Holding

The Supreme Court held that the Board was liable for deficiency in service but fixed compensation at Rs 1 lakh.

Summary

The Karnataka Industrial Areas Development Board allotted a 2.5‑acre plot to Nandi Cold Storage Pvt Ltd for a cold‑storage project. Subsequent litigation by the original landowners resulted in a High Court stay order, preventing construction, and the company's loan from Karnataka State Financial Corporation was cancelled. The company filed a complaint under the Consumer Protection Act, 1986 alleging deficiency in service by the Board and was awarded Rs 3 lakh compensation by the National Consumer Disputes Redressal Commission. The Board appealed, contending no deficiency and that compensation was unwarranted. The Supreme Court held that the Board’s conduct amounted to deficiency in service but, in view of the peculiar circumstances, reduced the compensation to Rs 1 lakh. The appeal was allowed in part and the reduced award was directed to be paid by the Board.

Issues considered

Whether the Karnataka Industrial Areas Development Board committed deficiency in service under the Consumer Protection Act, 1986
Whether the complainant is entitled to compensation for the alleged deficiency
What is the appropriate quantum of compensation in the circumstances

Legislation cited

Subjects

Consumer ProtectionDeficiency in serviceCompensationIndustrial land allotmentLoan cancellationSupreme CourtNCDRCKarnataka

Judgment

A KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD
v.
NANDI COLD STORAGE PVT. LTD.

JULY I I, 2007

B [DR. ARfJIT PASA YAT, P.K. BALASUBRAMANY AN AND D.K. JAIN. JJ.]

Consumer Protection Act. 1986:

Deficiency in service-Compensation-Plot allotted by Industrial Areas
C Development Board to complainant for opening a cold storage-loan
sanctioned-Later. loan cancelled as complainant could not go ahead with
the project due to litigation initiated by owners of lands-Claim for
compensation filed against Board-National Consumer Disputes Redressa/
Commission holding that there was deficiency in service and complainant
D u·as entitled to compensation of rupees three lakhs-On appeal. Supreme
Court issued notice limited to quantum of compensation onlv-Held: About
deficiency in service, correct approach has been adopted-However.
considering peculiar circumstances, compensation fixed to rupees one lakh.

The respondent-<:ompany filed a complaint before the National Consumer
E Disputes Redressal Commission, against the appellant-Industrial Areas
Development Board complaining deficiency of service, as on the plot allotted
to it b~· the Board, construction activities for opening the proposed cold storage
could not be carried out because of the litigation initiated by the owners with
regard to acquisition of the said plot and, ultimately, the loan obtained by the
complainant was cancelled. The National Commission held that there was
F deficiency in sen·ice and the complainant was entitled to a compensation of
rupees three lakhs. On the appeal filed by the Board, the notice issued was
limited to the quantum of compensation only.

Allowing the appeal in part, the Court
G HELD: In the notice it was indicated that the same was limited to the
question of compensation. About the deficiency in sen·ice the correct approach
has been adopted. Considering the peculiar circumstances of the case, the
compensation is fixed to rupees one lakh. IPara 10 and 1I) f273-D-EJ

H 270
L
I
KAR.'\ATAKA l:'<Ul'STRJAL AREASDE\'E BOARD I'. M'>DICOLD STORAGE P\'T LTD [PASAYAT. J] 27)

CIVIL APPELLATE JURISDICTION A
I.A. No. I

IN

Civil Appeal No. 5542 of2004 B
From the Final Judgment & Order dated 28.04.2004 of the National
Consumer Disputes Redressal Commission at New Delhi in Original Petition
No. 42of1999.

Kiran Suri and S.J. Amith for the Appellant. c
S. Nanda Kumar, Sathish Kumar. K. Mayil Samy and V.N. Raghupathy
for the Respondent.

The Judgment of the Court was delivered by

DR. ARIJIT PASA YAT, J. I. Challenge in this appeal is to the order
D
passed by the National Consumer Disputes Redressal Commission at New
.... Delhi (in short the "National Commission'). Respondent had filed a complaint
against the appellant before the National Commission.

