Bhubaneswar Development Auth. Vs. Susanta Kumar Mishra  INSC 192 (30
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.605 OF 2009 (Arising out
of SLP [C] No.14461 of 2007) Secretary, Bhubaneswar Development Authority ...
Appellant Susanta Kumar Mishra ... Respondent
O R D E R R. V.
granted. The respondent who appears in person, in response to the notice
informing the hearing date, has requested that his presence may be dispensed
with and his written submissions (reply with copies of the documents) may be
treated as his arguments and matter may be disposed of. We have heard the
learned counsel for appellant and considered the contentions of the respondent
in his written submissions.
appellant (Bhubaneshwar Development Authority) allotted MIG house bearing No.
M-19, to the respondent, as per letter of allotment dated 1.5.1991. A
lease-cum-sale agreement was entered between the appellant and the respondent
on 6.5.1991. Clause (2) of the agreement stipulated the price of the house to
be Rs.139,215/40. After deducting the payment of Rs.37,415/- made by the lessee
towards the price (on 29.6.1990), it permitted the lessee to pay the balance of
Rs.101,800/40 in 52 quarterly installments of Rs.1957/70 each commencing from
1.9.1989. The said clause gave the option to the Lessee to convert the lease
into a sale on completion of payment of all the installments by paying a
commitment charge of Rs.200/-. Clause (3) of the agreement required the lessee
to pay an annual rent of Rs.24/90 during the period of lease commencing from
1.9.1989. Clause (6) of the agreement stipulated that in the event of default
in paying any installment or other dues on the due date, the lessee shall pay
interest at the rate of 15% per annum on the defaulted installments/dues from
the date when the same fell due.
execution of the Lease-cum-Sale Agreement, the respondent took possession of
the house on 9.5.1991 and commenced paying the installments from June, 1991. He
paid the last 12 installments (No.41 to 52) in a lump sum on 5.7.2001. The
appellant by letter dated 1.12.2001 informed the respondent that he was still
due in a sum of Rs.57,175/-.
On 27.12.2001, the
respondent applied to the appellant for execution and registration of a sale
deed claiming that he had paid all the installments. The appellant sent a reply
dated 30.1.2002 informing the respondent that until the sum of Rs.57,175/-
which was due was paid, the sale deed could not be executed. A calculation
sheet showing how Rs.57,175/- was found to be due was also furnished.
aggrieved, the respondent approached the District Consumer Forum, Khurda
alleging deficiency of service. He sought a direction to the appellant to
execute the sale deed without insisting upon the payment of Rs.57,175/-. He
also claimed Rs.60,000/- as compensation from the appellant. The District Forum
by the order dated 27.10.2003 dismissed the complaint holding that refusal to
execute a sale deed until the amount due was paid, was not a deficiency in
service. The respondent filed an appeal before the State Consumer Disputes
Redressal Commission, Cuttack. The State Commission by its order dated
21.12.2006 allowed the appeal in part and directed the respondent to pay a lump
sum of Rs.20,000/- to the appellant in full and final settlement of the dues
and directed the appellant to execute the sale deed on receipt of such amount.
The appellant filed a revision before the National Consumer Disputes Redressal
Commission, New Delhi, challenging the reduction in the amount payable, as
arbitrary and contrary to the terms of contract. The National Commission
dismissed the revision by a short order dated 8.5.2007 observing that the
appellant could not charge compound interest and therefore, the order of the
State Commission was just and equitable and did not call for interference. Feeling
aggrieved the appellant has filed this appeal by special leave.
appellant contends that it charged interest strictly in accordance with the
terms of the lease agreement. It contends that charging of interest at the rate
of 15% per annum on delayed installments in terms of clause (6) of the
agreement was not illegal.
6. We find
considerable force in the submission of the appellant.
agreement shows the `price' of the house as Rs.139,215/40. After adjusting
Rs.37,415/- paid by the respondent, the balance of Rs.101,800/40 was made
payable in 52 quarterly installments commencing from 1.9.1989. There is no
requirement to pay interest, if the installments were paid on the due dates.
Only if the lessee committed default in paying any installment or other dues,
interest at 15% per annum was payable by the lessee, on the defaulted installments/dues
from the date of default to date of payment under clause 6 of the agreement.
Even when there was default, neither the installments that were already paid on
the due dates, nor the installments which were yet to fall due, were subjected
to interest under clause (6) of the agreement. Charging interest under clause
(6) from the date of default to date of payment on the defaulted amount is
unexceptionable and does not amount to charging of compound interest as wrongly
assumed by the State Commission and National Commission.
