IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
C.W.P. No. 17354 of 2007
DATE OF DECISION: January 6 , 2009
Ram Gopal
...Petitioner
Versus
Haryana Urban Development Authority and another
...Respondents
CORAM: HON'BLE MR. JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE JORA SINGH
Present: Mr. Gaurav Singla, Advocate,
for Mr. Sanjiv Gupta, Advocate,for the petitioner.
Mr. Ajay Kansal, Advocate,
for the respondents.
1. Whether Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporters or not?
3. Whether the judgment should be reported in
the Digest?
M.M. KUMAR, J.
1. This petition filed under Article 226 of the Constitution
challenges charging of compound interest and penalty on
enhancement as well as on the instalments. A further direction has
been sought to the respondents not to charge the compound interest
on delayed installments and to charge the amount as per the terms and
conditions of the allotment letter.
2. Brief facts of the case are that as a result of an open
auction Booth No. 9, Sector 13 Extension, Karnal, was allotted in the
names of Sarvshri Ram Gopal (petitioner), Naresh Kumar and Kishori
Lal for a sum of Rs. 2,01,000/-, vide Office Memo. No. 12866, dated
C.W.P. No. 17354 of 2007 2
5.8.1985. A sum of Rs. 20,100/- was deposited as bid money at the
time of auction. On 13.9.1985, possession of the site was given and
an amount of Rs. 30,150/- was required to be deposited within 30
days from the date of acceptance of the bid. It is claimed that the
balance amount of Rs. 1,50,750.08 paise was to be paid with 10%
simple interest in terms of clause 5 of the allotment letter. It is
pertinent to mention here that the petitioner Shri Ram Gopal and
others entered into an agreement with Smt. Mukesh Gupta, who
purchased the booth in question and obtained a General Power of
Attorney from the petitioner and others. The present petition has
been filed through Smt. Mukesh Gupta wife of Shri Om Parkash
Gupta being General Power of Attorney of Shri Ram Gopal.
3. It is conceded position that only 25% cost of the site was
deposited and thereafter no further payment was made. Accordingly,
the respondents issued notices under Section 17(1) & (2) of the
Haryana Urban Development Authority Act, 1977 (for brevity, the
Act’), dated 3.12.1986, 1.8.1990 and 24.3.1993 imposing penalty of
Rs. 2,261/-, Rs. 2,36,611 and Rs. 37,000/-. Thereafter notices under
Section 17(3) of the Act were also issued but no response was
received from the allottee. Faced with this situation, the respondents
further issued notices dated 16.3.1992, 22.1.1993, 3.3.1994,
27.9.1994 and 18.1.1995 under Section 17(4) of the Act. On
18.9.2000, one last opportunity was given for 6.10.2000. However,
neither the allottees turned up nor deposited the outstanding amount
of the site in question, which by that time increased further to Rs.
C.W.P. No. 17354 of 2007 3
13,52,830/- alongwith Rs. 25,013/- as extension fee. Accordingly,
the Estate Officer, HUDA, Karnal-respondent No. 2 passed an order
dated 31.1.2001 and resumed the built up Booth No. 8, Sector 13
Extension, Karnal and forfeited an amount equivalent to 10% of the
consideration money including interest and other dues payable (P-1).
4. Against the resumption order an appeal was filed by the
petitioner Ram Gopal and other allottees before the Administrator,
HUDA, Panchkula, which was dismissed on 11.9.2001, by holding
that the appellant-petitioner were given adequate chance to deposit
the dues but he failed. It was further found that they have occupied
the premises in question and running business without making
outstanding installments to the HUDA. Against the order dated
11.9.2001, passed by the Administrator, a revision was preferred
before the Financial Commissioner and Secretary to Government
Haryana, Town and Country Planning Department, Chandigarh.
During the hearing of revision petition, the GPA Smt. Mukesh Gupta
gave an undertaking to deposit the outstanding dues alongwith
interest as per allotment letter, in the event of restoration of site.
However, charging of interest over and above the rate of interest
mentioned in the allotment letter was agitated.
