Summary
An allottee who booked three flats in 1989 and paid 60% of the price never got possession; the builder purported to cancel and tendered a refund cheque in 2005, which she returned. Relying on Dr. Manjeet Kaur Monga v. K.L. Suneja, which arose from the same project under the MRTP Act, the State Consumer Commission directed refund with 14% compound interest from deposit and the National Commission affirmed. The Supreme Court disapproved the award: Dr. Monga's case held only that interest computed as ordered by COMPAT was 'compensation' under Section 12-B and laid down no ratio on compound interest; consumer fora may award reasoned compensation and punitive damages but not the shortcut of compound interest on refunds; and compounding could not have run beyond the refund offer of 8 November 2005. As an extraordinary measure she was allowed to retain the sums already received.
Issues
- Whether consumer fora under the Consumer Protection Act, 1986 can award compensation to a flat purchaser, deprived of possession and entitled to refund, in the form of compound interest on the amount deposited.
- Whether the Supreme Court's decision in Dr. Manjeet Kaur Monga v. K.L. Suneja, which left undisturbed COMPAT's award of 15% compound interest against the same builder, is a binding precedent for awarding compound interest.
- Whether compounding of interest, if at all permissible, could continue beyond the date on which the builder tendered a refund cheque that the purchaser returned.
Provisions considered
- Section 14(1)(d) with its proviso, Consumer Protection Act, 1986Empowers the forum to award compensation for loss or injury due to negligence and, since 2003, punitive damages; the absence of a stipulation for compound interest in the Act or contract is not decisive, but ordinarily compound interest as a measure of punitive damages on money refund is not envisaged and the relevant factors and basis of quantification must be specified. (¶¶ 20, 22, 23)
- Section 12-B, Monopolies and Restrictive Trade Practices Act, 1969In Dr. Monga's case the Court held only that the amount arrived at by calculating the interest ordered by COMPAT was the compensation referred to in this section; it did not decide that compound interest is a permissible measure of compensation. (¶¶ 15, 16.1, 16.2, 17)
- Section 34; Order XXI Rule 4, Code of Civil Procedure, 1908Central Bank of India v. Ravindra, on capitalisation of interest under contractual stipulation, has no application; the later decision in K.L. Suneja v. Dr. Monga applied the principle that once an amount is tendered the payee cannot later claim interest on it. (¶¶ 15.1, 20.2, 20.2.1)
Held
- A judgment is an authority for its ratio decidendi and not for its final order; in Dr. Manjeet Kaur Monga the question whether compound interest could be granted as a measure of compensation was neither raised nor decided, the Court merely holding that calculating the interest ordered by COMPAT yielded the amount of compensation under Section 12-B of the MRTP Act, so the decision cannot support awarding compensation or punitive damages under the 1986 Act by way of compound interest, and the substratum of the impugned orders falls. (¶¶ 16, 16.1, 16.2, 17, 17.1, 18)
- In real estate matters, even where possession is not delivered, this Court has restricted compensation to refund with simple interest in the range of 6% to 9% per annum, and in Ireo Grace Realtech a three-Judge Bench declined compound interest as having no nexus with the commercial realities of the market; the decisions in Clariant International, Central Bank of India and Indian Council for Enviro-Legal Action do not guide the award of compound interest by consumer fora. (¶¶ 14.7, 20.1, 20.2.1, 21, 21.3, 22)
- Consumer fora may award such compensation and punitive damages as the facts, the gravity of negligence and the consequential injury warrant, but must specify the relevant factors and the basis of quantification; the shortcut of awarding compound interest on money refund is neither envisaged by the statute nor supported by contract or usage and stands disapproved. The State Commission's open-ended order, which did not specify the period of compounding, ignored the refund cheque of 8 November 2005 and returned no finding on loss, was bereft of reasoning, and approving it would unjustly enrich the respondent beyond the present value of the flats. (¶¶ 22, 23, 24, 25, 26)
- Even if compounding were allowed, the builder's tender of Rs. 10,68,031 by cheque on 8 November 2005, though the purchaser was entitled to decline it, meant that compound interest on that sum could not run beyond that date; on that computation the amount payable did not exceed what the respondent had already received under this Court's interim order, which she was allowed to retain as an extraordinary measure without approval of the impugned orders. (¶¶ 27, 27.1, 27.2, 27.3)
- Objections that compound interest was not pleaded, or that the builder had not opposed it before the State Commission, did not merit dilation; the complainant could not be denied proper relief if available, and the builder had contested the applicability of Dr. Monga's case in revision. (¶¶ 12, 12.1)
Result
Appeals allowed; orders of the State Commission dated 12.03.2020 and of the National Commission dated 31.03.2022 awarding compound interest at 14% disapproved; the respondent permitted to retain Rs. 2,48,52,000 with accrued interest already received under this Court's interim order, but the appellants are not required to make any further payment towards refund, compensation or interest; parties to bear their own costs.