if we assume that the price of Rs.139,215.40 stipulated in the lease-cum-sale
agreement included, in addition to the cost of the plot and the construction of
the house, interest thereon, the position will be no different. Each equated installment
would then have a principal component and interest component. As the equated installments
would include interest on the principal only up to the due date of installment,
whenever there is a default, there can be no dispute that the `principal' part
of the installment could be subjected to interest from the date of default to
date of payment. It is no doubt true that when the defaulted installment in
entirety is subjected to interest, the `interest' component of the defaulted installment
is also subjected to interest. To that limited extent, there may be charging of
interest upon interest. Charging of such interest, on the interest part of the installment,
on default in payment of the installment, at a reasonable rate from the date of
default, cannot be termed as charging of compound interest in regard to the
entire dues. It is only a provision to ensure that the dues (installments) are
paid promptly and avoid misuse of the concession given by permitting payment in
installments. But for such a provision, lessees/allottees who have already been
given possession, will be tempted to delay payments, thereby leading to
continuous defaults. A statutory development authority, working on no profit no
loss basis, can ill afford to permit such continuous defaults by
lessees/allottees, which will paralyse their very functioning, thereby
affecting future developmental activities for the benefit of other members of
the general public. Therefore a provision for interest as contained in clause 6
of the lease-cum-sale agreement is neither inequitable nor in terrorem. Where
the basic rate of interest is itself very high, or where interest is charged on
the entire price instead of charging interest on the reducing balance, when
working out the equated installments, or where the rate of interest on default
is punitively excessive, the position may be different. But no such case is
made out by the respondent.
the facts are examined, it becomes evident that the sum of Rs.57,175/- was not
due on account of charging compound interest.
Though the allotment
was made on 1.5.1991 and the lease-cum-sale agreement was signed on 6.5.1991,
clause (2) of the lease-cum-sale agreement contained a rather unusual condition
that the quarterly installment of Rs.1957/70 would commence from 1.9.1989,
which is a date 28 months prior to the date of allotment and lease-cum-sale
The reason for such a
provision was that the last date for applications and allotment of houses under
the scheme had expired in the year 1989 and the allotment rate of the house had
been worked out with reference to 1989. The respondent had applied belatedly on
29.6.1990 and in the normal course, would not have obtained any allotment. In
fact, appellant, by letter dated 19.12.1990, informed the respondent that no
house was available for allotment. But subsequently, when some houses under the
MIG scheme became available on account of default or other reason, the
appellant issued an letter dated 1.5.1991 to the respondent allotting MIG House
No.M-19. Having regarding to the terms of the scheme, it became necessary to
require the lessee to pay the earnest money deposit and the installments with
reference to the original date stipulated for allotment, namely, 1.9.1989.
Therefore, when the lease- cum-sale agreement was executed on 6.5.1991, the
respondent was required to pay the original allotment price in quarterly installments
of Rs.1957/70 with effect from 1.9.1989 to avoid revising the allotment price.
This meant that when the agreement was executed on 6.5.1991, the respondent had
to pay the initial payment and installments which had fallen due between
1.9.1989 and 6.5.1991 and also pay the interest thereon at 15% per annum from
the respective due dates, under clause (6). But the respondent started paying
the quarterly installments of Rs.1957/70 as if such installments commenced
prospectively only after the agreement dated 6.5.1991, and not from 1.9.1989.
He paid the first installment only on 25.6.1991. There was thus an accumulated
default in regard to the payments due between 1.9.1989 and 6.5.1991 on which
interest was payable under clause (6). There were also some delay in paying the
subsequent installments. If the Development Authority charged interest for the
defaulted/delayed installments, in accordance with clause (6) of the
lease-cum-sale agreement, the respondent could not object to the same. We are
therefore of the view that the orders of the State Commission and National
Commission are not justified.
case of the respondent in its complaint was that the interest could not be
charged from September, 1989 as the allotment was made only on 1.5.1991
followed by the lease-cum-sale agreement on 6.5.1991 and delivery of possession
on 9.5.1991. He also contended that there was no provision for payment of any
interest by the lessee as clause (6) of the agreement was applicable only in
the event of default and he had not committed any default. It should be noted that
the respondent did not protest against the provisions of clauses (2) and (6) of
the lease-cum-sale agreement requiring payment of installments with effect from
1.9.1989 and took possession of the house in terms of the said agreement.
Therefore, he could not be heard to say that the installments should commence
only prospectively. The District Forum rightly held that charging of interest
by the appellant from 1.9.1989 in accordance with clause (6) of the agreement
and insisting upon payment of dues before executing the sale deed, did not
amount to deficiency in service. But the State Commission and National
Commission acted on wrong assumptions. Further, any fora under the Consumer
Protection Act, 1986 (`Act' for short) before granting any relief to a complainant,
should be satisfied that the complaint relates to any of the matters specified
in section 2(c) of the Act, and that the complainant has alleged and made out
either unfair or restrictive trade practice by a trader, or defects in the
goods sold, or any deficiency in a service rendered, or charging of excessive
price for the goods sold, or offering of any goods hazardous to life and safety
without displaying information regarding contents etc. If none of these is alleged
and made out, the complaint will have to be rejected. When a lessee signs
without protest an agreement agreeing to pay interest at a given rate from a
given date in given circumstances, and does not contend that the term relating
to installments or interest is invalid or inequitable, it is not open to the
consumer forum to grant any relief.
A demand for any
amount due in terms of the unchallenged terms of an agreement, does not furnish
a cause of action to the lessee/allottee to approach the consumer forum.
we allow this appeal, set aside the orders of the State Commission and National
Commission and restore the order of the District Forum. We, however, make it
clear that on payment of the balance amount due, the appellant shall execute
the sale deed, if it is not already executed.
[R. V. Raveendran]
[J. M. Panchal]