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CASE NO.: Appeal (civil)  7173 of 2002

PETITIONER: Ghaziabad Development Authority          

RESPONDENT: Balbir Singh     

DATE OF JUDGMENT: 17/03/2004

BENCH: S.N. VARIAVA & H. K. SEMA.

JUDGMENT: J U D G M E N T

O R D E R

WITH

Civil Appeal No. 7391/2002, C.A.No.7793/2002, C.A.No.8400/2002,    C.A.No.7700/2002, C.A.No. 7288/2002, C.A.No.7792/2002, C.A.  No.7788/2002,    C.A.No.7396/2002, C.A.No. 7685/2002, C.A.No.8408/2002, C.A.  No.8415/2002,   C.A.No.7786/2002, C.A.No. 7790/2002, C.A.No.7672/2002, C.A.  No.7289/2002,   C.A.No.7723/2002, C.A.No. 8418/2002, C.A.No.7690/2002, C.A.  No.8407/2002,  C.A.No.7782/2002, C.A.No. 7725/2002, C.A.No.7695/2002, C.A.  No.8404/2002,    C.A.No.7662/2002, C.A.No. 7676/2002, C.A.No.7693/2002, C.A.  No.7724/2002,  C.A.No.7286/2002, C.A.No. 7670/2002, C.A.No.7688/2002, C.A.  No.8405/2002,  C.A.No.7787/2002, C.A.No. 7789/2002, C.A.No.8530/2002, C.A.  No.8527/2002,    C.A.No.8588/2002, C.A.No. 7776/2002, C.A.No.7667/2002, C.A.  No.7783/2002,    C.A.No.7224/2002, C.A.No. 7699/2002, C.A.No.7698/2002, 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

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SLP(C)No.6303/2003,SLP(C)No.6304/2003, SLP(C)No.6305/2003 SLP(C)No.6306/2003, SLP(C)No.6307/2003, SLP(C)No.9715/2003 SLP(C)No.20289/2003, C.A.No.8504/2003, SLP(C)No.22189/2003,  C.A.No.549/2003, SLP(C)No.23127/2003, C.A.No.8402/2002, C.A.No.392/2003, C.A.No.404/2003, C.A.No.405/2003, C.A.No.410/2003, C.A.No.1014/2003, C.A.No.1491/2003, C.A.No.1498/2003, C.A.No.3381/2003,C.A.No.8514/2002    C.A.No.1009/2003,C.A.No.7878/2002,C.A.No.7775/2002,C.A.No.7781 /2002 SLP(C)No.12584/2003, SLP(C)No.12596/2003,SLP(C)No.12601/2003 SLP(C)No.12604/2003,SLP(C)No.14905/2003, SLP(C)No.12593/2003 C.A.No.8529/2002, C.A.No.7389/2002, C.A.No.393/2003, C.A.No.409/2003,C.A.No.9747/2003,C.A.No.7780/2002 C.A.No.8403/2002,C.A.No.7777/2002,SLP(C)No.14052/2003, SLP(C)No.14053/2003, C.A.No.7395/2002, C.A.No.7388/2002,    C.A.No.407/2003, SLP(C) No.8765/2003, SLP(C) No.8766/2003, SLP(C) No.8763/2003,SLP(C) No.9190/2003,  SLP(C) No.9670/2003, SLP(C) No.9665/2003, SLP(C) No.9662/2003,  SLP(C) No.12583/2003, SLP(C) No.12587/2003,SLP(C) o.l2588/2003,  SLP(C) No.l2589/2003, SLP(C) No.l2591/2003, SLP(C) No.l2599/2003  SLP(C) No.l2603/2003, SLP(C) No.l2605/2003, SLP(C) No.l2606/2003  SLP(C) No.l2607/2003, SLP(C) Nos.l2608-12609/2003, SLP(C)  No.l3785/2003  SLP(C) No.l2585/2003, SLP(C) No.l2586/2003, SLP(C) No.l4905/2003  SLP(C) No.l5139/2003, SLP(C) no.l7803/2003, SLP(C) Nos.l7805- 17806/2003, SLP(C) No.l6414/2003, C.A. No.7397/2002, C.A. No.7385/2002,  C.A. No.7390/2002, C.A. No.7875/2002, C.A. No.7778/2002,  C.A. No.8399/2002, C.A. No.7774/2002, C.A.No.7879/2002,  C.A. No.8398/2002, C.A.No.7232/2002, C.A. No.7236/2002, C.A. No.8401/2002, C.A. No.8586/2002, C.A.No.8528/2002,  C.A.No.7287/2002, C.A. No.7779/2002, C.A. No.389/2003,  C.A.No.391/2003, CA.No.395/2003  C.A.No.401/2003, C.A.  No.403/2003,  C.A. No.408/2003, C.A. No.1011/2003, CA.No.1016/2003,  C.A.No.1015/2003, C.A.No.1017/2003, C.A. No.1020/2003,  C.A.No.1490/2003, C.A. No.1496/2003, C.A. No.1961/2003,  C.A. No.1962/2003, C.A. No.1963/2003, C.A. No.1966-1967/2003, C.A.No.1965/2003, C.A.No.3956/2003,C.A.No.3957/2003,  C.A. No.3958/2003, C.A. No.3959/2003, C.A. No.3658/2003,  C.A. Nos.411-412/2003, C.A.No.7386/2002, C.A. No.1021/2003,  R.P.(C) No.1649/2003 in SLP(C) No.18369/2003, SLP (C) No.  4275/2004

