Full Judgment Text
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1994 OF 2006
U.T. Chandigarh Administration & anr. ……. Appellants
Vs.
Amarjeet Singh & Ors. ….… Respondents
and Civil Appeal No. 1995 of 2006,
CA No. 1633/2009 @ SLP [C] No.25250/2007;
CA No. 1634/2009 @ SLP [C] No.4518 of 2008,
CA No. 1635/2009 @ SLP [C] No.4519 of 2008,
CA No. 1636/2009 @ SLP [C] No.4520 of 2008,
CA No. 1637/2009 @ SLP [C] No.4523 of 2008,
CA No. 1638/2009 @ SLP [C] No.4525 of 2008,
CA No. 1639/2009 @ SLP [C] No.6362 of 2008,
CA No. 1640/2009 @ SLP [C] No. 6363 of 2008,
CA No. 1641/2009 @ SLP [C] No.6364 of 2008,
CA No. 1642/2009 @ SLP [C] No.6365 of 2008,
CA No. 1643/2009 @ SLP [C] No.6366 of 2008,
CA No. 1644/2009 @ SLP [C] No.6367 of 2008,
CA No. 1645/2009 @ SLP [C] No.6368 of 2008,
CA No. 1646/2009 @ SLP [C] No.6369 of 2008,
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CA No. 1647/2009 @ SLP [C] No. 6372 of 2008,
CA No. 1648/2009 @ SLP [C] No.6373 of 2008,
CA No. 1649/2009 @ SLP [C] No.6374 of 2008,
CA No. 1650/2009 @ SLP [C] No.6375 of 2008,
CA No. 1651/2009 @ SLP [C] No.6376 of 2008,
CA No. 1652/2009 @ SLP [C] No.6377 of 2008,
CA No. 1653/2009 @ SLP [C] No.6378 of 2008,
CA No. 1654/2009 @ SLP [C] No.6379 of 2008,
CA No. 1655/2009 @ SLP [C] No.6380 of 2008,
CA No. 1656/2009 @ SLP [C] No.6381 of 2008,
CA No. 1657/2009 @ SLP [C] No.6382 of 2008,
CA No. 1658/2009 @ SLP [C] No.6383 of 2008,
CA No. 1659/2009 @ SLP [C] No.6384 of 2008,
CA No. 1660/2009 @ SLP [C] No.6385 of 2008,
CA No. 1661/2009 @ SLP [C] No.15831 of 2008, and
CA No. 1662/2009 @ SLP [C] No.15859 of 2008.
With
CA Nos.1674-1686/2009 [@ SLP(C) Nos.3271 to 3283 of 2008].
J U D G M E N T
R.V. RAVEENDRAN, J.
Leave granted in the special leave petitions. These appeals are filed by
Union Territory of Chandigarh (for short ‘UT Chandigarh’). C.A. Nos.1994
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of 2006 and 1995 of 2006 are filed against a common order dated 21.2.2005
passed by the National Consumer Disputes Redressal Commission (“National
Commission” for short). Other appeals are filed against the common order
dated 21.2.2007 passed by the National Commission following the earlier
order dated 21.2.2005. By these orders, the lease premium instalments have
been rescheduled and certain reliefs have been granted in regard to interest, to
the lessees – respondents (who had secured leasehold interest in sites
belonging to UT Chandigarh in public auctions held by it).
FACTS OF THE CASE
2. As the facts are similar, we will refer to the facts of only one case (CA
No.1994/2006 arising from FA No.499/2003 on the file of the National
Commission). The Estate Officer, Union Territory Chandigarh Administration
issued an advertisement notifying the auction of 74 residential sites and 71
commercial sites in different sectors of Chandigarh, on leasehold basis
subject to the General Terms and Conditions regarding auction. The relevant
terms were :-
(i) The auction was for grant of a lease of sites for 99 years. The auction
was governed by the provisions of the Capital of Punjab (Development &
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Regulation) Act, 1952 (‘Development Act’ for short) and Chandigarh
Leasehold Sites & Building Rules, 1973 (‘Leasehold Rules’ for short).
(ii) In addition to the premium for lease (to be offered by bids), the lessee
had to pay annual rent at the rate of 2.5% of the premium for the first 33
years, liable to be raised to 3.375% of the premium for the next 33 years and
5% of the premium for the remaining 33 years;
(iii) 25% of the bid amount had to be paid by demand draft or cash at the
fall of the hammer. The remaining 75% premium could be paid either in a
lump sum with 30 days of the auction without any interest, or at the option of
the lessee, in three equated annual instalments along with interest at 10% per
annum, the first instalment becoming due on the expiry of one year from the
date of auction.
(iv) If the instalments of the lease of premium or the ground rent were not
paid on the due dates, interest at the rate of 24% per annum should be paid
from the due date to date of payment.
(v) The successful bidder should complete the construction of the building
on the plot within three years from the date of auction in accordance with the
Punjab Capital (Development & Regulation) Building Rules, 1952 (‘Building
Rules’ for short)
(vi) The government would not be responsible for leveling of uneven sites.
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(vii) In the event of default, breach or non compliance of any of the terms
and conditions of lease, the lease was liable to be cancelled and the
site/building resumed and the amount paid to government towards
premium/rent forfeited either wholly or in part.
(viii) The lessee was liable to pay all taxes and fees as may be levied by the
Chandigarh Administration in respect of the site and the building to be
constructed thereon.
3. Respondents 1 to 4 were the successful bidders in regard to plot
No.173 in Sector No.39C & D at the auction held on 18.12.1996. The lease
premium bid offered by them was Rs.20,45,000. The acceptance of the bid
cum confirmation of the lease of the plot was communicated to respondents 1
to 4 by letter dated 19.5.1997 (for short ‘letter of allotment’) enclosing
therewith a letter offering possession of the leased site. The said letter of
allotment acknowledged the receipt of Rs.511,250 towards 25% of the
premium and permitted the respondents to pay the balance 75% of the
premium with 10% interest thereon in 3 equated instalments of Rs.6,16,736/-
on 18.12.1997, 18.12.1998 and 18.12.1999. It also required the respondents
to pay annual ground rent of Rs.51125/- during the first 33 years of lease. The
letter of allotment set out and reiterated the terms and conditions of lease and
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required the respondents to enter into a lease deed within six months and take
possession of the site before the lease deed is executed.
