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TMI Blog2009 (3) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ("National Commission" for short). Other appeals are filed against the common order dated 21.2.2007 passed by the National Commission following the earlier order dated 21.2.2005. By these orders, the lease premium instalments have been rescheduled and certain reliefs have been granted in regard to interest, to the lessees - respondents (who had secured leasehold interest in sites belonging to UT Chandigarh in public auctions held by it). FACTS OF THE CASE 2. As the facts are similar, we will refer to the facts of only one case (CA No.1994/2006 arising from FA No.499/2003 on the file of the National Commission). The Estate Officer, Union Territory Chandigarh Administration issued an advertisement notifying the auction of 74 residential sites and 71 commercial sites in different sectors of Chandigarh, on leasehold basis subject to the General Terms and Conditions regarding auction. The relevant terms were :- (i) The auction was for grant of a lease of sites for 99 years. The auction was governed by the provisions of the Capital of Punjab (Development & Regulation) Act, 1952 ('Development Act' for short) and Chandigarh Leasehold Sites & Building Rules, 1973 ('Leasehold Rules' for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the first 33 years of lease. The letter of allotment set out and reiterated the terms and conditions of lease and required the respondents to enter into a lease deed within six months and take possession of the site before the lease deed is executed. 4. The respondents filed a complaint before the Consumer Disputes Redressal Commission, Union Territory, Chandigarh (for short 'UT Commission') under the Consumer Protection Act, 1986 ('Act' for short) in the year 1999. In the said complaint they alleged that in addition to the initial payment of Rs.511250/- towards the lease premium, they had paid Rs.616,736/- plus Rs.51,125/- on 9.1.1998, Rs.168,000/- on 4.3.1999 and Rs.200,000/- on 12.5.1999. They alleged that the appellant did not provide any amenities in regard to the site, and as a result they had suffered huge losses. They contended that until the basic amenities were provided, the appellants were not legally entitled to claim the balance of premium or the annual rent. They sought the following directions to the appellants: (i) Not to recover the balance amount of premium or the interest on the premium or the ground rent until the basic amenities (approach road, sewera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hief Engineer (or next rank) of UT Chandigarh shall certify that the plinth level as well as other basic requirements/amenities were provided. The date of such certificate shall be considered to be the date of auction. (iii) The instalments shall be rescheduled accordingly and the remaining price of the plots shall be deposited after rescheduling the instalments without any change in the bid price offered. (iv) The lease rent shall be payable from the date of certificate of the Chief Engineer mentioned above. (v) Interest on the amount due by the lessee shall be payable only from the date the aforesaid certificate is issued. (vi) The amount deposited by the complainants shall earn interest @ 18% per annum till the essential requirements were provided. [Note: Providing of "plinth level" directed by UT Commission apparently refers to filling up of low lying sites so as to bring them to the road level.] 7. Feeling aggrieved, the appellants filed an appeal before the National Commission. The National Commission allowed the appeal in part by a common order dated 21.2.2005, and modified and restricted the reliefs granted by the U.T. Commission as follows: (1) The Chandigarh Admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, either statutory or contractual, to provide the 'basic amenities' demanded by the respondents with reference to the lease of sites by public auction. The payment of the premium (which was permitted to be paid in instalments on the request of the successful bidder) and the annual rent was not conditional upon the UT Chandigarh providing any basic amenities. Payment of the amounts due could not be postponed on the ground of absence of amenities. Nor could payment of default interest be avoided, once there was default. Therefore, even assuming that the complaint was maintainable, the National Commission was not justified in interfering with the terms of the contract of lease and giving relief in regard to interest, which was legally due. Re: first contention 10. A 'complaint' is maintainable before a consumer forum under the Consumer Protection Act, 1986, by a 'complainant' ('consumer' or others specified) against a 'trader' or 'service provider'. The terms 'complainant' 'complaint' 'consumer' 'trader' and 'service' are defined in clauses (b),(c), (d),(q) and (o) of Section 2 of the Act. Therefore, a consumer forum will have jurisdiction only when: (i) the complainant is a 'con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he latter being for consideration is service as defined in the Act. Similarly when a statutory authority develops land or allots a site or constructs a house for the benefit of common man it is as much service as by a builder or contractor. The one is contractual service and other statutory service. If the service is defective or it is not what was represented then it would be unfair trade practice as defined in the Act. Any defect in construction activity would be denial of comfort and service to a consumer. When possession of property is not delivered within stipulated period the delay so caused is denial of service. Such disputes or claims are not in respect of immovable property as argued but deficiency in rendering of service of particular standard, quality or grade. Such deficiencies or omissions are defined in sub-clause (ii) or clause (r) of Section 2 as unfair trade practice. xxxxx Therefore if such authority undertakes to construct building or allot houses or building sites to citizens of the State either as amenity or as benefit then it amounts to rendering of service and will be covered in the expression 'service made available to potential users'. A person who appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the delay may amount to a deficiency in service by treating the development authority as a service provider and the allottee as the consumer. But where existing sites are put up for sale or lease by public auction by the owner, and the sale/lease is confirmed in favour of the highest bidder, the resultant contract relates to sale or lease of immovable property. There is no hiring or availing of services by the person bidding at the auction. Nor is the seller or lessor, a trader who sells or distributes 'goods'. The sale price or lease premium paid by the successful bidder of a site, is the consideration for the sale or lease, and not consideration for any service or for provision of any amenity or for sale of any goods. 