JUDGMENTS 02.04.2009

JUDGMENTS
Manager, Premanchal Motors Pvt. Ltd. Zone 2, Maharana Pratap Nagar Bhopal vs. Ramdas dated 2009-03-16
http://legalapproach.net/case_details.php?jid=1363

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
NEW DELHI
Revision Petition No. 1018 of 2008
(From the order dated 01.12.2007 in Appeal No. 815 of 2005 of the Madhya Pradesh State Consumer Disputes Redressal Commission, Bhopal)
Manager, Premanchal Motors Pvt. Ltd.
Zone 2, Maharana Pratap Nagar
Bhopal Petitioner
versus
1. Ramdas s/o Shri Khayaliram
2. Ramlal s/o Shri Khayaliram
3. Rambharose s/o Shri Khayaliram
4. Laxmibai d/o Shri Khayaliram
5. Dularibai w/o Shri Khayaliram
All residents of
Village Mahangaon Jadid
Tehsil Nasarullaganj, District Sehore Madhya Pradesh

6. Manager, Punjab Tractors Ltd.
Phase IV, S.A.S. Nagar
Ropar, District Ropar, Punjab

7. Ramashankar s/o Rameshwar Patel
Proprietor, Vijay Tractors
Bhopal Road, Nasarullaganj
District Sehore, Madhya Pradesh Respondents

Revision Petition No. 1105 of 2008
(From the order dated 01.12.2007 in Appeal No. 987of 2005 of the Madhya Pradesh State Consumer Disputes Redressal Commission, Bhopal)
1. Ramdas s/o Shri Khayaliram
2. Ramlal s/o Shri Khayaliram
3. Rambharose s/o Shri Khayaliram
4. Laxmibai d/o Shri Khayaliram
5. Dularibai w/o Shri Khayaliram
All residents of
Village Mahangaon Jadid
Tehsil Nasarullaganj, District Sehore Madhya Pradesh Petitioners
versus
1. M/s Punjab Tractors Ltd.
Through The Manager
Phase IV, S.A.S. Nagar
Ropar, District Ropar, Punjab

2. M/s Premanchal Motors Pvt. Ltd
Through: The Manager
M.P. Nagar
Bhopal

Ramashankar s/o Rameshwar Patel
Proprietor, Vijay Tractors
Bhopal Road, Nasarullaganj
District Sehore, Madhya Pradesh Respondents

Revision Petition No. 1147 of 2008
(From the order dated 01.12.2007 in Appeal No. 987of 2005 of the Madhya Pradesh State Consumer Disputes Redressal Commission, Bhopal)
Punjab Tractors Ltd.
Phase IV, S.A.S. Nagar
Ropar, District Ropar, Punjab
Through Manager Petitioner
versus
1. Ramdas s/o Shri Khayaliram
2. Ramlal s/o Shri Khayaliram
3. Rambharose s/o Shri Khayaliram
4. Laxmibai d/o Shri Khayaliram
5. Dularibai w/o Shri Khayaliram
All residents of
Village Mahangaon Jadid
Tehsil Nasarullaganj, District Sehore Madhya Pradesh

6. Manager, Premanchal Motors Pvt Ltd., Zone 2, Maharana Pratap Nagar, Bhopal Respondents
BEFORE:
HON’BLE MR. JUSTICE R. C. JAIN PRESIDING MEMBER
HON’BLE MR. ANUPAM DASGUPTA MEMBER

For the Petitioners (Original Opposite Parties) Mr. Atish Dipankar, Advocate
For the Petitioners (Original Complainants) Mr. Mohan Chouksey, Advocate

Dated the 16th March 2009

ORDER

ANUPAM DASGUPTA

These three revision petitions (RPs), filed by the original opposite party (OP) no. 2 (Premanchal Motors Private Ltd., Bhopal), the original complainants (Ramdas & others) and OP no. 1 (Punjab Tractors Ltd., Ropar) respectively, challenge the common order dated 1st December, 2007 of the Madhya Pradesh State Consumer Disputes Redressal Commission (in short, ‘the State Commission), disposing of appeals no. 815, 986 and 987 of 2004 against the common order dated 23rd March, 2005 of the District Consumer Disputes Redressal Forum (in short, ‘the District Forum), Sehore. By this order, the State Commission upheld the order of the District Forum which had directed the OPs no. 2 and 1 to pay compensation of Rs. 1.50 lakh and Rs. 25,000/- respectively as damages and both together Rs. 2,000/- as costs to the complainants, within one month of the date of the order, for deficiency in service in respect of repairs to a tractor manufactured by OP no. 1 and sold to the complainants by OP no. 2. In addition, the State Commission awarded a further compensation of Rs. 1.25 lakh to be paid by OP nos. 1 and 2, jointly and severally, to the complainants. The OPs were directed to make the payment within one month of the date of the State Commission’s order, failing which they were also directed to pay interest @ 12 per cent per annum upto the date of payment.

2. The few undisputed facts are that the complainants – all farmers by profession (and all related to one Khayaliram – wife, three sons and one daughter) – jointly bought, for the sum of Rs. 2.18 lakh, a Swaraj tractor (manufactured by OP no. 1) from OP no. 2. To buy the tractor, the complainants took a loan from the local District Cooperative Bank, apparently under a State Government scheme. The scheme (reportedly) entitled the complainants to a Government subsidy. The complainants took delivery of the tractor from the showroom of OP no. 2 on 24.05.1997.

3(i) This case has had a chequered history that warrants a somewhat detailed recapitulation of the sequence of events leading to these RPs.

(ii) In their complaint of 20.05.1998 to the District Forum, the complainants contented that ‘right from the date of purchase’ they faced problems with this tractor (including, alleged excessive fuel consumption, leakage of oil / fuel, overheating of the engine, inability to take load, excessive emission of smoke, improper functioning of the hydraulics, i.e., on the whole, being incapable of ‘use for agricultural purpose’). On oral complaint to OP no. 2, the latter asked the complainants to contact its sub-dealer, viz., Vishal Tractors (original OP no. 3; impleaded as respondent no. 7 in RP no. 1018). OP no.3 allegedly advised that the problems would get resolved with time. The complainants alleged that thereafter they also ‘showed’ the tractor several times to OP no.2 and complained about its continued malfunctioning but OP no.2 did nothing to repair the defects and merely repeated what OP no. 3 had stated, namely, the defects would get resolved with the use of the tractor over time. Claiming that the tractor was unfit for agricultural purpose, the complainants contended that it could also not be used to pull a trolley for transportation of heavy goods. They further alleged manufacturing (mechanical) defects in the tractor and held OP no. 1 responsible therefor. The complainants also alleged that when their several oral complaints to repair the defects were not heeded by OP no. 2, they even asked OP no. 2 to replace the tractor but again to no avail.

(iii) The complainants added that they finally took the tractor to OP no. 2 for repairs on 17.03.1998 and 19.03.1998 and paid for the repairs on these two dates but there was no improvement. They again took the tractor to OP no. 2 on 11.05.1998 but this time the OP no. 2 refused to repair the tractor.

(iv) Emphasising that they had taken a loan to buy the tractor and interest payments were mounting, the complainants claimed that they had been deprived of the additional income from agriculture they would have derived had the tractor functioned satisfactorily. They accordingly prayed for (i) replacement of the defective tractor with a new one, (ii) payment of damages of Rs. 50,000/- for loss of agricultural income caused by the defective tractor and (iii) award of costs of the proceedings.

(v) After OP no. 2 filed its written version denying the allegations in the complaint, the complainants filed, in February 1999, an application for amendments to the complaint, stating inter alia that the tractor did not have original parts/components to verify which it should be got tested at the Tractor Training Centre (TTC), Budhni. They also sought to amend the prayer and award of damages @ Rs. 500/- per day for loss of profit and reimbursement of the entire bank loan of Rs. 1 lakh as well as the (Government) subsidy 0f Rs. 1.25 lakh. The complainants made a second application for amendment on 22.11.2000, seeking to improve the allegations about leakage of oil and consumption of excess oil.

(vi) By its order of 20.02.2002, the District Forum allowed the complaint and directed OP no. 1 (Punjab Tractors Ltd.) to replace the tractor within 1 month, failing which to pay Rs.2, 16,810/- with interest @ 12% per annum from 24.05.1997 until the date of payment. The District Forum further directed OP no. 1 to pay Rs. 50,000/- as damages if it gave a new tractor to the complainants and, in addition, Rs. 1,000/- as costs. On the other hand, OP no. 2 (Premanchal Motors Pvt. Ltd.) was directed to pay Rs. 25,000/- as damages for mental agony on account of deficiency in service.