Not ready matters - listed for directions

C.A.No.7225/2002 , C.A. No.7285/2002, C.A. No.8589/2002,  C.A. No.8587/2002,  C.A. No.398/2003, C.A.No.1500/2003,  C.A. No.1501/2003, SLP(C) No.8755/2003, SLP(C) No.6078/2003,   SLP(C) No.6080/2003, SLP(C) No.9059/2003, 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

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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 Judgment the National Commission has been  disposing of all subsequent matters with a one paragraph order which,  for all practical purposes, reads as under :- "We have already taken a view in the case of Haryana  Urban Development Authority vs. Darsh Kumar [Revision  Petition No. 1197 of 1998], where we have upheld the  award of interest at the rate of 18% per annum.  We have  provided for certain period during which the interest would  not run.  The impugned judgment is modified only to that  extent.  This Revision Petition is disposed of in terms of  our judgment in the case of HUDA Vs. Darsh Kumar".  

It has been shown to us that the facts are varying and different.   Whilst facts of all cases cannot be set out by way of illustration it must  be stated that in some cases even though monies had been paid and  allotments had been made of flats/plots, the scheme itself got  cancelled for some reason or the other.  Possession was thus refused  to be delivered of the flats/plots allotted to the allottees.   In some  cases, at a much later date, possession of some other flat/plot was  offered at an increased rate.  In some cases possession was offered  but not taken by the party.  In some cases even though the scheme  was not cancelled and there was no refusal to deliver possession, yet  possession was not delivered for a number of years even after monies  had been received.  In some cases the construction was of sub- standard quality or it was incomplete.   In some of the cases the  authority has demanded extra amounts from the party.  In some cases  the party had not paid the extra amounts whilst in some cases they  had paid those amounts.  The question, therefore, was of refund of  those amounts wrongly collected.  In some cases allotments were  made and possession offered of flats/land which was encumbered or  occupied by some other party.  In some cases the party had asked for  refund of amounts paid. Irrespective of the type of case, irrespective of the amount of  delay, the National Commission has been granting/confirming interest  at the rate of 18% per annum without even going into the facts of the  case.  It must be mentioned that in some of the matters before us it  has been pointed out that the District and the State Forums had  granted interest at a lower rate.  Appeals had been filed only by the  authority.  Yet the National Commission has, in the Appeal filed by the  authority, increased the 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

