Consumer rights
Take the right interest
Pushpa Girimaji

Sometimes it is very difficult to understand the decisions of consumer courts. Look at the case of Mr and Mrs J.L. Sethi. Both senior citizens, the couple became members of the Senior Citizens Home Complex Welfare Society in 1997 and applied for a two-bedroom flat priced at Rs 8.30 lakh. They were to pay the full amount in ten equal instalments and the construction was to be completed by June 2000.

However, by the time the couple paid Rs 6.30 lakh, they realised that the Society had not even put their names in the draw of lots for flats. When even by August 2003, they did not see any possibility of their getting the flat, they filed a complaint before the District Forum in Delhi.

The District Forum directed the housing society to refund Rs 6.30 lakh along with 18 per cent interest (the interest component adding up to about Rs 7 lakhs). This rate of interest was decided on the ground that the builders were charging 18 per cent for delayed payment from consumers. The Forum also awarded Rs 25,000 as compensation for the harassment caused to the couple and Rs 5000 as costs. This was a fair order.

In fact, whenever consumer courts adjudicate over complaints pertaining to builders or land development authorities, justice and fair play demands that they take into consideration several factors while computing compensation. For example, if the consumer is denied a house or a flat after a long wait of six to seven years, the court has to take into consideration what it would cost him to buy a similar house or plot at the present rate and that should form the basis of the compensation package.

Or where a consumer gets a house or a flat, but after a long delay, then the court has to take into consideration, the money that he spent on a rented house. Or if there is an inordinate delay in allotting or giving possession of a plot, the escalation in the cost of construction would also be one of the issues. In addition to these, the courts can also award compensation for the harassment caused to the consumer. And if the consumer happens to be a senior citizen, the computation of compensation has to be even more liberal.

But in this case, the State Consumer Disputes Redressal Commission before which the society filed an appeal, found fault with the order of the District Forum and directed the society to refund the complainants Rs 6.30 lakh, but without any interest. It allowed only the compensation of Rs 25,000 and costs of litigation of Rs 5000. For this dramatic change in the order, it attributed Section 14 of the Consumer Protection Act, which it said, empowered the District Forum to only pay such amount as may be awarded as compensation to the consumer for any loss or injury suffered, but not any interest.

Alarmed by this decision, the senior citizens filed a revision petition before the National Commission, which held that the State Commission’s view was erroneous. Pointed the Commission: "No doubt, Section 14 provides for payment of compensation. However, for measuring the compensation, rate of interest can be taken into consideration. " The National Commission then went on to quote the Supreme Court in the case of Sovintorg India Ltd vs State Bank of India, wherein the apex court had said that interest may also be awarded in lieu of compensation or damages in appropriate cases. Interest can also be granted on equitable grounds, the court said.

The National Commission also referred to the case of Ghaziabad Development Authority vs Balbir Singh, where the court had observed that the rule that interest must be granted at the current rate of interest is only applicable where the proceedings are for recovery of debt or damages. However, the rules which govern the grant of interest do not apply to grant of compensation. On the basis of these observations, the apex consumer court said it was incorrect on the part of the State Commission to have directed the housing society not to pay any interest on the amount.

This order thus makes an extremely important point that when interest is being paid in lieu of compensation, it can go beyond the current rate of interest. However, the only negative point here is that after saying all this, the National Commission reduced the interest rate from 18 to 12 per cent and allowed the compensation of Rs 25,000 and costs. (RP no 3129 of 2005, decided on August 21, 2006) This, I would say is unfair, considering the escalation in property price in recent years and the amount of money the senior citizens will have to shell out for a similar flat now.