5. The Revisional Authority felt persuaded to grant one
opportunity to the appellant-petitioner to deposit the outstanding
dues. Accordingly, an order dated 19.7.2003 was passed restoring the
site with the condition that all the outstanding dues alongwith interest
as per policy of HUDA and penalty of Rs. 10,000/- are deposited
C.W.P. No. 17354 of 2007 4
within six months from the date of communication of the dues by the
Estate Officer. The Estate Officer was directed to convey the
outstanding dues alongwith penalty of Rs. 10,000/- within 15 days
from the date of order dated 19.7.2003 (P-2). On 13.8.2003, the
Estate Officer-respondent No. 2 sent a communication asking the
GPA of the petitioner to deposit Rs. 14,33,900 plus 10,000/- as
penalty within 6 months (P-3).
6. Instead of depositing the dues, the petitioner through
GPA again sent a representation dated 3.12.2003 disputing charging
of interest on delayed payment as well as charging of extension fee
claiming that no penal interest could have been charged from them
for non-deposit of installments in time and only simple interest is
leviable (P-4). The petitioner also requested for supply of details as
to how the aforementioned amount was calculated. It is claimed that
no details were ever furnished. After referring to Section 17 of the
Act, letter dated 12.4.1999 (P-5) and a number of judicial
pronouncements, the petitioner has approached this Court by way of
instant petition with the grievance that interest beyond the terms and
conditions of the allotment letter and beyond 10% cannot be charged
from him. Reliance in this regard has been placed on the judgment of
Hon’ble the Supreme Court in the case of Roochira Ceramics v.
HUDA, 2001(1) PLJ 109 and various judgments of this Court
rendered in the cases of Aruna Luthra v. State of Haryana, 1997
(2) PLJ 1 (D.B.); Kanta Devi Budhiraja v. State of haryana, 2000
(2) PLJ 244; Manju Jain and another v. HUDA and others (CWP
C.W.P. No. 17354 of 2007 5
No. 4405 of 1998, decided on 2.4.1998); Ashwani Puri v. HUDA,
(CWP No. 2363 of 1996, decided on 3.12.1996); Mohan Dass and
others v. HUDA (CWP No. 3737 of 2007, decided on 8.5.2007,
Annexure P-6); Harbans Lal v. HUDA and another (CWP No.
8035 of 2007, decided on 24.5.2007, Annexure P-7).
7. In the written statement filed on behalf of the respondents, it
has been asserted that charging of compound interest after a long
period of 22 years is justified and filing of instant petition is an
abuse of the process of law and the same also suffers from delay
and laches. It has been pointed out that as per policy dated
19.9.1985 (R-2) it was decided to charge compound interest. The
policy was further amended on 15.1.1987 (R-3) and it was decided
to charge 18% interest on the delayed payment of installments. The
policy was further amended on 22.9.2000 and it was then decided
to charge simple interest w.e.f. 1.9.2000. It has, thus, been claimed
that the petitioner cannot derive any benefit from policy dated
22.9.2000 and his case is covered under the earlier policies dated
19.9.1985 and 15.1.1987. Regarding charging of interest over and
above the terms of the allotment letter, reliance has been placed on
the judgments of Hon’ble the Supreme Court in the cases of
HUDA v. Raj Singh Rana AIR 2008 SC 3035 and S.M.S.
Sandhu v. Chandigarh Administration, AIR 2003 SC 1138. It
has further been pointed out that account statement giving the
complete breakup of the due amount was furnished to the petitioner
vide letter dated 16.12.2003 (R-4 & R-5) and that even in the case
C.W.P. No. 17354 of 2007 6
of Kanta Devi Budhiraja (supra) this Court has upheld charging of
18% interest as per policy dated 15.1.1987, thus, the judgments
relied upon by the petitioner are not applicable to the facts and
circumstances of the present case.
8. We have thoughtfully considered the submissions made by
learned counsel for the parties and are of the view that the question
of charging interest has to be concluded in terms of the judgement
in Raj Singh Rana’s case (supra). The Hon’ble Supreme Court has
resorted to statutory guidelines available under Section 3 of the
Interest Act, 1978 (for brevity ‘the Act’). Section 3 of the act clearly
marks a distinction between the agreed rate of interest and rate of
interest to be imposed in the absence of concurrence of the parties.
Therefore the agreed rate of interest has to be ascertained by
referring to the provisions of the allotment letter dated 5.8.1985.
