REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.                  OF 2010 (Arising out of SLP(C) No. 21740 of 2007)

Chandigarh Housing Board … Appellant

Versus

Avtar Singh and others … Respondents

WITH

C.A. No. ________ of 2010 [arising out of SLP(C) No.831/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.832/2008 ]  C.A. No. ________ of 2010 [arising out of SLP(C) No.834/2008 ] C.A. No. ________ of 2010 [arising out of SLP(C) No.24815/2007] C.A. No. ________ of 2010 [arising out of SLP(C) No.422/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.25308/2007] C.A. No. ________ of 2010 [arising out of SLP(C) No.25310/2007] C.A. No. ________ of 2010 [arising out of SLP(C) No.25313/2007] C.A. No. ________ of 2010 [arising out of SLP(C) No.25315/2007] C.A. No. ________ of 2010 [arising out of SLP(C) No.810/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.829/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.830/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.833/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.836/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.837/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.839/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.841/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.864/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.1011/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.1030/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.1309/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.1311/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.1343/2008] C.A. No. ________ of 2010 [arising out of SLP(C) No.1344/2008]

J  U  D  G  M  E  N  T

G.S. Singhvi, J.

1. Leave granted.

2. With a view to promote private housing and optimum utilisation of  

the  land  in  Chandigarh  by  constructing  multi-storeyed  structures,  the  

Administrator,  Union  Territory,  Chandigarh  framed  a  scheme  called  

“Chandigarh Allotment of Land to Co-operative House Building Societies  

Scheme, 1991” (for short, ‘the 1991 Scheme’) for allotment of land to Co-

operative  House  Building  Societies  (for  short,  ‘the  Societies’)  through  

Chandigarh Housing Board (for short, ‘the Board’).  The opening paragraph  

of the 1991 Scheme and clauses 3, 4 and 6 to 12 thereof read as under:

“No. UTFI(3)-91/5214 – With view to promote private housing  and optimum utilization  of  land  by  constructing  multistoried  structures,  the Administrator,  Union Territory, Chandigarh, is  pleaded to intake the following scheme regulating allotment of  land to the Co-operative House Building Societies, in the Union  Territory, Chandigarh, namely:-

1. xxx xxx xxx 2. xxx xxx xxx 2. xxx xxx xxx

3. The Chandigarh Administration may conduct survey to  assess the demand by inviting applications on prescribed forms  available  from  the  Chief  Executive  Officer,  Chandigarh  

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Housing Board alongwith 25% of the premium of land to be  applied for  as  earnest  money and proof  that  the  Society  has  sufficient funds and resources to pay the balance of premium of  land and to undertake construction work on the land if allotted  to them through the Chandigarh Housing Board.  Such Survey  shall, however, not be construed as a commitment for allotment  of land in any way.

4. The Chandigarh Administration shall allot land on chunk  basis to the Chandigarh Housing Board for its further allotment  to  the  eligible  Co-operative  House  Building  Societies  from  whom applications were invited under clause 3 above, having  sufficient funds and resources to the satisfaction of the Estate  Officer, on Lease Hold Basis  for 99 years for the construction  of  multistoreyed  structures/dwelling  units  (hereinafter  called  DU) and their allotment to its eligible members on the terms  and conditions to be laid down in the allotment letter and lease  deed.  The land so allotted shall be planned in consultation with  the  Chief  Architect  and  Secretary,  Architecture  Department,  Union Territory, Chandigarh and developed by the Engineering  Department  as  usual.   The  proposed  land  shall  be  got  sanctioned from the Chief Administrator, Chandigarh as per the  provisions of the Punjab Capital (Development and Regulation)  Building  Rules,  1952 as  amended to  date.   The  seniority  of  society may be determined from registration Number and date.  The Administrator  may  allot  land  to  the  societies  within  the  limits of Union Territory, Chandigarh subject to the fulfillment  of  provisions  of  the  Scheme  and  the  Capital  of  Punjab  (Development  and  Regulation)  Act,  1952  as  amended  from  time  to  time  and  the  rules  made  thereunder  including  the  Chandigarh Lease Hold of Sites and Building Rules, 1973 (as  amended from time to time).  The society and its members shall  be  jointly  and  severely  responsible  for  payment  of  premium  including instalments and ground rent and for complying with  terms and conditions, rules and regulations and the provisions  of the Act referred to above.  The minimum quantum of land  that can be allotted is one acre and 40 to 60 number of Dwelling  Units (as proved by the Chief Architect) are to be provided by  the Society per acre.  The Chandigarh Administration may fix  cut off date for the purpose of allotment of land to the Societies  as well as to members.   

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6. Eligibility. - A  society  may  be  considered  eligible  for  allotment of land if it is duly registered with the Registrar, Co- operative  Societies,  Union  Territory,  Chandigarh  functioning  property having sufficient funds/resources to pay the premium,  to undertake the construction work, to complete it is stipulated  period,  and  that  each  of  its  members  fulfills  the  following  conditions:-

(i) He is a bona fide resident of the Union Territory of  Chandigarh and should be residing in Union Territory,  Chandigarh atleast for last two years on the date of the  allotment of land to the Society;  

(ii) He  is  an  employee  of  the  Central  Government/Corporation owned or controlled by Central  Government  stationed  at  Chandigarh  on  the  date  of  notification  of  Scheme  or  has  served  in  the  past  at  Chandigarh, or

(iii) He  is  an  employee  of  Union  Territory  Administration or the States of Punjab and Haryana or  any Corporation owned or controlled by Union Territory  or  State  Governments  referred  to  above  and  is  either  serving at Chandigarh on the date of notification of the  Scheme or has served in the past; or

(iv) He  is  a  retired  from  the  Government  or  Corporation referred to at (ii) and (iii) above and residing  at Chandigarh.

An applicant member may be eligible for allotment of dwelling  unit in accordance with his monthly income i.e. one dwelling  unit  out  of  the  dwelling  units  constructed  per  acre,  as  per  category given below:-

A. (1) 25 Dwelling Units per acre Category “A” (2) 35 Dwelling Units per acre Category “B” (3) 45 Dwelling Units per acre Category “C”

(The density shall not in total exceed 40% of the covered area)

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B. Income Group        

Members having monthly income of Rs.5,0001 and above “A” Members having monthly income of Rs.2,0001 to 5,000 “B” Members having monthly income upto Rs.2,000 “C”

Provided that no society shall be eligible for allotment of a site  under  this  scheme  if  any  of  its  members,  their  spouses  or  dependent  children  already  owns,  either  on  free-hold,  lease- hold  or  hire  purchase  basis,  a  dwelling  unit  or  a  residential  house/site/flat at Chandigarh, Manimajra, Panchkula and S.A.S.  Nagar (Mohali).

Provided further that not more than one member of a family  shall be a member of any such Society and no more than one  dwelling unit shall be allotted to one family.

Provided further that no individual/Society shall part with the  possession  of  the  land or  dwelling  unit  before  the  expiry  of  atleast 5 years from the date of allotment.

