Supreme Court Directs Further Inquiry on Compensation in Unfair Trade Practice Case: Dr. Manjeet Kaur Monga vs. K.L. Suneja & Ors. (2017) INSC 640 (18 July 2017)

Date of the Judgment: 18 July 2017
Citation: (2017) INSC 640
Judges: Hon’ble Mr. Justice Kurian Joseph and Hon’ble Mrs. Justice R. Banumathi. This was a division bench. The majority opinion was authored by Justice Kurian Joseph.
Can a builder be liable for interest on a refund amount when the payment was made but not received by the payee? The Supreme Court of India addressed this question while hearing appeals related to an unfair trade practice case. The court examined the matter of compensation to a flat buyer whose allotment was canceled by the builder, focusing on the period for which interest should be calculated and the liability of a bank involved in the transaction.

Case Background

The case originated from a complaint filed against a builder for unfair trade practices. The complainant, initially Smt. Gursharan Kaur and later her legal heir Dr. Manjeet Kaur Monga, had booked a flat and made several installment payments. However, the builder failed to complete the construction within the promised timeframe. The allotment was eventually canceled by the builder. The Competition Appellate Tribunal had declared the cancellation as arbitrary and illegal and directed the builder to pay compound interest at 15% per annum on the deposited amount, but only up to the date of cancellation.

Timeline:

Course of Proceedings

The Competition Appellate Tribunal declared the cancellation of the flat allotment as arbitrary and illegal. It directed the builder to pay compound interest at 15% per annum on the deposited amount. However, the interest was calculated only up to April 30, 2005, the date of cancellation. The complainant appealed, seeking interest until the actual payment date. The builder also appealed, contesting their liability to pay any compensation.

Legal Framework

The case primarily involves Section 12B of The Monopolies and Restrictive Trade Practices Act, 1969 (the Act), which empowers the Commission to award compensation for losses or damages caused by monopolistic, restrictive, or unfair trade practices. Section 12B of the Act states:

“12B. Power of the Commission to award compensation. (1) Where, as a result of the monopolistic or restrictive, or unfair, trade practice, carried on by any undertaking or any person, any loss or damage is caused to the Central Government, or any State Government or any trader or class of traders or any consumer, such Government or, as the case may be, trader or class of traders or consumer may, without prejudice to the right of such Government, trader or class of traders or consumer to institute a suit for the recovery of any compensation for the loss or damage so caused, make an application to the Commission for an order for the recovery from that undertaking or owner thereof or, as the case may be, from such person, of such amount as the Commission may determine, as compensation for the loss or damage so caused.”

Arguments

Appellant’s (Complainant’s) Arguments:

• The appellant contended that since the allotment was canceled, they are entitled to compound interest at 15% from the original payment dates in 1989 until the actual date of payment.
• They argued that limiting the interest to April 30, 2005, was not justified.

Respondents’ (Builder’s) Arguments:

• The builder argued that they have no liability to pay the compound interest.
• They contended that if any compensation is due, it should be limited to the amount determined under Section 12B of the Act.

Citibank’s Arguments:

• Citibank contended that while the amount was deducted from the builder’s account on April 30, 2005, it was not paid to the payee.
• They argued that the bank was ready to honor the pay order at any moment and should not be held liable for interest due to the lapse of the payee or account holder.
• They stated that they are governed by the Reserve Bank of India’s instructions in this regard.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but addressed the following:

• Whether the appellant is entitled to compound interest at 15% from the original dates of payment until the date of actual payment, or only up to the date of cancellation (30.04.2005).
• Whether the builder is liable to pay the compound interest.
• Whether Citibank is liable to pay any interest to the account holder for the period the money was with the bank.

Treatment of the Issue by the Court

Authorities

The court considered the following authority:

• Citibank N.A. V. Hiten P. Dalal and Others, (2016) 1 SCC 411, Supreme Court of India: The builder argued that the principle of restitution should apply, and the appellant should not take undue advantage, as held in this case.

Judgment

The Supreme Court held that the amount of 15% compound interest, as ordered by the Tribunal, is the compensation amount under Section 12B of the Act. The court also noted that the builder’s account was debited when the pay order was issued, but the amount was not received by the payee and was re-credited to the builder’s account later.

The court remitted the matter back to the Competition Appellate Tribunal to determine:

• Whether there should be any compensation payable after 30.04.2005.
• If so, what should be the amount payable after 30.04.2005.
• Whether Citibank is liable to pay any interest to the account holder for the period the money was with the bank.

The court stated, “We do not think that there needs to be any elaborate consideration of the meaning of the word “compensation” in terms of the amount referred to under the Section. The amount referred to under the Section is the amount @ 15% compound interest on the amount already deposited, as ordered by the Tribunal.”

