|In the Supreme Court of India|
|Name of the Case||Ghaziabad Development Authority v. Balbir Singh|
|Citation||(2004) 4 SCC 65|
|Year of the Case||2004|
|Petitioner||Ghaziabad Development Authority|
|Bench/Judges||Justice H. K. Sema Justice S.N. Variava|
|Acts Involved||Consumer Protection Act, 1986|
|Important Sections||Section 14 of the Consumer Protection Act, 1986 Section 22 of the Consumer Protection Act, 1986|
The case of Ghaziabad Development Authority v Balbir Singh is a landmark decision that laid down certain judicial standards regarding the grounds on which compensation may be awarded, particularly, in matters of allotment of flats/plots by land development authorities. Compensation under consumer protection laws is required to recompense for loss or injury suffered by consumers, and therefore, the quantum of compensation to be awarded would necessarily have to be determined based on the facts and circumstances of each case. This decision set an established precedent on the issue of compensation to be awarded in consumer disputes, and its principles have been relied upon in numerous subsequent cases.
The consumer protection laws establish a redressal mechanism whereby consumers can claim monetary reliefs for defective goods, deficiency in service, and unfair trade practices. Sections 14 and 22 of the Consumer Protection Act, 1986 empower the District, State, and National Consumer Disputes Redressal Commission to “to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party”. Such monetary reliefs i.e., compensation awarded would have to be based on the facts and circumstances of each case, since the loss and injury suffered would vary. Given the absence of a straight-jacket formula for the determination of the amount of compensation to be awarded in each case, it follows that there can be no uniformity in the award of compensation.
It is for the Consumer Forum to grant compensation to the extent it finds it reasonable, fair, and proper in the facts and circumstances of a given case according to the established judicial standards where the claimant can establish his charge. These ‘established judicial standards’ have been laid down in a plethora of cases. The case of Ghaziabad Development Authority v Balbir Singh is a landmark decision that discussed the grounds on which compensation may be awarded, particularly, in matters of allotment of flats/plots by land development authorities. It set an established precedent on the issue of compensation to be awarded in consumer disputes, and its principles have been relied upon in numerous subsequent cases.
Background and Facts of the Case
The present case of Ghaziabad Development Authority v Balbir Singh arose out of an appeal directed against the judgment and award passed by the National Consumer Disputes Redressal Commission (NCDRC) awarding an interest @ 18% per annum. The Commission was considering a bunch of matters, the lead being the case of Haryana Urban Development Authority vs. Darsh Kumar, where it held that in cases of deficiency of service by development authorities, the rate of interest awarded must be 18% per annum. Following this, the Commission disposed of subsequent matters by its preceding award. Numerous appeals were filed before the Supreme Court against the decision of the Commission in various cases, primarily against its award of 18% interest.
Since the Supreme Court was considering a wide number of matters relating to allotment of land by development authorities, the facts of each case vary. In some cases, the scheme had gotten canceled after the payment of monies and allotment of flats/plots. Delivery of possession of the flats was therefore refused to the allottees. In some cases, either possession was offered at an increased rate at a much later date possession or was offered but not taken by the party. Possession was not delivered in some cases despite payment of monies and no refusal to deliver possession. In some cases, the construction was of sub-standard quality or it was incomplete, or the authority demanded extra amounts from the party which was paid only by some. In some cases, allotments were made and possession offered of flats/land which was encumbered or occupied by some other party
The appeal in the Supreme Court was filed due to the Commission granting interest at the rate of 18% per annum irrespective of the type of case or amount of delay and without even going into the facts of the case. Complainants had asked for the refund of amounts wrongly collected and in other cases, asked for a refund of the amounts paid.
- Whether the grant of interest at the rate of 18% per annum by the National Consumer Disputes Redressal Commission in all cases is justifiable?
Section 14 of the Consumer Protection Act, 1986
Section 22 of the Consumer Protection Act, 1986
The Supreme Court relied upon the case of Lucknow Development Authority v. M. K. Gupta which firstly widened the scope of “service” defined under Section 2(1)(o) of the Consumer Protection Act, 1986 to include the housing construction or building activities carried on by private or statutory bodies.