(vii) In appeal by all three parties against this order of the District Forum, the State Commission, by its order of 28.01.2004, set aside the Forum’s order. The State Commission clearly observed that the Forum had failed to get the tractor examined by some expert as required under the Consumer Protection Act, 1986 (hereafter, ‘the Act’) and passed the (final) order in question without deciding the application for such examination of the tractor though the case had been fixed for consideration of the said application. Accordingly, the State Commission remanded the complaint back to the District Forum for fresh adjudication, with specific direction to follow the procedure mandated by law.

(viii) In its order dated 23.03.2005, subsequent to the remand, the District Forum observed, “…. It is worthwhile mentioning that there was no allegation by the complainants that there was any manufacturing defect in the tractor; their only grievance has been that it has duplicate parts instead of Swaraj Company’s parts – for this, they have requested an inquiry by the Government Tractor Training Centre, Budhni. However, the Government Tractor Training Centre expressed its inability to conduct any kind of inquiry sought by the complainant. In such a situation, the case had to be decided on the basis of the facts and evidence available on record in this case.” It is also clear from this order of the District Forum that sometime during the second set of proceedings, it directed OP no. 2 to hand over the tractor to OP no. 1 for repairs. OP no. 2 did so and OP no. 1 then duly repaired the tractor. On 29.09.2004, the District Forum directed Ramdas – one of the complainants – to take delivery of the tractor from OP no. 1 on 30.09.2004 and use it in their fields for two days under the supervision of a technical expert of OP no. 1. The Forum also directed that he should inform OP no. 1 if he found any defect, whereupon OP no. 1 would rectify the said defect and inform the Forum. On the next date, i.e., 20.10.2004, the complainants still alleged that there was breakage in the tractor and it was not taking any load. The Forum then directed the complainant to present the tractor before the Forum. However, the complainant did not present the tractor on the next date, i.e., 27.10.2004. Finally, on 03.11.2004, Ramdas and Ramlal – complainants – remained present and produced the tractor before the Forum, with the continuing complaint that the tractor was not taking any load. The District Forum went on to record in its order, again, “…In order to find out the actual position regarding the load, the Forum requested Shri Mahendra Paliwal who is himself a farmer, to present his report with regard to load after driving the tractor somewhere in the nearby fields. Shri Paliwal presented his report before the District Forum stating that he got into the tractor for carrying out the test but the complainant – Ramdas – got the tractor stopped after moving 50 steps ahead, due to which it could not be tested that the tractor could take any load or not. On the said date, seeing the behaviour of the complainant – Ramdas – it can only be concluded that respondent no. 1, had fully repaired the tractor and that the statement of the complainant – Ramdas – that it did not take any load is not true. In this manner it is seen that the respondent no. 1 has fully repaired the tractor considering that the tractor was in working condition and there does not appears to be any manufacturing defect in the tractor.”

(ix) After further discussion, the District Forum finally passed the following orders:
“Respondent no. 2 shall pay Rs.1,50,000/- (Rupees one lakh fifty thousand only) to the complainants as damages.
Respondent no.1 shall pay Rs.25,000/- (Rupees twenty five thousand only) to the complainants as damages.
Respondent nos. 1 and 2 shall pay Rs.2,000/- (Rupees two thousand only) to the complainants as cost of this suit.”

(x) From the reasons detailed in its order, it seems that the District Forum held OP no. 2, – Premanchal Motors Pvt. Ltd. – entirely responsible for the tractor lying unused at the workshop/garage of OP no. 2, for six years (1998 – 2004) and, therefore, directed OP no. 2, to pay a compensation of Rs.1,50,000/- to the complainants on the ground that the complainants would have earned an extra income of at least Rs. 25,000/- per year during this period had they been able to use the tractor after due repairs by OP no. 2. Though the District Forum did not find any merit in support of the allegation of manufacturing defects in the tractor, it still directed OP no. 1 – Punjab Tractors Ltd. – to pay Rs.25,000/- to the complainants as damages, because, OP no. 1, did not take any effective steps to remove the defects in the tractor until the Forum had directed it to do so in July 2004.

(xi) Once again, all the three parties went in appeal against the order of the District Forum to the State Commission, leading to the impugned order. The State Commission not only confirmed the above-mentioned order dated 23.03.2005 of the District Forum but also directed OP nos. 1 and 2 to pay additional compensation of Rs.1,25,000/- within one month. This amount appears to be equal to the amount of subsidy that the complainants alleged they were entitled to but unable to avail of because of their inability to pay the bank loan and that inability was because of their loss of additional income form the use of the tractor.

4. In their respective revision petitions before us, OP nos. 1 and 2 have challenged the very validity of the findings of the order of the State Commission while, still dissatisfied, the complainants have sought further enhancement of the compensation.

5. We have heard Mr. Mohan Chouksey, learned counsel for the original complainants and Mr. Atish Dipankar, learned counsel for OP no. 1 (Punjab Tractors Ltd.) Though the learned counsel for OP no. 2 (Premanchal Motors Pvt. Ltd.) was unable to remain present, Mr. Dipankar argued the latter’s case too. At the outset, Mr. Chouksey admitted that the complainants had had the tractor in their possession ever since OP no.1 repaired it in 2004, at the direction of the District Forum, and handed it over to the complainants.

6. The allegation of manufacturing defect is obviously out of the way, in view of the clear findings of the District Forum. In any case, the law is explicit on this issue. Clause (c) of sub-section (1) of section 13 of the Act reads:
“13 (1) The District Forum shall, on admission of a complaint, if it relates to any goods,
(c) where the complaint alleges a defect in the goods which cannot be determined without proper analysis or test of the goods, the District Forum shall obtain a sample of the goods from the complainant, seal it and authenticate it in the manner prescribed and refer the sample so sealed to the appropriate laboratory with a direction that such laboratory make an analysis or test, whichever may be necessary, with a view to finding out whether such goods suffer from any defect alleged in the complaint or from any other defect and to report the findings thereon to the District Forum within a period of forty five days of receiving the reference or within such extended period as may be granted by the District Forum;”

The State Commission had remanded the complaint back to the District Forum specifically on this score. Yet, the type of examination of the tractor necessary under the law to establish if it had any manufacturing defect was not carried out. As already noted, this was perhaps so because of the reasons that the District Forum mentioned in its order of 23.03.2005.

7. Therefore, the surviving allegation is that OP no. 2 did not repair the tractor in time and satisfactorily. This led to the complainants’ inability to use the tractor productively for a long period. As a result, they lost not only additional income from agricultural operations but were also unable to pay the due instalments of loan and interest. For the second reason, they became ineligible for the subsidy that they were entitled to from the Government.

8. The documented background of this allegation is not quite in favour of the complainants. The complainants have not produced even a single job card of the persistent defects for repairs to which they claim they repeatedly took the tractor to OP no. 2. They have also not produced any correspondence with OP no. 2 in support of their allegations. There is not even an allegation that they ever wrote to OP no. 2 about any defects in the tractor – all allegations are of oral complaints. The case of OP no. 2, on the other hand, is that within the warranty period, the complainants brought the tractor to its garage/workshop on 3 occasions and each time OP no. 2 duly repaired the tractor in accordance with the terms of the warranty. If any defect recurred, it was because the complainants did not use the tractor properly. This defence of OP no. 2 is equally unsupported by any job card(s) or other form of record. Thus, these are rather bald, unsupported allegations and equally unsupported defence.

9. It is, however, a fact on record that the complainants filed a complaint with the District Forum within the warranty period, alleging as they did. Yet they took the tractor back to OP no. 2 in May 1998 (an admitted position of the complainants) and again in July 1998 (version of OP no. 2 but supported by other evidence, discussed by the District Forum). According to OP no. 2, it carried out the necessary repairs in July 1998, the cost of which came to Rs. 8,380/-. The complainants had to pay these charges to take delivery of the tractor as the warranty period had expired well before July 1998. The complainants stated that they would come back to OP no. 2 with the money for the payment, as they did not have sufficient funds on that day. However, they did not turn up at all. As a result, OP no. 2 wrote to the complainants to take the tractor back, adding that failure to do so would attract payment of additional garage charges. The tractor thereafter remained at the garage of OP no. 2, upto the end of September 2004. This is beyond doubt because it is on record that OP no. 2 filed a civil suit against the complainants in 2000, claiming recovery of the outstanding repairs and garage charges. It is also on record that the complainants took over the tractor in September/October 2004, after OP no. 1 had carried out repairs at the directions of the District Forum.