7. Grouping of Society/Enrolment of new members.-  If any  Society  has  less  than  50  members,  these  shall  be  grouped  together so as to enable the Chandigarh Housing Board to allot  atleast one acre of land to a group of Societies.

8. Refund of Earnest Money.-  The earnest money shall be  refunded  to  the  Society,  if  any  Society  cancels  its  demand  before allotment of land.  Earnest money shall also be refunded  to  un-accommodated  Societies,  if  any.   No  interest  shall,  however, be payable on any amount which remained deposited  with the Estate Officer under this Scheme.

9. Operation  of  Account/Check  thereon.-   Every  member  who  applied/have  applied  to  the  Society  for  allotment  of  a  dwelling unit under this Scheme shall pay all the amount in this  respect demanded by the Society by means of crossed demand  draft  payable  to the Society.   The Society  shall  deposit  it  in  their account maintained in the Chandigarh State Co-operative  Bank Ltd., Sector 22, Chandigarh only.  The Society shall not  be competent to withdraw any amount so deposited without the  prior  approval  of  the  Registrar,  Co-operative  Societies,  

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Chandigarh Administration, to discharge liabilities of payment  of earnest money, instalments, ground rent and for construction  purpose  in  respect  of  the  land  to  be  allotted/allotted  to  the  Society.

10. Construction  of  dwelling  units  and  allotment  thereof.-  The Society shall be responsible for completion of building i.e.  dwelling units  within 3 years from the date of allotment and  further  allotment  of  these to  their  members  by draw of  lots.  However,  grouping can be allowed by the Society.  Draw of  lost shall be witnessed by the authorised officer/officials of Co- operative  Department  and  Estate  Office,  Chandigarh  Administration.

11. Apart  from the provisions of this scheme, provision of  the Chandigarh Lease Hold of Sites and Building Rules, 1973,  as amended from time to time, shall be applicable to the land  allotted under this scheme.

12. If at any time any difficulty arises in giving effect to the  provisions of  this  scheme,  the Chief  Administrator  may give  directions  consistent  with  the  provisions  of  the  scheme  as  he/she may deem appropriate.”

(emphasis supplied)

3. Fifty  three  Societies  challenged  the  1991  Scheme in  Writ  Petition  

No.1454  of  1992  filed  in  the  Punjab  and  Haryana  High  Court  with  the  

following prayer:

i.) Writ of Certiorari or any other appropriate writ, order of  direction  in  the  nature  of  Certiorari,  may  be  issued  thereby quashing the impugned notification No.UTFI (3)- 91/5214 dated 28th May, 1991 (Annexure P.4) issued by  the Finance Secretary (respondent No.2).

ii.) Further a writ of Mandamus be issued to the respondent  with a direction to give individual and developed plots to  the  members  of  the  petitioner  societies  in  view of  the  Scheme  of  1983  which  is  still  operative  under  which  plots were/shall be given.

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4. By an interim order dated 11.5.1992, the Division Bench of the High  

Court permitted the Societies to deposit 10% of the tentative price and also  

recorded the undertaking given by them that if the writ petition is dismissed,  

they shall deposit the balance amount with interest @ 18% per annum, if  

they were to accept allotment of flats under the new scheme.  The relevant  

portion of that order is extracted below:

“Learned  counsel  for  the  petitioner  contends  that  the  rules  provide for deposit of only 10% of the amount of the tentative  price and the remaining 15% is to be deposited if plots/flats are  allotted.  In view of this, learned Counsel for the State-Union  Territory,  Chandigarh  does  not  oppose  the  prayer  of  the  petitioners  for  stay  to  the  extent  of  deposit  of  15%  of  the  tentative price.  The petitioner shall deposit 10% of the tentative  price within the time extended by this court vide order dated  30.5.1992.  The petitioners undertake that if the writ petition is  dismissed, they shall deposit the remaining amount with interest  @ 18% per annum if they accept allotment of flats under the  scheme. The Chandigarh Administration shall also refund the  amount deposited by the petitioner with interest at the same rate  to those petitioners who are not interested in the allotment of  flats.”

(emphasis supplied)

5. In  view of  the  aforesaid  order,  the  Societies  collected  10% of  the  

tentative  price  from their  members  and  deposited  the  same  in  the  bank  

specified in the 1991 Scheme.   Thereafter, the Chief Executive Officer of  

the Board issued circular-letters dated 3.11.1992 to the Societies indicating  

the amount deposited by them towards 10% of the earnest money/premium,  

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the total amount payable by them and also called upon them to furnish the  

list of eligible members and details of the deposits made on behalf of each  

member category-wise.  This is evident from the following paragraphs of  

one such letter sent to the Progressive Co-operative House Building Society  

Limited (respondent No.2 in the lead appeal):

“1. xxx xxx xxx

2. All  the  co-operative  House  Building  Societies  were  requested  to  apply  on  the  prescribed  forms  and  deposit earnest money equal to 25% of the premium on  behalf  of  eligible  members  for  the  allotment  of  land.  However,  in  view  of  the  Hon’ble  Punjab  &  Haryana  High Court’s  order  in  your  case  you were  required  to  deposit 10% of the tentative price by 31.5.1992.

3. xxx xxx xxx

4. Your society has deposited a sum of Rs.9,50,000/-  representing  10%  in  respect  of  933  members  as  per  details given below:-

Category

A 345 B 529 C   59

933

5. For the purpose of assessment of land requirement  the strength of your society has been taken as 933 which  is  the  number  of  members  on  behalf  of  whom  your  society has reportedly deposited at least 10% by 1.6.92.  This assessment of land is purely tentative and subject to  revision in case any member of your society is found to  have  not  been  declared  eligible  by  the  screening  Committee or to have not deposited at least 10% of the  premium by 1.6.1992.

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6. On the basis of the said strength of the society the  land  requirement  of  your  society  has  tentatively  been  assessed as 125379.05 Sq. Yd. provided that if the final  assessment  shows  that  the  total  number  of  eligible  members in your society is less tan the number required  for  allotment  in  terms  of  the  category-wise  density  specified per acre, your society shall be clubbed with one  or more of the Societies to attain the optimum number  required for allotment of land.

7. The  total  premium  of  this  land  works  out  to  Rs.9,40,34,287/- @ Rs.750/- per Sq. yd.  

8. With a view to finalize the matter relating to the  allotment of land, the following information may kindly  be furnished within 30 days:-

i) List of eligible members i.e. of the members duly  approved  by  Registrar  Co-operative  Society/Screening  Committee.

ii) List  of  each  member  giving  details  of  deposits  made on his behalf (as on 1.6.1992) category-wise.

9. xxx xxx xxx

10. In view of the above position, you are requested to  furnish  the  information,  as  indicated  in  para  8  above,  within 30 days from the date of issue of this letter for the  purpose  of  finalizing  the  assessment  of  the  land  requirement of your society.

11. xxx xxx xxx.

A copy of the local plan where land is tentatively  proposed to be allotted to your society is also enclosed  for information.”