4. The respondents filed a complaint before the Consumer Disputes
Redressal Commission, Union Territory, Chandigarh (for short ‘UT
Commission’) under the Consumer Protection Act, 1986 (‘Act’ for short) in
the year 1999. In the said complaint they alleged that in addition to the initial
payment of Rs.511250/- towards the lease premium, they had paid
Rs.616,736/- plus Rs.51,125/- on 9.1.1998, Rs.168,000/- on 4.3.1999 and
Rs.200,000/- on 12.5.1999. They alleged that the appellant did not provide
any amenities in regard to the site, and as a result they had suffered huge
losses. They contended that until the basic amenities were provided, the
appellants were not legally entitled to claim the balance of premium or the
annual rent. They sought the following directions to the appellants :
(i) Not to recover the balance amount of premium or the interest on the
premium or the ground rent until the basic amenities (approach road,
sewerage, ground water, street light, electricity, parking space) were
provided.
(ii) To provide the basic amenities so as to enable them to raise a
construction on the site.
(iii) To pay compensation of Rs.10 lacs for harassment and blocking of
various payments made by them.
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(iv) To pay interest at the rate of 18% per annum on the amounts paid by
them, from the date of payment till all the basic amenities were
provided.
5. The appellants filed a reply resisting the complaint. It was submitted
that the respondents, having accepted the terms and conditions of lease
contained in the conditions of auction and the letter of allotment were not
entitled to wriggle out of the contract terms or refuse to pay the balance. It
was also contended that the respondents were liable to pay the 75% balance
premium in three annual instalments and in addition pay interest @ 24% per
annum on the delayed instalments. The appellants submitted that they had not
made any representation to the public in general or the respondents in
particular that the plots auctioned were ‘fully developed’ plots or that the
plots are situated in fully developed areas; nor was payment of premium or
rent subject to Chandigarh Administration providing any ‘basic amenities’.
Therefore, the respondents could not link the issue of payment of instalments
or ground rent with the issue of basic amenities. It was also submitted neither
the terms of lease nor the provisions relating to auction of leasehold rights in
the Development Act and the Leasehold Rues, cast any obligation upon the
appellants to provide the basic amenities required by the respondents and
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ensure that the site auctioned was situated in a fully developed area; and that
the auction was on ”as is where is” basis and the bidders were fully aware of
the situation and condition of the site for which they were bidding, as also the
terms and conditions subject to which the auction was held. The appellants
also contended that the complaint was not maintainable.
6. The U.T. Commission allowed the complaint by the respondents,
alongwith other similar complaints, by a common order dated 31.3.2003 with
the following directions :
(i) The date of auction for the purpose of payment of price shall be
deemed to be date on which plinth level and all the basic amenities
demanded in the complaint cases are actually provided.
(ii) An officer of the rank of Chief Engineer (or next rank) of UT
Chandigarh shall certify that the plinth level as well as other basic
requirements/amenities were provided. The date of such certificate
shall be considered to be the date of auction.
(iii) The instalments shall be rescheduled accordingly and the remaining
price of the plots shall be deposited after rescheduling the instalments
without any change in the bid price offered.
(iv) The lease rent shall be payable from the date of certificate of the Chief
Engineer mentioned above.
(v) Interest on the amount due by the lessee shall be payable only from the
date the aforesaid certificate is issued.
(vi) The amount deposited by the complainants shall earn interest @ 18%
per annum till the essential requirements were provided.
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[Note: Providing of “plinth level” directed by UT Commission apparently
refers to filling up of low lying sites so as to bring them to the road level.]
7. Feeling aggrieved, the appellants filed an appeal before the National
Commission. The National Commission allowed the appeal in part by a
common order dated 21.2.2005, and modified and restricted the reliefs
granted by the U.T.Commission as follows :
(1) The Chandigarh Administration shall reschedule the recovery of three
instalments and recover the same on (i) 1.5.2005, (ii) 1.5.2006 and (iii)
1.5.2007.
(2) Complainants shall pay interest @ 10% on the instalment amounts from
the date of taking possession of the plot. This would be in conformity
with condition No.5 of the allotment letter which provides that balance of
75% of the premium is to be paid with 10% interest.
(3) The complainants shall also pay the ground rent as per the prevailing
rules.
However, the National Commission made it clear that:
(a) No penalty shall be levied for delayed payment of instalments or ground
rent as the complaints were pending with the State Commission which had
ultimately granted relief to the complainants;
st
(b) In respect of the premium instalments payable on 1 May, 2005, 2006 and
2007, complainants shall pay interest @ 10% and in case of any default in
payment of instalments as above, it would be open to the appellants to
recover interest as per the rules.
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8. The facts of the other appeals are also similar. Only the plot
numbers/dates/amounts vary. CA No.1995/2006 arises out of FA
No.500/2003 disposed by the said common order dated 21.2.2005. All other
appeals arise from a common order dated 21.2.2007 of the National
Commission which was passed in terms of the earlier order dated 21.2.2005,
the only change being to alter the dates of rescheduled instalments
as 1.5.2007, 1.5.2008 and 1.5.2009. The orders dated 21.2.2005 and
21.2.2007 of the National Commission are challenged in these appeals.
GROUNDS OF CHALLENGE
9. The appellants have urged the following common contentions in these
appeals :
(i) When the auction of sites (for grant of a lease for 99 years) was in
exercise of the power of the government (UT Chandigarh Administration)
under the provisions of the Development Act in accordance with the
Leasehold Rules, it involves neither sale of goods nor rendering of any
service. The act of leasing plots by auction by the appellants therefore did
not result in the successful bidder becoming a ‘consumer’ or the appellants
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becoming ‘service providers’. In the absence of hiring or availing of any
service, the question of deficiency in service or unfair or restrictive trade
practice with reference to a service, did not arise and the complaint under the
Act was not maintainable.