13. In Lucknow Development Authority, it was held that where a developer carries on the activity of development of land and invites applications for allotment of sites in a developed layout, it will amount to 'service', that when possession of the allotted site is not delivered within the stipulated period, the delay may amount to a deficiency or denial of service, and that any claim in regard to such delay is not in regard to the immovable property but in regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view the existing situation, position and condition of the site. If all amenities are available, he would offer a higher amount. If there are no amenities, or if the site suffers from any disadvantages, he would offer a lesser amount, or may not participate in the auction. Once with open eyes, a person participates in an auction, he cannot thereafter be heard to say that he would not pay the balance of the price/premium or the stipulated interest on the delayed payment, or the ground rent, on the ground that the site suffers from certain disadvantages or on the ground that amenities are not provided. With reference to a public auction of existing sites (as contrasted from sites to be 'formed'), the purchaser/lessee is not a consumer, the owner is not a 'trader' or 'service provider' and the grievance does not relate to any matter in regard which a complaint can be filed. Therefore, any grievance by the purchaser/lessee will not give rise to a complaint or consumer dispute and the fora under the Act will not have jurisdiction to entertain or decide any complaint by the auction purchaser/lessee against the owner holding the auction of sites. Re : Second Contention 15. The compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... central government in such a manner and in such instalments and at such rate of interest as may be prescribed. 16.2) The term 'amenity' is defined in section 2(b) of the Development Act as follows : "2(b). 'amenity' includes roads, water-supply, street lighting, drainage, sewerage, public building, horticulture, landscaping and any other public utility service provided at Chandigarh". Section 4 relates to power to issue directions in respect of erection of building. Section 5 relates to bar to erection of buildings in contravention of building rules. The term 'amenity' is significantly not used in section 3 which relates to transfer of land by sale or lease by the government. The term 'amenity' is referred only in sections 6 and 7 which are extracted below: "6. Power to require proper maintenance of site or building. - If it appears to the Chief Administrator that the condition or use of any site or building is prejudicially affecting the proper planning of, or the amenities in, any part of Chandigarh or the interests of the general public there, he may serve on the transferee or occupier of that site or building a notice requiring him to take such steps and within such period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable, and the procedure for payment of instalments, interest, fees, rents or other dues payable under this Act; (d) the terms and conditions under which the transfer of any right in any site or building may be permitted; (e) erection of any building or the use of any site; (f) levy of fees or taxes under Section 7 of the Act. 16.4) The Leasehold Rules were made in 1973 in regard to lease of properties by UT Chandigarh. We extract below the relevant rules:- "3. (2). 'premium' means the price paid or promised for the transfer of a right to enjoy immovable property under these Rules." "4. The Chandigarh Administration may demise sites and buildings at Chandigarh on lease for 99 years. Such leases may be given by allotment or by auction in accordance with these Rules. x x x x x x 6. Commencement and period of lease. - The lease shall commence from the date of allotment or auction as the case may be, and shall be for a period of 99 years. After the expiry of said period of 99 years the lease may be renewed for such further period and on such terms and conditions as the Government may decide. x x x x x x 8. Lease by allotment, Procedure for: xxx (not relevant) x x x 9. Leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it became payable he shall be liable to pay in respect of that instalment or ground rent or part thereof as the case may be, interest calculated at the rate of twenty-four per cent per annum from the date on which the instalment or ground rent became payable till such date it is actually paid. 13. Rent and consequences of non-payment.--In addition to the premium, whether in respect of site or building, the lessee shall pay rent as under-- (i) Annual rent shall be 2 ½ per cent of the premium for the first 33 years which may be enhanced by the Chandigarh Administration to 3 ¾ per cent of the premium for the next 33 years and to 5 per cent of the premium for the remaining period of the lease. (ii) Rent shall be payable annually on the due date without any demand from the Estate Officer: Provided that the Estate Officer may for good and sufficient reasons extend the time for payment of rent upto six months on the whole on further payment of 6 per cent per annum interest from the due date upto the date of actual payment. (iii) If rent is not paid by the due date, the lessee shall be liable to pay a penalty not exceeding 100 per cent of the amount due which may be impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that all amenities should be provided within three months and no interest shall be charged from the allottees if they pay the entire outstanding amount within three months from the date of providing amenities. 