Holding

The Court held that 12% per annum interest is appropriate and that interest on that interest must also be paid at the same rate from the date of each installment to the date of refund.

Summary

The appellant applied for a flat under the Indira Puram Housing Scheme in 1994 and paid all required installments, but the flat was never allotted. In 2001 he demanded a refund of the installments with 21% interest, but the authority refunded only the principal amount. He filed a claim under Section 12B (and Section 128) of the Monopolies and Restrictive Trade Practices Act, 1969, alleging deficiency of service, and the MRTP Commission ordered the authority to pay 12% per annum interest on the installments from the date of each payment to the date of refund. The appellant appealed, seeking a higher rate of interest. The Supreme Court held that there is no fixed rule for the rate of interest and that 12% per annum was appropriate in the circumstances, and further ordered that interest on that interest be payable at the same rate from the date of each installment to the date of refund. The Court modified the Commission’s order accordingly and disposed of the appeal.

Issues considered

What rate of interest is appropriate as compensation for deficiency of service under the Monopolies and Restrictive Trade Practices Act?
Whether the appellant is entitled to interest on the interest awarded?
Whether the appellant can claim a rate of interest higher than the 12% per annum ordered by the Commission?

Legislation cited

Monopolies and Restrictive Trade Practices Act, 1969s. 128, s. 12B

Subjects

interestinterest on interestdeficiency of serviceMonopolies and Restrictive Trade Practices Acthousing scheme refundcompensationequityrate of interest

Judgment

ALOKSHANKERPANDEY A
11.
UNION OF INDIA AND ORS.

FEBRUARY I5, 2007

[S.B. SINHA AND MARKANDEY KATJU, JJ.] B

Interest:

Interest on interest-Installments paid for seeking allotment of flat-
Flat not allotted-Claim for refund of the installments along with interest- C
Respondent authority refunded amount without interest-Commission ordered
payment of interest @ 12% p.a.-Appeal for higher interest-Held, in the
facts of case, interest @ 12% p.a. was appropriate-However as interest was
not paid along with the refund amount, respondent authority directed to pay
interest at the same rate on the interest amount from the date of refand of D
installments till date of payment.

Appellant applied for a flat in 1994. He paid all the installments as
demanded. On finding that there is no likelihood of availability of flat in the
near future, he made demand of the amount paid along with interest@21%
p.a. The amount was refunded to the applicant in the year 2001 without any E
interest. He claimed compensation by filing an application under S.128 of
Monopolies and Restrictive Trade Practices Act, 1969. The Commission held
that it is a clear case of deficiency of services on the part of the respondent
authority and that the appellant was not only deprived of return on his
investment made with the respondent but also the possession of the flat
promised to him. The Commission directed the respondent to pay 12% p.a. F
interest on the installments from the dates of the payment till the date of
refund. The present appeal is filed claiming interest at a higher rate.

Disposing of the appeal, the Court

HELD: Interest is not a penalty or punishment at all, but it is the normal G
accretion on capital Equity demands that borrower should not only pay back
the principal amount but also the interest thereon to the lender. There is no
hard and fast rule about how much interest should be granted and it all depends
on the facts and circumstances of each case. The grant of interest of 12%
737 II
738 SUPREME COURT REPORTS [2007] 2 S.C.R.

A per annurn is appropriate in the facts of this particular case. However, since
interest was not granted to the appellant along with the principal amount the
respondent should in addition to the interest at the rate of 12% per annum
also pay tO appellant interest at the same rate on the aforesaid interest from
the date of payment of installments by the appellant to the respondent till the
date of refund on this amount, and the entire amount must be paid to the
B appellant within two months. (Para 8, 9] [740-A, B, C, DJ

Renusagar Power Co. Ltd v. General Electric Co., [1994] Suppl. l SCC
644, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1598 of2005.
c
From the Order dated 13.9.2004 of the MRTP Commission in C.A. No.
193/2001.

Parag Tripathi, Deepti Rajpal and Dr. Kailash Chand for the Appellant.

D Mohan K. Parasaran, A.S.G., Ashok K. Srivastava, P. Parmeshwaran (for
D.S. Mahra) Reena Singh and Neelam Singh for the Respondents.

The Judgment of the Court was delivered by

. MARKANDEY KATJU, J. I. This appeal has been filed against the
E order pass~d by the Monopolies and Restrictive Trade Practice Commission,
New Delhi (hereinafter referred to as "the Commission") dated 13.9.2004 in
C.A. !'Jo.193 of2001.

