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Smart Summary

Supreme Court of India

Factual and Procedural Background

The respondent was allotted Plot No. 181, PLA Sector, Hisar on 9 October 1989. Although the respondent deposited substantial sums toward the allotment, the Haryana Urban Development Authority (HUDA) failed to deliver possession. The respondent therefore filed a consumer complaint.

The District Consumer Forum held HUDA deficient in service and awarded the respondent interest at 18% per annum on all deposits until possession was actually delivered. The State Consumer Disputes Redressal Commission dismissed HUDA’s appeal and confirmed the District Forum’s order. HUDA’s revision petition before the National Consumer Disputes Redressal Commission was also dismissed; the Commission relied on its earlier decision in HUDA v. Darsh Kumar and upheld the 18% interest award.

HUDA appealed to the Supreme Court. By the time the appeal was heard, possession had been offered on 12 May 1997, but the respondent declined to take it because HUDA had not complied with the interest directions. HUDA further attempted to set-off ₹1,99,453 against alleged dues, notwithstanding that the respondent had already paid ₹1,63,391.

Legal Issues Presented

  1. Whether consumer fora may award a flat interest rate of 18% per annum in all cases of delayed possession without examining the specific facts and evidence of loss or injury.
  2. Whether the appellant-authority can unilaterally set off alleged dues (including TDS deductions and escalation charges) against amounts it has been directed to pay when no such claim was raised before the adjudicating fora.
  3. What recalculation of amounts, if any, should be directed to remedy the deficiency in service caused by delayed delivery of possession.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ghaziabad Development Authority v. Balbir Singh, (2004) 5 SCC 65 Consumer fora should not grant 18% interest automatically; compensation must correlate to proven loss or injury, and findings on deficiency/misfeasance are mandatory. The Supreme Court relied on this decision to invalidate the blanket 18% interest awarded by the National Commission and to formulate a revised interest structure tied to actual deposits.
Haryana Urban Development Authority v. Darsh Kumar, RP No. 1197 of 1998 (NC) Earlier National Commission view permitting 18% interest in similar circumstances. The Court rejected the National Commission’s reliance on this case, holding that such blanket awards contravene the principles laid down in Balbir Singh.

Court's Reasoning and Analysis

Justice S.N. Variava observed that the National Commission’s practice of granting 18% interest irrespective of case-specific facts had already been disapproved in Balbir Singh. Applying those principles, the Court found:

  • Deficiency in service: HUDA’s failure to deliver possession until 12 May 1997 constituted clear deficiency.
  • Improper blanket interest rate: The 18% rate lacked factual foundation and could not stand.
  • Unilateral set-off disallowed: When litigation is pending, any claim for alleged dues must be pleaded before the adjudicating body; HUDA had not done so and therefore could not set off ₹1,99,453.
  • No interest on alleged delayed payments: Because the authority was at fault for delaying possession, it could not levy interest on instalments that might have been paid late by the respondent.
  • TDS deductions impermissible: Amounts payable represented compensation/damages, not income; hence tax deducted at source must be refunded with interest.

To balance equities, the Court prescribed a differentiated interest structure: 12% per annum from each deposit date until 17 March 2004, and 15% per annum thereafter until full payment. The Court directed fresh calculations, refund of any TDS with 12% interest, and submission of a compliance report.

Holding and Implications

Appeal allowed; National Commission’s order set aside.

HUDA must recompute and pay amounts due on the terms specified (12%/15% interest schedule, no escalation charges, refund of TDS) within the stipulated timeframe and file a compliance affidavit. The Court expressly stated that this order is fact-specific and “shall not be taken as a precedent” in other matters, directing consumer fora to follow the broader principles laid down in Balbir Singh. No costs were awarded.

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    Haryana Urban Development Authority v. Raj Mehta (Mrs) .

    S.N Variava, J.— Before this Court, a large number of appeals have been filed by the Haryana Urban Development Authority and/or the Ghaziabad Development Authority challenging orders of the National Consumer Disputes Redressal Commission, granting to the complainants interest at the rate of 18% per annum irrespective of the facts of each case. This Court has, in the case of Ghaziabad Development Authority v. Balbir Singh (2004) 5 SCC 65 deprecated this practice. This Court has held that interest at the rate of 18% cannot be granted in all cases irrespective of the facts of the case. This Court has held that the Consumer Forum could grant damages/compensation for mental agony/harassment where it finds misfeasance in public office. This Court has held that such compensation is a recompense for the loss or injury and it necessarily has to be based on a finding of loss or injury and must correlate with the amount of loss or injury. This Court has held that the Forum or the Commission thus had to determine that there was deficiency in service and/or misfeasance in public office and that it has resulted in loss or injury. This Court has also laid down certain other guidelines which the Forum or the Commission has to follow in future cases.