10. In our considered view, as an ordinary practice such abandonment of a new vehicle soon after its purchase or after repairs, at the premises of the manufacturer or the dealer concerned, is not prudent conduct on the part of a consumer, even if the consumer has justified grounds for serious dissatisfaction with the performance of the new vehicle or even after its repairs. In the best of circumstances, such abandonment is entirely to the disadvantage of the consumer for the vehicle can only deteriorate if left in the so-called care of an indifferent dealer who too may have his own reasons to feel aggrieved that his repairs bills and garage charges remain unpaid. This conduct is even more imprudent for a consumer who has purchased the vehicle in question after availing of a bank loan and is thus liable in any case to repay that loan. The conduct of the complainants in this case falls in this category. If they had reasons to feel unhappy with the condition of the tractor even after repeated repairs during the warranty period, they could file a consumer complaint, which they did in this case even before the warranty period was over. Therefore, they had no reason to go to the extent of abandoning the tractor altogether at the garage/workshop of the same dealer against which they had filed the complaint.

11. The complainants’ conduct during the remanded proceedings before the District Forum was also not bona fide. The District Forum observed that the complainants prevented a third party (one Mahendra Paliwal, a farmer who had been tasked by the District Forum to drive the repaired tractor to see if it was able to ‘take the load’) from carrying out even that simple, rough and ready test. Having alleged manufacturing defect in the tractor, it was clearly the intention of the complainants somehow to obtain a replacement. They were not interested in helping establish whether the tractor actually had any manufacturing defect, much less perhaps in cooperating to see if OP no. 1 had repaired the tractor satisfactorily at the instance of the District Forum in the course of the remanded proceedings. The latter conduct of theirs was also in consonance with their earlier abandonment of the tractor with OP no.2, particularly when they realised that they were liable to pay the repair charges beyond the warranty period. This is not the conduct of a set of persons genuinely interested in diligent use of a newly acquired tractor to improve their agricultural productivity, mindful of the fact that they had obtained a loan from a bank under a Government sponsored scheme which, given their socio-economic disadvantages, entitled them to a large subsidy to improve the financial viability of their asset against borrowing.

12. The District Forum gave a clear finding that OP no. 2 handed over the tractor to OP no.1 for repairs by the latter during the remanded proceedings and at that time, some parts of the tractor were missing. The fact that the Forum found it necessary to direct OP no. 1 to repair the tractor (and not OP no. 2) has to be held implicitly against OP no.2. Moreover, the missing parts suggested that OP no.2 did not keep the tractor in the condition it was in when the complainants left the tractor with it in 1998. As professional dealers, OP no. 2 was also expected to open job cards each time the complainants approached it complaints of malfunctioning of the tractor; in any case, it was for OP no. 2 to keep a complete record of the free servicing and repairs it did during the warranty period and make copies of these reports available to the complainants at the end of each visit to its garage. OP no. 2 failed to produce any such document before the District Forum during the remanded proceedings. These do amount to deficiencies in service on the part of OP no.2. However, the fact that the tractor could be repaired and brought back to serviceable condition even after six years of storage at the premises of OP no. 2 (and has been in use with the complainants since then, as admitted by the learned counsel, Mr. Chouksey) would be a mitigating factor in favour of OP no. 2.

13. In view of the foregoing discussion, we are constrained to hold that the complainants have much to blame themselves for. They set out with a case of manufacturing defect in the tractor, along with allegations of spurious parts/components and repeated instances of unsatisfactory performance. After filing a consumer complaint, they simply abandoned their new tractor for six long years at the premises of the same dealer against which they had filed the complaint, without bothering to pay the repair charges or to enquire if they could get the tractor released after a smaller payment. They did not co-operate with the District Forum in even establishing if OP no. 1 had repaired the vehicle satisfactorily. It is clear that the complainants were not seriously interested in operating the tractor – even if they believed that their complaint would be allowed, they had no way of knowing that they would necessarily get a new tractor. All this was against the backdrop of their bank loan remaining unpaid and, according to them; the subsidy was also cancelled/withdrawn.

14. There is thus no ground for the State Commission to award compensation equal to the amount of subsidy that the complainants merely alleged they were entitled to. We are also unable to uphold the District Forum’s order granting compensation for loss of additional agricultural income practically on the say-so of the complainants. Thus, the compensation awarded against the dealer OP no. 2 also needs to be modulated.

15. In conclusion, we partly allow RP nos. 1018 and 1147 of OP no. 2 and OP no. 1 respectively and set aside the impugned order of the State Commission and with that, the order dated 25.03.2005 of the District Forum. Accordingly, we direct that for deficiency in service to the extent discussed above (paragraph 12), OP no. 2 (Premanchal Motors Pvt. Ltd.) shall pay a consolidated compensation of Rs. 25,000/- to the complainants as damages, within four weeks of the date of this order. However, we do not find OP no.1 (Punjab Tractors Ltd.) and OP no. 3 (Vijay Tractors) guilty of any deficiency in service. In view of these, we also dismiss RP no. 1105 filed by the complainants. There shall be no order as to costs.

………………………………………..
[R. C. JAIN, J]

.….…………………………………….
[ANUPAM DASGUPTA]

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7438 OF 2000
http://legalapproach.net/case_details.php?jid=1355
V. Subramaniam .. Appellant (s)
-versus-
Rajesh Raghuvandra Rao .. Respondent(s)

J U D G M E N T
MARKANDEY KATJU, J.

