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Bihar State Housing Board v. Arun Dakshy .
Factual and Procedural Background
On 27-7-1989, the respondent deposited Rs 15,000 with the Bihar State Housing Board (BSHB) for allotment of a Middle-Income Group (MIG) house in Barari Housing Colony, Bhagalpur, under the Bihar State Housing Board (Management and Disposal of Housing Estate) Regulations, 1983. Allotments were to be decided by lottery, and the respondent was unsuccessful.
After four years, on 28-7-1993, the respondent issued a legal notice seeking a refund. BSHB replied on 6-10-1993, asking for the original pay-in-slip, which the respondent produced on 15-11-1994. The Board refunded the principal amount via cheque dated 6-12-1995.
Dissatisfied with the delay, the respondent filed a consumer complaint on 26-3-1996. The District Consumer Forum directed BSHB to pay the refunded Rs 15,000 with 18% interest and Rs 5,000 compensation. The State Commission dismissed BSHB’s appeal as time-barred, and the National Commission later affirmed both lower orders on 5-10-2001. BSHB appealed to the Supreme Court, where notice was issued limited to the question of the rate of interest.
Legal Issues Presented
- Whether consumer fora can award interest at 18% per annum when Regulation 45 of the BSHB Regulations prescribes simple interest at 5% on earnest money deposits.
Arguments of the Parties
Appellant (Bihar State Housing Board)
- Regulation 45 expressly limits interest on refunded earnest money to simple interest at 5% per annum; any higher rate is ultra vires the Regulations.
- The National Commission’s reliance on its earlier decision awarding 18% interest is contrary to Supreme Court precedent, including Bihar State Housing Board v. Vijay Sharan and the observations in Ghaziabad Development Authority v. Balbir Singh.
Respondent
No appearance was entered by the respondent, and the opinion records no separate arguments on their behalf.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Bihar State Housing Board v. Vijay Sharan | Interest payable under Regulation 45 is limited to 5%; consumer fora cannot direct a higher rate. | Relied upon to show that awarding more than 5% interest contravenes the statutory scheme. |
| HUDA v. Darsh Kumar, RP No. 1197 of 1998 (NC) | Instance where the National Commission awarded 18% interest. | Cited only to note that the impugned order followed this now-disapproved approach. |
| Ghaziabad Development Authority v. Balbir Singh, (2004) 5 SCC 65 | Supreme Court deprecated awarding a flat 18% interest irrespective of facts; compensation must vary case-wise. | Used to reinforce that a blanket 18% rate is unsustainable. |
Court's Reasoning and Analysis
The Supreme Court observed that Regulation 45 of the Bihar State Housing Board Regulations is a self-contained statutory provision mandating simple interest at 5% on refunded earnest money. Consumer fora, being creatures of statute, cannot override this express prescription.
The Court noted that both the District Forum and the Commissions had awarded 18% interest by relying on the National Commission’s earlier decision in HUDA v. Darsh Kumar. That approach had already been criticised in Ghaziabad Development Authority v. Balbir Singh, where the Supreme Court held that a flat 18% rate is impermissible.
Given these authorities—and the fact that the respondent’s claim fell squarely within the ambit of Regulation 45—the Court concluded that the consumer fora “travelled beyond the pale of statutory regulation” in granting 18% interest and additional compensation.
Holding and Implications
Appeal Allowed; Impugned Orders Quashed. The respondent is entitled only to simple interest at 5% under Regulation 45, and the Rs 5,000 compensation award is set aside. No order as to costs.
Implications: The decision reaffirms that where a statute explicitly regulates interest, consumer fora must adhere to that rate. The judgment does not announce new legal principles but enforces existing statutory and precedential limits on awarding interest.