(ii) There was no obligation on the part of the appellants, either statutory or
contractual, to provide the ‘basic amenities’ demanded by the respondents
with reference to the lease of sites by public auction. The payment of the
premium (which was permitted to be paid in instalments on the request of the
successful bidder) and the annual rent was not conditional upon the UT
Chandigarh providing any basic amenities. Payment of the amounts due could
not be postponed on the ground of absence of amenities. Nor could payment
of default interest be avoided, once there was default. Therefore, even
assuming that the complaint was maintainable, the National Commission was
not justified in interfering with the terms of the contract of lease and giving
relief in regard to interest, which was legally due.
Re : first contention
10. A ‘complaint’ is maintainable before a consumer forum under the
Consumer Protection Act, 1986, by a ‘complainant’ (’consumer’ or others
12
specified) against a ‘trader’ or ‘service provider’. The terms ‘complainant’
‘complaint’ ‘consumer’ ‘trader’ and ‘service’ are defined in clauses (b),(c),
(d),(q) and (o) of Section 2 of the Act. Therefore, a consumer forum will
have jurisdiction only when : (i) the complainant is a ‘consumer’ as defined in
clause (d) or a person specified in clause (b) of section 2 of the Act; (ii) the
respondent is a ‘trader’ as defined in clause (q) or a provider of ‘service’ as
defined in clause (o) of section 2 of the Act; and (iii) the ‘complaint’ relates
to any of the matters specified in clause (c) of section 2, for obtaining any
relief provided by order under the Act. It therefore follows that where the
complainant is not a ‘consumer’ (or a person specified in clause (b) of section
2), or where the respondent is not a ‘trader’ or ’service provider’ or where the
complaint does not relate to matters enumerated in clause (c) of Section 2 of
the Act, the consumer forum will have no jurisdiction either to entertain any
complaint or grant any relief under the Act.
11. The respondents relied upon the decisions in Lucknow Development
Authority v. M.K. Gupta - 1994 (1) SCC 243, Sector - 6, Bahadurgarh Plot
Holders Association v. State of Haryana - 1996 (1) SCC 485, Ghaziabad
Development Authority v. Balbir Singh - 2004 (5) SCC 65 and Municipal
Corporation, Chandigarh & Ors. v. Shanti Kunj Investment (P) Ltd. and Ors.
13
- 2006 (4) SCC 109, to contend that the complaints were maintainable and
relief sought could be granted. We may straight away note that the decisions
in Bahadurgarh and Shantikunj will not be of any assistance to decide the
issue of maintainability, as those cases did not relates to complaints under the
Consumer Protection Act, but arose out of writ petitions.
11.1 In Lucknow Development Authority v. M.K.Gupta [1994 (1) SCC 243]
this Court held that if the nature of duty or function performed was a service
as defined under the Act, then the provider of the service, irrespective of
whether it is a private body or statutory or a public authority, would be
amenable to the provisions of the Act. This Court held :-
“As pointed out earlier the entire purpose of widening the definition (of
‘service’ under section 2(o) of the Consumer Protection Act) is to include
in it not only day to day buying and selling activity undertaken by a
common man but even such activities which are otherwise not commercial
in nature yet they partake of a character in which some benefit is conferred
on the consumer. Construction of a house or flat is for the benefit of
person for whom it is constructed. He may do it himself or hire services of
a builder or contractor. The latter being for consideration is service as
defined in the Act. Similarly when a statutory authority develops land or
allots a site or constructs a house for the benefit of common man it is as
much service as by a builder or contractor. The one is contractual service
and other statutory service. If the service is defective or it is not what was
represented then it would be unfair trade practice as defined in the Act.
Any defect in construction activity would be denial of comfort and service
to a consumer. When possession of property is not delivered within
stipulated period the delay so caused is denial of service. Such disputes or
claims are not in respect of immovable property as argued but deficiency
in rendering of service of particular standard, quality or grade. Such
deficiencies or omissions are defined in sub-clause (ii) or clause (r) of
Section 2 as unfair trade practice . xxxxx Therefore if such authority
undertakes to construct building or allot houses or building sites to citizens
14
of the State either as amenity or as benefit then it amounts to rendering of
service and will be covered in the expression ‘service made available to
potential users’. A person who applies for allotment of a building site or
for a flat constructed by the development authority or enters into an
agreement with a builder or a contractor is a potential user and nature of
transaction is covered in the expression ‘service or any description’. It
further indicates that the definition is not exhaustive. The inclusive clause
succeeded in widening its scope but not exhausting the services which
could be covered in earlier part. So any service except when it is free of
charge or under a constraint of personal service is included in it.”
(emphasis supplied).
11.2 In Ghaziabad Development Authority v. Balbir Singh [2004(5) SCC
65] this Court held :-
“Thus the law is that the Consumer Protection Act, 1986 has a wide reach
and the Commission has jurisdiction even in cases of service rendered by
statutory and public authorities. Such authorities become liable to
compensate for misfeasance in public office i.e. an act which is oppressive
or capricious or arbitrary or negligent provided loss or injury is suffered by
a citizen. The Commission/Forum must determine that such sufferance is
due to mala fide or capricious or oppressive act. It can then determine the
amount for which the authority is liable to compensate the consumer for
his sufferance due to misfeasance in public office by the officers. Such
compensation is for vindicating the strength of the law. It acts as a check
on arbitrary and capricious exercise of power. It helps in curing social evil.
It will hopefully result in improving the work culture and in changing the
outlook of the officer/public servant. No authority can arrogate to itself the
power to act in a manner which is arbitrary. Matters which require
immediate attention should not be allowed to linger on. The consumer
must not be made to run from pillar to post. Where there has been
capricious or arbitrary or negligent exercise or non-exercise of power by
an officer of the authority, the Commission/Forum has a statutory
obligation to award compensation.”
12. The decisions in Lucknow Development Authority and Ghaziabad
Develoopment Authority make it clear that where a public development
15
authority having invited applications for allotment of sites in a lay out to be
formed or for houses to be constructed and delivered, fails to deliver
possession by forming the lay out of sites or by constructing the houses
within the stipulated period, the delay may amount to a deficiency in service
by treating the development authority as a service provider and the allottee as
the consumer. But where existing sites are put up for sale or lease by public
auction by the owner, and the sale/lease is confirmed in favour of the highest
bidder, the resultant contract relates to sale or lease of immovable property.
