While allowing a home-buyer to retain money already received from a builder only because of the particular circumstances of the case, the Supreme Court reiterated that it disapproves of consumer forums awarding compound interest in these matters while exercising jurisdiction under the Consumer Protection Act.
In an order last week, the bench of justice Dinesh Maheshwari and justice Sanjay Kumar says, “…even when we may not find fault with the stance of the respondent (homebuyer) in refusing to accept such an offer of a refund, particularly when she was desirous of the flats rather than money refund, the appellants (builder) cannot be saddled with any liability to pay compound interest over the amount offered by them beyond the date of their offer.”
“The consumer fora have failed to consider that when the appellants had indeed offered to pay the money and sent the cheque (of Rs10.68 lakh) on 8 November 2005, it would be bringing about negative imbalance if such an effort on the part of the appellants was to be ignored altogether and compounding of interest was continued beyond 8 November 2005,” the bench says.
The apex court observed that when the amount payable by the builder with reference to the principal and propositions is calculated, in its view, it does not exceed Rs2.48 crore together with accrued interest, which the home-buyer has already received. “Keeping in view the peculiar circumstances of this case, as an extraordinary measure, we propose to allow the respondent to retain the amount so received.”
The case related to Anita Merchant, who in 1989 was a non-resident Indian (NRI) and booked three flats in a residential project Siddharth Shila Apartments, launched in Vaishali in Uttar Pradesh by Suneja Towers Pvt Ltd, headed by KL Suneja. She was allotted three flats, one costing Rs7.37 lakh and the other two at Rs7.35 lakh. As per the agreement, the total cost was payable by Ms Merchant in 12 instalments. However, she did not make the remaining payments after paying up to the sixth instalment.
In October 2005, Ms Merchant issued a notice to Suneja Towers alleging that even after 16 years, the builder had kept the allottees waiting, despite receiving more than 60% of the total cost of the flats. She offered to pay the balance, provided that Suneja Towers clarified when the construction would be completed and she would get possession of her flats.
In its response, Suneja Towers stated that it was a provisional allotment and no agreement was executed between the builder and the home-buyer, and since Ms Merchant defaulted in payment, the allotment has been cancelled. Suneja Towers offered to refund Rs10.68 lakh through cheque on 8 November 2005. Ms Merchant, however, returned the cheque and sent a rejoinder to the builder.
Ms Merchant then filed a civil suit, which was dismissed for want of jurisdiction. She then filed a complaint before the district consumer forum. However, the district forum rejected her complaint, stating, “Ms Merchant tried to avail the services of Sujena Towers for commercial purpose… thus she does not fall within the category of consumer…”
The home-buyer then approached the state commission. While setting aside the order passed by the district forum, the state commission held that the complaints were maintainable by law. It observed that Ms Merchant paid 60% of the total sale consideration. “However, possession of the flats booked by her was not handed over even after the expiry of the agreed period. Having opted for the construction-linked plan, the buyer was to make payment of the balance amount on delivery of possession and the allegation of her being in default was to be rejected because, on inspection of the site, construction was not found as per schedule.”
The state commission found the case of Ms Merchant akin to that of Dr Manjeet Kaur Monga and when the units in question had already been sold, found it just and proper to direct the present appellants to refund the deposited amount together with compound interest at 14%pa (per annum) from the date of deposit.
Suneja Towers challenged the decision before the national consumer disputes redressal commission (NCDRC). However, the appeal was dismissed. It says, “…in this case, the state commission had duly followed the dictum of the Supreme Court in Dr Monga’s case, and therefore, it cannot be said that the findings of the state commission are perverse or without jurisdiction. We found no illegality or infirmity in the impugned order. The present revision petitions have no merit, and the same are dismissed.”
Suneja Towers then filed an appeal before the apex court. After hearing both sides, the bench observed that in her original complaint, Ms Merchant did not make any prayer for an award of compound interest; instead, her prayer had essentially been for directions to the appellants to deliver the flats and to award damages. She sought a simple interest at 18%pa. Citing the case of Dr Monga, the home-buyer for the first time claimed compound interest only before the state commission.
The SC observed that the state commission did not elaborate much on the principles governing its powers and those governing awarding compound interest and rather considered the decision in Dr Monga’s case to be decisive of the matter.
The apex court delved upon several judgements related to builders or developers and home-buyers and found, in most cases, the compensation for delayed delivery of possession and even in the cases where the builder was not delivering possession or not being taken by the purchaser for a valid reason, the award of compensation was restricted to the refund with a simple interest in the range of 6%pa to 9%pa.
The bench stated that while awarding compensation and/or punitive damages, the concerned (consumer) forum can take all the relevant factors into account and award such amount as deemed fit and necessary but “ordinarily, in the matters of money refund, awarding of compound interest as a measure of punitive damages is not envisaged.”
“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,” it added.
The apex court also clarified that it is allowing Ms Merchant to retain Rs2.48 crore with accrued interest, the money already received by her, only because of the peculiar circumstances of this case. “…this relaxation for the respondent is in no manner to be read as approval of the orders impugned or approval of the proposition of awarding compound interest in these matters.”
(Civil Appeal Nos2892-2894 of 2023 Date: 18 April 2023)