No Provision Of Compound Interest As Compensation Under Consumer Protection Act, 1986

Cause Title : M/s Suneja Towers Private Limited & Anr. vs Anita Merchant, Civil Appeal Nos. 2892-2894 Of 2023, Supreme Court Of India

Date of Judgment/Order : 18/4/23

Corum : Dinesh Maheshwari & Sanjay Kumar, JJ

Citied: 

1. Dr. Manjeet Kaur Monga v. K.L. Suneja: (2018) 14 SCC 679
2. Ghaziabad Development Authority v. Balbir Singh: (2004) 5 SCC 65
3. Malay Kumar Ganguly v. Sukumar Mukherjee (Dr.): [2009] CPJ 17 (SC)
4. Central Bank of India v. Ravindra: (2002) 1 SCC 367
5. Clariant International Ltd. and Anr. v. Securities & Exchange Board of India: (2004) 8 SCC 524
6. Experion Developers Pvt. Ltd. v. Sushma Ashok Shiroor: (2022) SCC OnLine SC 416; 
7. NBCC (India) Ltd. v. Shri Ram Trivedi: (2021) 5 SCC 273; 
8. Ireo Grace Realtech Pvt. Ltd. v. Abhishek Khanna and Ors.: (2021) 3 SCC, 241
9. DLF Home Developers Limited and Anr. v. Capital Greens Flat Buyers Association and Ors.: (2021) 5 SCC 537
10. Arifur Rahman Khan and Ors v. DLF Southern Homes Pvt Ltd and Ors.: (2020) 16 SCC 512
11. DLF Home Panchkula Pvt Ltd and Ors. v. DS Dhanda and Ors.: (2020) 16 SCC 318
12. Manohar Lal (D) by Lrs. v. Ugrasen (D) by Lrs. and Ors.: (2010) 11 SCC 557
13. K.L. Suneja and Anr. v. Dr. (Mrs.) Manjeet Kaur Monga (D) Through Her LRs and Anr: 2023 SCC OnLine SC 91
14. Wallersteiner v. Moir (No. 2): (1975) Q.B. 373
15. Indian Council for Enviro-Legal Action v. Union of India and Ors.: (2011) 8 SCC 161
16. Transmission Corp. of AP Ltd. v. P. Surya Bhagavan: (2003) 6 SCC 353
17. Balram Prasad v. Kunal Saha: (2014) 1 SCC 384

Background

Three flats were booked by the Respondent herein and had made 60% of the total consideration but the Appellant had failed to deliver the flats. One filling complaint before the consumer forum, the district court dismissed the same  on various grounds including that she had tried to avail of the services of the builder for commercial purposes by booking three flats and thus, did not fall within the category of “consumer”, as defined under Section 2(d) of the Consumer Protection Act, 1986. 

The State Forum however rejected the conclusion drawn by the District Forum and granted relief to the complainant in the manner that the appellants shall refund the amount deposited by her together with ‘compound interest at the rate of 14% from the date of deposit. The State Commission, thereafter, examined various connotations of the term “compensation” and referring to Ghaziabad Development Authority (supra) observed that the Commission or the Forum was entitled to award not only value of goods or services but also to compensate a consumer for injustice suffered by him. According to the State Forum in cases where possession was directed to be delivered to the complainant, the compensation for harassment would necessarily have to be less because that party was being compensated by increase in the value of the property but, in cases where only money was to be refunded, the party would be suffering a loss inasmuch as he had deposited the money in the hope of getting a flat/plot and he was deprived of the same, as also the benefit of price escalation. The State Commission also observed that in such case (only of refund of money), the complainant would suffer substantial loss on account of payment of interest on the loans raised; depreciation in the money value; and escalation in the cost of construction etc. The State Commission also observed that in these proceedings, necessary orders regarding refund of the deposited amount could be passed, notwithstanding the proceedings in any other forum.

On appeal filed by the builder, the National Forum rejected all the contentions urged on behalf of the appellant against the order so passed by the State Commission and also found no reason to interfere with the relief granted by the State Commission in view of the decision of this Court in the case of Dr. Manjeet Kaur Monga (supra). Hence this appeal.

Judgment

On the question as to whether the Consumer Fora had been justified in awarding and approving compound interest at the rate of 14%, the Supreme Court observed that in the complaint case as originally filed, the respondent did not make any prayer for award of compound interest; rather her prayer had essentially been for directions to the appellants to deliver the flats and to award damages. If at all, the respondent claimed simple interest @ 18% p.a. The main plank, rather substratum, of the decision of State Commission in awarding compound interest had been the view taken and relief granted against the appellants in relation to the very same project and in relation to a similar grievance of the said other prospective buyer, Dr. Monga, who was also deprived of the fruits of her deposits. A look at the decisions aforesaid makes it clear that though in most of the cases, the questions were relating to the compensation for delayed delivery of possession but even in the cases where possession was not being delivered by the builder or not being taken by the purchaser for a valid reason, the award of compensation was restricted to the refund with simple interest in the range 6% to 9% p.a.

Disapproving the proposition of awarding compound interest in the cases of monetary refund, the SC held that the forum would be entitled to provide for the amount of compensation as deemed fit, having regard to the facts and circumstances of the case and the gravity of the negligence of the opposite party and consequential injury suffered by the consumer. A shortcut of awarding compound interest is neither envisaged by the statute nor do we find any such term of contract between the parties or any such usage and if the award as made is approved, it could only lead to unjust enrichment of the respondent in the name of disgorgement of benefits purportedly derived by the appellants.