There is no hiring or availing of services by the person bidding at the auction.
Nor is the seller or lessor, a trader who sells or distributes ‘goods’. The sale
price or lease premium paid by the successful bidder of a site, is the
consideration for the sale or lease, and not consideration for any service or for
provision of any amenity or for sale of any goods.
13. In Lucknow Development Authority , it was held that where a developer
carries on the activity of development of land and invites applications for
allotment of sites in a developed layout, it will amount to ‘service’, that when
possession of the allotted site is not delivered within the stipulated period, the
delay may amount to a deficiency or denial of service, and that any claim in
regard to such delay is not in regard to the immovable property but in regard
16
to the deficiency in rendering service of a particular standard, quality or
grade. The activity of a developer, that is development of land into layout of
sites, inviting applications for allotment by assuring formation of a lay out
with amenities and delivery of the allotted sites within a stipulated time at a
particular price, is completely different from the auction of existing sites
either on sale or lease. In a scheme for development and allotment, the
allottee has no choice of the site allotted. He has no choice in regard to the
price to be paid. The development authority decides which site should be
allotted to him. The development authority fixes the uniform price with
reference to the size of plots. In most development schemes, the applications
are invited and allotments are made long before the actual development of the
lay out or formation of sites. Further the development scheme casts an
obligation on the development authority to provide specified amenities.
Alternatively the developer represents that he would provide certain
amenities, in the Brochure or advertisement. In a public auction of sites, the
position is completely different. A person interested can inspect the sites
offered and choose the site which he wants to acquire and participate in the
auction only in regard to such site. Before bidding in the auction, he knows
or is in a position to ascertain, the condition and situation of the site. He
knows about the existence or lack of amenities. The auction is on ‘as is where
17
is basis’. With such knowledge, he participates in the auction and offers a
particular bid. There is no compulsion that he should offer a particular price.
When the sites auctioned are existing sites, without any
assurance/representation relating to amenities, there is no question of
deficiency of service or denial of service. Where the bidder has a choice and
option in regard to the site and price and when there is no assurance of any
facility or amenity, the question of the owner of the site becoming a service
provider, does not arise even by applying the tests laid down in Lucknow
Development Authority or Balbir Singh.
14. Where there is a public auction without assuring any specific or
particular amenities, and the prospective purchaser/lessee participates in the
auction after having an opportunity of examining the site, the bid in the
auction is made keeping in view the existing situation, position and condition
of the site. If all amenities are available, he would offer a higher amount. If
there are no amenities, or if the site suffers from any disadvantages, he would
offer a lesser amount, or may not participate in the auction. Once with open
eyes, a person participates in an auction, he cannot thereafter be heard to say
that he would not pay the balance of the price/premium or the stipulated
interest on the delayed payment, or the ground rent, on the ground that the
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site suffers from certain disadvantages or on the ground that amenities are not
provided. With reference to a public auction of existing sites (as contrasted
from sites to be ‘formed’), the purchaser/lessee is not a consumer, the owner
is not a ‘trader’ or ‘service provider’ and the grievance does not relate to any
matter in regard which a complaint can be filed. Therefore, any grievance by
the purchaser/lessee will not give rise to a complaint or consumer dispute and
the fora under the Act will not have jurisdiction to entertain or decide any
complaint by the auction purchaser/lessee against the owner holding the
auction of sites.
Re : Second Contention
15. The complaint by the respondents proceeded on the assumption that
there was an obligation on the part of the appellants to provide amenities in
the nature of approach road, water supply lines, drainage system, rainwater
drainage and electricity and that unless such amenities were provided, they
were not liable to pay the premium or interest on the premium or the ground
rent. As noticed above, neither the terms and conditions of auction, nor the
advertisement relating to the auction, nor the letter of allotment contained any
assurance regarding provisions of any such amenities with reference to the
sites put up for auction. To get over the absence of such term or assurance,
the respondents relied upon the definitions of the words ‘site’ and ‘amenity’
19
in the Development Act and the provisions of the Leasehold Rules to contend
that there was a statutory obligation to provide the amenities and failure to
provide such amenities gave a cause of action to approach the Consumer
Forum with a complaint against the appellants and also withhold payment of
the premium instalments and ground rent. On the other hand, the appellants
contend that they had no obligation, either contractual or statutory, to provide
amenities of any nature, with reference to the auction of the leasehold rights
of sites and the lack of amenities or alleged non-provision of amenities cannot
be a ground for withholding the premium and rent.
16. In view of the rival contentions, it becomes necessary to refer to the
relevant provisions of the Development Act and the Leasehold Rules.
16.1) The Development Act re-enacts and modifies the law in relation to the
development and regulation of new capital of Punjab. Section 2(j) defines
‘site’ as meaning ‘any land’ which is transferred by the Central Government
under section 3. Section 3 relates to the power of Central Government in
respect of transfer of land and buildings in Chandigarh. Sub-section (1)
thereof provides that subject to the provisions of the said section, the central
government may sell, lease or otherwise transfer, whether by auction,
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allotment or otherwise, any land or building belonging to the government in
Chandigarh on such terms and conditions as it may subject to any rules that
may be made under the Act, think fit to impose. Sub-section (2) thereof,
provides that the consideration for any transfer under sub-section (1) shall be
paid to the central government in such a manner and in such instalments and
at such rate of interest as may be prescribed.
16.2) The term ‘amenity’ is defined in section 2(b) of the Development Act
as follows :
“2(b). ‘amenity’ includes roads, water-supply, street lighting, drainage,
sewerage, public building, horticulture, landscaping and any other public
utility service provided at Chandigarh”.
Section 4 relates to power to issue directions in respect of erection of
building. Section 5 relates to bar to erection of buildings in contravention of
building rules. The term ‘amenity’ is significantly not used in section 3 which
relates to transfer of land by sale or lease by the government. The term
‘amenity’ is referred only in sections 6 and 7 which are extracted below :
“6. Power to require proper maintenance of site or building. – If it
appears to the Chief Administrator that the condition or use of any site or
building is prejudicially affecting the proper planning of, or the amenities
in, any part of Chandigarh or the interests of the general public there, he
may serve on the transferee or occupier of that site or building a notice
requiring him to take such steps and within such period as may be
specified in the notice and thereafter to maintain it in such a manner as
may be specified therein.