6. After  seven  months,  the  Finance  Secretary,  Chandigarh  

Administration  (hereinafter  referred to  as  ‘the  Finance  Secretary’)  issued  

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memo dated 9.6.1993 and directed that if any member of the Society was to  

seek refund, then 10% out of 25% of the earnest money should be deducted  

as  calculated  on  reduced  density.   The  relevant  clause  of  that  memo  is  

reproduced below:

“V(i) 10% of  25% of the  premium amount as  calculated on  reduced density shall be deducted in case members seek refund  on any ground what so ever their earnest money deposited with  the Chandigarh Housing Board.”

7. The  writ  petition  was  finally  dismissed  by  the  High  Court  vide  

judgment dated 18.12.1996. The last paragraph of the judgment on which  

the appellant has heavily relied in support of its plea that the members of the  

Societies are not entitled to claim refund of 18% interest reads as under:

“Before parting,  we may observe that in view of the interim  order passed by this Court wherein the petitioners were allowed  to deposit 10% of the sale consideration while applying for the  allotment of plots, the Societies who had deposited 10% of the  sale consideration and found eligible for allotment or have been  allotted the sites, would be liable to pay the balance 15% of the  amount so as to make it 25% as per terms and conditions of the  allotment as agreed upon by them, with a further interest at the  rate of 18% per annum.”

8. By taking cue from the observations made by the  High Court,  the  

Finance  Secretary  sent  memo dated  6.11.1997 to  the  Chairperson  of  the  

Board with the request to accept the balance 15% earnest money from the  

Societies along with interest at the rate of 18%.  Paragraphs 2 and 3 of that  

letter read as under:

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“2. You are requested to accept the balance amount of 15%  to  complete  the  25%  earnest  money  along  with  the  interest  @18% p.a. up to date of the High Court order i.e.  18.12.96,  from  the  petitioners  of  the  Co-operative  House  Building  Societies who jointly filed CWP No.1454 of 1992 in the Punjab  and Haryana High Court, calculation and imposition of interest  would,  therefore,  be  stopped  till  the  possession  of  land  is  offered to the Societies.

3. Balance of 25% of the earnest money may be accepted at  the  original  rate.   However,  it  may  be  made  clear  to  the  Societies  that  balance  amount  of  the  premium  shall  be  determined at the rate applicable at the time of actual allotment  of land to the Societies.”

9.  Thereafter,  the  Board  vide  its  letter  dated  15.12.1997  directed  the  

Societies to deposit the balance 15% earnest money along with 18% interest.  

The Societies complied with the Board’s directive and deposited the amount  

after collecting the same from their members.  

10. Although,  the  members  of  the  Societies  paid  the  balance  earnest  

money and 18% interest, the Board did not take effective steps for allotment  

of land to the Societies.  This naturally gave rise to an apprehension in their  

mind that they may have to wait indefinitely for getting the flats.  Therefore,  

some of them including Lieutenant Colonel Avtar Singh (respondent No.1 in  

the lead appeal) applied through their respective Societies for refund of the  

amount  paid  by  them  by  clearly  indicating  that  they  were  no  longer  

interested in the flats.    The Societies  forwarded their  applications to the  

Board.  Thereupon, Secretary of the Board sent letter dated 11.12.1998 to  

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the Finance Secretary seeking his guidance in the matter.  That letter reads  

as under:

“CHANDIGARH HOUSING BOARD CHANDIGARH

No.HB(s)-GAO-AOI-98/22741     Dated:11/12/98

To

The Finance Secretary, Chandigarh Administration, Chandigarh.

Subject: Refund of Earnest Money.

Sir, It is stated that the Board has been making refunds to the  

members of societies by deducting 10% of the revised density  in terms of the Chandigarh Administration letter No.30/11/FTI- 31-93/5149 dated (copy enclosed).

As per instruction issued vide your letter No.5158-UTIF  (4)  97/20685  dated  6.11.1997,  the  Board  demanded  balance  15% to complete 25% earnest money alongwith interest @ 18%  p.a.  for  the  period  from  1.6.1992  to  18.12.1996  from  the  petitioner societies.  Now some of the societies after paying the  above amount of earnest money and interest have sought refund  in  respect  of  their  certain  members.   The  instructions  of  Chandigarh Administration dated 9.6.1993 provide for refund  of earnest money after forfeiting 10% of revised density but no  guidelines are available with the Board whether it should also  refund the interest paid by the members for the period 1.6.1992  to 18.12.1996 or not.  You are requested to decide the matter  and decision taken may kindly be conveyed at the earliest  to  decide such pending cases.

Yours faithfully,

Secretary, Chandigarh Housing Board.”

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11. However without waiting for the decision of the Finance Secretary,  

the Chief Accounts Officer of the Board suo motu remitted the amount of  

earnest money to the Societies after deducting 10% in accordance with the  

instructions issued by the Finance Secretary vide memo dated 9.6.1993 and  

directed that the same be paid to the members.   

12. In  the  meanwhile,  the  Finance  Secretary  constituted  a  committee  

consisting of Chief Executive Officer of the Board, Officer on Special Duty  

(CP),  Chandigarh  Administration  and  Joint  Registrar,  Co-operative  

Societies, Chandigarh to look into various pending issues of the Societies.  

After  considering  the  recommendations  of  the  committee  and  guidelines  

given  by  the  Deputy  Commissioner-cum-Estate  Officer,  the  Finance  

Secretary issued memo dated 9.3.2000, the relevant portions of which are  

reproduced below:  

“7. Full refund of earnest money will hence forth be made to  the  societies/and  its  members  without  forfeiting  10% of  the  25% earnest money deposited.

11. The interest paid by the Societies on the earnest money  deposited  with  the  Board  in  pursuance  of  High  Court’s  judgment dated 18.12.96 is  not to be refunded if  the Society  seek refund of earnest money as a whole or in respect of any  member, as it is not part of the earnest money.”   

13. The members of the Societies, who felt aggrieved by the action of the  

Board to forfeit 10% earnest money and the direction given by the Finance  

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Secretary not to refund 18% interest, filed complaints under Section 12 of  

the Consumer Protection Act, 1986 (for short, ‘the Act’).  They specifically  

averred that till  the making of applications for refund, the Board had not  

allotted  land  to  the  Societies.   They  pleaded  that  action  and  decision  

complained  against  were  not  only  contrary  to  the  provisions  of  the  

Chandigarh Lease Hold of Sites and Buildings Rules, 1973 (for short, ‘the  

1973 Rules’), the 1991 Scheme but were also discriminatory inasmuch as  

the applications made by Kuldip Singh son of Gurdin Singh and Smt. Subh  

Lata  w/o  Shri  Tarlochan  Singh  for  refund  of  the  amount  was  accepted  

without any deduction but in their cases 10% of the earnest money and 18%  

interest were arbitrarily forfeited.  