2. Heard learned counsel for the parties and perused the record.

F 3. The' case of the appellant is that after applying for a flat under the
"Indira Puram Housing Scheme" in-the year 1994, a reservation letter dated
30th March, 1994 was received by him and he was asked to pay seven
installments on the specified dates. The amount as well as the dates on which
the installments were to be paid was mentioned therein. The applicant started
G paying the installments as demanded. Subsequently, he opted out for a HIG
flat, which was also allotted to him vide letter dated 17th May, 1994. No
additional demand was asked for in the second letter. The installments were
duly paid as demanded. Thereafter, nothing was heard from the respondent
side for almost five years. After finding that there is no likelihood of the flat
to be made available to him in the near future, the applicant was left with no
H alternative but to demand his amount paid along with interest at the rate of
ALOK SHANKER PANDEY v. U.O.l. [MARKANDEY KATJU, J.] 739
21% per annum. The amount was refunded to the applicant in the year 2001 A
without any interest as asked for. The applicant thus suffered losses on
account of unfair trade practices adopted by the respondent, hence he sought
compensation from the respondent by filing an application under Section 12B
of the Monopolies and Restrictice Trade Practices Act, 1969 (hereinafter
referred to as "the Act").
B
4. In response to the notice issued under Section 12B of the Act, the
respondent filed its reply. The defence of the respondent was that as the full
payment ofRs.6,64,000/- (estimated cost) as indicated in the reservation letter
was not paid, the possession of the flat was not handed over to him. The
refund as requested, on the other hand was issued to him promptly. There C
was no deficiency of service as alleged in the application and as such the
Compensation Application should be dismissed.

5. It is not disputed that the installments as mentioned in both the
reservation letters, were paid on the specified dates as indicated therein. It
is also not disputed that though the estimated cost was indicated at D
Rs. 6,64,000/-, the same was not worked out till the year 1998 when the first
camp was held, in respect of allotment of such flats. The respondent also
made no efforts to issue demand letters in respect of the remaining amount
subsequent to the year 1995 when the last installment was paid. On the other
hand, the applicant was given an assurance that the possession of the flat
would be given to him in the near future. The applicant, therefore, had no E
alternative but to ask for refund of the amount as deposited. The respondent
on its side has no explanation for either not demanding the remaining amount
or handing over the possession of the flat. Even the averments of the applicant
that the house is not yet ready has not been strongly refuted. Thus it is a
clear case of deficiency of services on the part of the respondent. As a result p
of such unfair trade practices, the applicant has not only been deprived of
return on his investment made with the respondent authority but also the
possession of the flat promised to him.

6. Considering the above facts, the Commission directed the respondent
to pay 12% per annum interest on the installments from the dates of the G
payment till the date of refund. This appeal has been filed claiming interest
at a higher rate.

7. Learned counsel for the appellant Shri Parag P. Tripathi referred to
various decisions in which this Court has granted higher rate of interest e.g.
Renusagar Power Co. Ltd. v. General Electric Co., [1994] Supp. I SCC 644. H
;t

740 SUPREME COURT REPORTS (2007] 2 S.C.R.

A 8. We are of the opinion that there is no hard and fast rule about how
much interest should be granted and it all depends on the facts and f-
circumstances of the each case. We are of the opinion that the grant of
interest of 12% per annum is appropriate in the facts of this particular case.
However, we are also of the opinion that since interest was not granted to
the appellant along with the principal amount the respondent should then in
B addition to the interest at the rate of 12% per annum also pay to appellant
interest at the same rate on the aforesaid interest from the date of payment
of installments by the appellant to the respondent till the date of refund on
this amount, and the entire amount mentioned above must be paid to the
appellant within two months from the date of this judgment.
c 9. It may be mentioned that there is misconception about interest.
Interest is not a penalty or punishment at all, but it is the normal accretion
on capital. For example if A had to pay B a certain amount, say I 0 years ago,
but he offers that amo_unt to him today, then he has pocketed the interest on
the principal amount. Had A paid that amount to B JO years ago, B would
D have invested that amount somewhere and earned interest thereon, but instead
of that A has kept that amount with himself and earned interest on it for this
period. Hen~e equity demands that A should not only pay back the principal
amount but also the interest thereon to B.
·~

, I 0. With these observations the impugned judgment is modified and the
E appeal is disposed of accordingly.

D.G. Appeal disposed of.

i.

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