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7. Levy of fee or tax for amenities. – (1) For the purposes of
providing maintaining or continuing any amenity at Chandigarh the central
government may levy such fees or taxes as it may consider necessary
(which shall be in addition to any free or tax for the time being leviable
under any other law) in respect of any site or building on the transferee or
occupier thereof.
(2) If the central government considers it necessary or expedient so to
do having regard to the fact that the transferee or occupier is a religious or
charitable institution or that he does not enjoy the amenity for which any
fee or tax is levied, the central government may, by general or special
order, exempt wholly or partly any class of such transferees or occupiers
from the payment of fees or taxes levied under sub-section (1).”
Neither Sections 6 and 7 nor any other provision of the Development Act
casts any obligation on the central government to provide amenities to plots
sold/leased by public auction. Therefore the assumption that there is a
statutory obligation on the part of the Central Government to provide
amenities, because the word ‘amenity’ is defined in the Act is erroneous and
baseless. As noticed above, the word ‘amenity’ is used in the context of two
specific matters. The first is that the transferee/occupier of a site should not
use the site or leave it in a condition that it will prejudicially affect the
amenities in any part of Chandigarh (vide section 6). The second is that
central government can levy fees/taxes in respect of any site/building, on the
transferee/occupier for the purpose of providing, maintaining or continuing
any amenity at Chandigarh. Thus definition of the ‘amenity’ in the
Development Act, does not in any manner cast any obligation on Chandigarh
22
administration with reference to the auction of leasehold rights relating to
sites belonging to central government.
16.3) Section 22 of the Development Act empowers the Central Government
to make rules for carrying out the purposes of the Act, in particular and
among others : (a) the terms and conditions on which any land or building
may be transferred by the (central government) under this Act; (b) the manner
in which consideration money for any transfer may be paid; (c) the rate of
interest payable, and the procedure for payment of instalments, interest, fees,
rents or other dues payable under this Act; (d) the terms and conditions under
which the transfer of any right in any site or building may be permitted; (e)
erection of any building or the use of any site; (f) levy of fees or taxes under
Section 7 of the Act.
16.4) The Leasehold Rules were made in 1973 in regard to lease of
properties by UT Chandigarh. We extract below the relevant rules :-
“3. (2). ‘premium’ means the price paid or promised for the transfer of a
right to enjoy immovable property under these Rules.”
“4. The Chandigarh Administration may demise sites and buildings at
Chandigarh on lease for 99 years. Such leases may be given by allotment
or by auction in accordance with these Rules.
x x x x x x
23
6. Commencement and period of lease. – The lease shall commence from
the date of allotment or auction as the case may be, and shall be for a
period of 99 years. After the expiry of said period of 99 years the lease
may be renewed for such further period and on such terms and conditions
as the Government may decide.
x x x x x x
8. Lease by allotment, Procedure for : xxx (not relevant) x x x
9. Lease by auction, procedure for.—In case of auction, at least 25 per cent
of the bid accepted by the auctioning officer shall be paid on the spot by
the intending lessee in the prescribed mode of payment in accordance with
Rule 12:
Provided that the Estate Officer may, in his absolute discretion, allow the
successful bidder to deposit in the prescribed mode of payment not less
than 10 per cent of the bid on the condition that the difference between the
amount deposited and 25 per cent of the bid shall be deposited in the same
manner within 30 days of auction.
9A Extension of period : xxx (not relevant) xxx
10. Delivery of possession.—Actual possession of the site/building shall
be delivered to the lessee on payment of 25 per cent of the premium in
accordance with Rule 8 or Rule 9 as the case may be:
Provided that no ground rent payable under Rule 13 and interest on the
instalments of premium payable under sub-rule (2) of Rule 12 shall be
paid by the lessee till the actual and physical possession of the
site/building is delivered or offered to be delivered to him, whichever is
earlier.
11. Premium.—(1) In case of allotment, the premium shall be such amount
as may be determined by the Chandigarh Administration.
(2) In case of auction, the premium shall be the bid accepted by the Estate
Officer, as a result of bidding in open auction.
12. Payment of premium and consequences of non-payment or late
payment.—(1) In addition to payment of 25 per cent premium under Rule
8 or 9 as the case may be, the remaining 75 per cent premium may be paid
in lump sum within 30 days from the date of allotment/auction without any
interest.
24
(2) If payment is not made in accordance with sub-rule (1) of this rule, the
balance of the 75 per cent premium shall be paid in three annual equated
instalments or more as the Chief Administrator may in exceptional
circumstances of a case fix with prior approval of the Chief Commissioner
along with interest at the rate of 10 per cent per annum or at such higher
rate of interest as may be fixed by the Chief Administrator by a
notification in the Official Gazette before the commencement of the lease.
The first instalment shall become payable after one year from the date of
allotment/auction:
(3) x x x (Not relevant) x x x
(3-A) In case any equated instalment or ground rent or part thereof is not
paid by the lessee by the date on which it became payable he shall be liable
to pay in respect of that instalment or ground rent or part thereof as the
case may be, interest calculated at the rate of twenty-four per cent per
annum from the date on which the instalment or ground rent became
payable till such date it is actually paid.
13. Rent and consequences of non-payment.—In addition to the premium,
whether in respect of site or building, the lessee shall pay rent as under --
(i) Annual rent shall be 2 ½ per cent of the premium for the first 33 years
which may be enhanced by the Chandigarh Administration to 3 ¾ per cent
of the premium for the next 33 years and to 5 per cent of the premium for
the remaining period of the lease.
(ii) Rent shall be payable annually on the due date without any demand
from the Estate Officer:
Provided that the Estate Officer may for good and sufficient reasons
extend the time for payment of rent upto six months on the whole on
further payment of 6 per cent per annum interest from the due date upto
the date of actual payment.