14. The  Finance  Secretary,  Chandigarh  Administration,  through  whom  

the Union of India was impleaded as a party to the complaints did not file  

written statement and it was left to the Board to contest the complaints. In  

the written statement filed on behalf of the Board, an objection was raised to  

the very maintainability of the complaints on the ground that there was no  

privity of contract between the complainants and the Board.  On merits, it  

was pleaded that there was no deficiency in service or negligence on the  

Board’s  part  and  the  provisions  of  the  Act  cannot  be  invoked  by  the  

complainants.  It  was  further  pleaded that  the  decision of  the  Chandigarh  

Administration  not  to  refund  18%  amount  paid  by  the  members  of  the  

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Societies was in consonance with the 1991 Scheme and without challenging  

the same, the complainants were not entitled to any relief.   Another plea  

taken by the Board was that 18% interest was not refunded because it did not  

form  part  of  the  earnest  money.   The  allegation  of  discrimination  was  

controverted by asserting that in the cases of Shri Kuldip Singh and Smt.  

Subh Lata, 10% of the 25% earnest money was forfeited in accordance with  

the  instructions  dated  29.7.1993 issued  by the  Finance  Secretary  but  the  

amount was refunded to them in the month of March 1998.

15. The District Forum noted that till the making of applications by the  

complainants  for  refund  of  the  earnest  money  and  18%  interest  by  

specifically mentioning that they were no longer interested in the flats, the  

Board had not allotted land to the Societies and held that forfeiture of 10%  

earnest money in terms of the decision contained in memo dated 9.6.1993  

and non-refund of 18% interest were contrary to the 1991 Scheme and the  

1973 Rules and the same amounted to deficiency in service and unfair trade  

practice.  The District Forum also accepted the plea of discrimination and  

observed:

“The complainant has also alleged discrimination against him  vis-à-vis  two other  applicants  members  of  OP-2  namely  Sh.  Kuldeep  Singh  and  Smt.  Subh  Lata  to  her.   The  interest  component of their deposits was refunded without its forfeiture.  On this point the reply of the OP-1 is round about. It is stated  that 10% of 25% of the earnest money of these members was  also forfeited as per the instructions dated 29.7.1993 and the  

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refund was made to them in March 1998.  The refund to them  had been made vide the OP-1 letters dated 30.3.1998 (Annexure  H) and letter  dated 17.3.1998 (Annexure  I).   If  we compare  these  letters  with  each  other  and  with  the  pleadings  of  the  complainant and the pleadings of  the  OP. We find that  only  10% of 25% of the earnest money of Smt. Subh Lata and Sh.  Kuldeep  Singh  had  been  forfeited  and  not  the  interest  component  of  their  deposits.   Therefore,  to  this  extent,  the  complainant  was  discriminated  against  by  OP1  vis-à-vis  Kuldeep Singh and Subh Lata.”   

16. Before the State Commission, it was argued on behalf of the Board  

that District Forum did not have the jurisdiction to entertain the complaints  

because it had acted strictly in accordance with the directions given by the  

Finance Secretary.  While rejecting this contention, the State Commission  

observed  that  in  terms  of  clause  12  of  the  1991  Scheme,  the  Finance  

Secretary  could  give  directions  in  case  of  difficulty  arising  in  the  

implementation of the Scheme but he could not have used that power for  

giving  directions  in  violation  of  the  Rules  and  the  Scheme.   The  State  

Commission  then  held  that  memo  dated  9.6.1993  issued  by  the  Finance  

Secretary authorizing the Board to deduct 10% of the earnest money was  

contrary to clause 8 of the 1991 Scheme, which provided for refund of the  

earnest  money  without  any  deduction  if  the  Society  was  to  cancel  the  

demand before allotment of land.  The State Commission further held that  

once  the  Finance  Secretary  had  issued  instructions  vide  memo  dated  

9.3.2000 that full refund of earnest money will henceforth be made to the  

Societies/and  its  members  without  forfeiting  10%  of  the  earnest  money  

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already deposited, the Board should have refunded the remaining amount to  

the complainants and its failure to do so amounted to deficiency in service.  

The  State  Commission  also  opined  that  the  instructions  issued  by  the  

Finance Secretary to the Board not to refund 18% interest deposited by the  

members  of  the  Society  did  not  have  any  legal  sanction  and  the  Board  

committed  an  illegality  by  refusing  to  refund  the  amount  of  interest  by  

relying upon clause 11 of memo dated 9.3.2000.  In conclusion, the State  

Commission directed the Board to refund the amount to the complainants  

along with interest @ 8% per annum.  However, the direction given by the  

District Forum for payment of interest from the amount of earnest money  

was set aside by the State Commission.   

17. The National  Commission agreed with the findings and conclusion  

recorded by the State Commission and dismissed the revisions filed by the  

Board.  The National Commission referred to letter dated 11.12.1998 and  

Memo dated 9.3.2000 issued by the Finance Secretary, Rule 8 of the 1973  

Rules and observed:

“From the letter  dated 11.12.1998 and Memo dated 9.3.2000  extracted above, it may be seen that the issue of forfeiture of  10% of 25% of earnest money was under consideration of the  Chandigarh Administration since  1998 and the final  decision  taken is incorporated in the said Memo.  The petitioner Housing  Board cannot take benefit of the delay on their part in finalizing  the  said  issue  to  the  disadvantage  of  respondent  No.1/complainants.  Submission advanced on their behalf about  Clause  No.7  of  the  Memo  being  prospective,  therefore,  

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deserves to be repelled being without any merit.  At the cost of  repetition  it  may  be  mentioned  that  Clause  7  of  the  Memo  permits full refund of the earnest money to the society and/or to  its members.  Instructions contained in the letter dated 9.6.93  have no relevance.

Coming  to  interest  issue,  by  virtue  of  para  11  of  the  Scheme of 1991 the Rules of 1973 have been made applicable  to the land allotted to the Societies.  Neither Rules, 1973 nor  Scheme, 1991 vest in the petitioner Housing Board the power to  forfeit  the  interest  paid.   Moreover  there  seems  to  be  no  justification  in  forfeiting  the  interest  amount  paid  on  late  deposit  of 15% of earnest  money when the entire amount of  earnest money was decided to be paid to the Society and/or its  members under the Memo dated 9.3.2000.  Amount of interest  paid  by  respondent  No.1/Complainant  will  not  fall  in  the  category  of  interest  referred  to  in  para  No.8  of  the  Scheme,  1991.  Fora below had thus rightly made the order for refund of  the interest amount.”

18. The first and foremost argument of Ms. Rachana Joshi Issar, learned  

counsel for the Board is that the District Forum did not have the jurisdiction  

to entertain the complaints filed by the members of the Societies because  

there was no privity of contract between them and the Board. She pointed  

out that the 1991 Scheme envisaged allotment of land to the Societies and  

not to their members and argued that they cannot be treated as consumers  

within the meaning of Section 2(d) of the Act and the Board cannot be held  

liable  for  any  deficiency  in  service  because  it  had  not  entered  into  any  

agreement  with  the  members  of  the  Societies  for  allotment  of  land/flats.  

Learned counsel emphasized that the Board had acted in accordance with the  

directives given by the Finance Secretary vide memos dated 9.6.1993 and  

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9.3.2000 and argued that  the  consumer  foras  committed  serious error  by  

granting relief to the members of the Societies ignoring that they had not  

challenged the offending clauses of those memos.  She further argued that  

the members of the Society did not have the locus to complain against non-

refund of 18% interest because they had taken advantage of the interim order  

passed by the High Court and avoided payment of 15% earnest money.