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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 of vital significance in the present  day context.  Still more important issue is the liability of  payment.  That is, should the society or the tax payer be  burdened for oppressive and capricious act of the public  officers or it be paid by those responsible for it.  The  administrative law of accountability of public authorities for  their arbitrary and even ultra vires actions has taken many  strides.  It is now accepted both by this Court and English  Courts that the State is liable to compensate for loss or  injury suffered by a citizen due to arbitrary actions of its  employees.   In State of Gujarat v. Memon Mahomed Haji  Hasam [(AIR 1967 SC 1885: (1967) 3 SCR 938)] the order  of the High Court directing payment of compensation for  disposal of seized vehicles without waiting for the outcome  of decision in appeal was upheld both on principle of  bailee’s ’legal obligation to preserve the property intact  and also the obligation to take reasonable care of it .... to  return it in the same condition in which it was seized’ and  also because the Government was, ’bound to return the  said property by reason of its statutory obligation or to pay  its value if it had disabled itself from returning it either by  its own act or by act of its agents and servants’.  It was  extended further even to bona fide action of the authorities  if it was contrary to law in Lala Bishambar Nath v. Agra  Nagar Mahapalika, Agra [(1973) 1 SCC 788:  AIR 1973 SC  1289].  It was held that where the authorities could not  have taken any action against the dealer and their order  was invalid, ’it is immaterial that the respondents had  acted bona fide and in the interest of preservation of public  health.  Their motive may be good but their orders are  illegal.  They would accordingly be liable for any loss  caused to the appellants by their action.’ The theoretical  concept that King can do no wrong has been abandoned in  England itself and the State is now held responsible for  tortuous act of its servants.  The First Law Commission  constituted after coming into force of the Constitution on  liability of the State in tort, observed that the old  distinction between sovereign and non-sovereign functions  should no longer be invoked to determine liability of the  State.  Friedmann observed:

"It is now increasingly necessary to abandon the  lingering fiction of a legally indivisible State, and of a  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

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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. 695, para 20).  In any case the law has  always maintained that the public authorities who are  entrusted with statutory function cannot act negligently.   As far back as 1878 the law was succinctly explained in  Geddis v. Proprietors of Bann Reservoir (1878) 3 AC 430  thus:

"I take it, without citing cases, that it is now  thoroughly well established that no action will lie for  doing that which the Legislature has authorised, if it  be done without negligence, although it does  occasion damage to anyone; but an action does lie  for doing what the Legislature has authorised, if it be  done negligently."

Under our Constitution sovereignty vests in the people.   Every limb of the constitutional machinery is obliged to be  people oriented.  No functionary in exercise of statutory  power can claim immunity, except to the extent protected  by the statute itself.  Public authorities acting in violation  of constitutional or statutory provisions oppressively are  accountable for their behaviour before authorities created  under the statute like the commission or the courts  entrusted with responsibility of maintaining the rule of law.   Each hierarchy in the Act is empowered to entertain a  complaint by the consumer for value of the goods or  services and compensation.  The word ’compensation’ is  again of very wide connotation.  It has not been defined in  the Act.  According to dictionary it means, ’compensating  or being compensated; thing given as recompense;’.  In  legal sense it may constitute actual loss or expected loss  and may extend to physical mental or even emotional  suffering, insult or injury or loss.  Therefore, when the  Commission has been vested with the jurisdiction to award  value of goods or services and compensation it has to be  construed widely enabling the Commission to determine  compensation for any loss or damage suffered by a  consumer which in law is otherwise included in wide  meaning of compensation.  The provision in our opinion  enables a consumer to claim and empowers the  Commission to redress any injustice done to him.  Any  other construction would defeat the very purpose of the  Act.  The Commission or the Forum in the Act is thus  entitled to award not only value of the goods or services  but also to compensate a consumer for injustice suffered  by him."