1. This appeal by special leave has been filed against the impugned judgment of the Bombay High Court dated 27.9.2000 in Civil Reference No. 19 of 1999.
2. Heard learned counsel for the parties and perused the record.
3. This appeal arises out of a suit filed before the Bombay City Civil Court instituted by the appellant praying inter alia for dissolution of an unregistered partnership firm between the appellant and the respondent. In that suit a defence taken was that the suit was not maintainable in view of sub-section (2A) of Section 69 of the Indian Partnership Act, 1932 (hereinafter referred to as `the Act’). The Bombay City Civil Court was of the view that the said sub-section 2A, which was introduced by the Maharashtra Amendment to Section 69 of the Act, being the Maharashtra Act no.29 of 1984 (which received assent of the President of India) was unconstitutional being violative of Articles 14 and 19 (1)(g) of the Constitution of India. Hence the Bombay City Civil Court by order dated 16.8.1999 made a reference to the High Court under Section 113 of C.P.C.
4. The High Court, however, in the impugned judgment has held that the said sub-section 2A of Section 69 of the Act is not unconstitutional. Hence this appeal before us.
5. Section 69(1) & (2) of the Partnership Act originally read as follows :
“69. Effect of non-registration.
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm:
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of firms as partners in the firms.”
6. Sub-section 2A which was introduced by the Maharashtra Amendment 1984 states as follows :
“(2A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or have been a partner in the firm, unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm:
Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realize the property of a dissolved firm.”
7. It may be mentioned that the Maharashtra Amendment of 1984 not only inserted sub-section 2A in Section 69, it also substituted the original sub-section (3)(a) to Section 69 by an altogether different sub-section (3)(a).
8. The original sub-section (3)(a) of Section 69 in the Partnership Act read as follows :
“(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect:-(a) the enforcement of any right to sue for the dissolution of a firm
or for accounts of a dissolved firm, or any right or power to
realize the property of a dissolved firm.”
9. The Maharashtra Amendment of 1984 substituted clause (a) of
Section 69(3) of the original Act by the following sub-section (a) :
“The firms constituted for a duration of six months or with a capital upto Rs.2000/-“
10. The Maharashtra Amendment also added a proviso to Section 69(1)
which reads as follows:
“Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realize the property of the firm”
11. The English law in so far as it makes registration compulsory for a firm and imposes a penalty for non-registration was not followed when the Partnership Act was made in India in 1932 as it was considered that this step would be too drastic and would introduce several difficulties. Hence registration was made optional at the discretion of the partners, but following the English precedent, any firm which was not registered by virtue of sub-sections (1)& (2) of Section 69 disabled a partner or the firm (as the case may be ) from enforcing certain claims against the firm or third parties (as the case may be) in a Civil Court.
12. An exception to this disability with regard to an unregistered firm was made in sub-section (3)(a) to Section 69, and this clause enabled the partners in an unregistered firm to sue for the dissolution of the firm or for accounts or for realizing the property of the dissolved firm.
13. This exception in clause (a) of Section 69(3) was made on the principle that while registration of a firm is designed primarily to protect third parties, the absence of registration does not mean that the partners of an unregistered firm lose all rights in the said firm or its property and hence cannot sue for accounts or for its dissolution or for realizing their property in the firm.
14. It may be mentioned that a partnership firm, unlike a company registered under the Indian Companies Act, is not a distinct legal entity, and is only a compendium of its partners. Even the registration of a firm does not mean that it becomes a distinct legal entity like a company. Hence the partners of a firm are co-owners of the property of the firm, unlike shareholders in a company who are not co-owners of the property of the company.
15. Till the Maharashtra Amendment of 1984 came into force on 1.1.1985, a partner in a firm could file a suit for dissolution of an unregistered partnership firm or for accounts of the dissolved firm or to recover the properties of the dissolved firm. However, in view of subsection 2A of Section 69, since 1.1.1985 a partner in an unregistered partnership firm in the State of Maharashtra cannot file a suit for dissolution or for accounts of a dissolved firm or realize properties of a dissolved firm, unless the duration of the firm was only six months or it’s capital is upto Rs.2000/-. The question before us is whether sub-section 2A of Section 69 inserted by the Maharashtra Amendment is constitutionally valid.
16. In our opinion sub-section 2A of Section 69 inserted by the Maharashtra Amendment violates Articles 14, 19(1)(g) and 300A of the Constitution of India.
17. It has already been mentioned above that a partnership firm, whether registered or unregistered, is not a distinct legal entity, and hence the property of the firm really belongs to the partners of the firm. Sub-section 2A virtually deprives a partner in an unregistered firm from recovery of his share in the property of the firm or from seeking dissolution of the firm.
18. Article 300A of the Constitution of India states :
“No person shall be deprived of his property save by authority of law.”
19. It is by now well settled that a law to be valid has to be non arbitrary vide the 7-Judge Bench decision of this Court in Maneka Gandhi vs. Union of India and another AIR 1978 SC 597.
20. Sub-section 2A virtually deprives a partner of a firm from his share in the property of the firm without any compensation. Also, it prohibits him from seeking dissolution of the firm although he may want it dissolved.
21. Deprivation of property may take place in various ways, such as `destruction’ vide this Court’s decision in Chiranjit Lal Chowdhuri vs. Union of India AIR 1951 SC 41 or `confiscation’ vide this Court’s decision in Ananda Behera vs. State of Orissa AIR 1956 SC 17, or revocation of a proprietary right granted by a `private proprietor’ vide this Court’s decision in Virendra Singh vs. State of U.P. AIR 1954 SC 447, `seizure of goods’ vide this Court’s decision in Wazir Chand vs. State of H.P. AIR 1954 SC 415 or `immovable property’ vide this Court’s decision in Virendra Singh vs. State of U.P. (supra) from the possession of an `individual’ vide this Court’s decision in Wazir Chand vs. State of H.P. (supra) or `assumption of control of a business’ vide this Court’s decision in Virendra Singh vs. State of U.P. (supra) in exercise of the `police power’ of a State. Thus, there is a `deprivation’ where a municipal authority, under statutory power, pulls down `dangerous premises’ vide decision in Nathubhai Dhulaji vs. Municipal Corporation AIR 1959 Bom. 332 or an insolvent is divested of his `property’ vide decision in Vajrapuri Naidu, N. vs. New Theatres, Carnatic Talkies Ltd. 1959(2) MLJ 469.
22. The appellant challenges the Amendment as violative of Articles 14 and 19(1)(g) of the Constitution. Article 14 guarantees the right to equality and states that “The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.” Equal protection means the right to equal treatment in similar circumstances. In other words there can be classification for legitimate purposes, but it is well settled that the classification must be reasonable i.e. based on intelligible differentia and having nexus between the basis for classification and the object of the legislation.
23. Under Article 19(1)(g) of the Constitution all persons have the right to practice any profession or to carry on any occupation, trade or business. Clause (6) of that Article enables the State to make any law imposing, in the interest of general public, reasonable restrictions on the exercise of the right conferred under sub-clause (g) of Article 19(1).
24. In Chintamanrao and another vs. The State of Madhya Pradesh AIR 1951 SC 118 this Court observed :
“The phrase `reasonable restriction’ connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interest of the public. The word `reasonable’ implies intelligent care and deliberation, that is the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the equality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by clause (6) of Article 19, it must be held to be wanting in that quality.”
25. Similarly in M.C.V.S. Arunachala Nadar vs. State of Madras and others AIR 1959 SC 300 where the constitutional validity of the Madras Commercial Crops Markets Act was challenged, as violative of Article 19(1)(g), while considering the test of reasonableness to be applied this Court observed as under :
“It has been held that in order to be reasonable, a restriction must have a rational relation to the object which the legislature seeks to achieve and must not go in excess of that object (Chintamanrao and another vs. The State of Madhya Pradesh (supra). The mode of approach to ascertain the reasonableness of restriction has been succinctly stated by Patanjali Ssastri, C.J. in State of Madras vs. V.G. Row AIR 1952 SC 196 :
“It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict.”
26. The primary object of registration of a firm is protection of third parties who were subjected to hardship and difficulties in the matter of proving as to who were the partners. Under the earlier law, a third party obtaining a decree was often put to expenses and delay in proving that a particular person was a partner of that firm. The registration of a firm provides protection to the third parties against false denials of partnership and the evasion of liability. Once a firm is registered under the Act the statements recorded in the Register regarding the constitution of the firm are conclusive proof of the fact contained therein as against the partner. A partner whose name appears on the Register cannot deny that he is a partner except under the circumstances provided. Even then registration of a partnership firm is not made compulsory under the Act. A partnership firm can come into existence and function without being registered. However, the Maharashtra Amendment effects such stringent disabilities on a firm as in our opinion are crippling in nature. It lays down that an unregistered firm cannot enforce its claims against third parties. Similarly, a partner who is not registered is unable to enforce his claims against third parties or against his fellow partners. An exception to this disability was a suit for dissolution of a firm or a suit for accounts of a dissolved firm or a suit for recovery of property of a dissolved firm. Thus a partnership firm can come into existence, function as long as there is no problem, and disappear from existence without being registered. This is changed by the 1984 Amendment extending the bar of the proceedings to a suit for dissolution or recovery of property as well. The effect of the Amendment is that a partnership firm is allowed to come into existence and function without registration but it cannot go out of existence (with certain exceptions). This can result into a situation where in case of disputes amongst the partners the relationship of partnership cannot be put an end to by approaching a court of law. A dishonest partner, if in control of the business, or if simply stronger, can successfully deprive the other partner of his dues from the partnership. It could result in extreme hardship and injustice. Might would be right. An aggrieved partner is left without any remedy whatsoever. He can neither file a suit to compel the mischievous partner to cooperate for registration, as such a suit is not maintainable, nor can he resort to arbitration if any, because the arbitration proceedings would be hit by Section 69(1) of the Act (Jagdish Chandra Gupta vs. Kajaria Traders (India) Ltd. AIR 1964 SC 1882).
27. In our opinion the restrictions placed by sub-section 2A of Section 69 introduced by the Maharshtra Amendment Act, for the reasons given above, are arbitrary and of excessive nature and go beyond what is in the public interest. Hence the restrictions cannot be regarded as reasonable.
28. In the Constitution bench decision of this Court in Maneka Gandhi vs. Union of India and another (supra) it has been held that arbitrariness and unreasonableness violates Articles 14 and 19(1)(g) of the Constitution. The said provision is clearly unreasonable and arbitrary since by prohibiting suits for dissolution of an unregistered firm, for accounts and for realization of the properties of the firm, it creates a situation where businessmen will be very reluctant to enter into an unregistered partnership out of fear that they will not be able to recover the money they have invested in the firm or to get out of the firm if they wish to do so. As already stated above there is no legal requirement, unlike in England, which makes registration of a firm compulsory, rather in India it is voluntary. Both registered and unregistered are legal though of course registration and non registration have different legal consequences as stated above.
29. The High Court was of the view that the object of the Maharashtra Amendment was to induce partners to register and it was intended to protect third party members of the public. We cannot see how sub-section 2A of Section 69 in any way protects the third party members of the public. It makes it virtually impossible for partners in an unregistered firm to dissolve the firm or recover their share in the property of the firm. Hence it is totally arbitrary.
30. It is true that it has been held by this Court in Government of Andhra Pradesh & Others vs. P. Laxmi Devi AIR 2008 SC 1640 that the Court should not lightly declare a statute to be unconstitutional as it expresses the will of the people through its elected representatives. However, that does not mean that a statute can never be declared as unconstitutional. In fact the aforesaid decision this Court has held that in some circumstances a statute can be declared as unconstitutional, namely, where it clearly violates some constitutional provision. Since in our opinion sub-section 2A of Section 69 as introduced by the Maharashtra Legislature clearly violates Articles 14, 19(1)(g) and 300A of the Constitution, it is in our opinion ultra vires and is hence declared unconstitutional. Consequently this appeal is allowed and impugned judgment of the Bombay High Court is set aside. The suit can now proceed ignoring sub-section 2A which we have declared invalid. No costs.
…….. …………………
…..J.
(Markandey Katju)
……………………………J.
(G.S. Singhvi) New Delhi; March 20, 2009

Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1994 OF 2006
http://legalapproach.net/case_details.php?jid=1348
U.T. Chandigarh Administration & anr. ……. Appellants
Vs.
Amarjeet Singh & Ors. ….… Respondents

and Civil Appeal No. 1995 of 2006,
CA No. 1633/2009 @ SLP [C] No.25250/2007;
CA No. 1634/2009 @ SLP [C] No.4518 of 2008,
CA No. 1635/2009 @ SLP [C] No.4519 of 2008,
CA No. 1636/2009 @ SLP [C] No.4520 of 2008,
CA No. 1637/2009 @ SLP [C] No.4523 of 2008,
CA No. 1638/2009 @ SLP [C] No.4525 of 2008,
CA No. 1639/2009 @ SLP [C] No.6362 of 2008,
CA No. 1640/2009 @ SLP [C] No. 6363 of 2008,
CA No. 1641/2009 @ SLP [C] No.6364 of 2008,
CA No. 1642/2009 @ SLP [C] No.6365 of 2008,
CA No. 1643/2009 @ SLP [C] No.6366 of 2008,
CA No. 1644/2009 @ SLP [C] No.6367 of 2008,
CA No. 1645/2009 @ SLP [C] No.6368 of 2008,
CA No. 1646/2009 @ SLP [C] No.6369 of 2008,
CA No. 1647/2009 @ SLP [C] No. 6372 of 2008,
CA No. 1648/2009 @ SLP [C] No.6373 of 2008,
CA No. 1649/2009 @ SLP [C] No.6374 of 2008,
CA No. 1650/2009 @ SLP [C] No.6375 of 2008,
CA No. 1651/2009 @ SLP [C] No.6376 of 2008,
CA No. 1652/2009 @ SLP [C] No.6377 of 2008,
CA No. 1653/2009 @ SLP [C] No.6378 of 2008,
CA No. 1654/2009 @ SLP [C] No.6379 of 2008,
CA No. 1655/2009 @ SLP [C] No.6380 of 2008,
CA No. 1656/2009 @ SLP [C] No.6381 of 2008,
CA No. 1657/2009 @ SLP [C] No.6382 of 2008,
CA No. 1658/2009 @ SLP [C] No.6383 of 2008,
CA No. 1659/2009 @ SLP [C] No.6384 of 2008,
CA No. 1660/2009 @ SLP [C] No.6385 of 2008,
CA No. 1661/2009 @ SLP [C] No.15831 of 2008, and
CA No. 1662/2009 @ SLP [C] No.15859 of 2008.
With
CA Nos.1674-1686/2009 [@ SLP(C) Nos.3271 to 3283 of 2008].

J U D G M E N T R.V. RAVEENDRAN, J.

