1999 JTR(SC) 830
1999 AIR(SC) 2963 ; 1999 AIR(SCW) 2878 ; 2000 1 ALD(SC) 14 ; 1999 37 AllLR 130 ; 1999 4 AWC 3308 ; 2000 1 BomCR(SC) 41 ; 2000 99 CompCas 126 ; 1999 2 CPJ(SC) 4 ; 1999 4 ICC 225 ; 1999 ISJ(Banking) 600 ; 1999 6 JT 10 ; 2000 1 MLJ 5 ; 1999 3 PLR(SC) 490 ; 1999 3 RCR(Civ) 641 ; 1999 4 Scale 659 ; 1999 6 SCC 406 ; 1999 SCR 337 ; 1999 2 UJ 1524 ; 2000 WBLR 19 ; 1999 KHC 1294 ; 1999 7 Supreme 181
1999(7) Supreme 181
Supreme Court of India
(From National Consumer Disputes Redressal Commission, New Delhi)
S. Saghir Ahmad & R.P. Sethi, JJ.
Sovintorg (India) Ltd. -Appellant
versus
State Bank of India, New Delhi -Respondent
Civil Appeal No. 823 of 1992
Decided on 11-8-1999
Counsel for the Parties :
For the Appellant: Ms. Meenakshi Arora, Advocate.
For the Respondent : S.K. Bisaria, Advocate.
Important point
In proceedings under Consumer Protection Act 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. However the general provision of the Section 34 of CPC being based upon justice, equity and good conscious would authorise the Redressal Forums and Commissions to also grant interest appropriately under the circumstance of each case. Interest may also be awarded in lieu of compensation or damages in appropriate cases.
Act
Referred
:CIVIL PROCEDURE CODE : S.34
CONSUMER PROTECTION ACT : S.14, S.17, S.2(g), S.17(a)
(A) The Consumer Protection Act, 1986 (Sections 14, 17, 17(a), 2(g)) and the Civil Procedure Code, 1908 (Section 34) govern this dispute concerning delayed recovery of funds wrongfully withheld by a banking institution. Section 14 defines the scope of consumer disputes, while Sections 17 and 17(a) empower the Commissions to adjudicate on claims for compensation and interest. Section 2(g) provides the definitional framework for the appellant's grievance. Section 34 of the Civil Procedure Code is invoked to support the award of interest, reinforcing the principles of justice, equity, and good conscience in determining appropriate relief and monetary compensation for losses suffered.
(B) Key legal principles include the jurisdiction of consumer commissions to award compensation and interest, the application of equitable principles under Section 34 of the Civil Procedure Code for awarding interest in the absence of a specific contract, and the assessment of adequate interest rates when a party is deprived of the use of funds. The case also highlights the role of bank agreements regarding margin money and the burden of proof on the appellant to demonstrate negligence or wrongful withholding.
Facts of the case:
The appellant-company deposited a cheque for Rs. One lakh with the respondent-bank in June 1983. The proceeds were collected on June 17, 1983, but were not credited to the appellant's account for approximately seven years, as the bank retained the amount as margin money for a guarantee. The appellant claimed compensation for business losses and damages, in addition to principal and interest. The State and National Commissions allowed partial relief, awarding principal with interest at 12% but denied compensation for business losses and damages.
Findings of Court:
The Court noted that the bank was not wrong in retaining the amount based on an understanding between the parties, and the appellant failed to prove the termination date of the guarantee agreement, which remained in force until 1987. Consequently, the commissions were justified in awarding interest, but the rate of 12% was deemed inadequate given the seven-year deprivation. The Court held that interest at 15% per annum would serve the ends of justice.
Issues:
Whether the respondent-bank was liable for wrongful withholding of funds, whether the appellant is entitled to compensation for business losses and mental agony, and whether interest at a rate higher than 12% per annum should be awarded on the delayed payment.
Ratio Decidendi:
The core judicial reasoning is that while the bank's retention of funds was not wrongful, the appellant is entitled to interest on the equitable ground of deprivation over a prolonged period. The rate of interest must be just and adequate, and 15% per annum was deemed appropriate to compensate for the seven-year delay, subject to the terms of the guarantee agreement.
Result:
The appeal is partly allowed. The orders of the State Commission and the National Commission are modified, and the respondent is directed to pay the principal amount of Rs. One lakh with interest at 15% per annum from the date the amount was received until the date of payment, with the difference in interest to be paid within six weeks.
