Consumer Protection Act, 1986 — Ss. 2(1)(g), 14 — Deficiency of service — Development authorities
Statutory development authorities rendering housing and allotment services fall within the definition of “service” under the Consumer Protection Act. Failure to deliver possession, cancellation of schemes without justification, delay, sub-standard construction, or arbitrary demands constitute deficiency of service.
Consumer Protection Act, 1986 — Compensation — Scope
The expression “compensation” under the Act has a very wide connotation and includes recompense for actual loss, expected loss, harassment, mental agony, oppression and injustice suffered by a consumer. Compensation is not confined to refund of money alone.
Public Authorities — Misfeasance in public office
Where loss or injury is caused to a consumer due to oppressive, capricious, arbitrary or negligent acts of public authorities or their officers, such conduct amounts to misfeasance in public office, rendering the authority liable to compensate the consumer.
Interest — Award by Consumer Fora — Uniform rate — Impermissibility
Award of interest at a uniform flat rate of 18% per annum in all cases, irrespective of facts and nature of loss, is unsustainable. Interest or compensation must correlate to the facts of each case, the nature of deficiency, extent of delay, and injury suffered.
Compensation — Determination — Case-specific
No hard and fast rule can be laid down for awarding compensation. The Consumer Forum must determine, on facts, the nature of loss or harassment and quantify compensation under appropriate heads with reasons.
Refund of amounts — Interest — Principles
In cases of refund, interest is ordinarily payable from the date of deposit till repayment. In cases of compensation for harassment or mental agony, interest may be directed only if compensation is not paid within the stipulated time.
Public funds — Recovery from erring officials
Where compensation is awarded on account of mala fide, arbitrary or oppressive acts of officers, the authority must pay the amount to the consumer from public funds and thereafter recover the same from the officers responsible.
Interest Act, 1978 — Applicability
Principles under the Interest Act, 1978 apply where interest is awarded for recovery of debt or refund of money. They do not strictly govern grant of compensation for harassment or misfeasance, which is founded in administrative law.
Held
Consumer Fora erred in mechanically awarding interest at 18% per annum in all cases. Compensation must be reasoned, fact-specific and proportionate. Matters to be examined individually in light of principles laid down.
B. ANALYSIS OF FACTS AND LAW
I. FACTUAL BACKGROUND
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A large batch of appeals arose from orders of Consumer Fora and the National Consumer Disputes Redressal Commission involving development authorities such as Ghaziabad Development Authority.
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In all cases, the National Commission had followed a standardised formula awarding interest at 18% per annum, irrespective of:
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Nature of the scheme,
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Period of delay,
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Whether possession was delivered or refunded,
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Whether loss was monetary, physical, or mental.
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Facts varied widely:
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Cancellation of housing schemes after collecting money,
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Delay of several years in handing over possession,
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Offering alternate plots at higher prices,
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Sub-standard or incomplete construction,
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Arbitrary additional demands,
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Refund of amounts without compensation.
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Despite factual variations, the National Commission granted identical relief, prompting challenge before the Supreme Court.
II. CORE LEGAL ISSUES
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Whether Consumer Fora can award interest at a uniform rate in all cases.
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Scope and meaning of compensation under the Consumer Protection Act.
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Whether development authorities are liable for misfeasance in public office.
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Whether compensation can include mental agony and harassment.
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Whether liability should rest on public funds or be recovered from erring officials.
III. ANALYSIS OF LAW
A. Nature of Service and Liability
The Court reaffirmed that housing and allotment activities of development authorities constitute “service”. Any failure in performance resulting in loss or harassment amounts to deficiency of service.
B. Compensation under Consumer Protection Act
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Compensation is not limited to pecuniary loss.
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It extends to:
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Mental agony,
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Harassment,
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Oppression,
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Injury to dignity.
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The power to award compensation is rooted in administrative law accountability of public authorities.
C. Misfeasance in Public Office
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Acts which are arbitrary, capricious or oppressive transcend mere breach of contract.
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Such conduct attracts liability for misfeasance in public office.
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Compensation in such cases serves:
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Individual redress, and
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Societal purpose by checking abuse of power.
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D. Uniform Interest at 18% — Rejected
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The Court categorically held that mechanical grant of 18% interest is legally unsound.
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Interest or compensation must have a rational nexus with:
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Period of delay,
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Nature of deprivation,
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Loss actually suffered.
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Earlier cases granting 18% interest were upheld only due to gross and exceptional facts, not as a general rule.
E. Recovery from Responsible Officers
The Court emphasised that where loss arises from mala fide or oppressive acts, burden should not permanently fall on taxpayers. Recovery must be made from officers responsible, after payment to the consumer.
IV. APPLICATION OF LAW TO FACTS
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National Commission erred in adopting a “one-size-fits-all” approach.
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Each consumer dispute must be examined independently.
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Compensation must be awarded under separate heads with reasons.
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Interest may be used as a mode of compensation only where facts justify.
V. CONCLUSION / RATIO
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Uniform award of 18% interest is unsustainable.
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Compensation under the Consumer Protection Act is broad, remedial and deterrent.
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Development authorities are accountable for misfeasance.
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Consumer Fora must adopt a fact-specific, reasoned approach.
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Appeals to be considered individually on settled principles.
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