This Court then went on to hold as follows:

"10.  Who should pay the amount determined by the  Commission 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 Rs.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

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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 to what is called misfeasance of the officers by the  English Courts.  Even in England where award of  exemplary or aggravated damages for insult etc. to a  person has now been held to be punitive, exception has  been carved out if the injury is due to, ’oppressive,  arbitrary or unconstitutional action by servants of the  Government’ (Salmond and Heuston on the Law of Torts).   Misfeasance in public office is explained by Wade in his  book on Administrative Law thus:  

"Even where there is no ministerial duty as above,  and even where no recognised tort such as trespass,  nuisance, or negligence is committed, public  authorities or officers may be liable in damages for  malicious, deliberate or injurious wrong-doing.   There is thus a tort which has been called  misfeasance in public office, and which includes  malicious abuse of power, deliberate  maladministration, and perhaps also other unlawful  acts causing injury."  (p.777).

The jurisdiction and power of the courts to indemnify a  citizen for injury suffered due to abuse of power by public  authorities is founded as observed by Lord Hailsham in  Cassell & Co. Ltd. v. Broome [1972 AC 1027:  (1972) 1 All  ER 801] on the principle that, ’an award of exemplary  damages can serve a useful purpose in vindicating the  strength of law’.  An ordinary citizen or a common man is  hardly equipped to match the might of the State or its  instrumentalities.  That is provided by the rule of law.  It  acts as a check on arbitrary and capricious exercise of  power.  In Rookes v. Barnard [1964 AC 1129: (1964) 1 All  ER 367, 410] it was observed by Lord Devlin, ’the servants  of the government are also the servants of the people and  the use of their power must always be subordinate to their  duty of service’.  A public functionary if he acts maliciously  or oppressively and the exercise of powers results in  harassment and agony then it is not an exercise of power  but its abuse.  No law provides protection against it.  He  who is responsible for it must suffer it.  Compensation or  damage as explained earlier may arise even when the  officer discharges his duty honestly and bona fide.  But  when it arises due to arbitrary or capricious behaviour then  it loses its individual character and assumes social  significance.  Harassment of a common man by public  authorities is socially abhorring and legally impermissible.   It may harm him personally but 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

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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 ultra vires action  resulting in injury or loss to a citizen by awarding damages  against them.  Various decisions rendered from time to  time have been referred to by Wade on Misfeasance by  Public Authorities.  We shall refer to some of them to  demonstrate how necessary it is for our society.  In Ashby  v. White (1703) 2 Ld. Raym 938 the House of Lords  invoked the principle of ubi jus ibi remedium in favour of  an elector who was wrongfully prevented from voting and  decreed the claim of damages.  The ratio of this decision  has been applied and extended by English Courts in  various situations.  In Roncarelli v. Duplessis (1959) 16  DLR 2d 689 the Supreme Court of Canada awarded  damages against the Prime Minister of Quebec personally  for directing the cancellation of a restaurant-owner’s liquor  licence solely because the licensee provided bail on many  occasions for fellow members of the sect of Jehovah’s  Witnesses, which was then unpopular with the authorities.   It was observed that, ’what could be more malicious than  to punish this licensee for having done what he had an  absolute right to do in a matter utterly irrelevant to the  Alcoholic Liquor Act?  Malice in the proper sense is simply  acting for a reason and purpose knowingly foreign to the  administration, to which was added here the element of  intentional punishment by what was virtually vocation  outlawry. In Smith v. East Elloe Rural District Council  [1956 AC 736: (1956) 1 All ER 855)] the House of Lords  held that an action for damages might proceed against the  clerk of a local authority personally on the ground that he  had procured the compulsory purchase of the plaintiff’s  property wrongfully and in bad faith.  In Farrington v.  Thompson [1959 UR 286] the Supreme Court of Victoria  awarded damages for exercising a power the authorities  knew they did not possess.  A licensing inspector and a  police officer ordered the plaintiff to close his hotel and  cease supplying liquor.  He obeyed and filed a suit for the  resultant loss.  The Court observed:

"Now I take it to be perfectly clear, that if a public  officer abuses his office, either by an act of omission  or commission, and the consequence of that is an  injury to an individual, an action may be maintained  against such public officer."