(A) The Consumer Protection Act, 1986 (Sections 14, 17, 17(a), 2(g)) and the Civil Procedure Code, 1908 (Section 34) govern this dispute concerning delayed recovery of funds wrongfully withheld by a banking institution. Section 14 defines the scope of consumer disputes, while Sections 17 and 17(a) empower the Commissions to adjudicate on claims for compensation and interest. Section 2(g) provides the definitional framework for the appellant's grievance. Section 34 of the Civil Procedure Code is invoked to support the award of interest, reinforcing the principles of justice, equity, and good conscience in determining appropriate relief and monetary compensation for losses suffered.
(B) Key legal principles include the jurisdiction of consumer commissions to award compensation and interest, the application of equitable principles under Section 34 of the Civil Procedure Code for awarding interest in the absence of a specific contract, and the assessment of adequate interest rates when a party is deprived of the use of funds. The case also highlights the role of bank agreements regarding margin money and the burden of proof on the appellant to demonstrate negligence or wrongful withholding.
Facts of the case:
The appellant-company deposited a cheque for Rs. One lakh with the respondent-bank in June 1983. The proceeds were collected on June 17, 1983, but were not credited to the appellant's account for approximately seven years, as the bank retained the amount as margin money for a guarantee. The appellant claimed compensation for business losses and damages, in addition to principal and interest. The State and National Commissions allowed partial relief, awarding principal with interest at 12% but denied compensation for business losses and damages.
Findings of Court:
The Court noted that the bank was not wrong in retaining the amount based on an understanding between the parties, and the appellant failed to prove the termination date of the guarantee agreement, which remained in force until 1987. Consequently, the commissions were justified in awarding interest, but the rate of 12% was deemed inadequate given the seven-year deprivation. The Court held that interest at 15% per annum would serve the ends of justice.
Issues:
Whether the respondent-bank was liable for wrongful withholding of funds, whether the appellant is entitled to compensation for business losses and mental agony, and whether interest at a rate higher than 12% per annum should be awarded on the delayed payment.
Ratio Decidendi:
The core judicial reasoning is that while the bank's retention of funds was not wrongful, the appellant is entitled to interest on the equitable ground of deprivation over a prolonged period. The rate of interest must be just and adequate, and 15% per annum was deemed appropriate to compensate for the seven-year delay, subject to the terms of the guarantee agreement.
Result:
The appeal is partly allowed. The orders of the State Commission and the National Commission are modified, and the respondent is directed to pay the principal amount of Rs. One lakh with interest at 15% per annum from the date the amount was received until the date of payment, with the difference in interest to be paid within six weeks.
Judgment
Sethi, J.-Not satisfied with the majority view of the National Consumer Disputes Redressal Commission (hereinafter called “the National Commission”) but allured by the observation made by one of its members (Bala Krishna Eradi, J.), the appellant has moved this Court for modifying the majority order of the National Commission with direction to the respondent to pay the compensation for wrongfully withholding the amount and the interest at the commercial rates as then prevalent.
2. The facts of the case are that the appellant-company had a bank account with the respondent-bank wherein in the month of June, 1983 a cheque for Rs. One lakh was deposited by the appellant for collection and the proceeds thereof to be credited to its account. The appellant alleged that though the proceeds of the cheque were collected on June 17, 1983 yet they were not deposited in its account for over a period of seven years. The appellant filed a complaint before the State Consumer Disputes Redressal Commission (hereinafter called “the State Commission”) constituted under the Consumer Protection Act, 1986 (hereinafter called ‘The Act’) detailing therein its entitlement to the following amounts :
(a) Principal amount deposited with the Defendant on 15.5.83 Rs. 1,00,000/-
(b) Normal and penal interest @ 24% per annum quarterly compounded as per standard usual practice prevalent in all Nationalised Banks w.e.f. 18.6.83 till 31.10.89 Rs. 3,26,000/-
(c) Compensation for business losses inflicted on the petitioner on account of above criminal acts/ omissions and commissions by the deft. Rs. 2,00,000/-
(d) Nominal damages/ general damages/ special damages/ substantial damages including for loss of prestige, status and mental agony, suffered by the petitioner company and its Managing Director. Rs. 2,00,000/-
Total Rs. 8,26,000/-
3. The State Commission partly allowed the complaint by directing the respondent to pay Rs. One lakh with interest at the rate of 12% p.a. with quarterly rests from the date when the amount was received till the date of payment within the time prescribed by it. As noticed earlier the majority of the National Commission confirmed the order of the State Commission. Hence this appeal.
