2007 JTR(SC) 187
2007 AIR(SC) 1198 ; 2007 AIR(SCW) 1233 ; 2007 5 AllMR(SC) 419 ; 2007 136 CompCas 258 ; 2007 1 CompLJ 382 ; 2007 2 CPJ(SC) 3 ; 2007 2 ISJ(Banking) 165 ; 2007 2 JCR(SC) 358 ; 2007 4 JT 248 ; 2007 4 MLJ 205 ; 2007 2 RCR(Civ) 783 ; 2007 3 Scale 190 ; 2007 3 SCC 545 ; 2007 2 SCR 737 ; 2007 3 WBLR 9 ; 2007 2 WLC 218 ; 2007 3 WLR(SC) 9 ; 2007 KHC 3126 ; 2007 2 Supreme 249
2007(2) Supreme 249
SUPREME COURT OF INDIA
(From MRTP Commission)
S.B. Sinha and Markandey Katju, JJ.
Alok Shankar Pandey—Appellant
versus
Union of India & Ors.—Respondents
Civil Appeal No. 1598 of 2005
Decided on 15-2-2007
Counsel for the Parties :
For the Appellant : Parag Tripathi, Sr. Advocate, Ms. Deepti Rajpal and Dr. Kailash Chand, Advocates.
For the Respondents : Mohan K. Parasaran, ASG, Ashok K. Srivastava, P. Parmeshwaran (for D.S. Mahra), Ms. Reena Singh and Ms. Neelam Singh, Advocates.
Act Referred :MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT : S.12(b)
(A) The Monopolies and Restrictive Trade Practices Act, 1969, Section 12(b) provides for adjudication of complaints regarding unfair trade practices causing loss to consumers. The provisions apply where a party is alleged to have engaged in unfair trade practices in the course of its trade or business, including deficiency in service. The complaint in this appeal was entertained under Section 12B of the Act, read with Section 12, on the basis of the alleged unfair trade practice of deficiency in service by the respondent authority in connection with the Indira Puram Housing Scheme.
(B) Key legal principles include that interest is not a penalty but an equitable accrual on capital; interest may be granted at a rate commensurate with the loss suffered; and where a deficiency of service results in denial of possession and return of amounts, the adjudicating authority can direct payment of interest on amounts refunded. The court also clarified that interest on interest may be awarded to compensate for the delayed refund of amounts already paid.
Facts of the case:
The appellant applied for a flat under the Indira Puram Housing Scheme in 1994, paid all installments as per the reservation letters, and later opted for a Higher Income Group flat allotted in May 1994. The respondent neither demanded the remaining estimated cost nor handed over possession, while keeping the appellants amounts for nearly five years. Upon demand, the amount was refunded without interest. The appellant filed a complaint under Section 12B alleging unfair trade practice of deficiency of service.
Findings of Court:
The Commission found a clear deficiency of service, as the respondent failed to either collect the remaining amount or deliver possession despite assurances. The Commission directed payment of 12% per annum interest on the installments from their dates of payment to the date of refund. The court observed that the 12% rate was appropriate under the facts and additionally directed interest on that interest from the dates of payment to the date of refund, to be paid within two months.
Issues:
Whether the complaint under Section 12B of the Act disclosed a case of deficiency of service; whether the interest rate granted by the Commission was correct; and whether interest on interest was permissible.
Ratio Decidendi:
Where a party pays installments as per demand but the other party fails to perform its obligations resulting in deficiency of service, the party is entitled to compensation including interest at an equitable rate; the appellate court may enhance the interest rate if deemed appropriate, and interest may be awarded on the refunded interest to compensate for delayed recovery.
Result:
The appeal is allowed, the Commissions order is modified to include an additional direction for the respondent to pay interest at 12% per annum on the refunded installments and on the interest itself, with the entire amount payable within two months from the date of this judgment.
(A) The Monopolies and Restrictive Trade Practices Act, 1969, Section 12(b) provides for adjudication of complaints regarding unfair trade practices causing loss to consumers. The provisions apply where a party is alleged to have engaged in unfair trade practices in the course of its trade or business, including deficiency in service. The complaint in this appeal was entertained under Section 12B of the Act, read with Section 12, on the basis of the alleged unfair trade practice of deficiency in service by the respondent authority in connection with the Indira Puram Housing Scheme.
(B) Key legal principles include that interest is not a penalty but an equitable accrual on capital; interest may be granted at a rate commensurate with the loss suffered; and where a deficiency of service results in denial of possession and return of amounts, the adjudicating authority can direct payment of interest on amounts refunded. The court also clarified that interest on interest may be awarded to compensate for the delayed refund of amounts already paid.
Facts of the case:
The appellant applied for a flat under the Indira Puram Housing Scheme in 1994, paid all installments as per the reservation letters, and later opted for a Higher Income Group flat allotted in May 1994. The respondent neither demanded the remaining estimated cost nor handed over possession, while keeping the appellants amounts for nearly five years. Upon demand, the amount was refunded without interest. The appellant filed a complaint under Section 12B alleging unfair trade practice of deficiency of service.