In Wood v. Blair [The Times, July 3, 4, 5, 1957 (Hallet J  and Court of Appeal] a dairy farmer’s manageress  contracted 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

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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 to act  in a manner which is arbitrary.  It is unfortunate that  matters which require immediate attention linger on and  the man in the street is made to run from one end to other  with no result.  The culture of window clearance appears to  be totally dead.  Even in ordinary matters a common man  who has neither the political backing nor the financial  strength to match the inaction in public oriented  departments gets frustrated and it erodes the credibility in  the system.  Public administration, no doubt involves a  vast amount of administrative discretion which shields the   action of administrative authority.  But where it is found  that exercise of discretion was mala fide and the  complainant is entitled to compensation for mental and  physical  harassment then the officer can no more claim to  be under protective cover.  When a citizen seeks to  recover compensation from a public authority in respect of  injuries suffered by him for capricious exercise of power  and the National Commission finds it duly proved then it  has a statutory obligation to award the same.  It was  never more necessary than today when even social  obligations are regulated by grant of statutory powers.   The test of permissive form of grant is over.  It is now  imperative and implicit in the exercise of power that it  should be for the sake of society.  When the Court directs  payment of damages or compensation against the State  the ultimate sufferer is the common man.  It is the tax  payers’ money which is paid for inaction of those who are  entrusted under the Act to discharge their duties in  accordance with law.  It is, therefore, necessary that the  Commission when it is satisfied that a complainant is  entitled to compensation for harassment or mental agony  or oppression, which finding of course should be recorded  carefully on material and convincing circumstances and not  lightly, then it should further direct the department  concerned to pay the amount to the complainant from the  public fund immediately but to recover the same from  those who are found responsible for such unpardonable  behaviour by dividing it proportionately where there are  more than one functionaries."    

We are in full agreement with what is observed herein. Thus the law is  that the Consumer Protection Act has a wide reach and the  Commission has jurisdiction even in cases of service rendered by  statutory and public authorities.  Such authorities 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

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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 officer/public servant.  No authority can  arrogate to itself the power to act in a manner which is arbitrary.   Matters which require immediate attention should not be allowed to  linger on.  The consumer must not be made to run from pillar to post.   Where there has been capricious or arbitrary or negligent exercise or  non exercise of power by an officer of the authority, the  Commission/Forum has a statutory obligation to award compensation.   If the Commission/Forum is satisfied that a complainant is entitled to  compensation for loss or injury or for harassment or mental agony or  oppression, then after recording a finding it must direct the authority  to pay compensation and then also direct recovery from those found  responsible for such unpardonable behaviour.    At this stage itself it must be mentioned that learned Attorney  General had relied upon the case of Ghaziabad Development Authority  vs. Union of India reported in (2000) 6 SCC 113 wherein, whilst  considering a case of breach of contract under Section 73 of the  Contract Act, it has been held that no damages are payable for mental  agony in cases of breach of ordinary commercial contracts.   This Court  considered the case of Lucknow Development Authority (supra) and  held that liability for mental agony had been fixed not within the  realms of contract but under principles of administrative law.  In this  case the award towards mental agony was deleted on the ground that  these were no pleadings to that effect and no finding on that point.   This authority does not take a contrary view to the principles laid down  in Lucknow Development Authority’s case but merely differentiates it  on facts.  Thus where there is a specific finding of misfeasance in  public office compensation for mental agony can be granted.  If there  are findings of misfeasance in public office then the principles set out  in this authority will have no application and the principles set out in  Lucknow Development Authority’s case (supra) would apply.   In such  cases it would be open for the Commission/Forums to grant  compensation for mental agony.    However, the power to and duty to award compensation does  not mean that irrespective of facts of the case compensation can be  awarded in all matters at a uniform rate of 18% per annum.   As seen  above what is being awarded is compensation i.e. a recompense for  the loss or injury.  It therefore necessarily has to 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