19. Shri S.S. Khetrapal, learned counsel for the complainants argued that  

the District Forum did not commit illegality by entertaining the complaints  

because they were the direct  beneficiaries of the 1991 Scheme.  Learned  

counsel submitted that the members of the Societies were compelled to file  

complaints because the Board did not allot land to the Societies even after  

deposit  of  the  balance  earnest  money  and  18%  interest.  Shri  Khetrapal  

emphasized  that  the  Chandigarh  Administration  and  the  Board  were  not  

empowered to forfeit 10% earnest money or withhold refund of 18% interest  

because the land had not been allotted to the Societies till  the making of  

applications for refund and filing of the complaints.  Learned counsel relied  

upon clause 7 of memo dated 9.3.2000 in terms of which the Board was  

required to refund the earnest money to the Societies/their members without  

forfeiting any portion thereof and argued that the direction given by the State  

Commission for refund of the forfeited portion of the earnest  money and  

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18% interest, which was upheld by the National Commission does not suffer  

from any legal infirmity.

20. Before  proceeding  further,  we  deem  it  proper  to  mention  that  

arguments in these appeals were heard and the judgment was reserved on  

16.8.2010.  Thereafter, the case was listed in the mentioning list on 7.9.2010  

because the Court wanted to find out from the learned counsel for the Board  

whether  land  had  been  allotted  to  the  Societies  till  the  making  of  

applications  by their  members for refund of  the earnest  money and 18%  

interest.  On 7.9.2010, the case was adjourned to 9.9.2010 at the request of  

learned counsel for the Board.  On the next date, learned counsel produced  

xerox copy of  letter  dated 3.11.1992 sent  by the  Board to  the  President,  

Progressive  Co-operative  House  Building  Society  and  a  three-page  note.  

She  also  disclosed  that  allotment  letters  were  issued  to  the  Societies  

sometime in 2002.

21. We have considered the respective arguments and submissions.   The  

question  which  calls  for  determination  in  these  appeals  is  whether  the  

members of the Societies, who would have been benefited by allotment of  

land under the 1991 Scheme were consumer within the meaning of Section  

2(d) of the Act and the District Forum had the jurisdiction to entertain the  

complaints filed by them for refund of 10% earnest money forfeited by the  

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Board and 18% interest paid by them in the light of the orders passed by the  

High Court in Writ Petition No.1454/1992.   

22. The definitions of the terms `consumer’, `deficiency’  and `service’  

contained in Section 2(d), (g) and (o), which have bearing on the decision of  

these appeals read as under:

“2. Definitions.  -  (1)  In  this  Act,  unless  the  context  otherwise requires,—

(d) "consumer" means any person who—

(i) buys any goods for a consideration which has been paid  or promised or partly paid and partly promised, or under any  system  of  deferred  payment  and  includes  any  user  of  such  goods  other  than  the  person  who  buys  such  goods  for  consideration  paid  or  promised  or  partly  paid  or  partly  promised, or under any system of deferred payment, when such  use  is  made  with  the  approval  of  such person,  but  does  not  include a person who obtains such goods for resale or for any  commercial purpose; or

(ii) hires or avails of any services for a consideration which  has been paid or promised or partly paid and partly promised,  or  under  any  system  of  deferred  payment  and  includes  any  beneficiary of such services other than the person who hires or  avails  of  the  services  for  consideration  paid  or  promised,  or  partly  paid  and  partly  promised,  or  under  any  system  of  deferred payment, when such services are availed of with the  approval of the first mentioned person  but does not include a  person  who  avails  of  such  services  for  any  commercial  purposes;

Explanation.— For  the  purposes  of  this  clause,  “commercial  purpose” does not include use by a person of goods bought and  used by him and services availed by him exclusively for the  

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purposes  of  earning  his  livelihood  by  means  of  self- employment

(g) "deficiency" means any fault, imperfection, shortcoming  or inadequacy in the quality, nature and manner of performance  which is required to be maintained by or under any law for the  time being in force or has been undertaken to be performed by a  person in pursuance of a contract or otherwise in relation to any  service

(o) "service" means service of any description which is made  available to potential users and includes, but not limited to, the  provision  of  facilities  in  connection  with  banking,  financing  insurance,  transport,  processing,  supply  of  electrical  or  other  energy,  board  or  lodging  or  both,  housing  construction,  entertainment,  amusement  or  the purveying of news or  other  information, but does not include the rendering of any service  free of charge or under a contract of personal service”

23. The first part of the definition of `consumer’ refers to the buyer of  

goods and user thereof by a person other than buyer but does not include a  

person who obtains such goods for resale or for any commercial purpose.  

The second part of the definition refers to a person who hires or avails of any  

services for a consideration which has been paid or promised or partly paid  

and partly promised, or under any system of deferred payment and includes  

the beneficiary of such services other than the person who hires or avails of  

the  services  but  does  not  include  a  person  who avails  such  services  for  

commercial purpose.  The term `deficiency’ means any fault, imperfection,  

shortcoming or inadequacy in the quality, nature and manner of performance  

which is  required to  be maintained by or  under  any law by a  person in  

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pursuance of a contract or otherwise in relation to any service.  The term  

`service’  means  service  of  any  description  which  is  made  available  to  

potential users and includes the provision of facilities in relation to banking,  

financing,  insurance,  transport,  processing,  supply  of  electrical  and other  

energy,  boarding  or  lodging,  housing  construction,  entertainment,  

amusement etc.  However, the services rendered free of charge or under a  

contract  of  personal  service  are  excluded  from  the  definition  of  term  

‘service’.   

24. The question whether the consumer foras can entertain a complaint in  

the matter of allotment of plot or construction of a flat by statutory authority  

was  considered  by  a  two-Judge  Bench  of  this  Court  in  Lucknow  

Development Authority v. M.K. Gupta (1994) 1 SCC 243, in the backdrop  

of challenge to the orders passed by the National Commission which had  

awarded  damages  to  the  respondents  on  account  of  delayed  delivery  of  

possession of the houses.  The Bench observed that the nature of ‘complaint’  

which can be filed under clause 2(c) of the Act is for unfair trade practice or  

restrictive trade practice adopted by any trader or for the defects suffered for  

the goods bought or agreed to be bought and for deficiency in service hired  

or availed of or agreed to be hired or availed of,  by a complainant i.e. a  

consumer  or  any  voluntary  consumer  association  registered  under  the  

Companies Act, 1956 or under any law for the time being in force or the  

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Central Government or any State Government.  The Bench then noted that  

the definition of `consumer’ is in two parts and proceeded to observe:  

“The first deals with goods and the other with services. Both  parts first declare the meaning of goods and services by use of  wide  expressions.  Their  ambit  is  further  enlarged  by  use  of  inclusive clause. For instance, it is not only purchaser of goods  or hirer of services but even those who use the goods or who  are beneficiaries of services with approval of the person who  purchased the goods or who hired services are included in it.  The  legislature  has  taken  precaution  not  only  to  define  ‘complaint’, ‘complainant’, ‘consumer’ but even to mention in  detail what would amount to unfair trade practice by giving an  elaborate definition in clause (r) and even to define ‘defect’ and  ‘deficiency’ by clauses (f) and (g) for which a consumer can  approach  the  Commission.  The  Act  thus  aims  to  protect  the  economic interest of a consumer as understood in commercial  sense as a purchaser of goods and in the larger sense of user of  services. The common characteristics of goods and services are  that they are supplied at a price to cover the costs and generate  profit or income for the seller of goods or provider of services.  But the defect in one and deficiency in other may have to be  removed and compensated differently. The former is, normally,  capable of being replaced and repaired whereas the other may  be required to be compensated by award of the just equivalent  of the value or damages for loss.”