Leave granted in the special leave petitions. These appeals are filed by Union Territory of Chandigarh (for short ‘UT Chandigarh’). C.A. Nos.1994 of 2006 and 1995 of 2006 are filed against a common order dated 21.2.2005 passed by the National Consumer Disputes Redressal Commission (“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 short).
(ii) In addition to the premium for lease (to be offered by bids), the lessee had to pay annual rent at the rate of 2.5% of the premium for the first 33 years, liable to be raised to 3.375% of the premium for the next 33 years and 5% of the premium for the remaining 33 years;
(iii) 25% of the bid amount had to be paid by demand draft or cash at the fall of the hammer. The remaining 75% premium could be paid either in a lump sum with 30 days of the auction without any interest, or at the option of the lessee, in three equated annual instalments along with interest at 10% per annum, the first instalment becoming due on the expiry of one year from the date of auction.
(iv) If the instalments of the lease of premium or the ground rent were not paid on the due dates, interest at the rate of 24% per annum should be paid from the due date to date of payment.
(v) The successful bidder should complete the construction of the building on the plot within three years from the date of auction in accordance with the Punjab Capital (Development & Regulation) Building Rules, 1952 (‘Building Rules’ for short)
(vi) The government would not be responsible for leveling of uneven sites.
(vii) In the event of default, breach or non compliance of any of the terms and conditions of lease, the lease was liable to be cancelled and the site/building resumed and the amount paid to government towards premium/rent forfeited either wholly or in part.
(viii) The lessee was liable to pay all taxes and fees as may be levied by the Chandigarh Administration in respect of the site and the building to be constructed thereon.
3. Respondents 1 to 4 were the successful bidders in regard to plot No.173 in Sector No.39C & D at the auction held on 18.12.1996. The lease premium bid offered by them was Rs.20,45,000. The acceptance of the bid cum confirmation of the lease of the plot was communicated to respondents 1 to 4 by letter dated 19.5.1997 (for short ‘letter of allotment’) enclosing therewith a letter offering possession of the leased site. The said letter of allotment acknowledged the receipt of Rs.511,250 towards 25% of the premium and permitted the respondents to pay the balance 75% of the premium with 10% interest thereon in 3 equated instalments of Rs.6,16,736/-on 18.12.1997, 18.12.1998 and 18.12.1999. It also required the respondents to pay annual ground rent of Rs.51125/- 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, sewerage, ground water, street light, electricity, parking space) were provided.
(ii) To provide the basic amenities so as to enable them to raise a construction on the site.
(iii) To pay compensation of Rs.10 lacs for harassment and blocking of various payments made by them.
(iv) To pay interest at the rate of 18% per annum on the amounts paid by them, from the date of payment till all the basic amenities were provided.
5. The appellants filed a reply resisting the complaint. It was submitted that the respondents, having accepted the terms and conditions of lease contained in the conditions of auction and the letter of allotment were not entitled to wriggle out of the contract terms or refuse to pay the balance. It was also contended that the respondents were liable to pay the 75% balance premium in three annual instalments and in addition pay interest @ 24% per annum on the delayed instalments. The appellants submitted that they had not made any representation to the public in general or the respondents in particular that the plots auctioned were ‘fully developed’ plots or that the plots are situated in fully developed areas; nor was payment of premium or rent subject to Chandigarh Administration providing any ‘basic amenities’. Therefore, the respondents could not link the issue of payment of instalments or ground rent with the issue of basic amenities. It was also submitted neither the terms of lease nor the provisions relating to auction of leasehold rights in the Development Act and the Leasehold Rues, cast any obligation upon the appellants to provide the basic amenities required by the respondents and ensure that the site auctioned was situated in a fully developed area; and that the auction was on ”as is where is” basis and the bidders were fully aware of the situation and condition of the site for which they were bidding, as also the terms and conditions subject to which the auction was held. The appellants also contended that the complaint was not maintainable.
6. The U.T. Commission allowed the complaint by the respondents,
alongwith other similar complaints, by a common order dated 31.3.2003 with
the following directions :
(i) The date of auction for the purpose of payment of price shall be deemed to be date on which plinth level and all the basic amenities demanded in the complaint cases are actually provided.
(ii) An officer of the rank of Chief 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 Administration shall reschedule the recovery of three instalments and recover the same on (i) 1.5.2005, (ii) 1.5.2006 and (iii) 1.5.2007.
(2) Complainants shall pay interest @ 10% on the instalment amounts from the date of taking possession of the plot. This would be in conformity with condition No.5 of the allotment letter which provides that balance of 75% of the premium is to be paid with 10% interest.
(3) The complainants shall also pay the ground rent as per the prevailing rules.
However, the National Commission made it clear that:
(a) No penalty shall be levied for delayed payment of instalments or ground rent as the complaints were pending with the State Commission which had ultimately granted relief to the complainants;
(b) In respect of the premium instalments payable on 1st May, 2005, 2006 and 2007, complainants shall pay interest @ 10% and in case of any default in payment of instalments as above, it would be open to the appellants to recover interest as per the rules.
8. The facts of the other appeals are also similar. Only the plot numbers/dates/amounts vary. CA No.1995/2006 arises out of FA No.500/2003 disposed by the said common order dated 21.2.2005. All other appeals arise from a common order dated 21.2.2007 of the National Commission which was passed in terms of the earlier order dated 21.2.2005, the only change being to alter the dates of rescheduled instalments as 1.5.2007, 1.5.2008 and 1.5.2009. The orders dated 21.2.2005 and 21.2.2007 of the National Commission are challenged in these appeals.
GROUNDS OF CHALLENGE
9. The appellants have urged the following common contentions in these appeals :
(i) When the auction of sites (for grant of a lease for 99 years) was in exercise of the power of the government (UT Chandigarh Administration) under the provisions of the Development Act in accordance with the Leasehold Rules, it involves neither sale of goods nor rendering of any service. The act of leasing plots by auction by the appellants therefore did not result in the successful bidder becoming a ‘consumer’ or the appellants becoming ‘service providers’. In the absence of hiring or availing of any service, the question of deficiency in service or unfair or restrictive trade practice with reference to a service, did not arise and the complaint under the Act was not maintainable.
(ii) There was no obligation on the part of the appellants, 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 ‘consumer’ as defined in clause (d) or a person specified in clause (b) of section 2 of the Act; (ii) the respondent is a ‘trader’ as defined in clause (q) or a provider of ‘service’ as defined in clause (o) of section 2 of the Act; and (iii) the ‘complaint’ relates to any of the matters specified in clause (c) of section 2, for obtaining any relief provided by order under the Act. It therefore follows that where the complainant is not a ‘consumer’ (or a person specified in clause (b) of section 2), or where the respondent is not a ‘trader’ or ’service provider’ or where the complaint does not relate to matters enumerated in clause (c) of Section 2 of the Act, the consumer forum will have no jurisdiction either to entertain any complaint or grant any relief under the Act.
11. The respondents relied upon the decisions in Lucknow Development Authority v. M.K. Gupta – 1994 (1) SCC 243, Sector – 6, Bahadurgarh Plot Holders Association v. State of Haryana – 1996 (1) SCC 485, Ghaziabad Development Authority v. Balbir Singh – 2004 (5) SCC 65 and Municipal Corporation, Chandigarh & Ors. v. Shanti Kunj Investment (P) Ltd. and Ors. – 2006 (4) SCC 109, to contend that the complaints were maintainable and relief sought could be granted. We may straight away note that the decisions in Bahadurgarh and Shantikunj will not be of any assistance to decide the issue of maintainability, as those cases did not relates to complaints under the Consumer Protection Act, but arose out of writ petitions.
11.1 In Lucknow Development Authority v. M.K.Gupta [1994 (1) SCC 243] this Court held that if the nature of duty or function performed was a service as defined under the Act, then the provider of the service, irrespective of whether it is a private body or statutory or a public authority, would be amenable to the provisions of the Act. This Court held :-“As pointed out earlier the entire purpose of widening the definition (of ‘service’ under section 2(o) of the Consumer Protection Act) is to include in it not only day to day buying and selling activity undertaken by a common man but even such activities which are otherwise not commercial in nature yet they partake of a character in which some benefit is conferred on the consumer. Construction of a house or flat is for the benefit of person for whom it is constructed. He may do it himself or hire services of a builder or contractor. The 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 applies for allotment of a building site or for a flat constructed by the development authority or enters into an agreement with a builder or a contractor is a potential user and nature of transaction is covered in the expression ‘service or any description’. It further indicates that the definition is not exhaustive. The inclusive clause succeeded in widening its scope but not exhausting the services which could be covered in earlier part. So any service except when it is free of charge or under a constraint of personal service is included in it.”
(emphasis supplied).
11.2 In Ghaziabad Development Authority v. Balbir Singh [2004(5) SCC
65] this Court held :-“Thus the law is that the Consumer Protection Act, 1986 has a wide reach and the Commission has jurisdiction even in cases of service rendered by statutory and public authorities. Such authorities become liable to compensate for misfeasance in public office i.e. an act which is oppressive or capricious or arbitrary or negligent provided loss or injury is suffered by a citizen. The Commission/Forum must determine that such sufferance is due to mala fide or capricious or oppressive act. It can then determine the amount for which the authority is liable to compensate the consumer for his sufferance due to misfeasance in public office by the officers. Such compensation is for vindicating the strength of the law. It acts as a check on arbitrary and capricious exercise of power. It helps in curing social evil. It will hopefully result in improving the work culture and in changing the outlook of the officer/public servant. No authority can arrogate to itself the power to act in a manner which is arbitrary. Matters which require immediate attention should not be allowed to linger on. The consumer must not be made to run from pillar to post. Where there has been capricious or arbitrary or negligent exercise or non-exercise of power by an officer of the authority, the Commission/Forum has a statutory obligation to award compensation.”
12. The decisions in Lucknow Development Authority and Ghaziabad Develoopment Authority make it clear that where a public development authority having invited applications for allotment of sites in a lay out to be formed or for houses to be constructed and delivered, fails to deliver possession by forming the lay out of sites or by constructing the houses within the stipulated period, 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 regard to the deficiency in rendering service of a particular standard, quality or grade. The activity of a developer, that is development of land into layout of sites, inviting applications for allotment by assuring formation of a lay out with amenities and delivery of the allotted sites within a stipulated time at a particular price, is completely different from the auction of existing sites either on sale or lease. In a scheme for development and allotment, the allottee has no choice of the site allotted. He has no choice in regard to the price to be paid. The development authority decides which site should be allotted to him. The development authority fixes the uniform price with reference to the size of plots. In most development schemes, the applications are invited and allotments are made long before the actual development of the lay out or formation of sites. Further the development scheme casts an obligation on the development authority to provide specified amenities. Alternatively the developer represents that he would provide certain amenities, in the Brochure or advertisement. In a public auction of sites, the position is completely different. A person interested can inspect the sites offered and choose the site which he wants to acquire and participate in the auction only in regard to such site. Before bidding in the auction, he knows or is in a position to ascertain, the condition and situation of the site. He knows about the existence or lack of amenities. The auction is on ‘as is where is basis’. With such knowledge, he participates in the auction and offers a particular bid. There is no compulsion that he should offer a particular price. When the sites auctioned are existing sites, without any assurance/representation relating to amenities, there is no question of deficiency of service or denial of service. Where the bidder has a choice and option in regard to the site and price and when there is no assurance of any facility or amenity, the question of the owner of the site becoming a service provider, does not arise even by applying the tests laid down in Lucknow Development Authority or Balbir Singh.
14. Where there is a public auction without assuring any specific or particular amenities, and the prospective purchaser/lessee participates in the auction after having an opportunity of examining the site, the bid in the auction is made keeping 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 complaint by the respondents proceeded on the assumption that there was an obligation on the part of the appellants to provide amenities in the nature of approach road, water supply lines, drainage system, rainwater drainage and electricity and that unless such amenities were provided, they were not liable to pay the premium or interest on the premium or the ground rent. As noticed above, neither the terms and conditions of auction, nor the advertisement relating to the auction, nor the letter of allotment contained any assurance regarding provisions of any such amenities with reference to the sites put up for auction. To get over the absence of such term or assurance, the respondents relied upon the definitions of the words ‘site’ and ‘amenity’ in the Development Act and the provisions of the Leasehold Rules to contend that there was a statutory obligation to provide the amenities and failure to provide such amenities gave a cause of action to approach the Consumer Forum with a complaint against the appellants and also withhold payment of the premium instalments and ground rent. On the other hand, the appellants contend that they had no obligation, either contractual or statutory, to provide amenities of any nature, with reference to the auction of the leasehold rights of sites and the lack of amenities or alleged non-provision of amenities cannot be a ground for withholding the premium and rent.
16. In view of the rival contentions, it becomes necessary to refer to the relevant provisions of the Development Act and the Leasehold Rules.
16.1) The Development Act re-enacts and modifies the law in relation to the development and regulation of new capital of Punjab. Section 2(j) defines ‘site’ as meaning ‘any land’ which is transferred by the Central Government under section 3. Section 3 relates to the power of Central Government in respect of transfer of land and buildings in Chandigarh. Sub-section (1) thereof provides that subject to the provisions of the said section, the central government may sell, lease or otherwise transfer, whether by auction, allotment or otherwise, any land or building belonging to the government in Chandigarh on such terms and conditions as it may subject to any rules that may be made under the Act, think fit to impose. Sub-section (2) thereof, provides that the consideration for any transfer under sub-section (1) shall be paid to the 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 as may be specified in the notice and thereafter to maintain it in such a manner as may be specified therein.
7. Levy of fee or tax for amenities. – (1) For the purposes of providing maintaining or continuing any amenity at Chandigarh the central government may levy such fees or taxes as it may consider necessary (which shall be in addition to any free or tax for the time being leviable under any other law) in respect of any site or building on the transferee or occupier thereof.
(2) If the central government considers it necessary or expedient so to do having regard to the fact that the transferee or occupier is a religious or charitable institution or that he does not enjoy the amenity for which any fee or tax is levied, the central government may, by general or special order, exempt wholly or partly any class of such transferees or occupiers from the payment of fees or taxes levied under sub-section (1).”
Neither Sections 6 and 7 nor any other provision of the Development Act casts any obligation on the central government to provide amenities to plots sold/leased by public auction. Therefore the assumption that there is a statutory obligation on the part of the Central Government to provide amenities, because the word ‘amenity’ is defined in the Act is erroneous and baseless. As noticed above, the word ‘amenity’ is used in the context of two specific matters. The first is that the transferee/occupier of a site should not use the site or leave it in a condition that it will prejudicially affect the amenities in any part of Chandigarh (vide section 6). The second is that central government can levy fees/taxes in respect of any site/building, on the transferee/occupier for the purpose of providing, maintaining or continuing any amenity at Chandigarh. Thus definition of the ‘amenity’ in the Development Act, does not in any manner cast any obligation on Chandigarh administration with reference to the auction of leasehold rights relating to sites belonging to central government.
