J.L. Sethi v. Senior Citizen Home Complex

M.B Shah, J. President:— Petitioner filed Case No. 1183 of 2003 before the District Forum-II, Delhi, against Respondent, contending that the Complainants were senior citizens and the society floated by the Opposite Party at Greater Noida was exclusively for senior citizens. Complainants applied for a two bed room flat and paid Rs. 70,000/- towards registration money on 17.12.1997 Membership was assigned to the Complainants. An agreement dated 3.1.1998 was executed between the parties. The price of the two bed room flat was fixed by the society at Rs. 8.20 lakhs and the payment was to be made in ten equal instalments of Rs. 70,000/- each linked with the progress of the construction. The final instalment of Rs. 50,000/- was to be made at the time of completion of the conveyance deed. The society was to complete the construction of the flat within a period of two-and-half years from the date of registration, i.e to say construction was to be completed on or before 17 June, 2000.

It is contended that for reasons best known to the society, after collecting the 5 instalment (instalments were regularly paid by the Complainants), the society suddenly stopped sending any information or progress report, and the society acknowledged their failure in their letter dated 18.7.2000, but demanded the payment of 6, 7 and the 8 instalment on verbal assurance that the progress report would soon follow. But the assurance was not kept. By that time, the Complainants had paid to the society the total sum of Rs. 6.30 lakhs.

It is the say of the Complainants that even after 6 years of registration, the Opposite Party has not allotted any flat to them and when they visited the site in August/September, 2002, they found that two blocks were constructed and the Complainants were ignored at the time of draw of lots. Construction with regard to the other blocks was not in sight. Therefore, they sent a letter dated 9.9.1992 And, thereafter, on persistent follow up, the society merely kept on assuring that they were finding a suitable flat for allotment to the Complainants. Complainants also found that the society has handed over flats to some other applicants ignoring their membership number.

Hence, reluctantly, by letter dated 18.8.2003, they sought refund of the amount with interest and in the alternative immediate allotment and possession of the flat. And, that was not done, the aforesaid complaint was filed.

On the basis of the said facts and the deficiency found by it, the District Forum directed the Opposite Party to refund the amount deposited by the Complainants with interest at the rate of 18% p.a from the respective dates of deposit till the payment. The District Forum specifically noted that interest at the rate of 18% was awarded because agreement between the parties allows the Opposite Party to charge interest at the said rate on delayed payments; and, that the Complainants who are senior citizens have booked the flat in question in hope of getting shelter in their old age. Hence, in addition to interest the District Forum directed the Opposite Party to pay Rs. 25,000/- as compensation and Rs. 5,000/- as cost of litigation.

Against that order the society preferred Appeal No. A-442 of 2005. Without issuing any notice to the Petitioner, by order dated 21 September, 2005, the State Commission partly allowed the appeal by directing that the society shall refund the amount of Rs. 6.30 lakhs to the Petitioner without interest, but maintained the order of compensation of Rs. 25,000/- and Rs. 5,000/- for the cost of litigation, by observing that once the compensation is awarded, interest cannot be awarded.

The State Commission referred to Section 14 of the Consumer Protection Act, 1986, which empowers the District Forum only to pay such amount as may be awarded as compensation to the consumer for any loss or injury suffered by the consumer, but not to award any interest.

Award of Interest:

In our view, the finding recorded by the State Commission is, on the face of it, erroneous. No doubt, Section 14 provides for payment of compensation. However, for measuring the compensation, rate of interest can be taken into consideration. In case of refund of money, interest, prevailing in the market, can be a reasonable basis for assessing the loss suffered by the complainants. In some quarters, there is some misunderstanding with regard to award of interest. Sec. 14 which provides for adequate compensation would certainly mean that the Complainant who are deprived of the benefit which they were entitled for years together, they should be adequately compensated. Measure for adequate compensation can be a lump sum amount, may be a reasonable rate of interest by way of damages, say, in the case of not delivering possession of the house/flat, loss of prevailing rent could be the criteria for determining compensation. In such cases, rate of interest would be only a measure of compensation and this is required to be properly appreciated.

In the case of Sovintorg (India) Ltd. v. State Bank Of India, New Delhi - (1999) 6 SCC 406 a contention was raised that there was no contract between the parties regarding payment of interest on delayed deposit or on account of delay on the part of the Opposite Party to render service. In such set of circumstances, it was held that interest cannot be claimed under Section 34 of the Civil Procedure Code as its provisions have not been specifically made applicable to the proceedings under the Act. The Apex Court held that the general provision of Section 34 being based upon justice, equity and good conscience would authorise the Redressal Forums and Commissions to also grant interest appropriately under the circumstances of each case. Interest may also be awarded in lieu of compensation or damages in appropriate cases. The interest can also be granted on equitable grounds. The Court referred to the cases of Satinder Singh v. Umrao Singh - AIR 1961 SC 908 and Laxmichand v. Indore Improvement Trust, (1975) 1 SCC 565.

Thereafter, in the case of Ghaziabad Development Authority v. Balbir Singh. - (2004) 5 SCC 65 interest was awarded by the Consumer Fora by way of compensation/damages. In that case the Court observed that while awarding interest “.. 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 principle that interest must be granted at the current rate of interest is only applicable where the proceedings 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 the grant of interest do not apply to grant of compensation. For this reason also it becomes necessary to consider facts and thereafter award damages/compensation under various heads”.

Hence, in our view, the order passed by the District Forum directing the Respondent to refund the amount with interest can be said to be justified because interest would properly measure loss/damages suffered by the Complainants. Loss can be on the basis of the fact that Complainants were required to deposit Rs. 6,30,000/- with the Opposite Party. Not only the Complainants have lost the interest on the said amount but have also lost the chances of having the premises at the rate which was prevailing in 1997 or 1998. It is known fact that market price of the premises is increasing year after year. This compensation can be looked at from another angle by considering the fact that if the possession of the flat was delivered, complainants would have saved the rent which they were paying or they would have earned the rent if they had let out the premises.

Complainants have produced a chart indicating that if the amount is refunded along with interest @ 18/% per annum they are entitled to recover more than Rs. 7 lakhs from the Respondent-Society.

As against this, the learned counsel appearing on behalf of the Respondent submitted that in any set of circumstances rate of interest should not exceed 9% to 10% per annum.

Considering the facts of the present case, particularly the senior citizens have lost the opportunity of having a flat in the area of their choice and the fact that there is all over increase in the market price of the flats/premises, we direct that the Respondent-Society shall refund the amount deposited by the complainants with interest @ 12% per annum instead of 18% per annum as directed by the District Forum.

In the result, the orders passed by the District Forum and the State Commission are modified accordingly. The Respondent is directed to refund the amount of Rs. 6,30,000/- with interest @ 12% per annum from the respective dates of deposits till payment within a period of eight weeks from the date of the Order. Respondent shall also pay Rs. 25,000/- as litigation cost to the complainant. The amount already paid by the respondent shall be adjusted. This Revision Petition is disposed of accordingly.