The Court repelled the argument that the Act is confined to movable  

goods only and observed that the consumer foras have jurisdiction to deal  

with  complaints  of  deficiency  of  service  in  relation  to  immoveable  

properties.  The Court referred to the definition of term ‘service’ as amended  

in 1993 to cover ‘housing construction’ and observed:

“It  is  in  three  parts.  The  main part  is  followed by inclusive  clause and ends by exclusionary clause. The main clause itself  

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is  very  wide.  It  applies  to  any  service  made  available  to  potential users. The words ‘any’ and ‘potential’ are significant.  Both are of wide amplitude. The word ‘any’ dictionarily means  ‘one or some or all’. In Black’s Law Dictionary it is explained  thus,  “word  ‘any’  has  a  diversity  of  meaning  and  may  be  employed to indicate ‘all’ or ‘every’ as well as ‘some’ or ‘one’  and its meaning in a given statute depends upon the context and  the subject-matter of the statute”. The use of the word ‘any’ in  the context it has been used in clause (o) indicates that it has  been used in wider sense extending from one to all. The other  word ‘potential’ is again very wide. In  Oxford Dictionary it is  defined  as  ‘capable  of  coming  into  being,  possibility’.  In  Black’s Law Dictionary it is defined as “existing in possibility  but not in act. Naturally and probably expected to come into  existence  at  some  future  time,  though  not  now existing;  for  example, the future product of grain or trees already planted, or  the successive future installments or payments on a contract or  engagement already made.” In other words service which is not  only  extended  to  actual  users  but  those  who  are  capable  of  using it are covered in the definition. The clause is thus very  wide and extends to any or all actual or potential users. But the  legislature did not stop there. It expanded the meaning of the  word  further  in  modern  sense  by  extending  it  to  even  such  facilities  as  are  available  to  a  consumer  in  connection  with  banking,  financing  etc.  Each  of  these  are  wide-ranging  activities  in  day  to  day  life.  They  are  discharged  both  by  statutory  and  private  bodies.  In  absence  of  any  indication,  express or implied there is  no reason to hold that authorities  created by the  statute  are beyond purview of the Act.  When  banks  advance  loan  or  accept  deposit  or  provide  facility  of  locker  they  undoubtedly  render  service.  A  State  Bank  or  nationalised bank renders as much service as private bank. No  distinction  can  be  drawn  in  private  and  public  transport  or  insurance  companies.  Even  the  supply  of  electricity  or  gas  which  throughout  the  country  is  being  made,  mainly,  by  statutory authorities is included in it. The legislative intention is  thus clear to protect a consumer against services rendered even  by statutory bodies. The test, therefore, is not if a person against  whom complaint is made is a statutory body but whether the  nature of the duty and function performed by it  is service or  even facility.”

(emphasis supplied)

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The Court then considered the question whether public authorities are  

amenable to the jurisdiction of the consumer foras and answered the same in  

affirmative.   An  ancillary  issue  considered  by  the  Court  was  whether  

housing construction or building activity carried on by a private or statutory  

body was service within the meaning of Section 2(o) as it  stood prior to  

inclusion of the expression ‘housing construction’ in the definition and it  

was observed:

“As  pointed  out  earlier  the  entire  purpose  of  widening  the  definition is  to include in it  not only day to day buying and  selling activity  undertaken by a common man but  even such  activities which are otherwise not commercial in nature yet they  partake of a character in which some benefit is conferred on the  consumer. Construction of a house or flat is for the benefit of  person for whom it is constructed. He may do it himself or hire  services  of  a  builder  or  contractor.  The  latter  being  for  consideration is service as defined in the Act. Similarly when a  statutory authority develops land or allots a site or constructs a  house for the benefit of common man it is as much service as  by a builder or contractor. The one is contractual service and  other statutory service. If the service is  defective or it  is  not  what was represented then it would be unfair trade practice as  defined in the Act. Any defect in construction activity would be  denial of comfort and service to a consumer. When possession  of property is not delivered within stipulated period the delay so  caused is denial of service. Such disputes or claims are not in  respect  of  immoveable  property  as  argued  but  deficiency  in  rendering  of  service  of  particular  standard,  quality  or  grade.  Such deficiencies or omissions are defined in sub-clause (  ii  ) of    clause  (  r  )  of  Section  2  as  unfair  trade  practice  ……..A  development authority while developing the land or framing a  scheme for housing discharges statutory duty the purpose and  

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objective  of  which  is  service  to  the  citizens.  As pointed  out  earlier  the  entire  purpose  of  widening  the  definitions  is  to  include in it not only day to day buying of goods by a common  man  but  even  such  activities  which  are  otherwise  not  commercial but professional or service-oriented in nature. The  provisions  in  the  Acts,  namely,  Lucknow Development  Act,  Delhi Development Act or Bangalore Development Act clearly  provide for preparing plan, development of land, and framing of  scheme etc. Therefore if such authority undertakes to construct  building or allot houses or building sites to citizens of the State  either as amenity or as benefit then it amounts to rendering of  service  and will  be  covered  in  the  expression  ‘service  made  available to potential users’. A person who applies for allotment  of a building site or for a flat constructed by the development  authority  or  enters  into  an  agreement  with  a  builder  or  a  contractor  is  a  potential  user  and  nature  of  transaction  is  covered in the expression ‘service of any description’. It further  indicates  that  the  definition  is  not  exhaustive.  The  inclusive  clause succeeded in widening its scope but not exhausting the  services which could be covered in earlier part. So any service  except  when  it  is  free  of  charge  or  under  a  constraint  of  personal  service is  included in it.  Since housing activity is  a  service it was covered in the clause as it stood before 1993.”

(emphasis supplied)

25. The judgment in  M.K. Gupta’s case was relied upon in  Ghaziabad  

Development Authority v. Balbir Singh (2004) 5 SCC 65 and it was held  

that the Act has a wide reach and the Commission has jurisdiction even in  

cases  of  service rendered by statutory and public  authorities.   The Court  

observed  that  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.  

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26. We shall  now consider whether the members of the Societies were  

consumer of the service rendered by the Chandigarh Administration and the  

Board in the matter  of allotment of land to the Societies  under the 1991  

Scheme and the complaints filed by them were maintainable.   