16.3) Section 22 of the Development Act empowers the Central Government to make rules for carrying out the purposes of the Act, in particular and among others : (a) the terms and conditions on which any land or building may be transferred by the (central government) under this Act; (b) the manner in which consideration money for any transfer may be paid; (c) the rate of interest 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. Lease by auction, procedure for.—In case of auction, at least 25 per cent of the bid accepted by the auctioning officer shall be paid on the spot by the intending lessee in the prescribed mode of payment in accordance with Rule 12:
Provided that the Estate Officer may, in his absolute discretion, allow the successful bidder to deposit in the prescribed mode of payment not less than 10 per cent of the bid on the condition that the difference between the amount deposited and 25 per cent of the bid shall be deposited in the same manner within 30 days of auction.
9A Extension of period : xxx (not relevant) xxx
10. Delivery of possession.—Actual possession of the site/building shall be delivered to the lessee on payment of 25 per cent of the premium in accordance with Rule 8 or Rule 9 as the case may be:
Provided that no ground rent payable under Rule 13 and interest on the instalments of premium payable under sub-rule (2) of Rule 12 shall be paid by the lessee till the actual and physical possession of the site/building is delivered or offered to be delivered to him, whichever is earlier.
11. Premium.—(1) In case of allotment, the premium shall be such amount as may be determined by the Chandigarh Administration.
(2) In case of auction, the premium shall be the bid accepted by the Estate Officer, as a result of bidding in open auction.
12. Payment of premium and consequences of non-payment or late payment.—(1) In addition to payment of 25 per cent premium under Rule 8 or 9 as the case may be, the remaining 75 per cent premium may be paid in lump sum within 30 days from the date of allotment/auction without any interest.
(2) If payment is not made in accordance with sub-rule (1) of this rule, the balance of the 75 per cent premium shall be paid in three annual equated instalments or more as the Chief Administrator may in exceptional circumstances of a case fix with prior approval of the Chief Commissioner along with interest at the rate of 10 per cent per annum or at such higher rate of interest as may be fixed by the Chief Administrator by a notification in the Official Gazette before the commencement of the lease. The first instalment shall become payable after one year from the date of allotment/auction:
(3) x x x (Not relevant) x x x
(3-A) In case any equated instalment or ground rent or part thereof is not paid by the lessee by the date on which 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 imposed and recovered in the manner laid down in section 8 of the Capital of Punjab (Development and Regulation) Act, 1952, as amended by Act No.17 of 1973.
14. Execution of lease deed.—(1) After payment of 25 per cent premium the lessee shall execute a lease deed in Form B, B-I, B-II or C, as the case may be, in such manner as may be directed by the Estate Officer within six months of the date of allotment/auction or within such further period as the Estate Officer may, for good and sufficient reasons, allow.
17. The National Commission has proceeded on erroneous and baseless assumptions that there is no obligation to pay the instalments until the amenities were provided and consequently the instalments could be rescheduled so as to begin after the amenities were provided and that interest would start to run only when the lessee takes possession. In view of the conflicting views of the High Court as to whether instalments are payable only after the government provides the basic amenities, the National Commission circumvented the issue. It held that as the appellant herein had however provided all the basic facilities by 1999 and the matter had been pending thereafter before the Consumer fora, the three annual instalments would get postponed and commence only after its decision, that is from 1.5.2005, instead of the instalment schedule specified by the appellants (which commenced in 1997).
18. The conflict referred to by the National Commission was with reference to the decisions of the High Court in Shanti Kunj Investments Pvt. Ltd. v. U.T. Administration Chandigarh reported in AIR 2001 P&H 309 (CWP No. 959/1999 decided on 2.2.2001) and in DLJ Builders (P) Ltd. v. Advisor to the Administrator Chandigarh Administration (CWP No. 13695 of 2001 dated 18.2.2002).
18.1) Shantikunj Investments related to an auction of leasehold rights of a site by the UT Chandigarh. In that case, the lessee found large number of jhuggis, adjacent to the plot which were not removed inspite of his repeated requests. He also found no amenities such as road, water, landscaping etc. Therefore the lessee filed a writ petition before the High Court seeking relief. The High Court declared that the UT Chandigarh having failed to provide the basic amenities, its order of resumption and forfeiture could not be sustained and therefore liable to be set aside. The High Court further directed 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 particular amenity at the site. If the basic amenities, like water, electricity and approach road are not available at the site and on that account it is not possible to construct the building, the allottee can represent to the Administration that he may not be burdened with the liability of ground rent and may not be penalized for non construction within the specified time. After completion of building, he can represent for waiver of ground rent in case facility of sewerage has not been provided. However, after taking possession of the site and constructing the building, he cannot avoid his obligation to pay the balance of the premium along with interest and ground rent in accordance with the conditions of allotment and the provisions of Rule 12 of the Rules on the pretext that land scaping has not been done or pavement has not been tiled or the particular public utility service has not been provided. In our considered view, the allottee is bound to pay the balance premium and other charges in accordance with the conditions of allotment.”
18.3) The decision of the High Court in Shantkunj Investments was challenged by the Chandigarh Administration and Municipal Corporation of Chandigarh. The decision in DLG Builders was challenged by the allottees. They were disposed of by this Court by a common judgment reported in Municipal Corporation, Chandigarh v. Shantikunj Investments Pvt. Ltd. 2006 (4) SCC 109. This Court noted that the conflict between the two decisions of the High Court were in regard to the question whether providing of amenities as defined in Section 2(b) of the Development Act was a condition precedent for payment of instalments and charging interest. After examining the provisions of the Act and the relevant rules, this Court rejected the contentions of the lessees and held that the High Court’s view in Shantikunj could not be sustained. This Court held :-
“On a plain reading of the definition “amenities” read with Rule 11(2) and Rule 12, it cannot be construed to mean that the allottees could take upon themselves not to pay the lease amount and take recourse to say that since all the facilities were not provided, therefore, they are not under any obligation to pay the installment, interest and penalty, if any, as provided under the Act and the Rules. …… It has never been the condition precedent. It is true that in order to fully enjoy 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-is-where-is basis and the Administration promised that the basic amenities will be provided in due course of time. It cannot be made a condition precedent. This has never been a condition of the auction or of the lease. As per the terms of allotment upon payment of the 25 per cent, possession will be handed over and rest of the 75 per cent of the leased amount to be paid in a staggered manner i.e. in three annual equated installments along with interest at the rate of 10 per cent. If someone wants to deposit the whole of the 75 per cent of the amount he can do so. In that case, he will not be required to pay any interest. But if a party wants to make payment within a period of three years then he is under the obligation to pay 10 per cent interest on the amount of installment. This is the obligation on the part of the allottee as per the condition of lease and he cannot get out of it by saying that the basic amenities have not been provided for enjoying the allotted land, therefore he is not liable to pay the interest”.
We asked the learned counsel for the parties to tell us which is the obligation of the lessor in the lease deed which says that they will not charge interest on the installments before providing the amenities. There is neither any condition in the lease nor any obligation under the auction. If the parties have given their bids an with their eyes wide open, they have to blame themselves. It cannot be enforced by any mandamus as there is no obligation contained in the lease deed or in the auction-notice.”
Therefore, it is evident that a lessee/successful bidder cannot seek reschduling of the instalments of premium or postponement of accrual of the interest payable as per rules.
19. The equated instalment includes interest only upto the dates stipulated as due dates. When the instalments are not paid on the due dates, the lessees become liable to pay penal interest at 24% per annum from the due date to date of actual payment (vide clause 4 of General Term & Conditions of Auction and clause 5 of Letter of allotment and Rule 12(3A) of the Leasehold Rules). We may also refer to two decisions of this Court in the context of interest.
20. In Sector-6, Bahadurgarh Plot Holders’ Association (supra), the issue that arose for determination was whether the allottee could refuse to pay interest on the instalments of the price on the ground that the 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 plots. This Court held :-“As the offer had stated that modern amenities noted above “will be provided”, it cannot be held that till the amenities as mentioned have become fully functional, the offer is incomplete. It is for this reason that the fact that full development has not yet taken place, even if that be the position as contended by Shri Bhandare, cannot be a ground to hold that interest has not become payable. It is true that the applicants were given to understand that the amenities noted above would become available (and within reasonable time), the fact that the same did not become available to the desired extent could not be a ground not to accept delivery of possession. From the order of the High Court which we have quoted above, we find that the offer of possession of the undeveloped plot was not accepted by the counsel of the appellant. That order being of 17-10-1980, we are of the view that interest did become payable from that date. The fact that the plot has not yet been fully developed, as is the case of the appellant, has, therefore, no significance insofar as charging of interest is concerned. We are not in a position to accept the submission of Shri Bhandare that equity would not demand charging of interest, even though the plots are yet to be fully developed. When parties enter into contract, they are to abide by the terms and conditions of the same, unless the same be inequitable. In the present case, question of equity does not really arise inasmuch as the condition relating to interest is founded on a statutory rule, vires of which has not been challenged.”
(emphasis supplied)
If interest could not be denied to the state government even where there was an assurance of all “modern amenities”, it is needless to say that the claim of the government will be much more stronger, when there is no assurance at all, as in this case.
21. In regard to default interest, we may refer to the following observations of this Court in Secretary, Bhubaneswar Development Authority v. Susanta
Kumar Mishra (C.A.No. 605/2009 decided on 30.1.2009)
“Each equated instalment would then have a principal component and interest component. As the equated instalments would include interest on the principal only up to the due date of instalment, whenever there is a default, there can be no dispute that the ‘principal’ part of the instalment could be subjected 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 in clause 6 of the lease-cum-sale agreement is neither inequitable nor in terrorem. Where the basic rate of interest is itself very high, or where interest is charged on the entire price instead of charging interest on the reducing balance, when working out the equated instalments, or where the rate of interest on default is punitively excessive, the position may be different. But no such case is made out by the respondent.”
22. In this case, having regard to the provisions in the leasehold Rules and
contractual terms (as contained in the General terms and conditions of auction
lease and the letter of confirmation of lease cum offer of possession), the
following position is evident :
(i) Interest at 10% per annum is payable from the date of auction till date of payment on the balance of premium (if the lessee chooses to pay the 75% of premium in instalments).
(ii) Payment of interest has nothing to do with provision of amenities.
(iii) If the premium interest on ground rent is not paid on the due date, then interest will be payable at 24% P.A. from the date of default (due date) to date of payment.
(iv) The lessee will not be liable to pay interest on the premium instalments or the rent, till the actual and physical possession of the site is delivered or offered to be delivered to the lessee (whichever date is earlier).
23. The lessees-respondents, however, placed strong reliance on the following observations and directions in para 38 of the decision of this Court in Shantikunj (supra) to contend that commencement of interest could be
postponed :-“We make it clear that though it was not a condition precedent but there is obligation on the part of the Administration to provide necessary facilities for full enjoyment of the same by the allottees. We therefore, remit the matter to the High Court for a very limited purpose to see that in cases where facilities like kutcha road, drainage, drinking water, sewerage, street lighting have not been provided, then in that case, the High Court may grant the allottees some proportionate relief. Therefore, we direct that all these cases be remitted to the High Court and the High Court may consider that in case where kutcha road, drainage, sewerage, drinking water, facilities have not been provided, no relief shall be granted but in case any of the facilities had not been provided, then the High Court may examine 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 the matter, it was alleged that the amenities had not been provided. It is in those peculiar facts that this Court obviously thought fit to give some reliefs with reference to penal interest wherever amenities had not been provided at all even after 17 years. In fact, this court made it clear while remanding to High Court that wherever facilities/amenities had been provided before the date of the judgment (28.2.2006), the lessees will not be entitled to any reliefs and where the facilities/amenities had not been granted even in 2006, the High Court may consider giving some relief by proportionate reduction in penal interest. This direction was apparently on the assumption that in case of penalty, the court can grant relief in writ jurisdictions.
24. But the facts of this case are completely different. The auction sale was in December 1996. The National Commission has recorded a finding that almost all the facilities/amenities had provided in the year 1999, that is within about two years. Therefore, the observations of this court in para 38 of Shantikunj will have no applications to these cases, particularly as they were made in the context of a writ proceeding, whereas we are concerned with a proceedings under Consumer Protection Act. We may also refer to another aspect. Section 7 of the Act empowers the Central Government to levy such fees and taxes as it may consider necessary (which shall be in addition to any fee or tax for the time being leviable under any other law) in respect of any site or building on the transferee or the occupier thereof, for the purpose of providing, maintaining or continuing any amenity at Chandigarh. This provision clearly demonstrates that the providing amenities is not linked to auction of plots on lease basis and the premium paid is not for providing any amenity. The Central Government is required to provide amenities by levying fees and taxes in respect of sites/plots on the transferees/ occupiers thereof. Therefore, it is doubtful whether any proportionate reduction in penal/default interest could be made on the ground of non-provision of amenities. Be that as it may. As we have already held that para 38 will not apply, we do not propose examine that aspect any further in these cases.
25. The respondents lastly contended that the rate of default interest was only 12% per annum under Rule 12(3A) of the Leasehold Rules as on 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’ under the Act. As such a contention was not raised either before the UT Commission or National Commission, we do not propose to examine the said contention in these appeals.
27. The appellants thus succeed on both grounds. We, therefore, allow these appeals by UT Chandigarh and set aside the orders dated 21.2.2005 and 21.2.2007 of the National Commission in the matters which are the subject matter of these appeals and dismiss the respective complaints filed by the respondents as not maintainable.
CA Nos.1674-1686 of 2009 [@ SLP [C] Nos.3271-3283 of 2008]
28. Leave granted. The lessees-complainants have filed these appeals against the common order dated 21.2.2007 of the National Commission seeking further relief. They contend that the National Commission ought to have further directed the UT Chandigarh not to charge interest on the premium instalments nor claim the ground rent until the basic amenities were provided. They also contend that as the basic amenities were not provided on the date of delivery of possession of the sites, but were provided only in 1999, their liability to pay ground rent and interest on premium instalments would start only with effect from 25.10.1999.
29. We have considered and rejected these contentions while dealing with
the appeals by UT Chandigarh. In view of the dismissal of their complaints,
these appeals do not survive and are dismissed.

