TaxTMI 
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TaxTMI 
Residential property disputes - Interest allowed by courts in range of 9 to 15 Percent, SC held 9% as reasonable. With due respect author feels that ground realities could not be emphasized by consumer who appeared in person against large team of counsels of Appellant / board.
For the Appellant : Mr. Chirag M. Shroff, AOR Ms. Mahima C. Shroff, Adv. Mr. Anand Thumbayil, Adv.
For the Respondent : Respondent-in-person
Orders of courts about interest:
SCDRC allowed @15% pa in original round as well as after remand.
NCDRC reduced and allowed @ 9% pa
HC allowed @15% (confirming as per SCDRC)
SC allowed @ 9% (confirming as per NCDRC)
NAGPUR HOUSING AND AREA DEVELOPMENT BOARD (A MHADA UNIT)- in short Board.
Facts relevant to issue of interest are simplified as follows:
The consumer (before SC petitioner MANOHAR BURDE) applied for a 3 BHK flat under a scheme of the Board. He deposited the requisite amount of Rs. 4,00,000/- on 23.09.2009 and by virtue of lottery drawn on 03.01.2010, he was allotted a flat.
Consumer was required to pay the balance consideration in eight (8) instalments, out of which he deposited seven (7) instalments between 31.12.2011 to 31.03.2013 and the eighth (8th) instalment was deposited on 26.08.2013 on the assurance that possession of flat will be delivered timely.
Consumer alleged deficiency in service and unfair trade practice, filed a complaint before the State Consumer Disputes Redressal Commission (in short “SCDRC”).
SCDRC allowed petition vide order dated 20.02.2017 with a direction to the authorities to deliver possession within six (6) months and to pay interest @ 15% p.a. for the period of delay w.e.f. July 2013 till handing over of possession.
The same was challenged by the Board in First Appeal before NCDRC and the case was remitted to the SCDRC for adjudication on merits afresh.
On remand, the SCDRC by order dated 07.02.2019 partly allowed the complaint and directed the Board to complete the construction of the allotted flat along with a direction to Respondent Nos. 1, 2 & 3 therein to pay interest @ 15% p.a. to the consumer / complainant for the delayed period w.e.f. 01.07.2013 till delivery of the possession of flat on the amount paid by the complainant.
It was further ordered that, in the event construction is not completed, the amount paid by the complainant should be refunded along with interest @ 15% p.a. from the date of respective payments till realization along with compensation of Rs. 10,00,000/- towards loss suffered by consumer and Rs. 1,00,000/- towards physical and mental harassment along with Rs. 25,000/- towards litigation cost.
The board being aggrieved, again preferred appeal before NCDRC which was partly allowed by order dated 27.07.2022 and Board and respondents were directed to refund the entire amount deposited by the consumer /complainant with interest @ 9% p.a. against interest @ 15% as directed by SCDRC.
The NCDRC also directed payment of Rs. 50,000/- as consolidated costs. The Board/ respondents again filed a review petition seeking review of the order dated 27.07.2022, which was dismissed by NCDRC vide order dated 26.08.2022. Thus the order of NCDRC dated 27.07.2022 became final so far Board was concerned.
Being aggrieved the consumer/ complainant filed W.P. No. 5052 of 2022 before the High Court of Judicature at Bombay, Nagpur Bench, which was allowed vide impugned order setting aside the order passed by the NCDRC and granting the reliefs as sought in the Writ Petition. That means relief allowed by SCDRC was restored in favor of consumer.
High Courts reasoning and order analyzed:
- The High Court opined that there was delay on the part of the Board /respondent in not completing the construction within the agreed period and there has been delay at all stages.
- That the reduction in the rate of interest by NCDRC to 9% p.a. from 15% p.a. was not for any justifiable reason.
Therefore, the board filed appeal before the Supreme Court seeking restricted relief to consumer as per order of NCDRC.