27. A cursory reading of the 1991 Scheme may give an impression that  

the sole object thereof was to allot land to the Societies through the agency  

of the Board for construction of multistoried structures and the Chandigarh  

Administration and the Board had nothing to do with the members of the  

Societies,  but a careful reading of various clauses of the Scheme and the  

directives given by the Finance Secretary from time to time leave little room  

for  doubt  that  the  members  of  the  Societies  were  the  real  and  ultimate  

beneficiaries.  This is evident from the following:

(i) Clause  4  of  the  Scheme envisaged  allotment  of  land  by  the  

Chandigarh Administration to the Board on chunk basis for its further  

allotment to the eligible Societies so as to enable them to construct  

multistoried  structures/dwelling  units  for  their  members.   The  

Societies  and  their  members  were  made  jointly  and  severely  

responsible  for  payment  of  premium  including  installments  and  

ground rent.  By clause 4, a duty was cast upon the Societies and their  

members  to  comply  with  the  provisions  of  the  Capital  of  Punjab  

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(Development  and  Regulation)  Act,  1952  and  the  rules  and  

regulations framed thereunder.  Clause 6 of the Scheme enumerated  

the  conditions  of  eligibility  and  entitlement  of  the  members  for  

allotment of dwelling units of different categories.  Clause 8 provided  

for  refund of  earnest  money to  a  Society,  if  it  were  to  cancel  the  

demand before allotment of land.  In terms of clause 9, every member  

of the Society was required to pay the amount to the Society by means  

of crossed demand draft and the latter was to deposit the same in its  

account  maintained  in  the  Chandigarh  State  Co-operative  Bank  

Limited.  Clause 10 provided for construction of dwelling units by the  

Societies within three years from the date of allotment.  By clause 11,  

the provisions of the 1973 Rules were made applicable to the land  

allotted under the 1991 Scheme.   

(ii) In view of the interim order passed by the High Court in Writ  

Petition No.1454/1992, the Board accepted 10% earnest money and  

then called upon the Societies to give the particulars of their members  

and the amount deposited by them.   

(iii) Vide memo dated 9.6.1993, the Finance Secretary directed that  

in  case  the  members  of  the  Societies  seek  refund  of  the  earnest  

money,  then  10%  of  25%  amount  deposited  by  them  shall  be  

deducted.   

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(iv) After dismissal of the writ petition by the High Court with an  

observation  that  the  Societies  who  had  deposited  10% of  the  sale  

consideration and found eligible for allotment, would be liable to pay  

balance 15% with a further interest at the rate of 18% per annum, the  

Finance Secretary issued memo dated 6.11.1997 and asked the Board  

to accept the balance 15% earnest money with 18% interest.   

(v) When the members  of  the Societies  demanded refund of  the  

amount paid by them by indicating that they were no longer interested  

in  the  flats,  the  Board  requested  the  Finance  Secretary  to  give  

guidance in the matter.   The latter constituted a committee of three  

officers and on receipt of the recommendations of the committee, he  

issued  memo  dated  9.3.2000  for  refund  of  earnest  money  to  the  

Societies  and their  members  without  forfeiting  10% of  the  earnest  

money but, at the same time, he directed that interest paid pursuant to  

the High Court’s judgment be not refunded because the same did not  

form part of the earnest money.

28. From what we have noted above, it is crystal clear that even though  

the  1991  Scheme  was  ostensibly  framed  for  allotment  of  land  to  the  

Societies for construction of multistoried structures (dwelling units/flats) for  

their members, but the provisions contained therein not only regulated the  

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relationship of the Societies with their members, but also made them jointly  

and  severally  responsible  for  payment  of  the  earnest  money  etc.   The  

Finance Secretary and the Board issued directions  from time to  time for  

payment of the earnest money and interest by the members of the Societies.  

If the scheme had nothing to do with the members of the Societies, then it  

would  not  have  contained  provisions  to  regulate  their  eligibility  and  

entitlement to get dwelling units to be constructed on the land allotted by the  

Board and made them jointly and severally responsible for payment of the  

premium etc.  and the Finance Secretary would not have issued directions  

vide memos dated 9.6.1993 and 9.3.2000 in the matter of refund of earnest  

money and interest.  The Board too would not have entertained the request  

made by the members of the Societies for refund of the earnest money and  

remitted  the  amount  to  the  Societies  after  deducting  10%.    Thus,  even  

though no formal contract  had been entered into between the Chandigarh  

Administration  and  the  Board  on  the  one  hand and  the  members  of  the  

Societies on the other hand, the former exercised sufficient degree of control  

over the latter.  By making applications for allotment of land, the Societies  

will  be  deemed to  have  hired  or  availed  the  services  of  the  Chandigarh  

Administration  and  the  Board  in  relation  to  housing  construction  as  

elucidated and explained in M.K. Gupta’s case and Balbir Singh’s case.  If  

the scheme had been faithfully implemented and land had been allotted to  

the  Societies,  their  members  would  have  been  the  actual  and  real  

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beneficiaries.  Therefore, they were certainly covered by the definition of  

`consumer’ under Section 2(d)(ii),  the second part  of which includes any  

beneficiary of the services hired or availed for consideration which has been  

paid or promised or partly paid and partly promised.  As a sequel to this, it  

must be held that the members of the Societies had every right to complain  

against illegal, arbitrary and unjustified forfeiture of 10% earnest money and  

non-refund  of  18%  interest  and  the  District  Consumer  Forum  did  not  

commit any jurisdictional error by entertaining the complaints.

29. The  argument  of  Mrs.  Rachana  Joshi  Issar  that  the  Board  had  

deducted 10% earnest  money and declined to refund 18% interest  to the  

members of the Societies strictly in accordance with the directives given by  

the  Finance  Secretary  and  in  the  absence  of  challenge  to  memos  dated  

9.6.1993 and 9.3.2000, the complainants were not entitled to any relief is  

meritless and deserves to be rejected.    At the cost of repetition, we may  

observe that in terms of clause 8 of the 1991 Scheme, a Society would have  

become entitled to refund of the earnest money without any deduction if it  

were to cancel the demand before allotment of land.  This is also the spirit of  

Rule 8 of the 1973 Rules which were made applicable to the land allotted  

under the scheme.  That rule reads as under:  

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“8.  Lease  by  allotment,  Procedure  for.––  (1)  In  case  of  allotment of site or building the intending lessee shall make an  application to the Estate Officer in Form ‘A’. (2) No application under sub-rule (1) shall be valid unless it  is accompanied by 10 per cent of the premium as earnest money  in the prescribed mode of payment. (3) When 10 per cent of the premium has been so tendered  the Estate Officer shall,  subject to such directions as may be  issued by the Chief Administrator in this behalf, allot a site of  the size applied for or a building of which particulars are given  in  the  application  and  shall  intimate,  by  registered  post  the  number, sector, approximate area, premium and the rent of the  site or building allotted to the applicant. (4) The  applicant  shall,  unless  he  refuses  to  accept  the  allotment  within  30  days  of  the  date  of  the  receipt  of  the  allotment order, deposit within that period and in the prescribed  mode of payment,  further  15 per  cent  of  the premium.  The  remaining 75 per cent of the per cent of the premium shall be  paid as provided in rule 12. (5) If the applicant refuses to accept the allotment within said  period  of  30  days,  he  will  be  entitled  to  the  refund  of  the  amount paid by him.  The refusal shall be communicated to the  Estate  Officer  by  a  registered  letter  (acknowledgement  due).  The refund shall be made by means of a cheque payable at the  State Bank of India at Chandigarh and the applicant shall bear  the collection charges for the same. (6) If the applicant fails to communicate his refusal to accept  the allotment within 30 days and also fails to deposit  15 per  cent of the premium under sub-rule (4) the Estate Officer may  forfeit the whole or part of the earnest money.”

