CIVIL WRIT PETITION NO.16961 OF 2009 :{ 1 }: IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH DATE OF DECISION: FEBRUARY 21,2011 R. K. Verma .....Petitioner VERSUS The State of Haryana and others ....Respondents CORAM:- HON'BLE MR.JUSTICE RANJIT SINGH 1. Whether Reporters of local papers may be allowed to see the judgement? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? PRESENT: Mr. S. K. Narwana, Advocate, for the petitioner. Ms. Sharuti Jain, AAG, Haryana, for the State. Mr. Siddharth Batra, Advocate, for respondent Nos.2 and 3. **** RANJIT SINGH, J. Primarily the grievance of the petitioner is against the action of respondent-HUDA in adding compound and penal interest charges on the amount levied as non-construction charges. As per the petitioner, this action is in violation of the law laid down by this Court in number of judgments which have been ignored while passing the impugned order, demanding a sum of ` 3,37,195.80P. CIVIL WRIT PETITION NO.16961 OF 2009 :{ 2 }: The plot was allotted for a total amount of ` 40,589/-. The facts, in brief, are that on 5.9.1991, the petitioner was allotted a plot No.2517, Sector 13, Bhiwani on free hold basis by respondent-HUDA. The petitioner deposited a payment of ` 9741/- on 5.10.1991 towards payment of instalment. Thereafter, the petitioner deposited three instalments of ` 8118/- each on 11.2.1993, 5.12.1994 and 14.1.1998 respectively. On 21.5.2001, Estate Officer, HUDA, sent a communication to the petitioner, imposing penalty of Rs.5022/- regarding this plot. The petitioner in response asked the Estate Officer for supply statement of accounts. The Estate Officer intimated the petitioner on 14.11.2003 that plot stood resumed. The petitioner accordingly filed an appeal against the resumption order on 24.1.2004. Administrator, HUDA, while deciding the appeal, remanded the case back to the Estate Officer on 17.6.2005. The Estate Officer then wrote to Chief Administrator, HUDA, requesting him for fresh calculation/implementation of the order of Hon'ble Supreme Court. Estate Officer thereafter asked the petitioner on 23.11.2005 to deposit the balance amount as mentioned in the notice. The petitioner instead sent a legal notice, enquiring about his liability to make payment as he had not received any calculations. Simultaneously, the petitioner sent a draft for Rs.24,500/- on 25.2.2006, which according to him was the balance amount due. The petitioner would maintain that he had paid a sum of Rs.65,089/- whereas the price of the plot, as per the allotment letter, was Rs.64,940/-. Respondent No.3 had decided the representation CIVIL WRIT PETITION NO.16961 OF 2009 :{ 3 }: filed by the petitioner on 9.2.2007. As per the petitioner, the view taken by the Estate Officer is against the rules and settled principles of law laid down in Roochira Ceramics Vs. Haryana Urban Development Authority and others, 2001 (1) PLJ 109 and Gian Inder Sharma Vs. HUDA, 2003 (1) RCR (Civil) 279. Upon receipt of the order, the petitioner made another representation on 13.6.2007, requiring respondent No.3 to pass an order in terms of the law noticed in the above referred judgments. The petitioner also requested respondent No.3 to send a correct statement of accounts because as per the order passed, the amount due had been calculated by charging 18% interest instead of 10% and that too by way of compound interest, which was not warranted. The petitioner then had made few representations and ultimately approached Chief Administrator, HUDA, on 20.8.2008, making an offer of payment of amount due in lump-sum. When the Estate Officer still did not take any action, the petitioner filed Civil Writ Petition No.8530 of 2009 before this Court. The said writ petition was disposed of to treat the representation of the petitioner as appeal and to decide the same in accordance with law by passing a speaking order. Respondent No.2 accordingly passed an order dated 8.9.2009. The petitioner again sent a legal notice, requesting the respondents to provide calculation sheet of the balance amount. The petitioner then received a letter requiring him to make a payment of Rs.1,19,927/- as instalment and Rs.61169/- as non-construction fee and Rs.2,26,911/- as enhanced compensation besides penalty of Rs.5022/-, making a total of Rs.4,13,029/-. The petitioner is again CIVIL WRIT PETITION NO.16961 OF 2009 :{ 4 }: before this Court by way of this writ petition. Respondent-HUDA has filed reply, disclosing that the petitioner failed to pay instalments in time and notices were issued to him for non-payment of the same. It is stated that possession of the plot was offered to the petitioner on 29.6.1994 and on account of default in payment of instalments, the interest @ 10% was charged, as per the HUDA policy and 18% interest on the delayed payment upto 15.11.2002. It is pointed out that simple interest was charged w.e.f. 3.4.2000 and, thus, it is stated that there is no infirmity or illegality in the impugned order. Counsel for the petitioner submits that compound interest and penal interest have been unfairly and wrongly charged and the same would not be permissible. Counsel for HUDA, however, would make reference to the conditions contained in the allotment letter to justify the action in charging the interest and compound interest on the delayed payments. The counsel for