Supreme Court- order with notice:
Before passing the final order the Supreme Court after hearing Mr. Shyam Divan, learned senior counsel that the petitioners/ Board, while issuing notice on the Special Leave Petition vide order dated 19.02.2024 had observed / passed the following orders (analysed by author):
That approximately 100 cases are coming against the petitioners/ Board, which may have adverse impact, if payments are allowed, under the impugned order.
that the Board /petitioners have already deposited the entire amount along with the interest at the rate of 15% per annum including Rs. 10 Lakhs.
After considering the aforesaid, the Supreme Court orders to issue notice, returnable in six weeks. The Court further directed that in execution or otherwise, the consumer would be entitled to receive the amount under the order impugned along with the interest at the rate of 9% per annum and the remaining amount of interest and Rs.10 Lakhs, shall be detained in the account. The remaining amount shall be kept in short term auto renewal fixed deposit.”
Hearing, arguments, order etc. at the Supreme Court analyzed:
On service of notice, the petitioner (sic. Respondent) appeared in-person and filed the counter affidavit reiterating the contentions raised before the SCDRC and High Court.
11. We have heard the arguments of Mr. Tushar Mehta, learned Solicitor General appearing for the respondents (sic. Petitioners) and Shri Manohar Burde, appearing in person and perused the material placed on record.
12. Mr. Tushar Mehta appearing for the respondents (Sic. Petitioner) strenuously argued that the High Court was not justified in exercising its supervisory jurisdiction under Article 227 of the Constitution of India to modify the well-reasoned findings of NCDRC which had balanced the scale by evaluating the evidence of the parties including pleadings and thus allowing the Writ Petition by granting enhanced interest @ 15% p.a. is not only exorbitant, but also contrary to the principles of law enunciated by this Court. He also urged that when petitioner had opted for refund of amount, at the most the interest at a reasonable rate could have been awarded as was done by the NCDRC. Awarding an interest @ 15% p.a. on payment made by the complainant coupled with additional compensation of Rs. 10,00,000/- is unjustifiable. Hence, he prayed that appeal be allowed and impugned order be set-aside.
13. The petitioner (Sic. Respondent) appearing as party in person argued in support of the impugned order and contended that there have been repeated defaults on the part of the statutory authorities and explicit deficiency of service on part of the developer, hence interest @ 15% p.a. on account of inordinate delay is just and appropriate warranting no interference under Article 136 of the Constitution of India. Hence, he prayed for dismissal of the appeal.
14. Having heard the learned advocates appearing for the parties and on perusal of the case papers, we are of the considered view that the NCDRC having taken note of the relevant aspects including the factum of delay and the fact that petitioner had opted for refund of money deposited, rightly held that as a home buyer, petitioner cannot be compelled to take possession of the flat after such long time, and as such ordered for refund of entire amount deposited with interest of 9% p.a. Placing reliance on the law laid down by this Court in ‘Bangalore Development Authority v. Syndicate Bank, (2007) 6 SCC 711’, wherein a coordinate Bench of this Court dealing with the question of grant of relief to a consumer in cases of delay of delivery of possession held that when possession of the allotted plot/flat/house is not delivered within the specified time, the allottee is entitled to a refund of the amount paid with reasonable interest thereon from the date of payment till the date of refund. The Court summarized the general principles and in particular para 10(f) observed as follows –
“(f) Where the plot/flat/house has been allotted at a tentative or provisional price, subject to final determination of price on completion of the project (that is acquisition proceedings and development activities), the development authority will be entitled to revise or increase the price. But where the allotment is at a fixed price, and a higher price or extra payments are illegally or unjustifiably demanded and collected, the allottee will be entitled to refund of such excess with such interest, as may be determined with reference to the facts of the case.”