The Court relied upon the English case Geddis v. Proprietors of Bann Reservoir which gave a wide connotation to the word compensation, holding that “Compensation has not been defined in the Act. According to the dictionary, it means, ‘compensating or being compensated; thing given as recompense;’. In a 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.”
The Supreme Court, at the outset, reiterated the position taken in the case of Lucknow Development Authority v. M.K. Gupta, and held 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”. It further held that the power of the NCDRC extends to awarding compensation to consumers for misfeasance in the public office i.e. an act which is oppressive or capricious or arbitrary or negligent provided loss or injury is suffered by a citizen. Therefore, it upheld the appeals filed before it to the extent that it confirmed the jurisdiction of the NCDRC to award compensation in cases of service rendered by statutory & public authorities (the land development authorities in the present case).
As to the issue of whether the grant of interest at the rate of 18% per annum by the NCDRC in all cases is justifiable, the Supreme Court held in the negative. It stated that “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.” It held it to be unsustainable. The Court further stated that the “Award of compensation must be under different separate heads and must vary from case to case depending on the facts of each case.” The purpose of awarding compensation is to recompense for a loss or injury suffered and such compensation would therefore be proportional to the amount of loss and injury.
While considering the compensation to be awarded to the consumers in cases of deficiency of service by Development Authorities, the Court laid down a range of principles for the determination of the amount of compensation, summarised below:
- To award compensation, the Forum or the Commission must determine that service has been deficient and/or misfeasance in public office which has resulted in loss or injury. While no hard and fast rule can be laid down, the Court gave a few instances where the award of compensation would be justifiable, including where possession is not handed over within the intimated period even though allotment is made and the price is paid. In such cases, the loss could be determined based on loss of rent which could have been earned if possession was given. Compensation could also be the scheme has been canceled without any justifiable cause, after the allotment.
- Compensation cannot be uniform and to illustrate this, the Court lays down the principle to be followed for the determination of compensation in two cases- – (a) where the delivery of possession is being directed, and (b) where only the monies are directed to be returned or refunded by the Court. In case (a), the compensation for harassment will necessarily have to be less since in a way the aggrieved party is being compensated by an increase in the value of the property he is getting. In case (b) however, the party is suffering a greater loss since he has been deprived of the flat/plot, and his expectation of delivery of possession. He would also be denied the benefit of an increase in the value of land and the compensation thereof. Therefore, the compensation to be awarded in such cases would have to be higher than in case (a).
The Court held that “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 has been caused to the consumer.”
- Compensation would include compensation for physical, mental, or even emotional suffering, insult, or injury or loss.
Awarding of Compensation in the Event of Deficiency in Service Rendered
The consumer protection laws have a wide reach and the consumers are entitled to receive compensation for deficiency in services rendered by statutory and public authorities. The Consumer Commissions have been vested with the jurisdiction to award the value of goods or services and compensation. On being satisfied that a complainant is entitled to compensation for loss or injury or harassment or mental agony or oppression, it must direct the authority to pay compensation. A wide discretion has been given to determine the quantum of compensation for any loss or damage suffered by a consumer, to redress any injustice. However, it is a well-established principle that the computation of compensation has to be fair, reasonable, and must reconcile with the loss or injury suffered. The Consumer Forum is cast with the duty to take into account all relevant factors for arriving at the compensation to be paid.
This landmark decision has set a precedent on the matter of compensation to be awarded in matters relating to allotment of land by development authorities and has been relied upon in many subsequent cases of the Supreme Court. In the case of H. P. Housing Board v Varinder Kumar Garg and Haryana Urban Development Authority vs Darsh Kumar, the Supreme Court directed the Commission to follow the principles laid down in the case of Ghaziabad Development Authority vs. Balbir Singh in future cases.
This landmark decision laid down rudimentary principles and set judicial standards concerning the awarding of compensation and the determination of the quantum of compensation to be awarded. It struck down the mechanical application of a fixed rate of interest at 18% per annum by the National Commission in numerous cases, asserting that there can be no hard and fast rule.
The principles enunciated go a long way in ensuring that consumers are compensated appropriately and proportionally for the loss and injury suffered. This decision has further strengthened the consumer protection laws by bringing clarity to how the consumer is required to award compensation.
- Indian Kanoon https://indiankanoon.org/
- Consumer Protection Act, 1986 http://legislative.gov.in/sites/default/files/A1986-68_0.pdf