TMI Blog2004 (3) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... C.A. No.7120/2002, C.A.No.390/2003, C.A.No. 394/2003, C.A.No.397/2003, C.A.No. 399/2003, C.A.No.400/2003, C.A.No.413/2003, C.A.No.414/2003, C.A.No.415/2003, C.A.No.416/2003, C.A.No.417/2003, C.A.No.1057/2003,C.A.No.1012/2003,C.A.No.1018/2003, C.A.No.1022/2003 C.A.No.1488/2003,C.A.No.1489/2003, C.A.No.1492/2003, C.A.No.1493/2003,C.A.No.1494/2003, C.A.No.1495/2003, C.A.No.1499/2003,C.A.No.3256/2003, C.A.No.3910/2003, SLP(C)No.8758/2003, SLP(C)No.8760/2003, SLP(C)No.8764/2003, C.A.No.3955/2003 C.A.No.4068/2003,SLP(C)No.6079/2003, SLP(C)No.6081/2003, SLP(C)No.6083/2003, SLP(C)No.6084/2003, SLP(C)No.6085/2003, SLP(C)No.9600/2003, SLP(C)No.9663/2003 SLP(C)No.9666/2003, SLP(C)No.9669/2003, SLP(C)No.9060/2003, SLP(C)No.9061/2003,SLP(C)No.9062/2003, C.A.No.3657/2003, C.A.No.8417/2002, C.A.No.2692/2003, C.A.No.4082/2003, SLP(C)No.11676/2003, SLP(C)No.12592/2003, C.A.No.5473/2003, C.A.No.1010/2003, SLP(C)No.6082/2003, SLP(C)No.12594/2003, C.A.No.1013/2003,C.A.No.1019/2003,C.A.No.1960/2003 C.A.No.1964/2003,C.A.No.3382/2003,SLP(C)No.20283/2003, SLP(C)No.20285/2003, SLP(C)No.6299/2003, SLP(C)No.6302/2003 SLP(C)No.6303/2003,SLP(C)No.6304/2003, SLP(C)No.6305/2003 SLP(C)No.6306/2003, SLP(C)No.6307/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SLP(C) No.9063/2003, SLP(C) No.9064/2003, SLP(C) No.12582/2003, SLP(C) No.l2590/2003 SLP(C) No.l2610/2003, SLP(C) No.l6415/2003, SLP(C) No.6077/2003, SLP(C) No.l5291/2003, SLP(C) No.20287/2003, SLP(C) No.20288/2003, SLP(C) No.23120/2003, SLP(C) No.23124/2003, SLP(C) No.23122/2003, SLP(C) No.6297/2003, SLP(C) No.6298/2003, SLP(C) No.6300/2003, SLP(C) No.6301/2003, SLP(C) No.9717/2003, C.A. No.1562/2004, with SLP(C) Nos.4853-4854/2004. In this batch of matters the question is whether grant of interest at the rate of 18% per annum by the Consumer Forums in all cases is justifiable. As facts are varying, at this stage, this Court is only dealing with the question of law. Thereafter this Court shall take up each case separately. The National Consumer Disputes Redressal Commission considered a bunch of matters, the lead matter being the case of Haryana Urban Development Authority vs. Darsh Kumar. The Commission held, in those cases, that in cases of deficiency of service by development authorities like HUDA and GDA, interest must be awarded at the rate of 18% per annum and that this would take into consideration the escalation in the cost of construction as well. Pursuant to this J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of interest to 18% per annum. The learned Attorney General submitted that the liability to pay interest only arises if there is any default or omission on the part of the Body which caused damage or prejudice to the allottee of the flat/plot. This submission requires to be accepted. However, in the context of the Consumer Protection Act the principles laid down in the case of Lucknow Development Authority vs. M. K. Gupta reported in (1994) 1 SCC 243 have to be kept in mind. In this case the question was whether a Development Authority rendered service to bring it within the purview of the Consumer Protection Act. It has been held that the Development Authority is rendering service. It has been also held as follows:- 8. Having examined the wide reach of the Act and jurisdiction of the Commission to entertain a complaint not only against business or trading activity but even against service rendered by statutory and public authorities the stage is now set for determining if the Commission in exercise of its jurisdiction under the Act could award compensation and if such compensation could be for harassment and agony to a consumer. Both these aspects specially the latter are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feudal conception of the Crown, and to substitute for it the principle of legal liability where the State, either directly or through incorporated public authorities, engages in activities of a commercial, industrial or managerial character. The proper test is not an impracticable distinction between governmental and non-governmental function, but the nature and form of the activity in question. Even Kasturi Lal Ralia Ram Jain v. State of U.P. [AIR 1965 SC 1039: (1965)1 SCR 375: (1966) 2 LLJ 583] did not provide any immunity for tortuous acts of public servants committed in discharge of statutory function if it was not referable to sovereign power. Since house construction or for that matter any service hired by a consumer or facility availed by him is not a sovereign function of the State the ratio of Kasturi Lal could not stand in way of the Commission awarding compensation. We respectfully agree with Mathew, J. in Shyam Sunder v. State of Rajasthan (1974) 1 SCC 690 that it is not necessary, 'to consider whether there is any rational dividing line between the so-called sovereign and proprietary or commercial functions for determining the liability of the State' (SCC p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission for harassment and agony, the statutory authority or should it be realised from those who were responsible for it? Compensation as explained includes both the just equivalent for loss of goods or services and also for sufferance of injustice. For instance in Civil Appeal No.... of 1993 arising out of SLP (Civil) No.659 of 1991 the Commission directed the Bangalore Development Authority to pay ₹ 2446 to the consumer for the expenses incurred by him in getting the lease-cum-sale agreement registered as it was additional expenditure