In the present case, the High Court by the impugned order modified the finding of NCDRC and awarded interest @ 15% p.a. primarily relying upon the judgment of this Court in ‘Rohit Chaudhary and another v. Vipul Ltd., (2024) 1 SCC 8’, wherein this Court in order to balance the equities and to compensate the loss caused to the purchaser/complainant who had booked an office premise for his use, directed the refund of the amount paid along with interest @ 12% p.a. from the date of complaint till the date of payment. However, the issue in the instant case relates to allotment of a 3 BHK flat after payment of sale consideration and delay in delivery of same. As such, the NCDRC considering the entirety of the facts and circumstances of the case, had awarded interest @ 9% p.a., which in our view was fair and reasonable. The interest @ 15% p.a. awarded by High Court is excessive. Therefore, the impugned order hereby is setaside and the order dated 27.07.2022 passed by NCDRC in so far as it relates to award of interest @ 9% on the respective deposit till the date of actual payment is restored.
15. As already discussed above, this Court at the time of issuing notice on this appeal, noted that the appellants have already deposited the entire amount with interest @ 15% p.a. including Rs.10,00,000/- as ordered by SCDRC. Having regard to the fact that the appellant herein is an instrumentality of State, the delay if any, cannot be attributed to any personal animosity of the officers manning the institution and they have been discharging the statutory duties. Considering the aforesaid and in the peculiar facts and circumstances of the case, we deem it proper to reduce the compensation payable from Rs. 10,00,000/- to Rs.7,50,000/- as it would meet the ends of justice. Accordingly, the order stands modified to the extent above referred to. The appeal stands partly allowed with no order as to costs. Pending application(s), if any, shall stand consigned to records.
View of author:
It seems that some vital points could not be raised by the respondent MANOHAR BURDE who appeared in person and large team of senior advocates weighed against him.
Simple interest - Interest allowed by Courts is simple interest and not compounding interest. Therefore, rate of interest is very low. In fact there is no reason for allowing simple interest for such a long period. Particularly because banks are charging interest on monthly basis.
The fact is that money was paid long ago in the year 2009, 2011 and 2013. At that time rate of interest was very high. Furthermore, period of delay for which interest is allowed w.e.f July 2013 to the date of handing over of possession / refund is very long. This is more than ten years old and at that time also rate of interest was much higher than at the time of judgment passed by the Supreme Court.
In the construction business it is known fact that rate of interest is very high due to uncertainties and for the reason that it is not given status of industry. At that time obtaining loans from banks and financial institutions was very tough and portion of loan granted was also low.
The difference of commercial property and residential property is not a ground for allowing lower rate of interest. We find interest was allowed @15% by the Supreme Court in case of Rohit Chaudhary and another v. Vipul Ltd. [2023 (9) TMI 1569 - SUPREME COURT].
The judgment in case of Rohit Choudhary was more appropriate to be followed as it is near in time in comparison to Bangalore Development Authority v. Syndicate Bank, [2007 (5) TMI 565 - SUPREME COURT] – 16 years earlier. In the matter of interest it is desirable to follow latest judgment, rates and trend.
2009 vis a vis 2025:
In year 2009 price was fixed and substantial amount of Rs. Four lakh was paid as application money on 23.09.2009 and full payment was made by 26.08.2013. (instalments amount and full amount is not mentioned). We can say that even against sum of Rs. four lakh compensation amount of Rs.750000/- ( reduced from ten lakh) is too low because during the period 2009-2025 at least three upswings have been noticed in property rates.
Therefore, damages and interest allowed both seems very low and does not compensate the consumer.
Wrong reason for low compensation:
The compensation is for loss suffered by consumer, it should not be affected whether the vendor is a private party or government agency. Reasons for delay are attributable to the organization of vendor and not to any individual officer. With due respect, author feels that the following reasoning is not proper:
Having regard to the fact that the appellant herein is an instrumentality of State, the delay if any, cannot be attributed to any personal animosity of the officers manning the institution and they have been discharging the statutory duties.
Whether, there was delay, if yes, how long was delay and during that period of delay what is loss suffered by consumer/ complainant is only relevant. Whether, vendor is outfit of state or a private organization is not relevant. If the organization had discharged duty properly , then there should not be unreasonable delay. There is nothing on record as to why delay took place or whether there was an force measure for such delay. Therefore, presumption that Board was discharging its duties properly is not correct. However, this was not a matter of discussion.
Therefore, the judgment need a fresh look in view of admitted position that large number of cases are of similar type.