(iii) If rent is not paid by the due date, the lessee shall be liable to pay a
penalty not exceeding 100 per cent of the amount due which may be
imposed and recovered in the manner laid down in section 8 of the Capital
of Punjab (Development and Regulation) Act, 1952, as amended by Act
No.17 of 1973.
14. Execution of lease deed.—(1) After payment of 25 per cent premium
the lessee shall execute a lease deed in Form B, B-I, B-II or C, as the case
may be, in such manner as may be directed by the Estate Officer within six
months of the date of allotment/auction or within such further period as
the Estate Officer may, for good and sufficient reasons, allow.
25
17. The National Commission has proceeded on erroneous and baseless
assumptions that there is no obligation to pay the instalments until the
amenities were provided and consequently the instalments could be
rescheduled so as to begin after the amenities were provided and that interest
would start to run only when the lessee takes possession. In view of the
conflicting views of the High Court as to whether instalments are payable
only after the government provides the basic amenities, the National
Commission circumvented the issue. It held that as the appellant herein had
however provided all the basic facilities by 1999 and the matter had been
pending thereafter before the Consumer fora, the three annual instalments
would get postponed and commence only after its decision, that is from
1.5.2005, instead of the instalment schedule specified by the appellants
(which commenced in 1997).
18. The conflict referred to by the National Commission was with
reference to the decisions of the High Court in Shanti Kunj Investments Pvt.
Ltd . v. U.T. Administration Chandigarh reported in AIR 2001 P&H 309
(CWP No. 959/1999 decided on 2.2.2001) and in DLJ Builders (P) Ltd . v.
26
Advisor to the Administrator Chandigarh Administration (CWP No. 13695 of
2001 dated 18.2.2002).
18.1) Shantikunj Investments related to an auction of leasehold rights of a
site by the UT Chandigarh. In that case, the lessee found large number of
jhuggis, adjacent to the plot which were not removed inspite of his repeated
requests. He also found no amenities such as road, water, landscaping etc.
Therefore the lessee filed a writ petition before the High Court seeking relief.
The High Court declared that the UT Chandigarh having failed to provide the
basic amenities, its order of resumption and forfeiture could not be sustained
and therefore liable to be set aside. The High Court further directed that all
amenities should be provided within three months and no interest shall be
charged from the allottees if they pay the entire outstanding amount within
three months from the date of providing amenities.
18.2) On the other hand, in its subsequent decision in DLG Builders Pvt. Ltd .
v. Advisor to the Administratotr, Chandigarh Admn. (CWP No. 13695/2001
dated 18.2.2002) the High Court had held :-
“In our opinion, the judgment in M/s. Shanti Kunj Investment Pvt. Ltd.’s
case (supra) has to be read in the light of the peculiar facts brought before
the court and the same cannot be read as laying down the proposition that
the allottee is not required to pay the insalments of premium with interest
and ground rent in accordance with the terms and conditions of allotment
and Rule 12 of the Rules till each and every amenity enumerated in
Section 2(1) is made available at the site. The obligation of the
Administration to provide approach road, water supply, electricity,
27
sewerage, storm water drainage can be read as implicit in the scheme of
the Act and the Rules, but it cannot be said that the allottee is entitled to
withhold the payment of instalments on the ground of lack of particular
amenity at the site. If the basic amenities, like water, electricity and
approach road are not available at the site and on that account it is not
possible to construct the building, the allottee can represent to the
Administration that he may not be burdened with the liability of ground
rent and may not be penalized for non construction within the specified
time. After completion of building, he can represent for waiver of ground
rent in case facility of sewerage has not been provided. However, after
taking possession of the site and constructing the building, he cannot avoid
his obligation to pay the balance of the premium along with interest and
ground rent in accordance with the conditions of allotment and the
provisions of Rule 12 of the Rules on the pretext that land scaping has not
been done or pavement has not been tiled or the particular public utility
service has not been provided. In our considered view, the allottee is
bound to pay the balance premium and other charges in accordance with
the conditions of allotment.”
18.3) The decision of the High Court in Shantkunj Investments was
challenged by the Chandigarh Administration and Municipal Corporation of
Chandigarh. The decision in DLG Builders was challenged by the allottees.
They were disposed of by this Court by a common judgment reported in
Municipal Corporation, Chandigarh v. Shantikunj Investments Pvt. Ltd . 2006
(4) SCC 109. This Court noted that the conflict between the two decisions of
the High Court were in regard to the question whether providing of amenities
as defined in Section 2(b) of the Development Act was a condition precedent
for payment of instalments and charging interest. After examining the
provisions of the Act and the relevant rules, this Court rejected the
28
contentions of the lessees and held that the High Court’s view in Shantikunj
could not be sustained. This Court held :-
“On a plain reading of the definition "amenities" read with Rule 11(2) and
Rule 12, it cannot be construed to mean that the allottees could take upon
themselves not to pay the lease amount and take recourse to say that since
all the facilities were not provided, therefore, they are not under any
obligation to pay the installment, interest and penalty, if any, as provided
under the Act and the Rules. …... It has never been the condition
precedent. It is true that in order to fully enjoy the allotment, proper
linkage is necessary. But to say that this is a condition precedent, that is
not the correct approach in the matter. …... It is true the word, "enjoy"
appearing in the definition of the word "premium" in Rule 3(2) of the
Rules, means the price paid or promised for the transfer of a right to enjoy
immovable property under the Rules. It was very seriously contended
before us that the word, enjoy immovable property necessarily means that
the Administration should provide all the basic amenities as appearing
under Section 2(b) of the Act for enjoying that allotment. The expression
"premium" appearing in the present context does not mean that the
allottees/ lessees cannot enjoy the immovable property without those
amenities being provided. The word "enjoy" here in the present context
means that the allottees have a right to use the immovable property which
has been leased out to them on payment of premium i.e. the price….. It is
the common experience that for full development of an area it takes years.
It is not possible in every case that the whole area is developed first and
allotment is served on a platter. Allotment of the plot was made on an as-
is-where-is basis and the Administration promised that the basic amenities
will be provided in due course of time. It cannot be made a condition
precedent. This has never been a condition of the auction or of the lease.