for alternative site allotted to him. No misfeasance was found. The moment the authority came to know of the mistake committed by it, it took immediate action by allotting alternative site to the respondent. It was compensation for exact loss suffered by the respondent. It arose in due discharge of duties. For such acts or omissions the loss suffered has to be made good by the authority itself. But when the sufferance is due to mala fide or oppressive or capricious acts etc. of a public servant, then the nature of liability changes. The Commission under the Act could determine such amount if in its opinion the consumer suffered injury due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the injury to society is far more grievous. Crime and corruption thrive and prosper in the society due to lack of public resistance. Nothing is more damaging than the feeling of helplessness. An ordinary citizen instead of complaining and fighting succumbs to the pressure of undesirable functioning in offices instead of standing against it. Therefore the award of compensation for harassment by public authorities not only compensates the individual, satisfies him personally but helps in curing social evil. It may result in improving the work culture and help in changing the outlook. Wade in his book Administrative Law has observed that it is to the credit of public authorities that there are simply few reported English decisions on this form of malpractice, namely, misfeasance in public offices which includes malicious use of power, deliberate maladministration and perhaps also other unlawful acts causing injury. One of the reasons for this appears to be development of law which apart, from other factors succeeded in keeping a salutary check on the functioning in the government or semi-government offices by holding the officers personally responsible for their capricious or even ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d typhoid fever and the local authority served notices forbidding him to sell milk, except under certain conditions. These notices were void, and the farmer was awarded damages on the ground that the notices were invalid and that the plaintiff was entitled to damages for misfeasance. This was done even though the finding was that the officers had acted from the best motives. 11. Today the issue thus is not only of award of compensation but who should bear the brunt. The concept of authority and power exercised by public functionaries has many dimensions. It has undergone tremendous change with passage of time and change in socio-economic outlook. The authority empowered to function under a statute while exercising power discharges public duty. It has to act to subserve general welfare and common good. In discharging this duty honestly and bana fide, loss may accrue to any person. And he may claim compensation which may in circumstances be payable. But where the duty is performed capriciously or the exercise of power results in harassment and agony then the responsibility to pay the loss determined should be whose? In a modern society no authority can arrogate to itself the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities become liable to compensate for misfeasance in public office i.e. an act which is oppressive or capricious or arbitrary or negligent provided loss or injury is suffered by a citizen. The word compensation is of a very wide connotation. It may constitute actual loss or expected loss and may extend to compensation for physical, mental or even emotional suffering, insult or injury or loss. The provisions of the Consumer Protection Act enables a consumer to claim and empower the Commission to redress any injustice done. The Commission or the Forum is entitled to award not only value of goods or services but also to compensate a consumer for injustice suffered by him. The Commission/Forum must determine that such sufferance is due to malafide or capricious or oppressive act. It can then determine amount for which the authority is liable to compensate the consumer for his sufferance due to misfeasance in public office by the officers. Such compensation is for vindicating the strength of law. It acts as a check on arbitrary and capricious exercise of power. It helps in curing social evil. It will hopefully result in improving the work culture and in changing the outlook of the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be based on a finding of loss or injury and has to correlate with the amount of loss or injury. Thus the Forum or the Commission must determine that there has been deficiency in service and/or misfeasance in public office which has resulted in loss or injury. No hard and fast rule can be laid down, however a few examples would be where an allotment is made, price is received/paid but possession is not given within the period set out in the brochure. The Commission/Forum would then need to determine the loss. Loss could be determined on basis of loss of rent which could have been earned if possession was given and the premises let out or if the consumer has had to stay in rented premises then on basis of rent actually paid by him. Along with recompensing the loss the Commission/Forum may also compensate for harassment/injury both mental and physical. Similarly, compensation can be given if after allotment is made there has been cancellation of scheme without any justifiable cause. That compensation cannot be uniform and can best of illustrated by considering cases where possession is being directed to be delivered and cases where only monies are directed to be returned. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment in Darsh Kumar's case (supra) stated that the interest at the rate of 18% per annum takes into consideration the escalation in the cost of construction as well. Even if that be so the compensation cannot be at a uniform rate. If the delay is only of one or two years the escalation in the cost of construction will not be as much as in a case where the delay is of five years or more. Therefore, if compensation has to be awarded for escalation in the costs of construction, it must be done under that head after taking into consideration the amount of delay. Such compensation can be fixed on the basis of indexes of bodies like CPWD or PWD. Further, it must be noted that where a flat is allotted and possession given even though it is given belatedly there will be no question of escalation in the cost of construction. Yet, even in such cases interest at the rate 18% per annum including escalation in the cost of construction has been granted. Further in cases where the Commission/Forum has directed delivery of possession the party has to a certain extent has already got a benefit. The cost of the land/flat would have gone up in the meantime. Of course, even in cases where deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was delay in delivery of possession and in the meantime the complainant had been compelled to live in rented accommodation and pay ₹ 1600/- per month. This Court has noted that interest at 18% was given instead of directing the body to compensate for the loss caused i.e. at the rate of ₹ 1600/- per month. It is on those facts this Court upheld the grant of interest @ 18% per annum. Far from showing that these authorities justify grant of interest at 18% in all cases irrespective of the facts, the authorities of this Court clearly indicate that interest at such rate is to be granted only when the facts so justify. The learned Attorney General submitted that interest is to be awarded taking into consideration the rates of interest which would be payable by Financial Institutions if amounts are deposited with them. He submitted that the Interest Act, 1978 is applicable even to a Tribunal. He pointed out that under the Interest Act the current rate of interest would mean the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on; the money due to the creditor was not paid, or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation whether the compensation was liquidated under an agrement or statute. A Dvision Bench of the High Court of Punjab speaking through Tek Chand, J. In CIT v. Dr. Sham Lal Narula [AIR 1963 Punj 411:(1963) 50 ITR 513] thus articulated the concept of interest: (AIR p. 414, para 8) 8. The words 'interest' and 'compensation' are sometimes used interchangeably and on other occasions they have distinct connotation. 'Interest' in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, 'interest' is understood to mean the amount which one has contracted to pay for use of borrowed money. ... In whatever category 'interest' in a particular case may be put, it is a consdieration paid either for the use of money or for forbearance in demanding it, after it has fallen due, and thus, it is a charge for the use or forbearance of money. In this sense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 18% is not justified. It is clear that in all these cases interest is being awarded as and by way of compensation/damages. Whilst so awarding 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 principles that interest must be granted at the current rate of interest is only applicable where the proceeding 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 grant of interest do not apply to grant of compensation. For this reason also it becomes necessary to consider facts and award damage/compensation under various heads. That brings to the question as to the date from which interest would be payable. Normally in cases of refund interest will be payable from the date the monies were deposited with the body till they are returned either by payment to that party or deposited in a Court. In cases where compensation is directed to be paid, the Commission/Forum must direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher price. This therefore is also a case where absolutely no justifiable reason why the party has not been delivered possession of the flat which had been allotted to him nor has any offer been made to return his money with interest. Instead the body has asked the party to apply for an alternate flat at a higher rate. In our view, on these facts the award of interest at the rate 18% is justified. It is not just interest on the amount invested but is also compensation for the harassment and agony caused to the allottee. We have given these two instances only by way of illustrations. As stated above the interest, in both these cases, will be payable from the date the monies were paid till they are retained or deposited in Court/Tribunal. We however clarify that merely because we are maintaining awards of interest it must not be taken to mean that in future the Commission/Forum must not work out compensation under various heads and that they can continue to grant interest only by way of damage/compensation. We clarify that in all cases where interest has already been paid @ 18% irrespective of the above order, the authority will not be entitled to call upon the party to refund ..... X X X X Extracts X X X X X X X X Extracts X X X X
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