    2. This Court is now taking up the cases before it for disposal as per principles set out in earlier judgment. On taking the cases we find that the copies of the claim/petitions made by the respondent complainant and the evidence, if any, led before the District Forum are not in the paper-book. This Court has before it the order of the District Forum. The facts are thus taken from that order.

    3. In this case, the respondent was allotted a plot bearing No. 181.PLA Sector, Hisar on 9-10-1989. The respondent paid substantial amounts but the possession was not delivered. The respondent thus filed a complaint. On these facts, the District Forum awarded interest @ 18% p.a on the amounts deposited from the date of deposit till actual possession is delivered.

    4. The State Forum dismissed the appeal and confirmed the order of the District Forum. The appellants went in revision before the National Commission. The National Commission dismissed the revision filed by the appellants relying upon its own decision in the case of Haryana Urban Development Authority v. Darsh Kumar RP No. 1197 of 1998 dated 31-8-2001 (NC) and observing that interest @ 18% p.a has been allowed by them under similar circumstances. As has been stated in so many matters, the order of the National Commission cannot be sustained. It cannot dispose of the matters by awarding interest @ 18% in all matters irrespective of the facts of that case. The order of the National Commission is hereby set aside.

    5. In this case possession has been offered on 12-5-1997. The respondent has not taken possession as the appellants have not complied with the orders for payment of interest in spite of there being no orders of stay in their favour. The appellants have purported to deduct a sum of Rs 1,99,453 against the alleged dues of the respondent. The respondent has paid a sum of Rs 1,63,391.

    6. We find in a number of matters that the appellants unilaterally seek to set off amounts directed to be paid by them against amounts claimed to be due to them. It therefore needs to be clarified that when a matter is sub judice, then the appellants have to place before the Court, all their defences/claims. If amounts are allegedly due and payable to them they must so state before the adjudicating body. Then the veracity of their claim can be tested. If before the District Forum or the State Forum or the National Commission, no such claim is made, then unilaterally they cannot raise a claim and seek to adjust amounts directed to be paid by them. If this is allowed this would be a method of defeating decrees/awards of courts/forums. It would unnecessarily lead to another litigation.

    7. In this case, even in the appeal memo before this Court, it has not been stated that amounts were recoverable from the respondent. Counsel had no instructions and could not explain how amounts were allegedly due from the respondent. Admittedly the respondent has paid Rs 1,63,391. As possession was not being offered till 12-5-1997 the appellants are not entitled to charge interest even though there may be delayed payments by the respondent. If the appellants are at fault in not delivering possession they cannot expect the respondent allottees to go on paying instalments to them. Also as stated in so many matters the appellants cannot deduct TDS as these are payments towards compensation/damages for mental agony and harassment and escalation in costs of construction.

    8. Thus the appellants shall now within 15 days from the date of this order recalculate in this following manner: they shall pay interest at the rate of 12% per annum from the date of each deposit till 17-3-2004 and thereafter @ 15% per annum till payment. They will not be entitled to charge any interest on delayed payments, if any. They will also not be entitled to charge any escalation in price as delivery has to be given at the agreed rate. If TDS has been deducted they shall now pay that over to the respondent with interest thereon at 12% per annum from the date it was deducted till payment. After recalculating on this basis they will forward to the respondent the amounts found due and payable to him within one month from the date of this order. They must also send a calculation sheet to the respondent indicating how they have recalculated. The appellants to also file a compliance report in this Court. Along with the compliance report they must annex the calculation sheet.

    9. We clarify that this order shall not be taken as a precedent in any other matter as the order is being passed taking into account special features of the case. The Forum/Commission will follow the principles laid down by this Court in the case of Ghaziabad Development Authority v. Balbir Singh (2004) 5 SCC 65 in future cases.

    10. With these observations, the appeal stands disposed of with no order as to costs.

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    Comments

    Haryana Urban Development Authority v. Raj Mehta (Mrs) .
    (Sep 24, 2004)