2. Background facts in a nutshell are as follows:

3. In the complaint responde~t inter alia stated as follows:

The complainant company. desirous of opening a cold storage unit in
the State of Kamataka. applied for allotment of land to the appellant in
August 1991. After meeting all the formalities required from time to time by F
the appellant, a plot bearing No.2 of Chickballapur Industrial Area, measuring
2.5 acre of land, was allotted for setting up a cold storage. Possession
c·ertificate was issued on 26/30.8.93. The complainant also in the meantime
obtained a loan of Rs.67 lakh from the Karnataka State Financial Corporation
(in short 'KFC'). For the first time in August 1994, a letter was written by
appellant to the complainant that "the company could not go ahead with G
construction activity on the plot allotted as the erstwhile land owner of plot
No.2 covered in Sy.No.29 and 30 of Jadalathimmanahally Village has obtained
f
.... stay order from the High Court ofKamataka in W.P.No.70/88 challenging the
.. -..i.
acquisition proceedings. The Board initiated action for vacating the stay
order granted by the High Court of Karnataka. However, the company could H
_J

l
272 SUPREME COURT REPORTS [2007] 8 S.C.R.

A not go ahead with implementation in view of the stay order granted by the
High Court. The complainant sought for pennission to go ahead with
implementation after the litigation in respect of the above land is disposed of ~-
by the High Court. The Board should also grant extension of time to the
company for implementation of the project after disposal of the litigation.

B 4. Original land holder took back possession forcibly in view of the
order of the Karnataka High Court. The writ petition fi_led by the original land
holder was allowed by the High Court leaving the complainant high and dry

C
without land. more so when in September 1994. the KFC cancelled the term
loan in view of the fact that no progress was made in the implementation of
the project. Since the complainant was keen to go ahead with the project, on
)-

... _

collecting some information. it approached the appellant to allot plot No. I ·A
and 1-B which was lying vacant, which were allotted to the complainant in
1995. But it seems that bad luck had not stopped chasing the complainant.
As soon as the allotment in respect of plot no. I-A and 1-B were made on a
resumed plot, the original allottees moved the High Court making the
D complainant a party before it. However, after protracted litigation, the writ
petition was dismissed but in the meanwhile the loans 'had been cancelled and
the complainant was left high and dry. It is in these circumstances that a
complaint was filed alleging deficiency in service.

5. The appellant-Board appeared before the National Commission on
E issue of notice. It took the stand that there was no deficiency in service and
it acted in terms of the procedure laid down in Karnataka Industrial Areas
Development Act, 1966 (in short the ·Act') and Rules made thereunder. The
State Government had acq11ired the land and handed over the same to the
present appellant for development and allotment for setting up the industries.
F The acquisition was done by the State Government. After the land was
handed over. same was developed and allotted to various entrepreneurs. ·
Since the appellant came to know about the pendency of the litigation between
the Government and the original landholder of plot No.2 it had given notice
to the complainant and all that was required to be done for the complainant
was done. There was no deficiency in the service which was attributed by
G the government which acquired the land from the appellant after such
acquisition.

6. After hearing learned counsel for the parties the National Commission
held that the appellant was clearly at fault. There was deficiency in service
H and it was. therefore. held that the complaint was to be allowed. Considering
j
KAR.'A TAKA P.l;Dl'STRJAL AREAS DE\ 10 BOARD 1·. 'A'DI COLD STORAGE P\ T LTD [PASA YAT. J.] 273

the facts and circumstances of the case the National Commission held that A
the complainant was entitled to compensation of Rupees three lakhs. The
order of the National Commission is the subject matter of challenge in this
appeal.

7. In support of the appeal, it was submitted that there was no deficiency
in service in view of what has been stated above. In any event, there was B
no scope for awarding compensation.

8. Learned counsel for the respondent on the other hand supported the
order of the National Commission ..

9. While issuing notice on 10.9.2004, the same was limited to the question C
of compensation. In support of the appeal. learned counsel for the appellant
submitted that there is no deficiency in service. All possible steps have been
taken at different points of time. In a hypothetical case which was not
established, the National Commission erroneously came to hold that it was
a case of deficiency in service. D
10. In the notice. as noted above, it was indicated that the same was
... limited to the question of compensation. About the deficiency in service the
correct approach has been adopted.

11. The only question however. is with regard .. to the quantum. E
Considering the peculiar circumstances of the case, we fix the same to be
rupees one lakh. This is to be paid to the appellant by the respondent within
4 weeks from today.

12. The appeal is allowed in the aforesaid circumstances. No order is
necessary in the I.A. in view of the disposal of appeal. There will be no order F
as to costs.

RP. Appeal partly allowed.