respondent-HUDA has referred to Clause 6 of the allotment letter, Annexure P-1, which provides that sum of Rs.48,705/- could be paid in lump-sum without interest within 60 days or in 6 half yearly instalments and each instalment was recoverable together with interest on the balance price at 10% interest on the remaining amount. The interest was to accrue from the date of offer of possession. Interest @ 18% could be charged on delayed payment. The counsel accordingly contends that interest has been charged purely in terms of the conditions contained in the allotment letter and hence, would justify the action of respondent-HUDA. CIVIL WRIT PETITION NO.16961 OF 2009 :{ 5 }: Hon'ble Supreme Court in Roochira Ceramics's case (supra) has clearly held that when allottee committed default in payment of instalment, interest can be charged at the rate of 10% and not 18%. In this regard, the Hon'ble Supreme Court observed as under:- “Learned counsel, appearing for the appellant, urged that the consistent view of the High Court has been that where an allottee has committed default in payment of instalment, the Authority was made to charge interest at the rate of 10% and not 18%. It is also urged that the judgment of the High Court has been upheld by this Court. Learned Counsel appearing for the appellant, referred to judgment of the High Court of Punjab and Haryana passed in C.W.P. No.12975/94 decided on 25.7.96, wherein the Division Bench of the High Court held that the Authority is entitled to charge interest at the rate of 10% and not 18% when there is default in payment of instalment. The Special Leave Petition No.23203/96 preferred by the Authority against the said judgment was dismissed on 9.12.96. The decision of the High Court of Punjab and Haryana in C.W.P. No.16487/91-Harish Kumar Virja V. State of Haryana and another, which was followed in other cases, laid down that the Authority in cases of default in payment of instalments is entitled to charge interest at the rate of 10%. Learned counsel, appearing for the respondents, conceded that no special CIVIL WRIT PETITION NO.16961 OF 2009 :{ 6 }: leave petition was filed against the said judgment and the said judgment has attained finality. In view of the aforesaid decision, we are of the view that the respondents were entitled to charge interest @ 10% only and not 18%. Since the appellant had deposited interest @ of 18%, the Authority under law is required to refund the excess of the interest realised from the appellant. For the aforesaid reason, the judgment under appeal is set- aside. The respondent-Authority is directed to refund excess interest realised from the appellant within three months from the date of service of certified copy of this order.” Here only, it would be important to notice some very pertinent observations made by Hon'ble Supreme Court H.U.D.A. Vs. Raj Singh Rana, 2009 (1) RCR (Civil) 129. In this case, Estate Officer HUDA had raised an additional demand by imposing simple interest @ 10% per annum upto a particular date and 15% per annum upto another date and compound interest @ 15% per annum upto another date and thereafter again a simple interest @ 15% per annum. The rate of interest, as indicated in the allotment letter, was 7% simple interest per annum and so the appellant therein was accused of acting illegally in demanding the interest at higher rate indicated herein before and this demand was termed as arbitrary and, thus, not sustainable. District Consumer Disputes Redressal Forum, where the allottee had approached for refund of the extra amount of interest CIVIL WRIT PETITION NO.16961 OF 2009 :{ 7 }: charged, had allowed the request, which was impugned by HUDA before the Hon'ble Supreme Court. The plea of the allottee before the Hon'ble Supreme Court was that the rate of interest demanded was arbitrary. It was also extremely high and ought not to have been levied from the date of allotment inasmuch as the tentative sale price had been fully paid and as such, demand could not be operative retrospectively. The Hon'ble Supreme Court went into the concept of levying or allowing interest in financial deals and commercial transaction and the provisions empowering the Courts to allow interest under the Interest Act, 1978. Noticing this aspect, the Hon'ble Supreme Court observed as under:- “The concept of levying or allowing interest is available in almost all statutes involving financial deals and commercial transactions, but the provision empowering Courts to allow interest is contained in the Interest Act, 1978, which succeeded and repealed the Interest Act, 1839. Section 3 of the said Act, inter alia, provides that in any proceeding for the recovery of any debt or damages or in any proceeding in which a claim for interest in respect of debt or damage 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, for the whole or part of the periods indicated in the said Section.” The Hon'ble Supreme Court observed that important thing CIVIL WRIT PETITION NO.16961 OF 2009 :{ 8 }: to notice was the mention of allowing the interest at a rate not exceeding the current rate of interest. Such a provision excluded in respect of interest payable as of right by virtue of agreement as indicated in sub-section (3) of Section 3. It is accordingly noticed that where there is an agreement between the parties to the payment of interest at a certain stipulated rate, the same will have the precedence over the provision contained in Sub-Section (1), which provides for the Courts to allow interest at a rate not exceeding the current rate of interest. The provisions of Section 34 of C.P.C. were noticed, as per which the Court may in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged. This provision restricts the interest at such a rate not exceeding 6% per annum. Reference is made to Ghaziabad Development Authority Vs. Balbir Singh, 2004 (3) RCR (Civil) 658, where flat rate of interest @ 18% per annum irrespective of the facts was held to be unsustainable. The relevant observations in this regard are as under:- “However, the power 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. 