As per the terms of allotment upon payment of the 25 per cent, possession
will be handed over and rest of the 75 per cent of the leased amount to be
paid in a staggered manner i.e. in three annual equated installments along
with interest at the rate of 10 per cent. If someone wants to deposit the
whole of the 75 per cent of the amount he can do so. In that case, he will
not be required to pay any interest. But if a party wants to make payment
within a period of three years then he is under the obligation to pay 10 per
cent interest on the amount of installment. This is the obligation on the
part of the allottee as per the condition of lease and he cannot get out of it
by saying that the basic amenities have not been provided for enjoying the
allotted land, therefore he is not liable to pay the interest”.
We asked the learned counsel for the parties to tell us which is the
obligation of the lessor in the lease deed which says that they will not
charge interest on the installments before providing the amenities. There
29
is neither any condition in the lease nor any obligation under the auction.
If the parties have given their bids an with their eyes wide open, they have
to blame themselves. It cannot be enforced by any mandamus as there is
no obligation contained in the lease deed or in the auction-notice.”
Therefore, it is evident that a lessee/successful bidder cannot seek reschduling
of the instalments of premium or postponement of accrual of the interest
payable as per rules.
19. The equated instalment includes interest only upto the dates stipulated
as due dates. When the instalments are not paid on the due dates, the lessees
become liable to pay penal interest at 24% per annum from the due date to
date of actual payment (vide clause 4 of General Term & Conditions of
Auction and clause 5 of Letter of allotment and Rule 12(3A) of the Leasehold
Rules). We may also refer to two decisions of this Court in the context of
interest.
20. In Sector-6, Bahadurgarh Plot Holders’ Association (supra), the issue
that arose for determination was whether the allottee could refuse to pay
interest on the instalments of the price on the ground that the site had not
been fully developed by providing all the modern amenities as assured. The
issue did not arise in a complaint under the Consumer Protection Act, but in a
30
writ petition filed by the allottees challenging the charging of interest and
requiring the authority to complete the development. The allottees contended
that what was offered was allotment of developed sites and not undeveloped
sites; that they were informed that “all modern amenities like underground
sewerage, storm water drainage, roads, electricity, supply of potable water”
will be provided; that as the sites were not developed fully and as possession
of “developed sites” was yet to be given, the state government could not
charge interest. The state government, on the other hand, contended that
charging of interest was not correlated to the delivery of possession under the
Punjab Urban Estates Sale of Rights Rules, 1965 and having regard to Rule
12(2) of the Rules, interest accrued from the date of issue of an allotment
order. Interpreting the said provisions, this Court held that while interest
could not be demanded till possession was offered, it was not necessary that
such offer should be of fully developed plots. This Court held :-
“As the offer had stated that modern amenities noted above “will be
provided”, it cannot be held that till the amenities as mentioned have
become fully functional, the offer is incomplete. It is for this reason that
the fact that full development has not yet taken place, even if that be the
position as contended by Shri Bhandare, cannot be a ground to hold that
interest has not become payable. It is true that the applicants were given to
understand that the amenities noted above would become available (and
within reasonable time), the fact that the same did not become available to
the desired extent could not be a ground not to accept delivery of
possession. From the order of the High Court which we have quoted
above, we find that the offer of possession of the undeveloped plot was not
accepted by the counsel of the appellant. That order being of 17-10-1980,
we are of the view that interest did become payable from that date. The
fact that the plot has not yet been fully developed, as is the case of the
appellant, has, therefore, no significance insofar as charging of interest is
31
concerned. We are not in a position to accept the submission of Shri
Bhandare that equity would not demand charging of interest, even though
the plots are yet to be fully developed. When parties enter into contract,
they are to abide by the terms and conditions of the same, unless the same
be inequitable. In the present case, question of equity does not really arise
inasmuch as the condition relating to interest is founded on a statutory
rule, vires of which has not been challenged.”
(emphasis supplied)
If interest could not be denied to the state government even where there was
an assurance of all “modern amenities”, it is needless to say that the claim of
the government will be much more stronger, when there is no assurance at all,
as in this case.
21. In regard to default interest, we may refer to the following observations
of this Court in Secretary, Bhubaneswar Development Authority v. Susanta
Kumar Mishra (C.A.No. 605/2009 decided on 30.1.2009)
“Each equated instalment would then have a principal component and
interest component. As the equated instalments would include interest on
the principal only up to the due date of instalment, whenever there is a
default, there can be no dispute that the ‘principal’ part of the instalment
could be subjected to interest from the date of default to date of payment.
It is no doubt true that when the defaulted instalment in entirety is
subjected to interest, the ‘interest’ component of the defaulted instalment
is also subjected to interest. To that limited extent, there may be charging
of interest upon interest. Charging of such interest, on the interest part of
the instalment, on default in payment of the instalment, at a reasonable rate
from the date of default, cannot be termed as charging of compound
interest in regard to the entire dues. It is only a provision to ensure that the
dues (instalments) are paid promptly and avoid misuse of the concession
given by permitting payment in instalments. But for such a provision,
lessees/allottees who have already been given possession, will be tempted
to delay payments, thereby leading to continuous defaults. A statutory
development authority, working on no profit no loss basis, can ill afford to
permit such continuous defaults by lessees/allottees, which will paralyse
32
their very functioning, thereby affecting future developmental activities for
the benefit of other members of the general public. Therefore a provision
for interest as contained in clause 6 of the lease-cum-sale agreement is
neither inequitable nor in terrorem. Where the basic rate of interest is itself
very high, or where interest is charged on the entire price instead of
charging interest on the reducing balance, when working out the equated
instalments, or where the rate of interest on default is punitively excessive,
the position may be different. But no such case is made out by the
respondent.”
22. In this case, having regard to the provisions in the leasehold Rules and
contractual terms (as contained in the General terms and conditions of auction
lease and the letter of confirmation of lease cum offer of possession), the
following position is evident :
(i) Interest at 10% per annum is payable from the date of auction till
date of payment on the balance of premium (if the lessee chooses
to pay the 75% of premium in instalments).
(ii) Payment of interest has nothing to do with provision of
amenities.