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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 cases where possession is being directed to be delivered the  compensation for harassment will necessarily have to be less because  in a way that party is being compensated by increase in the value of  the property he is getting.   But in cases where monies are being  simply returned then the party is suffering a loss inasmuch as he had  deposited the money in the hope of getting a flat/plot.  He is being  deprived of that flat/plot.  He has been deprived of the benefit of  escalation of the price of that flat/plot.  Therefore the compensation in  such cases would necessarily have to be higher.  Further if the  construction is not of good quality or not complete, the compensation  would be the cost of putting it in good shape or completing it along  with some compensation for harassment.  Similarly, if at the time of  giving possession a higher price or other amounts is collected  unjustifiably and without there being any provision for the same the  direction would be to refund it with a reasonable rate of interest.  If  possession is refused or not given because the consumer has refused  to pay the amount, then on the finding that the demand was  unjustified the consumer can be compensated for harassment and a  direction to deliver possession can be given.   If a party who has paid  the amount is told by the authority that they are not in a position to  ascertain whether he has paid the amount and that party is made to  run from pillar to post in order to show that he has paid the amount,  there would be deficiency of service for which compensation for  harassment must be awarded depending on the extent of harassment.   Similarly, if after delivery of possession, the sale deeds or title deeds  are not executed without any justifiable reasons, the compensation  would depend on the amount of harassment suffered.  We clarify that  the above are mere examples.  They are not exhaustive.   The above  shows that compensation cannot be the same in all cases irrespective  of the type of loss or injury suffered by the consumer. As has been set out hereinabove, the National Forum has been  awarding interest at a flat rate of 18% per annum irrespective of the  facts of each case.  This, in our view, is unsustainable.  Award of  compensation must be under different separate heads and must vary  from case to case depending on the facts of each case.  At this stage, it must be mentioned that the National Forum has,  in its Judgment 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 delivery of possession  has been directed there could be compensation for the  harassment/loss.  But such compensation has to be worked out after  looking into the facts of each case and after determining what is the  amount of harassment/loss which had been caused to the consumer. The National Forum in the lead judgment has considered the  authorities of this Court in the case of Ghaziabad Development  Authority vs. Dhanesh Chand Goel [SLP (Civil) no. 11315/2000)

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decided on 12th January, 2001 arising from the order of the MRTP  Commission dated 22nd Fabruary, 2000] and the case of Haryana  Urban Development Authority vs. Rajnish Chander Sharde reported in  JT 2000 (8) SC 154.  From these decisions, the National Forum has  concluded that award of interest at the rate of 18% per annum on  amount deposited by the allottee where there is a delay in handing  over possession is reasonable and could be awarded on equitable  grounds.  In our view, this conclusion of the National Forum is not  correct.  In Dhanesh Chand Goel’s case (supra) the facts were gross.   Those facts have been set out in the order of the National Forum itself.   Those facts show that GDA started a scheme for allotment of houses in  Governdpuram.  Dhanesh Chand had applied for allotment.  He had  paid the amount. He had been intimated on 16th November, 1993 that  he had been allotted a house, as per the draw held on 20th October,  1993.  Thereafter in 1996 he was informed that there was an increase  in the price.  He did not pay the increased amount and therefore  possession was not given to him.   It appears that the flat which had  been allotted to him was thereafter allotted to one Shanti Suraksha  Bal.  Shri Dhanesh Chand was asked to give his option for allotment in  some other scheme at a different place.  It is under those  circumstances that refund  was directed with interest at the rate of  18% per annum.  This Court while dismissing the Special Leave  Petition was careful enough to record that the rate of 18% interest per  annum was reasonable given the facts  recorded by the lower  authority.  Thus, this case shows that if the facts are gross then 18%  interest could be given but the Forum must first conclude that the  facts justified grant of interest at such a rate.  Similarly, in Rajnish  Chander Sharde’s case (supra), the facts were such that they justified  a grant of interest at the rate of 18% per annum.  This Court has  noted that there was delay in delivery of possession and in the  meantime the complainant had been compelled to live in rented  accommodation and pay Rs.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 Rs.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 the Reserve Bank of India under the Banking Regulations  Act, 1949.  He relied on Section 3 of the Interest Act which provides  that in any proceedings for the recovery of any debt or damages or in  any proceedings in which a claim for interest in respect of any debt or  damages already paid is made, the Court may, if it thinks fit, allow  interest to the person entitled to the debt or damages or to the person  making such claim, as the case may be, at a rate not exceeding the  current rate of interest.   He submitted that the Commission whilst  awarding interest has to follow the provisions of the Interest Act.  He  submitted that the same principles apply under Section 34 of the Code  of Civil Procedure.   The learned Attorney General relied upon the case of Central  Bank of India vs. Ravindra reported in (2002) 1 SCC 367, wherein  interest has been defined as follows: "37. Black’s Law Dictionary (7th Edn.) defines "interest"  inter alia as the compensation fixed by agreement or  allowed by law for the use or detention of money, or for  the loss of money by one who is entitled to its use;

