CWP No. 1230 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.W.P.No. 1230 of 2008 Date of decision 8 .1.2009 Sushil and another ...Petitioners Versus Haryana Urban Development Authority and another ... Respondents. CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JORA SINGH Present: Mr.Sanjiv Gupta ,Advocate for the petitioners. Mr.Ajay Kansal , Advocate for the respondents 1. Whether Reporters of local papers may be allowed to see the judgement ? 2. To be referred to the Reporter or not ? 3. Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. Through the instant petition filed under Article 226 of the Constitution the prayer made by the petitioners is for quashing the action of the respondents in charging penalty, compound interest on delayed instalments and also on enhanced compensation. Further prayer made is from restraining the respondents from proceeding further under Section 17 of the Haryana Urban Development authority Act, 1977. Brief facts of the case are that the petitioners were re-allotted Plot No.353, Sector 14, Part I, Karnal ( Annexure P.1) after payment of instalments by the original allottee. The HUDA authorities demanded enhancement of the price of the land and have also started demanding compound interest on delayed instalments which according to the petitioners is not permissible. In this behalf they made a representation on 15.10.2007 ( Annexure P.2). CWP No. 1230 of 2008 2 The grievance of the petitioners is that respondents are charging compound and penal interest on delayed payment from the allottees. It is averred that no compound interest or penal interest could be charged in view of the judgement of Hon'ble the Supreme Court in the case of Ruchirca Ceremics v. HUDA 2001(1) PLJ 109 and that of this Court in the case of Gian Inder Sharma v. HUDA 2003(1) RCR (Civil) 279.Apart from this, the original petitioner paid the entire amount as per allotment schedule. The petitioner submitted a representation dated 15.10.2007 (Annexure P.2) asserting that no compound interest can be charged from the allottee in respect of the period of default. In the reply filed by the respondents the stand taken is that in the allotment letter it has been clearly mentioned that the allottee will have to abide by the terms and conditions stated therein and also the provisions of the HUDA Act, instructions/guidelines and rules/regulations framed thereunder. The respondents vide its policy dated 19.9.1985 (R.1) has decided to charge compound interest which policy was again amended on 22.9.2000 (R.2) and it was decided to charge simple interest w.e.f. 1.9.2000 (lateron from 3.4.2000). The petitioners are liable to pay extension fee and penalty as per para 1 of the re-allotment letter read with condition No. 5 which reads thus: “ 5. In the event of breach of any other condition of transfer, the Estate Officer may resume the land in accordance with the provisions of Section 17 of the Act.” In reply to para 2 it is submitted that the petitioners have not paid the enhancement/additional price of Rs. 7662.70 which was demanded on 8,.2.1990. CWP No. 1230 of 2008 3 We have heard learned counsel for the parties at a considerable length and have perused the record with their able assistance. The matter is no longer res-integra. In a recent judgement of the Hon'ble Supreme Court rendered in the case of HUDA v. Raj Singh Rana AIR 2008 SC 3035 where the issue of charging of interest has been considered. The Hon'ble Supreme Court has resorted to statutory guidelines available under Section 3 of the Interest Act, 1978 (for brevity 'the Act'). Section 3 of the Act clearly marks a distinction between the 'agreed rate of interest' and 'rate of interest' to be imposed in the absence of concurrence of the parties. It has been laid down in the following two paras that in the absence of agreed rate of interest the current rate of interest would be applicable as per the provisions of Section 3 of the Act: “ 10. 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. 11.What is important is the mention of allowing the interest at a rate not exceeding the current rate of interest. Such a CWP No. 1230 of 2008 4 provision is, however, excluded in respect of the interest payable as of right by virtue of any agreement as indicated in sub section (3) of Section 3. In other words, where there is an agreement between the parties to payment of interest at a certain stipulated rate, the same will have the precedence over the provisions contained in sub section (1) which provides for the Court to allow interest at a rate not exceeding the current rate of interest.” In the afore-mentioned paras, two principles with regard to charging of interest have been laid down (a) in any proceeding for recovery of any debt or damages or any proceedings in which claim for interest is made the court may allow interest to the person entitled to the debt or damages at a rate not exceeding the current rate; (b) the above principle would not be applicable in a case where the parties have concurred for charging of interest at a specified rate which flows from sub section 3 of Section 3 of the Act. This provision has to have precedence over the principle noted above. The argument of Mr.Kansal, learned counsel for the respondent that interest is liable to be paid under section3(3) of the Act has not impressed us. There is no agreed rate of interest accepted by the parties. Reliance of the respondent on the affidavit