(iii) If the premium interest on ground rent is not paid on the due
date, then interest will be payable at 24% P.A. from the date of
default (due date) to date of payment.
(iv) The lessee will not be liable to pay interest on the premium
instalments or the rent, till the actual and physical possession of
the site is delivered or offered to be delivered to the lessee
(whichever date is earlier).
23. The lessees-respondents, however, placed strong reliance on the
following observations and directions in para 38 of the decision of this Court
33
in Shantikunj (supra) to contend that commencement of interest could be
postponed :-
“We make it clear that though it was not a condition precedent but there is
obligation on the part of the Administration to provide necessary facilities
for full enjoyment of the same by the allottees. We therefore, remit the
matter to the High Court for a very limited purpose to see that in cases
where facilities like kutcha road, drainage, drinking water, sewerage, street
lighting have not been provided, then in that case, the High Court may
grant the allottees some proportionate relief. Therefore, we direct that all
these cases be remitted to the High Court and the High Court may consider
that in case where kutcha road, drainage, sewerage, drinking water,
facilities have not been provided, no relief shall be granted but in case any
of the facilities had not been provided, then the High Court may examine
the same and consider grant of proportionate relief in the matter of
payment of penalty under Rule 12(3) and interest for delay in payment of
equated instalment or ground rent or part thereof under Rule 12(3-A) only.
We repeat again that in case the above facilities had not been granted then
in that case consider grant of proportionate relief and if the facilities have
been provided then it will not be open on the part of the allottees to deny
payment of interest and penalty. So far as payment of instalment is
concerned, this is a part of the contract and therefore, the allottees are
under obligation to pay the same. However, so far as the question of
payment of penalty and penal interest is concerned, that shall depend on
the facts of each case to be examined by the High Court. The High Court
shall examine each individual case and consider grant of proportionate
relief.”
The above observations and directions were apparently on the special facts
and circumstances of that case. As noticed above, in Shantikunj , the auction
was of the year 1989. The Lessee had approached the High Court in its writ
jurisdiction in the year 1999 seeking amenities. Even in 2006 when this Court
heard the matter, it was alleged that the amenities had not been provided. It is
in those peculiar facts that this Court obviously thought fit to give some
reliefs with reference to penal interest wherever amenities had not been
34
provided at all even after 17 years. In fact, this court made it clear while
remanding to High Court that wherever facilities/amenities had been provided
before the date of the judgment (28.2.2006), the lessees will not be entitled to
any reliefs and where the facilities/amenities had not been granted even in
2006, the High Court may consider giving some relief by proportionate
reduction in penal interest. This direction was apparently on the assumption
that in case of penalty, the court can grant relief in writ jurisdictions.
24. But the facts of this case are completely different. The auction sale was
in December 1996. The National Commission has recorded a finding that
almost all the facilities/amenities had provided in the year 1999, that is within
about two years. Therefore, the observations of this court in para 38 of
Shantikunj will have no applications to these cases, particularly as they were
made in the context of a writ proceeding, whereas we are concerned with a
proceedings under Consumer Protection Act. We may also refer to another
aspect. Section 7 of the Act empowers the Central Government to levy such
fees and taxes as it may consider necessary (which shall be in addition to any
fee or tax for the time being leviable under any other law) in respect of any
site or building on the transferee or the occupier thereof, for the purpose of
providing, maintaining or continuing any amenity at Chandigarh. This
35
provision clearly demonstrates that the providing amenities is not linked to
auction of plots on lease basis and the premium paid is not for providing any
amenity. The Central Government is required to provide amenities by levying
fees and taxes in respect of sites/plots on the transferees/ occupiers thereof.
Therefore, it is doubtful whether any proportionate reduction in penal/default
interest could be made on the ground of non-provision of amenities. Be that
as it may. As we have already held that para 38 will not apply, we do not
propose examine that aspect any further in these cases.
25. The respondents lastly contended that the rate of default interest was
only 12% per annum under Rule 12(3A) of the Leasehold Rules as on the
date of the auction and therefore clause (4) of the General Terms &
Conditions of Sale and clause (5) of the letter of allotment, providing for
payment of default interest @ 24% per annum was illegal and unauthorized.
This contention is urged for the first time in this court. The appellants
countered by contending that the Administrator had by notification, fixed the
default interest at 24% per annum. Suffice it to say that the rate of default
interest mentioned in Rule 12(3A) as on the date of auction, would
alone apply. If Rule 12(3A) was not amended increasing the rate of default
interest from 12% P.A. to 24% per annum as on the date of auction, then the
36
rate of interest stipulated in Rule 12(3A) as it stood on the date of
auction will apply. The appellants could not charge default interest at a rate
higher than what was provided in the said rule. If any higher rate has been
charged by way of default interest and it is not corrected, it is open to the
lessees to seek relief in accordance with law.
26. We may note that the appellants raised one more contention that the
complaints were not maintainable against the government can never be
considered as a ‘service provider’ under the Act. As such a contention was
not raised either before the UT Commission or National Commission, we do
not propose to examine the said contention in these appeals.
27. The appellants thus succeed on both grounds. We, therefore, allow
these appeals by UT Chandigarh and set aside the orders dated 21.2.2005 and
21.2.2007 of the National Commission in the matters which are the subject
matter of these appeals and dismiss the respective complaints filed by the
respondents as not maintainable.
CA Nos.1674-1686 of 2009 [@ SLP [C] Nos.3271-3283 of 2008]
37
28. Leave granted. The lessees-complainants have filed these appeals
against the common order dated 21.2.2007 of the National Commission
seeking further relief. They contend that the National Commission ought to
have further directed the UT Chandigarh not to charge interest on the
premium instalments nor claim the ground rent until the basic amenities were
provided. They also contend that as the basic amenities were not provided on
the date of delivery of possession of the sites, but were provided only in 1999,
their liability to pay ground rent and interest on premium instalments would
start only with effect from 25.10.1999.
29. We have considered and rejected these contentions while dealing with
the appeals by UT Chandigarh. In view of the dismissal of their complaints,
these appeals do not survive and are dismissed.
__________________J
[R. V. Raveendran]
__________________J
[Markandey Katju]
New Delhi;
March 17, 2009