H.K Sema, J.— This appeal preferred by the Bihar State Housing Board is directed against the judgment and order dated 5-10-2001 passed by the National Consumer Disputes Redressal Commission (hereinafter the Commission) passed in Revision Petition No. 2099 of 1999 affirming the orders passed by the State Consumer Disputes Redressal Commission and District Consumer Forum awarding interest @ 18%.
2. Despite receipt of the notice, none entered appearance on behalf of the sole respondent.
3. Briefly stated the facts are as follows:
On 27-7-1989, the respondent deposited an amount of Rs 15,000 for allotment of MIG House in Barari Housing Colony in Bhagalpur, Bihar, under the Bihar State Housing Board (Management and Disposal of Housing Estate) Regulations, 1983 (hereinafter the Regulations). Under the Regulations, the allotment of plots/house/flat is to be made by draw of lottery. The respondent was unsuccessful in the draw of lottery and so he could not be allotted a house under the MIG category. On 28-7-1993, the respondent issued legal notice to the appellant for refund of the amount of Rs 15,000. The aforesaid notice was replied by a letter dated 6-10-1993 by the appellant, directing the respondent to submit the original pay-in-slip for the purpose of refund. On 15-11-1994, the respondent submitted the original pay-in-slip. Thereafter, the appellant refunded Rs 15,000 to the respondent vide Cheque No. 223231 dated 6-12-1995. On 26-3-1996, the respondent filed a complaint before the District Forum. The District Forum passed an award directing the appellant to pay Rs 15,000 with 18% interest. The appellant was also directed to pay Rs 5000 as compensation. Being aggrieved, the appellant filed an appeal before the State Consumer Disputes Redressal Commission, which was rejected, being barred by limitation.
4. Notice was issued limited to the question of rate of interest.
5. At this stage, it may be noted that the contention of the appellant, before the Commissions was that as per Regulation 45 of the Regulations, simple interest @ 5% will be payable on an amount of earnest money. It would appear from the impugned order of the National Commission dated 5-10-2001, the same contention was also raised before the Commission without any result. It was also brought to the notice of the Commission that in an identical case in Bihar State Housing Board v. Vijay Sharan this Court held that the respondents are entitled to interest @ 5% under Regulation 45 of the Regulations instead of awarded interest @ 11%. This Court further pointed out that when the regulation fixed the rate of interest, the Commission could not give a direction to pay the interest contrary to the interest regulated by the statute.
6. It is noticed that in the impugned order while affirming the award of interest @ 18% awarded by the District Forum and the State Consumer Disputes Redressal Commission, the National Commission referred to the interest awarded @ 18% by the Commission in the case of HUDA v. Darsh Kumar RP No. 1197 of 1998 dated 31-8-2001 (NC). Awarding of interest @ 18% by the National Commission in Darsh Kumar RP No. 1197 of 1998 dated 31-8-2001 (NC) was considered by this Court in the case of Ghaziabad Development Authority v. Balbir Singh (2004) 5 SCC 65 where this Court deprecated the award of 18% interest at a flat rate after threadbare discussion. It was held in para 10 of the judgment as under:
“10. As has 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.”
7. Learned counsel for the appellant contended and in our opinion rightly, that the Commission should not have travelled beyond the interest regulated by the statutory regulations, which fixed at 5% and awarding 18% interest dehors Regulation 45 of the said Regulations. In the instant case, in the Regulations itself, namely, Regulation 45 provides that simple interest @ 5% will be payable on the money so deposited. The Regulations being self-contained and the interest payable under the Regulations being regulated by the statute under Regulation 45 of the Bihar State Housing Board Regulations, the Commission should not have travelled beyond the pale of statutory regulation, apart from awarding interest @18% at the flat rate being deprecated by this Court in Balbir Singh (2004) 5 SCC 65.
8. For the reasons aforestated, the impugned orders are not sustainable in law and they are being quashed and set aside. The respondent is entitled to interest @ 5% as envisaged under Regulation 45. The award of compensation of Rs 5000 is also set aside. The appeal is allowed. No costs.
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