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especially, the amount owed to a lender in return for the  use of the borrowed money.  According to Stroud’s Judicial  Dictionary of Words And Phrases (5th Edn.) interest  means, inter alia, compensation paid by the borrower to  the lender for deprivation of the use of his money.  In  Secy., Irrigation Deptt., Govt. Of Orissa v. G.C. Roy  [(1992) 1 SCC 508]  the Constitution Bench opined that a  person deprived of the use of money to which he is  legitimately entitled has a right to be compensated for the  deprivation, call it by any name.  It may be called interest,  compensation or damages.... this is the principles of  section 34 of the Civil Procedure Code.  In Sham Lal Narula  (Dr) v. CIT [AIR 1964 SC 1878:(1964) 7 SCR 668] this  Court held that interest is paid for the deprivation of the  use of the money.  The essence of interest in the opinion if  Lord Wright, in Riches v. Westminster Bank Ltd. [(1947) 1  All ER 469: 1947 AC 390(HL)] All ER at p. 472 is that it is  a payment which becomes due because the creditor has  not had his money at the due date.   It may be regarded  either as representing the profit he might have made if he  had had the use of the money, or, conversely, the loss he  suffered because he had not that use.  The general idea is  that he is entitled to compensation for the deprivation; 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, it is a compensation allowed by law or fixed  by parties, or permitted by custom or usage, for use  of money, belonging to another, or for the delay in  paying money after it has become payable."

In this case it is also observed that the Reserve Bank of India has  supervisory role over banking.  It is observed that Reserve Bank of  India has been issuing directions/circulars dealing with rates of  interest.  It is held that the Reserve Bank of India circulars can be  treated as standards regarding rates of interest.          The learned Attorney General then referred to the case of In  Defence of Arnit Das vs. State of Bihar reported in (2001) 2 SCC 9,  wherein, in the context of a claim under the Motor Vehicles Act, this  Court has noted that with the change in economy and policy of  Reserve Bank of India the interest rates are lowered.  Interest at the  rate of 9% was granted on the footing that nationalised banks now  grant interest at that rate on fixed deposits for one year.  It was  pointed out that this reasoning was approved by this Court in the case