dated 21.11.1973 ( R.3) does not show that the petitioner had agreed to any rate of interest. He has only agreed with the terms and conditions of allotment and the incidental open spaces. He had also agreed to abide by all the provisions of the act and the rules/ Regulations applicable thereunder alongwith amendments made from time to time. There is no express agreement with regard to the rate of interest in CWP No. 1230 of 2008 5 terms of sub section 3 of the Section 3 of the Interest Act, 1978. The expression 'prevalent policy' does not necessarily lead to the policy with regard to rate of interest claimed by HUDA as per clause 1,3 and 4. These clauses are required to be considered in the light of the rate of interest currently in vogue as is provided by sub section 1 of section 3 of the Act. Therefore, we reject the submission made on behalf of the respondent. However, it does not mean that there cannot be any variation in the rate of interest to be awarded in a proceeding where such a claim is made. The Hon'ble Supreme Court in the case of Raj Singh Rana (supra) has placed reliance on para 8 of the judgement rendered in the case of Ghaziabad Development Authority v. Balbir Singh 2004(5) SCC 65 which in term applies the principle that facts of each case have to be taken into account and interest should not be imposed mechanically at a uniform rate of interest . In para 15 of the judgement it has been concluded as under: “...... 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.” Applying the principles laid down in Raj Singh Rana's case (supra) the petitioner is liable to pay interest in terms of Section 3(1) of the Act and the same reads thus: 3. Power of court to allow interest. (1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the CWP No. 1230 of 2008 6 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 following period, that is to say,- (a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings; (b) if the proceedings do not relate to any such debt, them from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings: Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment. “ The expression 'rate of interest' has not been left to any guess work but has also been defined in Section 2(b) of the Act and the same reads thus: “(b) "current rate of interest" means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949.” A perusal of the afore-mentioned provisions makes it clear that CWP No. 1230 of 2008 7 current rate of interest would mean the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued to the banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949. Therefore, the issue with regard to payment of interest is answered in the above terms. There is however, yet another issue as to whether the respondents could charge interest on the additional price on account of increase of the acquisition cost. The afore- mentioned question also stands answered in para 18 of the judgement in Raj Singh Rana's case (supra) wherein it has been held that such imposition has to be kept in view with the provisions of the Act and not in an unreasonable manner. It would be appropriate to extract para 18 which reads thus: “ In the aforesaid circumstances, even though the rate of interest indicated in the allotment letter dated 22.3.1974 may not have application as far as payment of the additional price is concerned, the District forum has erred on the site of reason and has allowed interest at the rate of 7 percent per annum upon holding that the demand made by the appellant at a higher rate was contrary to the mutual agreement contained in the allotment letter. In our view, even though a policy may have been adopted by the appellant for imposing a deterrent rate of interest on defaults committed by allottees in payment of their dues, such imposition has to be in keeping with the provisions of Section 3 of the Interest Act, 1978 and not in a unreasonable manner. It may perhaps be even more pragmatic if a condition regarding charging of interest at the prevailing banking rates CWP No. 1230 of 2008 8 were included in the allotment letters, having regard to the provisions of sub section(3) of Section 3 of the said Act.”. In view of the above, we are of the view that the writ petition deserves to be allowed. The respondents are directed not to demand compound interest on the delayed payment which is held to be unreasonable and arbitrary nor they can ask for compound interest on the enhanced amount of compensation. Accordingly a direction is issued to the respondents to calculate interest on the delayed payment of additional price of the property in question by applying the current rate of interest which means the highest of the maximum rate at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions issued to the banking companies by the Reserve Bank of India under the Banking Regulation Act, 1949. It would necessarily exclude the rate of interest on the accounts maintained in saving or those maintained by charitable or religious institutions. It has come on record that the petitioner had already deposited the demanded amount under protest which shall be set of as per the law and calculations be made accordingly. We make it further clear that no penalty can be charged from the petitioner on account of delayed payment of additional price. However, the respondents shall be entitled to deduct any other amount due to them. (M.M.Kumar) Judge (Jora Singh) 8.1.2009 Judge okg