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 CIVIL WRIT PETITION NO.16961 OF 2009 :{ 9 }: 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 justifiable cause.” The Hon'ble Supreme Court thereafter made reference to number of other cases to hold that it was the duty of Consumer Fora to consider the circumstances of the case and to keep in mind the provisions of Section 3 of the Interest Act in awarding the high rate of interest without linking the same to the current rate of interest. It would be of benefit to notice the observations of the Hon'ble Supreme Court, which are as under:- “Applying the aforesaid principle laid down in the aforesaid case, it was the duty of the Consumer Fora to consider the circumstances of the case and keep in mind the provisions of Section 3 of the Interest Act in awarding the high rate of interest, without linking the same to the current rate of interest. As was mentioned in Balbir Singh's case and thereafter, in HUDA v. Prem Kumar CIVIL WRIT PETITION NO.16961 OF 2009 :{ 10 }: Agarwal and another, 2008(1) RCR (Civil) 846: 2008(1) RAJ 410: (2008(1) SCALE 484); Bihar State Housing Board Vs. Arun Dakshy, 2005(4) RCR (Civil) 432: (2005(7) SCC 103); Haryana Urban Development Authority V. Manoj Kumar, (2005(9) SCC 541). and Krishna Bhagya Jala Nigam Limited v. G.Harischandra Reddy and another, (2007(2) SCC 720) the rate of interest is to be fixed in the circumstances of each case and it should not be imposed at a uniform rate without looking into the circumstances leading to a situation where compensation was required to be paid.” The counsel for the respondents, however, has made reference to a decision in the case of Sudha Singhal Vs. HUDA and another (Civil Writ Petition No.17576 of 2007), decided on 19.2.2009, where this Court has taken a view that the petitioner therein could not be exempted from payment of penal or compound interest, which are integral part of the bilateral agreement. The ratio of this case may not strictly apply as the petitioner's plea was that no development work had been carried out, which was seriously disputed. It was observed that this would not absolve the petitioner from the consequences arising out of breach of contract. A combined reading of the judgments referred to above would clearly show that the respondent- HUDA would be entitled to charge interest but such an exercise will have to be undertaken within the parameters of circumstances and reasons and the rate of interest normally should not be allowed to operate arbitrarily. The Hon'ble Supreme Court had sounded a note CIVIL WRIT PETITION NO.16961 OF 2009 :{ 11 }: of caution that rates of interest fixed by the Court must not be arbitrary and should take into account the current bank rates, which in recent years have shown a tendency to slide downward. The rate of interest as indicated in the allotment letter may not have application so far as payment of enhanced compensation required to be paid is concerned. It is true that the rate of interest agreed was 10% per annum on instalments and in case of default, it was 18% per annum. The interest to be charged should be reasonable and can not be arbitrary. Interest at the rate of 18% in the present day financial dealing may sound on the higher side. The case, thus, is made out for issuing direction to the respondents to recalculate the amount payable by the petitioner by charging interest at some reasonable rate of interest on the payments. Calculation attached with Annexure P-17 would show that as per policy, simple interest at the rate of 14% or 12% has been charged. Thus, charging of interest at 18% may not be fair. Moreover, charges of penal interest may also sound a bit harsh. Respondents may also calculate the amount by way of simple interest on the enhanced compensation and extension fee and not as a compound interest. It would be fair to direct that interest at the rate of 18% per annum, though chargeable, may not be charged in this case due to peculiar facts and circumstances of this case. The respondents may calculate the interest at some reasonable rate say 14% per annum as rate of interest. The petitioner has already deposited a sum of Rs.1,00,000/- to show his bonafides and if any further interest is payable, then the same may be intimated to the petitioner, who shall CIVIL WRIT PETITION NO.16961 OF 2009 :{ 12 }: then discharge the entire liability within a period of one month from the date of receipt of such intimation. The writ petition is allowed in the above terms. February 21,2011 (RANJIT SINGH ) khurmi JUDGE