CWP No. 1230 of 2008 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
C.W.P.No. 1230 of 2008
Date of decision 8 .1.2009
Sushil and another ...Petitioners
Versus
Haryana Urban Development Authority and another ... Respondents.
CORAM: HON'BLE MR. JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE JORA SINGH
Present: Mr.Sanjiv Gupta ,Advocate for the petitioners.
Mr.Ajay Kansal , Advocate for the respondents
1. Whether Reporters of local papers may be allowed to see the judgement ?
2. To be referred to the Reporter or not ?
3. Whether the judgement should be reported in the Digest ?
M.M.KUMAR, J.
Through the instant petition filed under Article 226 of the
Constitution the prayer made by the petitioners is for quashing the action of
the respondents in charging penalty, compound interest on delayed
instalments and also on enhanced compensation. Further prayer made is
from restraining the respondents from proceeding further under Section 17
of the Haryana Urban Development authority Act, 1977.
Brief facts of the case are that the petitioners were re-allotted
Plot No.353, Sector 14, Part I, Karnal ( Annexure P.1) after payment of
instalments by the original allottee. The HUDA authorities demanded
enhancement of the price of the land and have also started demanding
compound interest on delayed instalments which according to the
petitioners is not permissible. In this behalf they made a representation on
15.10.2007 ( Annexure P.2).
CWP No. 1230 of 2008 2
The grievance of the petitioners is that respondents are
charging compound and penal interest on delayed payment from the
allottees. It is averred that no compound interest or penal interest could be
charged in view of the judgement of Hon’ble the Supreme Court in the case
of Ruchirca Ceremics v. HUDA 2001(1) PLJ 109 and that of this Court in
the case of Gian Inder Sharma v. HUDA 2003(1) RCR (Civil) 279.Apart
from this, the original petitioner paid the entire amount as per allotment
schedule. The petitioner submitted a representation dated 15.10.2007
(Annexure P.2) asserting that no compound interest can be charged from the
allottee in respect of the period of default.
In the reply filed by the respondents the stand taken is that in
the allotment letter it has been clearly mentioned that the allottee will have
to abide by the terms and conditions stated therein and also the provisions
of the HUDA Act, instructions/guidelines and rules/regulations framed
thereunder. The respondents vide its policy dated 19.9.1985 (R.1) has
decided to charge compound interest which policy was again amended on
22.9.2000 (R.2) and it was decided to charge simple interest w.e.f. 1.9.2000
(lateron from 3.4.2000). The petitioners are liable to pay extension fee and
penalty as per para 1 of the re-allotment letter read with condition No. 5
which reads thus:
” 5. In the event of breach of any other condition of transfer, the
Estate Officer may resume the land in accordance with the
provisions of Section 17 of the Act.”
In reply to para 2 it is submitted that the petitioners have not paid the
enhancement/additional price of Rs. 7662.70 which was demanded on
8,.2.1990.
CWP No. 1230 of 2008 3
We have heard learned counsel for the parties at a considerable
length and have perused the record with their able assistance.
The matter is no longer res-integra. In a recent judgement of the
Hon’ble Supreme Court rendered in the case of HUDA v. Raj Singh Rana
AIR 2008 SC 3035 where the issue of charging of interest has been
considered. 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. 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 interest. Such a
CWP No. 1230 of 2008 4provision 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.”
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.
The argument of Mr.Kansal, learned counsel for the respondent that
interest is liable to be paid under section3(3) of the Act has not impressed
us. There is no agreed rate of interest accepted by the parties. Reliance of
the respondent on the affidavit dated 21.11.1973 ( R.3) does not show that
the petitioner had agreed to any rate of interest. He has only agreed with the
terms and conditions of allotment and the incidental open spaces. He had
also agreed to abide by all the provisions of the act and the rules/
Regulations applicable thereunder alongwith amendments made from time
to time. There is no express agreement with regard to the rate of interest in
CWP No. 1230 of 2008 5
terms of sub section 3 of the Section 3 of the Interest Act, 1978. The
expression ‘prevalent policy’ does not necessarily lead to the policy with
regard to rate of interest claimed by HUDA as per clause 1,3 and 4. These
clauses are required to be considered in the light of the rate of interest
currently in vogue as is provided by sub section 1 of section 3 of the Act.
Therefore, we reject the submission made on behalf of the respondent.
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 facts of each case have to be taken into
account and interest should not be imposed mechanically 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.”
Applying the principles laid down in Raj Singh Rana’s case
(supra) 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
CWP No. 1230 of 2008 6person 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 where 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. “
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.”
A perusal of the afore-mentioned provisions makes it clear that
CWP No. 1230 of 2008 7
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 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 aforesaid 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
CWP No. 1230 of 2008 8were included in the allotment letters, having regard to the
provisions of sub section(3) of Section 3 of the said Act.”.
In view of the above, we are of the view that the writ petition
deserves to be allowed. The respondents are directed not to demand
compound interest on the delayed payment which is held to be unreasonable
and arbitrary nor they can ask for compound interest on the enhanced
amount of compensation. Accordingly a direction is issued to the
respondents to calculate interest on the delayed payment of additional price
of the property in question by applying the current rate of interest which
means the highest of the maximum rate 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. It has come on
record that the petitioner had already deposited the demanded amount under
protest which shall be set of as per the law and calculations be made
accordingly. We make it further clear that no penalty can be charged from
the petitioner on account of delayed payment of additional price. However,
the respondents shall be entitled to deduct any other amount due to them.
(M.M.Kumar)
Judge
(Jora Singh)
8.1.2009 Judge
okg