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of United India Inausrance Co. Ltd. Vs. Patricia Jean Mahajan reported  in (2002) 6 SCC 281.         The learned Attorney General also relied on the case of Bihar  State Housing Board vs. Prio Ranjan Roy reported in (1997) 6 SCC 487  wherein it is held that where damages are awarded there must be  assessment thereof.  It is held that the Order awarding damages must  contain an indication of the basis upon which the amount awarded is  arrived at.  It was held that in the Order there must be some  statement about the relationship between the amount awarded and  the default and unjustifiable delay and harassment found to have been  caused.  This Court then remitted the matter back to National  Commission for consideration of the aspect of compensation de-hors.    It was directed that if damages are awarded reasons must be set out.           The learned Attorney General also relied upon the case of  Prashant Kumar Shahi vs. Ghaziabad Development Authority reported  in (2000) 4 SCC 120.  In this case it has been held that facts would  have to be looked into to ascertain whether the authority or the  allottee was responsible for the alleged delay.         There can be no dispute to the principles laid down in Prashant  Kumar Shahi’s case and Bihar State Housing Board’s case (supra).  It  is on these principles that it is already held that awaring interest at a  flat rate 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 payment within a particular period and  further direct that if payment is not made within that time the  authority will also pay interest. Such interest must be based on the  current rate of interest.  Now we come to the question as to what is to be done in all  these matters where the Commission/Forum has already passed the  stereo-type order set out above.  To remit all matters back to the  Commission would cause undue hardship and unnecessary costs to the  Consumer, many of whom are appearing in person as they cannot  afford a lawyer.  In all future matters the Commission/Forum must  now award compensation under various heads if it concludes that  there has been dificiency of service or misfeasence in public office.  So  far as this bunch of matters is concerned instead of remitting them  back we consider it expedient to take up each matter ourselves. If we  find that the Forum/Commission has on facts found deficiency of  service or misfeasance in public office, then depending on facts of that  case we may not interefere with the award of interest.  We will then  treat it to be in lieu of compensation. We may however vary the rate  of interest depending on facts of each case.  Just by way of example  we take two instances set out below. In a Scheme known as "Karpuripuram Scheme" plots were  allotted, monies collected.    However thereafter the scheme was  cancelled.  In some of the mattes we have seen that the District Forum  has recorded that the authority could give no explanation as to why  the Scheme was cancelled.  Before us some sort of explanation is  sought to be given.  In our view, irrespective of whether there was

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genuine reason to cancel or not, the monies must be returned with  interest at the rate of 18%.  We say so because it is clear that even if  the body has not already floated another scheme on the same land it  is clear that the body is going to derive great profit from this land and  therefore compensating the allottee with interest at 18% per annum is  just and fair.           In Civil Appeal No. 7224 of 2002 the Respondent had applied for  a house in a Scheme floated in 1992. He had paid the entire cost. He  had been allotted a flat and issued a reservation letter.  Yet no  possession was given.  Thereafter, in 1996 the Respondent was  informed that for unavoidable reasons the house has been allotted to  somebody else and if he desires, he can obtain an alternate flat at a  much higher 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 the amount which have  already been paid. Another point also requires consideration at this stage.  In the  lead Judgment the National Commission has held that no interest is  payable for the period 24/4/1991 to 16/12/1993 as during that period  there was a stay order passed by the Allahabad High Court in  operation.   Some of the allottees have filed Appeals challenging that  portion of the Order.  It is contended, on their behalf that there was no  stay order in respect of the plots allotted to them.  It was contended  that the authority cannot justify non-delivery to them.   As against this  it is pointed out that this Court has already in the case of G.D.A. vs.  Sanchar Vihar Sahkari Avas Samiti Ltd. reported in (1996) 9 SCC 314  upheld the view of the National Commission in refusing interest or  damages for the period during which the stay operated.  It is also  pointed out that the Commission had deputed the Vice-Chairman to  enquire and report whether the authority was prevented from  delivering possession to all due to the stay order.  It is pointed out  that the Vice-Chairman had submitted a Report pointing out that even  though the stay Order was not in respect of all plots, yet the authority  could not deliver possession of any plot as well the pipelines and other  infrastructural work had to be taken through the plots in respect of  which the stay Order operated.  As per the Report of the Vice  Chairman the authority was prevented, by the stay Order, from  delivering possession to anybody.  The National Commission has  accepted this Report.  We see no reason to take a different view,  particularly when another Bench has already refused to interfere on  this aspect.   Before we part with this Order, we have to mention that many  parties complained to us that even the undisputed amounts had not  been paid to them.  This was disputed on behalf of the authorities.   However, it is clear that the amounts were paid/deposited belatedly.   We therefore clarify that unless there is astay obtained from a higher  forum, the mere fact of filing of an Appeal/Revision will not entitle the  authority to not comply with the Order of the Forum.  Even though the  authority may have filed an Appeal/Revision, if no stay is obtained or if

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stay is refused, the Order must be complied with.  In such cases the  higher forum should, before entertaining the Appeal/Revision, ensure  that the Order is first complied with.   The matters are adjourned for two weeks.