4. Learned counsel appearing for the appellant has vehemently argued that the State Commission as well as the National Commission were not justified in rejecting the claim of the appellant in so far as it pertained to payment of the compensation and the interest at the rate of 24% per annum. Reliance is also placed on the provisions of Section 34 of the Civil Procedure Code. It is contended that in view of the finding of one of the members of the National Commission, the negligence of the respondent stood proved which entitled the appellant to the payment of the amount claimed before the State Commission.
5. After hearing the learned counsel for the parties and perusing the record, we have noticed that the State Commission as well as the National Commission have concurrently found that the amount realised by the collection of cheque in question could not be deposited apparently on the basis of an understanding between the parties which authorised the bank to keep the same as margin money for the guarantee furnished by the Bank on behalf of the complainant company to the Chief Controller of Exports and Imports. It has been found that the bank was not wrong in having retained the said amount in its custody. The appellant was further found to have not proved as to from which date the contract for guarantee stood terminated. However, the said contract was found to be in force as late as in 1987. In the absence of any negligence, we do not find any substance in the submission made by the learned counsel for the appellant to modify the orders of the State Commission and National Commission for directing the payment of compensation on allegedly wrong retention of the amount as was submitted in the complaint.
6. Relying upon the province of Section 34 of the Civil Procedure Code, the learned counsel for the appellant submitted that appellant was entitled to the payment of interest at the rate at which moneys are lent or advanced by Nationalised Banks in relation to commercial transactions. Referring to I.A. 2 filed in this Court and Banking Law and Practice in India issued in 1991, she had contended that the appellant was entitled to the payment of interest minimum at the rate of 19.4 per cent per annum. The general submission made in this behalf cannot be accepted in view of the provision of Section 14 of the Act. 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 the services. 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. We, however, find that the general provision of the Section 34 being based upon justice, equity and good conscious would authorise the Redressal Forums and Commissions to also grant interest appropriately under the circumstance of each case. Interest may also be awarded in lieu of compensation or damages in appropriate cases. The interest can also be awarded on equitable grounds as was held by this Court in Satinder Singh & Ors. v. Amrao Singh & Ors.1 . Referring to the province of the Interest Act of 1839, in relation to the compulsory acquisition of land where no specific provision is made for grant for awarding the interest, the Court held :
“In this connection we may incidentally refer to Interest Act, 1839 (XXXII of 1839). Section 2 of this Act confers power on the Court to allow interest in cases specified therein, but the proviso to the said section makes it clear that interest shall be payable in all cases in which it is now payable by law. In other words, the operative provisions of Section 1 of the said Act do not mean that where interest was otherwise payable by law Court’s power to award such interest is taken away. The power to award interest on equitable grounds or under any other provisions of the law is expressly saved by the proviso to Section 1. This question was considered by the Privy Council in Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji2. Referring to the proviso to Section 1 of the Act the Privy Council observed “this proviso applies to cases in which the Court of equity exercises its jurisdiction to allow interest.” We have already seen that the right to receive interest in lieu of possession of immovable property taken away either by private treaty or by compulsory acquisition is generally regarded by judicial decisions as an equitable right; and so, the proviso to Section 1 of the Interest Act saves the said right. We must accordingly hold that the High Court was in error in rejecting the claimants’ case for the payment of interest on compensation amount, and so we direct that the said amount should carry interest at 4% per annum from the date when respondent 2 took possession of the claimants’ lands to the date on which it deposited or paid the amount of compensation to them.”
To the same effect is the judgment in Laxmichand v. Indore Improvement Trust, Indore, & Ors.2. The State Commission as well as the National Commission were, therefore, justified in awarding the interest to the appellant but in the circumstances of the case we feel that grant of interest at the rate of 12% was inadequate as admittedly the appellant was deprived of the user of a sum of Rs. One lakh for over a period of seven years. During the aforesaid period, the appellant had to suffer the winding up proceedings under the Companies Act, allegedly on the ground of financial crunch. We are of the opinion that awarding interest at the rate of 15 per cent annum would have served the ends of justice.
7. Under the facts and circumstances of the case the appeal is partly allowed by modifying the orders of the State Commission as well as the National Commission with direction that the appellant shall be entitled to the payment of Rs. One lakh with interest at the rate of 15% per annum with quarterly rests from the date when the amount was received by it till the date of payment. The difference of the amount on account of enhancement of the rate of interest shall be paid to the appellant within a period of six weeks from the date of this judgment.
(C.R.) Appeal partly allowed.
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