18.2) On the other hand, in its subsequent decision in DLG Builders Pvt. Ltd. v. Advisor to the Administratotr, Chandigarh Admn. (CWP No. 13695/2001 dated 18.2.2002) the High Court had held:- "In our opinion, the judgment in M/s. Shanti Kunj Investment Pvt. Ltd.'s case (supra) has to be read in the light of the peculiar facts brought before the court and the same cannot be read as laying down the proposition that the allottee is not required to pay the insalments of premium with interest and ground rent in accordance with the terms and conditions of allotment and Rule 12 of the Rules till each and every amenity enumerated in Section 2(1) is made available at the site. The obligation of the Administration to provide approach road, water supply, electricity, sewerage, storm water drainage can be read as implicit in the scheme of the Act and the Rules, but it cannot be said that the allottee is entitled to withhold the payment of instalments on the ground of lack of parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allotment, proper linkage is necessary. But to say that this is a condition precedent, that is not the correct approach in the matter. …... It is true the word, "enjoy" appearing in the definition of the word "premium" in Rule 3(2) of the Rules, means the price paid or promised for the transfer of a right to enjoy immovable property under the Rules. It was very seriously contended before us that the word, enjoy immovable property necessarily means that the Administration should provide all the basic amenities as appearing under Section 2(b) of the Act for enjoying that allotment. The expression "premium" appearing in the present context does not mean that the allottees/ lessees cannot enjoy the immovable property without those amenities being provided. The word "enjoy" here in the present context means that the allottees have a right to use the immovable property which has been leased out to them on payment of premium i.e. the price….. It is the common experience that for full development of an area it takes years. It is not possible in every case that the whole area is developed first and allotment is served on a platter. Allotment of the plot was made on an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site had not been fully developed by providing all the modern amenities as assured. The issue did not arise in a complaint under the Consumer Protection Act, but in a writ petition filed by the allottees challenging the charging of interest and requiring the authority to complete the development. The allottees contended that what was offered was allotment of developed sites and not undeveloped sites; that they were informed that "all modern amenities like underground sewerage, storm water drainage, roads, electricity, supply of potable water" will be provided; that as the sites were not developed fully and as possession of "developed sites" was yet to be given, the state government could not charge interest. The state government, on the other hand, contended that charging of interest was not correlated to the delivery of possession under the Punjab Urban Estates Sale of Rights Rules, 1965 and having regard to Rule 12(2) of the Rules, interest accrued from the date of issue of an allotment order. Interpreting the said provisions, this Court held that while interest could not be demanded till possession was offered, it was not necessary that such offer should be of fully developed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interest from the date of default to date of payment. It is no doubt true that when the defaulted instalment in entirety is subjected to interest, the 'interest' component of the defaulted instalment is also subjected to interest. To that limited extent, there may be charging of interest upon interest. Charging of such interest, on the interest part of the instalment, on default in payment of the instalment, at a reasonable rate from the date of default, cannot be termed as charging of compound interest in regard to the entire dues. It is only a provision to ensure that the dues (instalments) are paid promptly and avoid misuse of the concession given by permitting payment in instalments. But for such a provision, lessees/allottees who have already been given possession, will be tempted to delay payments, thereby leading to continuous defaults. A statutory development authority, working on no profit no loss basis, can ill afford to permit such continuous defaults by lessees/allottees, which will paralyse their very functioning, thereby affecting future developmental activities for the benefit of other members of the general public. Therefore a provision for interest as contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same and consider grant of proportionate relief in the matter of payment of penalty under Rule 12(3) and interest for delay in payment of equated instalment or ground rent or part thereof under Rule 12(3-A) only. We repeat again that in case the above facilities had not been granted then in that case consider grant of proportionate relief and if the facilities have been provided then it will not be open on the part of the allottees to deny payment of interest and penalty. So far as payment of instalment is concerned, this is a part of the contract and therefore, the allottees are under obligation to pay the same. However, so far as the question of payment of penalty and penal interest is concerned, that shall depend on the facts of each case to be examined by the High Court. The High Court shall examine each individual case and consider grant of proportionate relief." The above observations and directions were apparently on the special facts and circumstances of that case. As noticed above, in Shantikunj, the auction was of the year 1989. The Lessee had approached the High Court in its writ jurisdiction in the year 1999 seeking amenities. Even in 2006 when this Court heard th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of the auction and therefore clause (4) of the General Terms & Conditions of Sale and clause (5) of the letter of allotment, providing for payment of default interest @ 24% per annum was illegal and unauthorized. This contention is urged for the first time in this court. The appellants countered by contending that the Administrator had by notification, fixed the default interest at 24% per annum. Suffice it to say that the rate of default interest mentioned in Rule 12(3A) as on the date of auction, would alone apply. If Rule 12(3A) was not amended increasing the rate of default interest from 12% P.A. to 24% per annum as on the date of auction, then the rate of interest stipulated in Rule 12(3A) as it stood on the date of auction will apply. The appellants could not charge default interest at a rate higher than what was provided in the said rule. If any higher rate has been charged by way of default interest and it is not corrected, it is open to the lessees to seek relief in accordance with law. 26. We may note that the appellants raised one more contention that the complaints were not maintainable against the government can never be considered as a 'service provider' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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