Compensation for escalation in construction cost set aside by SC where construction...

Compensation for escalation in construction cost set aside by SC where construction intentionally delayed

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In a case where the possession of plot was delayed by development agency, it was held that the purchaser suffered an injury due to the delay in handing over the possession as there was definitely escalation in the cost of construction; however, it was held that at the same time the purchaser had surely benefited by the increase in the cost of plot during the period of delay; and that since the State Consumer Disputes Redressal Commission had itself criticized the conduct of the purchaser in intentionally delaying the construction for 6 years but still proceeded to award compensation, it was held that award of interest would have been sufficient to compensate the purchaser for the loss suffered by him due to the delay in handing over the possession of the plot, and that the compensation of Rs. 15 lakhs awarded by the State Commission was excessive. This order was passed by a Supreme Court bench comprising the Chief Justice of India T.S. Thakur, Justice D.Y. Chandrachud and Justice L. Nageswara Rao, in the case of Chief Administrator, H.U.D.A. & Anr. v. Shakuntla Devi [Civil Appeal No. 7335 of 2008, decided on 8 December, 2016].

In this case, the Respondent (purchaser) was allotted Plot No. 40, measuring 40 marlas in Sector 8, Urban Estate, Karnal on 03.04.1987. As physical possession of the plot was not given to her by the Appellants (HUDA), the Respondent filed Original Complaint No. 54 of 1997 before the State Consumer Disputes Redressal Commission.

The State Commission by its order dated 21.12.1998 held that the Respondent had established deficiency of service by the Appellants as there was delay in handing over physical possession of the plot. The complaint was allowed and the Appellants were directed to deliver vacant physical possession of the plot, if not already done. There was a further direction to pay interest on the amount deposited by the Respondent at the rate of 12% with effect from 03.04.1989 and to pay a sum of Rs.2 lakhs as compensation on account of escalation in the cost of construction etc. The Appellants were also directed to pay Rs.20,000/- towards compensation for monetary loss and mental harassment suffered by the Respondent.

In appeal filed by HUDA, the National Consumer Disputes Redressal Commission, confined the dispute only to the award of compensation of Rs.2 lakhs relating to escalation in cost of construction. The other reliefs pertaining to payment of compensation towards monetary loss and mental harassment of Rs. 20,000/- and interest on the amount deposited by the Respondent were confirmed. The National Commission remanded the matter for re-consideration of compensation for escalation of cost of construction in accordance with CPWD rates.

The State Commission reconsidered the matter and permitted both sides to produce evidence which would enable it to compute the compensation for escalation of construction cost as per CPWD rates. The Respondent (purchaser) produced evidence to show that the escalation in cost of construction between April, 1989 and January, 2000 would be Rs. 18,67,000/-. HUDA stated that the physical possession of the plot was given to the Respondent on 21.01.2000 and that the Respondent submitted a building plan only on 14.02.2006 which would clearly prove that the Respondent was not interested in constructing the house. The material produced by the Respondent to prove escalation in the cost of construction was accepted by the State Commission which held that the Respondent was entitled for a sum of Rs. 18,67,000/- as compensation. However, the State Commission held that since the Respondent did not commence construction till 2006 with a view to get more compensation, therefore, she was awarded a compensation of Rs. 15,00,000/- instead of Rs. 18,67,000/- towards increase in the cost of construction.

The National Commission by an order dated 25.09.2007 dismissed Appeal filed by HUDA and confirmed the order passed by the State Commission holding that the compensation awarded was just and reasonable.

In appeal, the Supreme Court held that the avowed object of the Consumer Protection Act, 1986 is to provide for better protection of the interest of consumers. The statement of the objects and reasons, inter alia, provides for a speedy and simple redressal to consumer disputes. The quasi judicial bodies at the District, State and Central levels were empowered to give relief to the consumers and award, wherever appropriate, compensation to consumers.

Supreme Court further held that the sine qua non for entitlement of compensation is proof of loss or injury suffered by the consumer due to the negligence of the opposite party. Once the said conditions are satisfied, the Consumer Forum would have to decide the quantum of compensation to which the consumer is entitled. The computation of compensation has to be fair, reasonable and commensurate to the loss or injury. There is a duty cast on the Consumer Forum to take into account all relevant factors for arriving at the compensation to be paid.

The Supreme Court referred to the decision in Ghaziabad Development Authority v. Balbir Singh, reported in (2004) 4 SCC 65, where in similar circumstances, it had been held as under:

“9. That compensation cannot be uniform and can best be illustrated by considering cases where possession is being directed to be delivered and cases where only monies are directed to be returned. In cases where possession is being directed to be delivered the compensation for harassment will necessarily have to be less because in a way that party is being compensated by increase in the value of the property he is getting.

“11. Further, in cases where the Commission/Forum has directed delivery of possession, the party has to a certain extent already got a benefit. The cost of the land/flat would have gone up in the meantime. Of course, even in cases, where delivery of possession has been directed there could be compensation for the harassment/ loss. But such compensation has to be worked out after looking into the facts of each case and after determining what is the amount of harassment/loss which has been caused to the consumer.”

The Supreme Court noted that, in the present case, the State Commission while awarding the compensation of Rs. 15 lakhs towards escalation in the cost of construction commented on the conduct of the Respondent in delaying the construction only with a view to claim higher compensation. In these circumstances, the Supreme Court held as under:

“The point that falls for our consideration in this case is whether the State Commission was justified in awarding Rs. 15 lakhs towards the escalation in the cost of construction as compensation. We are of the view that the Respondent is not entitled to such compensation awarded by the State Commission and confirmed by the National Commission. The Respondent suffered an injury due to the delay in handing over the possession as there was definitely escalation in the cost of construction. At the same time the Respondent has surely benefited by the increase in the cost of plot between 1989 to 2000. In our opinion, the order of the State Commission is vitiated for non application of mind to a vital and relevant factor and hence, suffers from the vice of unreasonableness. The State Commission criticized the conduct of the Respondent in intentionally delaying the construction for 6 years but still proceeded to award compensation. In the facts and circumstances of this case, we are of the opinion that award of interest would have been sufficient to compensate the Respondent for the loss suffered by him due to the delay in handing over the possession of the plot. The compensation of Rs. 15 lakhs awarded by the State Commission is excessive. …”

Accordingly, the Order of the State Commission dated 05.07.2007 as confirmed by the National Commission was set aside by the Supreme Court.

Read full order of the court:

 

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