According to clause 5 the balance amount of the estimated price of
the plot was payable in ten half yearly instalments and the first
instalment was to fall due after the expiry of six months. Each
instalment was recoverable with interest @ 10 percent on the
balance price. The interest was to accrue from the date of offer of
possession. The first question which needs to be answered is
whether interest @ 10 percent is required to be charged as per
clause 5 of the allotment letter dated 5.8.1985 (Annexure R/1) as
has been agreed by the parties or the petitioner can be subjected to
higher rate of interest increased by the policies announced later.
The afore-mentioned question has been raised by virtue of clause 2
C.W.P. No. 17354 of 2007 7
of the allotment letter ( R.1). Another ancillary question would be
that the rate of interest at 10 percent p.a. was applicable on the
instalments which were to be paid within the period specified in the
allotment letter and if the instalment has not been paid according to
the schedule then what would be the rate of interest. The afore-
mentioned question infact stand answered in Raj Singh Rana’s case
(supra). It has been laid down in the following two paras that in the
absence of agreed rate of interest the current rate of interest would
be applicable as per the provisions of Section 3 of the Act:
” 10. The concept of levying or allowing interest is
available in almost all statutes involving financial deals
and commercial transactions, but the provision
empowering courts to allow interest is contained in the
Interest Act, 1978, which succeeded and repealed the
Interest Act, 1839. Section 3 of the said Act, inter alia,
provides that in any proceeding for the recovery of any
debt or damages or in any proceeding in which a claim
for interest in respect of debt or damage already paid is
made, the Court may, if it thinks fit, allow interest to the
person entitled to the debt or damages or to the person
making such claim, as the case may be, at a rate not
exceeding the current rate of interest, for the whole or
part of the periods indicated in the said Section.
11.What is important is the mention of allowing the
interest at a rate not exceeding the current rate of
C.W.P. No. 17354 of 2007 8interest. Such a provision is, however, excluded in
respect of the interest payable as of right by virtue of
any agreement as indicated in sub section (3) of
Section 3. In other words, where there is an agreement
between the parties to payment of interest at a certain
stipulated rate, the same will have the precedence over
the provisions contained in sub section (1) which
provides for the Court to allow interest at a rate not
exceeding the current rate of interest.”
9. In the afore-mentioned paras two principles with regard to
charging of interest have been laid down (a) in any proceeding for
recovery of any debt or damages or any proceedings in which claim
for interest is made the court may allow interest to the person
entitled to the debt or damages at a rate not exceeding the current
rate; (b) the above principle would not be applicable in a case where
the parties have concurred for charging of interest at a specified rate
which flows from sub section 3 of Section 3 of the act. This
provision has to have precedence over the principle noted above.
10. However, it does not mean that there cannot be any variation
in the rate of interest to be awarded in a proceeding where such a
claim is made. The Hon’ble Supreme Court in the case of Raj
Singh Rana (supra) has placed reliance on para 8 of the judgement
rendered in the case of Ghaziabad Development Authority v. Balbir
Singh 2004(5) SCC 65 which in term applies the principle that
C.W.P. No. 17354 of 2007 9
facts of each case have to be taken into account and interest should
not be imposed at a uniform rate of interest . In para 15 of the
judgement it has been concluded as under:
“…… the rate of interest is to be fixed in the
circumstances of each case and it should not be imposed
at a uniform rate without looking into the circumstances
leading to a situation where compensation was required
to be paid.”
11. When the facts of the present case are examined in the
light of the principles laid down in Raj Singh Rana’s case (supra) it
becomes evident that allotment to the petitioner was made in the year
1985 and possession was also given to him. The petitioner had
deposited only 25 percent of the cost of the site and no further
payment was made despite the fact that the schedule of payment as
per the allotment letter was given. According to schedule provided by
clause 5 the whole price of the plot was payable in ten half yearly
instalments. In that regard clause 5 deserves to be read in extenso:
” 5. The balance amount i.e. Rs. 150750-00 of the price
of the plot/building can be paid in lump sum without
interest within 60 days from the date of issue of the
allotment letter or in 10 half/yearly instalments. The first
instalment will fall due after the expiry of six months one
year of the date of issue of this letter. Each instalment
would be recoverable together with interest on the
balance price at 10 percent interest on the remaining
C.W.P. No. 17354 of 2007 10amount. The interest shall however accrue from the date
of offer of possession.”