The court also observed, “It has been brought to the notice of this Court that when the builder company, the appellant in the appeals arising out of SLP(C) Nos.10484-10485/2016, had taken the pay order from the Citibank on 30.04.2005, the amount of Rs.4,53,750/- covered by the pay order had actually been deducted from their current account. But at the same time, the amount had not been paid/received by the payee.”

The court noted the builder’s submission on the principle of restitution, stating, “We may, of course, take note of the submission of the builder that in terms of the principles of restitution under Section 144 C.P.C. and on the general principle of restitution, the builder cannot be put to unmerited injustice and the appellant should not take the undue advantage as held by this Court in Citibank N.A. V. Hiten P. Dalal and Others, (2016) 1 SCC 411.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure fair compensation for the complainant while also considering the complexities arising from the involvement of Citibank in the transaction. The court recognized that the builder was at fault for the delay and cancellation of the allotment, justifying the award of compound interest up to the cancellation date. However, the court also acknowledged the unusual situation where the builder’s account was debited but the complainant did not receive the funds, raising questions about the period for which interest should be calculated and the potential liability of the bank. The court’s decision to remit the case back to the Tribunal reflects its desire to thoroughly investigate these issues and ensure that all parties are treated equitably.

Key Takeaways

• The Supreme Court clarified that the 15% compound interest awarded by the Tribunal is considered “compensation” under Section 12B of The Monopolies and Restrictive Trade Practices Act, 1969.
• The court acknowledged the complexity of the situation where a pay order was issued but not received, leading to a re-credit of funds.
• The matter was remitted to the Competition Appellate Tribunal to determine the liability for interest after the cancellation date and the role of Citibank.
• This case highlights the importance of ensuring that compensation is fair and takes into account all relevant circumstances.

Directions

The Supreme Court directed the following:

• Citibank N.A. was impleaded as an additional respondent in the complaint before the Competition Appellate Tribunal.
• The builder was directed to pay compound interest at 15% up to 30.04.2005.
• The Tribunal was directed to determine if any compensation is payable after 30.04.2005 and whether Citibank is liable to pay any interest.

Development of Law

The ratio decidendi of this case is that the amount of compensation under Section 12B of The Monopolies and Restrictive Trade Practices Act, 1969 can include compound interest. The case also highlights the need for a thorough examination of all relevant circumstances in determining compensation, including the liability of third parties like banks. This case does not change any previous position of law but rather clarifies the scope of compensation under the Act and the need to consider all aspects of a transaction.

Conclusion

The Supreme Court’s judgment in Dr. Manjeet Kaur Monga vs. K.L. Suneja & Ors. clarifies that the compensation awarded under Section 12B of The Monopolies and Restrictive Trade Practices Act, 1969 can include compound interest. The Court remitted the matter to the Competition Appellate Tribunal to determine the liability for interest after the cancellation date and the role of Citibank, ensuring that all parties are treated equitably. This case underscores the importance of a comprehensive approach to compensation in cases of unfair trade practices and the need to consider all relevant circumstances.

Category:

• Monopolies and Restrictive Trade Practices Act, 1969
  • Section 12B, Monopolies and Restrictive Trade Practices Act, 1969
  • Unfair Trade Practices
  • Compensation
• Consumer Law
  • Consumer Rights
  • Real Estate Disputes

FAQ

Q: What was the main issue in the Dr. Manjeet Kaur Monga vs. K.L. Suneja & Ors. case?
A: The main issue was whether the builder should pay compound interest at 15% on the deposited amount from the original payment dates until the actual date of payment, or only up to the date of cancellation of the allotment. Additionally, the court considered if the bank was liable to pay interest for the period the money was with them.

Q: What did the Supreme Court decide about the interest calculation?
A: The Supreme Court did not make a final decision on the interest calculation period. It remitted the matter back to the Competition Appellate Tribunal to determine if any compensation is payable after the cancellation date and whether the bank is liable for any interest.

Q: What is Section 12B of The Monopolies and Restrictive Trade Practices Act, 1969?
A: Section 12B empowers the Commission to award compensation for losses or damages caused by monopolistic, restrictive, or unfair trade practices.

Q: What was the role of Citibank in this case?
A: Citibank was involved because the builder had taken a pay order from them for the refund amount. The amount was deducted from the builder’s account but not received by the complainant, and was later re-credited to the builder’s account. The court directed the Tribunal to investigate if Citibank was liable to pay any interest for the period the money was with them.

Q: What does it mean that the case was “remitted” to the Competition Appellate Tribunal?
A: “Remitted” means the Supreme Court sent the case back to the Competition Appellate Tribunal for further consideration and to make a decision on the specific issues the Supreme Court highlighted.