Supreme Court sets new interest rate at 12%, excludes 'mental agony' compensation under contract law principles

The Supreme Court held that compensation for 'mental agony' could not be awarded under contract law principles, setting aside the award in a case involving the Ghaziabad Development Authority. The Court determined that interest could be awarded at a rate of 12% per annum, modifying the earlier rate of 18% per annum, based on equitable grounds. It settled on 12% per annum as a just and proper rate of interest to meet the ends of justice, clarifying that the authority's brochure provision on interest payment did not apply in the circumstances of the appeals.

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Issues:
1. Compensation for 'mental agony' suffered by claimants.
2. Payment of interest by Ghaziabad Development Authority to claimants.
3. Rate of interest to be paid by Ghaziabad Development Authority.

Analysis:

Issue 1: Compensation for 'mental agony' suffered by claimants
The appeals involved a common question of law regarding the award of compensation for 'mental agony' suffered by claimants. The Ghaziabad Development Authority had been found guilty of unreasonably delaying schemes, leading to complaints from subscribers. In one case, the MRTP Commission awarded compensation for 'mental agony' suffered by claimants. However, the Supreme Court held that compensation for mental agony could not have been awarded under contract law principles. The Court referred to established legal principles regarding damages in contract law, emphasizing that damages typically do not include compensation for mental distress. The Court set aside the award of compensation for mental agony in the specific case.

Issue 2: Payment of interest by Ghaziabad Development Authority
The second issue revolved around the payment of interest by the Ghaziabad Development Authority to claimants. The Court noted that there was no express or implied contract for the payment of interest by the authority to claimants. The legal provisions enabling the award of interest had not been highlighted. The claimants relied on a previous decision where interest was awarded in similar circumstances. The Court acknowledged that interest could be awarded on equitable grounds in appropriate cases. It cited a case where interest was awarded at a rate of 15% per annum. In the present cases, the Court deemed 12% per annum as just and proper for awarding interest, modifying the earlier rate of 18% per annum.

Issue 3: Rate of interest to be paid by Ghaziabad Development Authority
The final issue addressed the rate of interest to be paid by the Ghaziabad Development Authority to claimants. The Court considered various factors in determining the appropriate rate of interest, emphasizing that it should neither be too high nor too low. The Court settled on 12% per annum as a just and proper rate of interest to meet the ends of justice in the cases under consideration. The Court clarified that the provision in the authority's brochure absolving it from paying interest applied only when claimants were responsible for the refund circumstances, which was not the case in the appeals. Therefore, the Court modified the direction for payment of interest from 18% to 12% per annum in all relevant cases.

In conclusion, the Supreme Court addressed the issues of compensation for 'mental agony,' payment of interest, and the rate of interest to be paid by the Ghaziabad Development Authority to claimants, providing detailed legal analysis and setting the appropriate rates in each case.

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