12 The afore-mentioned ten half yearly instalments were
payable upto August, 1990. therefore, the agreed rate of interest in
any case does not remain intact. Applying the principles laid down in
Raj Singh Rana’s case (supra) we are of the view that the petitioner is
liable to pay interest in terms of Section 3(1) of the Act and the same
reads thus:
3. Power of court to allow interest. (1) In any
proceedings for the recovery of any debt or damages or
in any proceedings in which a claim for interest in
respect of any debt or damages already paid is made, the
court may, if it thinks fit, allow interest to the person
entitled to the debt or damages or to the person making
such claim, as the case may be, at a rate not exceeding
the current rate of interest, for the whole or part of the
following period, that is to say,- (a) if the proceedings
relate to a debt payable by virtue of a written instrument
at a certain time, then, from the date when the debt is
payable to the date of institution of the proceedings; (b)
if the proceedings do not relate to any such debt, them
from the date mentioned in this regard in a written notice
given by the person entitled or the person making the
claim to the person liable that interest will be claimed, to
the date of institution of the proceedings: Provided that
C.W.P. No. 17354 of 2007 11where the amount of the debt or damages has been repaid
before the institution of the proceedings, interest shall
not be allowed under this section for the period after
such repayment. ”
13 The expression ‘rate of interest’ has not been left to any
guess work but has also been defined in Section 2(b) of the Act and
the same reads thus:
“(b) “current rate of interest” means the highest of the
maximum rates at which interest may be paid on
different classes of deposits (other than those maintained
in savings account or those maintained by charitable or
religious institutions) by different classes of scheduled
banks in accordance with the directions given or issued
to banking companies generally by the Reserve Bank of
India under the Banking Regulation Act, 1949.”
14 A perusal of the afore-mentioned provisions makes it
clear that current rate of interest would mean the highest of the
maximum rates at which interest may be paid on different classes of
deposits by different classes of scheduled banks in accordance with
the directions given or issued to the banking companies generally by
the Reserve Bank of India under the Banking Regulation Act, 1949.
Therefore, the issue with regard to payment of interest is answered in
the above terms. There is however, yet another issue as to whether the
respondents could charge interest on the additional price on account
C.W.P. No. 17354 of 2007 12
of increase of the acquisition cost. The afore-mentioned question also
stands answered in para 18 of the judgement in Raj Singh Rana’s case
(supra) wherein it has been held that such imposition has to be kept in
view with the provisions of the Act and not in an unreasonable
manner. It would be appropriate to extract para 18 which reads thus:
” In the aforesasid circumstances, even though the rate of
interest indicated in the allotment letter dated 22.3.1974
may not have application as far as payment of the
additional price is concerned, the District forum has
erred on the site of reason and has allowed interest at the
rate of 7 percent per annum upon holding that the
demand made by the appellant at a higher rate was
contrary to the mutual agreement contained in the
allotment letter. In our view, even though a policy may
have been adopted by the appellant for imposing a
deterrent rate of interest on defaults committed by
allottees in payment of their dues, such imposition has to
be in keeping with the provisions of Section 3 of the
Interest Act, 1978 and not in a unreasonable manner. It
may perhaps be even more pragmatic if a condition
regarding charging of interest at the prevailing banking
rates were included in the allotment letters, having
regard to the provisions of sub section(3) of Section 3 of
the said Act.”.
C.W.P. No. 17354 of 2007 13
15 In view of the above, the writ petition is disposed of with
a direction to the respondents to calculate interest by applying current
rate of interest which means the highest of the maximum rates at
which interest may be paid on different classes of deposits by
different classes of scheduled banks in accordance with the directions
issued to the banking companies by the Reserve Bank of India under
the Banking Regulation Act, 1949. It would necessarily exclude the
rate of interest on the accounts maintained in saving or those
maintained by charitable or religious institutions. The afore-
mentioned calculations shall be in respect of default in payment of
instalment as well as in respect of the additional price required to be
paid on account of increase of the acquisition cost. However, it is
further held that the petitioner shall not be liable to pay any penalty
after he has been subjected to payment of interest.
The writ petition stands disposed of in the above terms.
(M.M. KUMAR)
JUDGE
(JORA SINGH)
January 6 , 2009 JUDGE
Pkapoor/okg