30. An  analysis  of  the  above  reproduced  rule  would  show  that  an  

application  for  allotment  of  site  or  building  by  way  of  lease  can  be  

entertained only if  it  is  accompanied  by 10% of the  premium as earnest  

money.  The allottee is required to deposit 15% of the premium within 30  

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days of allotment.  The balance amount is to be paid in accordance with Rule  

12.  An applicant who refuses to accept allotment within 30 days is entitled  

to refund of the amount paid by him.  If the applicant neither refuses to  

accept the allotment nor deposits 15% of the premium, the Estate Officer can  

forfeit the whole or part of the earnest money.  The provision relating to  

refund  of  the  premium/earnest  money  or  forfeiture  of  the  whole  or  part  

thereof gets attracted only after the allotment is made and not before that.   

If para V(i) of memo dated 9.6.1993 issued by the Finance Secretary  

is examined in the light of the plain language of Rule 8 of the 1973 Rules  

and clause 8 of the 1991 Scheme, it becomes clear that the concerned officer  

had  exceeded  his  brief  when  he  directed  that  10%  of  25%  of  the  

premium/earnest money should be deducted if the members seek refund of  

the earnest money on any ground whatsoever.  By giving this directive, the  

concerned officer indulged in arm twisting and attempted to teach a lesson to  

the members of the Societies who had filed writ petition and succeeded in  

persuading the High Court to restrict payment of the earnest money to 10%.  

However, he must have realized the folly committed by issuing a direction  

in complete disregard of the spirit of Rule 8(5) of the 1973 Rules and clause  

8 of the 1991 Scheme and this must have been the reason why he made  

amends by incorporating clause 7 in memo dated 9.3.2000 for full refund of  

the earnest money without forfeiting 10%.  Unfortunately, it proved to be a  

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half hearted attempt by the Finance Secretary to redeem the wrong done  

earlier  because  while  directing  refund of  the  earnest  money  without  any  

deduction, he used the expression ‘will henceforth’ in clause 7, which gave  

leverage to the Board to decline the request of the members of the Societies  

for full  refund of the earnest money on the ground that 15% had already  

been remitted to the Societies for being paid to their members before the  

issue of memo dated 9.3.2000.  In our view, once the Finance Secretary took  

the corrective step, which was in consonance with the spirit of Rule 8(5) of  

the 1973 Rules and clause 8 of the 1991 Scheme, the Board should have  

refunded the balance 10% amount to all the members who had applied for  

refund on finding that land had not been allotted to the Societies and they  

may have to wait for indefinite period to get the flats.

31. It is also worth noticing that on receipt of the applications made by the  

members of the Societies for refund of the earnest money and interest, the  

Secretary of the Board had written letter dated 11.12.1998 to the Finance  

Secretary seeking his guidance in the matter.   However,  before the latter  

could take a decision, the Chief Accounts Officer of the Board remitted the  

amount  of  earnest  money  to  the  Societies  after  deducting  10%  with  a  

direction  that  the  same  be  paid  to  their  members.   The  Board  has  not  

explained  why  its  officers  did  not  wait  for  the  decision  of  the  Finance  

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Secretary  and  why the  Chief  Accounts  Officer  exhibited  undue  haste  in  

remitting the amount of earnest money to the Societies after deducting 10%.  

In any case, after the Finance Secretary decided that earnest money will be  

refunded  to  the  Societies  and  their  members  without  any  deduction,  the  

Board should have refunded forfeited portion of the earnest money to the  

members  of  the  Societies  and its  failure  to  do  so  certainly  amounted  to  

deficiency in service.   

32. The issue which remains to be examined is whether the Chandigarh  

Administration  and  the  Board  were  justified  in  refusing  to  refund  18%  

interest paid by the members of the Societies in view of the observations  

made  by  the  High  Court.    The  consideration  of  this  issue  needs  to  be  

prefaced  with  a  comment  that  the  1952 Act  and the  1973 Rules  do  not  

provide for levy of 18% interest on the delayed payment of earnest money or  

a portion thereof.  The 1991 Scheme also did not provide for levy of such  

interest.  Notwithstanding this, the members of the Societies had to pay 18%  

interest because while dismissing the writ petition, the High Court observed  

that  the  Societies  who  had  deposited  10% of  the  sale  consideration  and  

found eligible for allotment or have been allotted sites would be liable to pay  

the  balance  15% with  a  further  interest  at  the  rate  of  18% per  annum.  

However,  there was nothing either in the interim or the final order of the  

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High  Court  from  which  it  can  be  inferred  that  the  Chandigarh  

Administration or for that reason the Board was authorised or empowered to  

refuse refund of 18% interest to the members who did not seek allotment of  

flat.  If the final order passed by the High Court is read in conjunction with  

interim order dated 11.5.1992, it becomes clear that the Societies were to  

deposit the remaining amount with interest at the rate of 18% per annum  

only if they were to accept allotment of flats under the Scheme.  Although,  

the writ petitions were filed by the Societies,  the language of the interim  

order passed by the High Court shows that the learned Judges were thinking  

of imposing liability of 18% interest only on those members who were to  

accept allotment of flats to be constructed by the Societies.   The members of  

the Societies did not get an opportunity to accept the allotment because even  

after deposit of full earnest money and 18% interest, the Board did not allot  

land to the Societies on which they could construct dwelling units/flats.  The  

Finance Secretary misinterpreted the orders of the High Court and issued  

wholly arbitrary and unjust directive to the Board not to refund 18% interest  

to the members of the Societies who had applied for refund before allotment  

of land by the Board.  In our view, the Chandigarh Administration and the  

Board had no right to refuse refund of 18% interest and absence of direct  

challenge  to  clause  11  of  memo  dated  9.3.2000  was  not  sufficient  to  

legitimize indirect forfeiture of that amount and the State Commission did  

not  commit  any  error  by  directing  refund  of  the  amount  of  interest  by  

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treating it to be a case of deficiency in service and the National Commission  

rightly declined to interfere with the order of the State Commission.

33. In  the  result,  the  appeals  are  dismissed.   The Board is  directed  to  

refund the amount due to the complainants within a period of three months  

from the date of receipt/production of copy of this judgment.  Within that  

period, the Board shall also pay litigation cost of Rs.25,000/- to each of the  

complainants.

………………………….…J. [G.S. Singhvi]

………………………… …..J.

[Asok Kumar Ganguly] New Delhi September 22, 2010.

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