Findings of Court:
The Commission found a clear deficiency of service, as the respondent failed to either collect the remaining amount or deliver possession despite assurances. The Commission directed payment of 12% per annum interest on the installments from their dates of payment to the date of refund. The court observed that the 12% rate was appropriate under the facts and additionally directed interest on that interest from the dates of payment to the date of refund, to be paid within two months.
Issues:
Whether the complaint under Section 12B of the Act disclosed a case of deficiency of service; whether the interest rate granted by the Commission was correct; and whether interest on interest was permissible.
Ratio Decidendi:
Where a party pays installments as per demand but the other party fails to perform its obligations resulting in deficiency of service, the party is entitled to compensation including interest at an equitable rate; the appellate court may enhance the interest rate if deemed appropriate, and interest may be awarded on the refunded interest to compensate for delayed recovery.
Result:
The appeal is allowed, the Commissions order is modified to include an additional direction for the respondent to pay interest at 12% per annum on the refunded installments and on the interest itself, with the entire amount payable within two months from the date of this judgment.
JUDGMENT
Markandey Katju, J.—This appeal has been filed against the order passed by the Monopolies and Restrictive Trade Practice Commission, New Delhi (hereinafter referred to as “the Commission”) dated 13.9.2004 in C.A. No.193 of 2001.
2. Heard learned counsel for the parties and perused the record.
3. The case of the appellant is that after applying for a flat under the “Indira Puram Housing Scheme” in the year 1994, a reservation letter dated 30th March, 1994 was received by him and he was asked to pay seven installments on the specified dates. The amount as well as the dates on which the installments were to be paid was mentioned therein. The applicant started paying the installments as demanded. Subsequently, he opted out for a HIG flat, which was also allotted to him vide letter dated 17th May, 1994. No additional demand was asked for in the second letter. The installments were duly paid as demanded. Thereafter, nothing was heard from the respondent side for almost five years. After finding that there is no likelihood of the flat to be made available to him in the near future, the applicant was left with no alternative but to demand his amount paid along with interest at the rate of 21% per annum. The amount was refunded to the applicant in the year 2001 without any interest as asked for. The applicant thus suffered losses on account of unfair trade practices adopted by the respondent, hence he sought compensation from the respondent by filing an application under Section 12B of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as “the Act”).
4. In response to the notice issued under Section 12B of the Act, the respondent filed its reply. The defence of the respondent was that as the full payment of Rs.6,64,000/- (estimated cost) as indicated in the reservation letter was not paid, the possession of the flat was not handed over to him. The refund as requested, on the other hand was issued to him promptly. There was no deficiency of service as alleged in the application and as such the Compensation Application should be dismissed.
5. It is not disputed that the installments as mentioned in both the reservation letters, were paid on the specified dates as indicated therein. It is also not disputed that though the estimated cost was indicated at Rs. 6,64,000/-, the same was not worked out till the year 1998 when the first camp was held, in respect of allotment of such flats. The respondent also made no efforts to issue demand letters in respect of the remaining amount subsequent to the year 1995 when the last installment was paid. On the other hand, the applicant was given an assurance that the possession of the flat would be given to him in the near future. The applicant, therefore, had no alternative but to ask for refund of the amount as deposited. The respondent on its side has no explanation for either not demanding the remaining amount or handing over the possession of the flat. Even the averments of the applicant that the house is not yet ready has not been strongly refuted. Thus it is a clear case of deficiency of services on the part of the respondent. As a result of such unfair trade practices, the applicant has not only been deprived of return on his investment made with the respondent authority but also the possession of the flat promised to him.
6. Considering the above facts, the Commission directed the respondent to pay 12% per annum interest on the installments from the dates of the payment till the date of refund. This appeal has been filed claiming interest at a higher rate.
7. Learned counsel for the appellant Shri Parag P. Tripathi referred to various decisions in which this Court has granted higher rate of interest e.g. Renusagar Power Co. Ltd. Vs. General Electric Co. 1994 Supp.(1) SCC 644.
8. We are of the opinion that there is no hard and fast rule about how much interest should be granted and it all depends on the facts and circumstances of the each case. We are of the opinion that the grant of interest of 12% per annum is appropriate in the facts of this particular case. However, we are also of the opinion that since interest was not granted to the appellant along with the principal amount the respondent should then in addition to the interest at the rate of 12% per annum also pay to appellant interest at the same rate on the aforesaid interest from the date of payment of installments by the appellant to the respondent till the date of refund on this amount, and the entire amount mentioned above must be paid to the appellant within two months from the date of this judgment.
9. It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital. For example if A had to pay B a certain amount, say 10 years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to B 10 years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned interest on it for this period. Hence equity demands that A should not only pay back the principal amount but also the interest thereon to B.
10. With these observations the impugned judgment is modified and the appeal is disposed of accordingly.
Appeal allowed accordingly.