Supreme Court Increases Interest on Refund in Consumer Dispute: Ashoka Investment Co. vs. United Towers India (2022)

Date of the Judgment: 11 October 2022

Citation: [Not Available in Source]

Judges: Aniruddha Bose, J., Vikram Nath, J.

Can a consumer court award a higher interest rate on a refund when a builder defaults on handing over possession of a property, especially when the agreement allows for a higher interest rate on delayed payments by the consumer? The Supreme Court addressed this question in a recent case involving a dispute over a property purchase. The core issue revolved around the appropriate interest rate to be applied to a refund when a builder failed to deliver possession of flats and subsequently cancelled the allotment. The Supreme Court bench comprised Justice Aniruddha Bose and Justice Vikram Nath, with the judgment authored by Justice Vikram Nath.

Case Background

In 1980, M/s. Ashoka Investment Co. (the appellant) applied to purchase two flats in Bangalore from M/s. United Towers India (Pvt.) Ltd. (the respondent). The total sale consideration was Rs. 4,95,000. The appellant paid Rs. 1,00,000 for each flat as an advance. An agreement to sell was executed on 17 May 1980, stipulating that possession would be given within 18-21 months, subject to certain conditions. The appellant eventually paid the entire sale consideration of Rs. 4,95,000. In 1991, the respondent demanded additional amounts of Rs. 1,56,046 and Rs. 1,62,202 for the two flats, which the appellant objected to, requesting possession instead. In January 1999, the appellant discovered that the respondent had transferred the flats to third parties after cancelling the original allotment on 17 January 1995.

Timeline

Course of Proceedings

The appellant filed a complaint before the NCDRC seeking possession of the flats, compensation for delayed delivery, and damages. Alternatively, the appellant sought a refund of Rs. 48,27,000 with interest. The respondent contested the complaint, arguing that the appellant was not a consumer and that the cancellation was valid. The NCDRC ruled that the appellant was a consumer, but also noted faults on both sides. The NCDRC directed the respondent to refund the amount of Rs. 4,95,000 with a 9% interest rate from 17 January 1995. The appellant appealed to the Supreme Court, seeking a higher interest rate and other reliefs. The respondent did not file an appeal.

Legal Framework

The case was adjudicated under the Consumer Protection Act, 1986. Specifically, Section 23 of the Consumer Protection Act, 1986, allows appeals to the Supreme Court from orders of the National Consumer Disputes Redressal Commission (NCDRC). The definition of “consumer” under Section 2(1)(d)(i) of the Consumer Protection Act, 1986, was also relevant, particularly the amendment in 2003 that excluded those who obtain goods for resale or commercial purposes. The agreement between the parties stipulated that in case of default in payment of installments, the builder could charge interest at 18% per annum on the defaulted amount.

Arguments

Appellant’s Arguments:

• The appellant argued that the NCDRC order was insufficient and sought the original reliefs claimed in the complaint, including possession of the flats or a higher refund amount with interest.
• The appellant contended that the respondent had unjustly enriched itself by selling the flats to third parties after cancelling the original allotment.
• The appellant emphasized that the respondent should produce the sale deeds of the flats transferred to third parties.

Respondent’s Arguments:

• The respondent argued that the appellant was not a consumer under the Consumer Protection Act, 1986.
• The respondent claimed that the cancellation of the allotment was valid, as it was done after providing several opportunities and due notice to the appellant.
• The respondent sought to justify the order of the NCDRC.

Submissions Table:

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue before the court was:

1. Whether the interest rate awarded by the NCDRC was appropriate given the circumstances of the case and the terms of the agreement between the parties.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court did not cite any specific cases or books in its judgment. The court primarily relied on the terms of the agreement between the parties and the provisions of the Consumer Protection Act, 1986.

Legal Provisions Considered:

• Section 23, Consumer Protection Act, 1986: This section provides for appeals to the Supreme Court from the orders of the NCDRC.
• Section 2(1)(d)(i), Consumer Protection Act, 1986: This section defines “consumer” and was relevant to determining whether the appellant qualified as a consumer under the Act.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court used Section 23 of the Consumer Protection Act, 1986 to hear the appeal against the NCDRC order.
• The Court acknowledged the NCDRC’s finding that the appellant was a consumer under Section 2(1)(d)(i) of the Consumer Protection Act, 1986.
• The Court relied on the interest clause in the agreement, which stipulated an 18% interest rate on defaulted payments by the consumer, to justify increasing the interest rate on the refund.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of fairness and equity, given the conduct of both parties. The Court noted that while the appellant had delayed approaching the Commission, the respondent had acted in a high-handed and arbitrary manner by cancelling the allotment and transferring the flats to third parties. The Court also emphasized the contractual agreement between the parties, specifically the clause that allowed the builder to charge 18% interest on delayed payments. This clause was used as a benchmark to determine a fair interest rate for the refund, ensuring parity between the parties.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

Logical Reasoning:

The Court reasoned that since the agreement allowed the builder to charge 18% interest on delayed payments, the consumer was also entitled to a similar rate of interest on the refund, especially given the builder’s default. The Court did not discuss any alternative interpretations or reject any legal points. The decision was based on the principle of parity and fairness.

The Supreme Court stated, “Once, we find that under the agreement, in the event of default, the appellant’s liability to pay interest on the defaulted amount could go up to 18%, it would be just and proper in the facts of the present case that 18% interest be awarded on the refund amount.” The court further directed that, “respondent will refund the amount of Rs.4,95,000/-(four lakhs and ninety-five thousand) being the total sale consideration to the appellant along with interest @ 18% per annum w.e.f. 17.01.1995 till the date, it is paid.” The Court also mentioned that, “The said amount be paid at the earliest and in any case within a period of four weeks from today.” The decision was unanimous, with both judges concurring.

Key Takeaways

• Builders cannot arbitrarily cancel allotments and transfer properties to third parties without facing consequences.
• Consumer courts may award higher interest rates on refunds if the builder has defaulted and the agreement allows for a higher interest rate on delayed payments by the consumer.
• The principle of parity is important in consumer disputes, ensuring that both parties are treated fairly.
• The Supreme Court can modify orders of the NCDRC to ensure justice and equity.

Directions

The Supreme Court directed the respondent to refund the amount of Rs. 4,95,000 with interest at 18% per annum from 17 January 1995 until the date of payment. The payment was to be made within four weeks from the date of the judgment.

Development of Law

This judgment reinforces the principle that consumer courts can award interest rates that reflect the terms of the agreement between the parties, especially when the builder is at fault. It clarifies that the interest rate on refunds can be higher than the standard rate if the agreement allows for a higher interest rate on delayed payments by the consumer. This decision also highlights the importance of fair and equitable treatment in consumer disputes.

Conclusion

The Supreme Court’s decision in M/s. Ashoka Investment Co. vs. M/s. United Towers India (Pvt.) Ltd. modified the NCDRC’s order by increasing the interest rate on the refund amount from 9% to 18%. This ruling emphasizes the need for fairness and equity in consumer disputes and ensures that builders are held accountable for their actions. The judgment also underscores the significance of contractual agreements and the principle of parity in determining appropriate remedies.