003, SLP(C) No.9064/2003, SLP(C)
No.12582/2003, SLP(C) No.l2590/2003 SLP(C) No.l2610/2003, SLP(C) No.l6415/2003,
SLP(C) No.6077/2003, SLP(C) No.l5291/2003, SLP(C) No.20287/2003, SLP(C)
No.20288/2003, SLP(C) No.23120/2003, SLP(C) No.23124/2003, SLP(C)
No.23122/2003, SLP(C) No.6297/2003, SLP(C) No.6298/2003, SLP(C) No.6300/2003,
SLP(C) No.6301/2003, SLP(C) No.9717/2003, C.A. No.1562/2004, with SLP(C)
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.
National Consumer Disputes Redressal Commission considered a bunch of matters,
the lead matter being the case of Haryana Urban Development Authority vs. Darsh
Kumar. 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.
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 [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 It has been shown to us that the facts are varying and different.
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.
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.
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 of Lucknow Development Authority vs. M. K.
Gupta reported in (1994) 1 SCC 243 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 or trading activity but even
against service rendered by statutory and public authorities the stage is now
set for 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 payment. 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 v. 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 v. 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. Friedmann observed:
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 v.
State of U.P. [AIR 1965 SC 1039: (1965)1 SCR 375: (1966) 2 LLJ 583] did not
provide any immunity for tortuous acts of 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 function 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 v. State of Rajasthan (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.
back as 1878 the law was succinctly explained in Geddis v. Proprietors of Bann
Reservoir (1878) 3 AC 430 thus:
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.
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
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:
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 (Civil) No.659 of
1991 the Commission directed the Bangalore Development Authority to pay Rs.2446
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.
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' (Salmond and Heuston on
the Law of Torts).
in public office is explained by Wade in his book on Administrative Law thus:
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
is thus a tort which has been called misfeasance in public office, and which
includes malicious abuse of power, deliberate maladministration, and perhaps
also other unlawful acts causing injury." (p.777).
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. v. 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 v. Barnard [1964 AC 1129: (1964) 1 All ER 367,
410] it was observed by Lord Devlin, 'the servants of the government 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.
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 individual,
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 maladministration 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 v. 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 v. Duplessis (1959) 16 DLR 2d 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
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 v. 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 v. 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:
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 v. Blair [The Times, July 3, 4, 5, 1957 (Hallet J and
Court of Appeal] a dairy farmer's manageress contracted 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.
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 subserve
general welfare and common good.
discharging this duty honestly and bana 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 exercise 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
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 payers' 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 recorded
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 dividing 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.
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.
which require immediate attention should not be allowed to linger on. The
consumer must not be made to run from pillar to post.
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.
Commission/Forum is satisfied that a complainant is entitled to compensation
for loss or injury 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.
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
(2000) 6 SCC 113 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 of Lucknow 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.
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.
the power to 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
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. Similarly,
compensation can be given if after allotment is made there has been cancellation
of scheme without any justifiable cause.
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.
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 because 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 has 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.
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.
been set out hereinabove, the National Forum 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.
this stage, it must be mentioned that the National Forum 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.
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 Fabruary, 2000] and the case of Haryana
Urban Development Authority vs. Rajnish Chander Sharde reported in JT 2000 (8)
SC 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.
facts have been set out in the order of the National Forum itself.
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 justify
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.
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.
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 of 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.
learned Attorney General relied upon the case of Central Bank of India vs. Ravindra reported in (2002) 1
SCC 367, wherein interest has been defined as follows:
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
v. 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) v. CIT [AIR 1964 SC 1878:(1964)
7 SCR 668] this Court held that interest is paid for the deprivation of the use
of the money. The essence of interest in the opinion if Lord Wright, in Riches
v. 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 agrement
or statute. A Dvision Bench of the High Court of Punjab speaking through Tek Chand,
J. In CIT v. 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 words
'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 or 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 consdieration
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
also 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.
learned Attorney General then referred to the case of In Defence of Arnit Das
vs. State of Bihar reported in (2001) 2 SCC 9, 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 in (2002) 6 SCC
learned Attorney General also relied on the case of Bihar State Housing Board
vs. Prio Ranjan Roy reported in (1997) 6 SCC 487 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.
directed that if damages are awarded reasons must be set out.
learned Attorney General also relied upon the case of Prashant Kumar Shahi vs. Ghaziabad
Development Authority reported in (2000) 4 SCC 120. In this case it has been
held that facts would have to be looked into to ascertain whether the authority
or the allottee was responsible for the alleged delay.
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 awaring 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
so awarding it must be shown that there is relationship between the amount
awarded and the default/unjustifiable delay/harassment.
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.
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 that time the authority will
also pay interest. Such interest must be based on the current rate of interest.
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 dificiency
of service or misfeasence 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 interefere 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.
Scheme known as "Karpuripuram Scheme" plots were allotted, monies
collected. However thereafter the scheme was cancelled. In some of the mattes
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.
Civil Appeal No. 7224 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 has 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.
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.
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.
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 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. reported in (1996) 9 SCC 314 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.
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.
it is clear that the amounts were paid/deposited belatedly.
therefore clarify that unless there is astay obtained from a higher forum, the
mere fact of filing of an Appeal/Revision will not entitle 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.
matters are adjourned for two weeks.