J
[R. V. Raveendran]
J
[Markandey Katju] New Delhi; March 17, 2009

Reportable
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 402 OF 2001
http://legalapproach.net/case_details.php?jid=1345
Krishna Ram Appellant
Versu s State of Rajasthan Respondent

J U D G M E N T Lokeshwar Singh Panta , J.

1. This appeal arises out of the judgment and order dated 22.12.2000 passed by the High Court of Rajasthan, Bench at Jodhpur in S.B. Criminal Appeal No. 673 of 1999 by which the learned Single Judge of the High Court has set aside the order of acquittal of the accused and convicted him for offences under Sections 7 and 13(1)(D) read with Section 13(2) of the Prevention of Corruption Act, 1988 [for short “P.C. Act, 1988”] and sentenced him to undergo rigorous imprisonment for one year and to pay a fine of Rs.500/-. In default of payment of fine, the accused shall suffer further simple imprisonment for two months.
2. Brief facts, which led to the trial of the accused, are as under:-2.1] Krishna Ram – accused-appellant herein in the year 1991 was posted as Patwari and was Incharge of the Revenue Circle 84 RBB Tehsil Raisinghnagar, District Sri Ganganagar. On 20.03.1991, Gurmukh Singh-complainant [PW-2], resident of 85, RB visited the Rajasthan State Investigation Bureau (SB) Ganganagar Post and submitted an application to Hazari Lal [PW-8], Inspector Chowki Incharge in which he stated that he was holder of land measuring 10 bighas 5 biswas in Chak 85 RB and land measuring 12.5 bighas in Lakha Tiba on the basis of temporary cultivation lease. He wanted to convert his temporary lease into permanent lease for which purpose he filled in the requisite application form (Exhibit P7) and presented the same before Shri Jagmal Singh [PW-9], the Sub-Divisional Officer, Raisinghnagar, who in turn marked it to the Tehsildar, Raisinghnagar and handed over the original application to the complainant. The Tehsildar in turn marked the application to the Patwari concerned.
2.2] On 18.03.1991, PW-2 approached the appellant (Patwari)
and presented the application (Ex.-P-7) to him for giving his report thereon. The complainant alleged that the appellant had demanded a sum of Rs.1,000/- as bribe money for giving favourable report in his (complaints) favour in regard to allotment of the lands to him on permanent lease holders rights. PW-2 pleaded to the appellant that he did not possess enough money to meet his demand whereupon the appellant asked the complainant to come to his house with an amount of Rs.500/- instead of Rs.1,000/- as demanded by him on an earlier occasion. It was also stated by the complainant that he was not willing to pay the bribe money to the appellant and wanted to get him apprehended by the police for demanding illegal gratification and it was with that sole object that the complaint (Ex.-P-13) came to be presented to PW-8 Hazari Lal-Inspector, Bureau Incharge of Chowki, Ganganagar. On receipt of the complaint of the complainant, PW-8 summoned Askaran (PW-1) and Raje Ram (PW-3) employees of UIT, Ganganagar, who were introduced to the complainant and they were apprised of complete gist of the complaint. Both the witnesses had voluntarily agreed to participate in the trap proceedings proposed to be laid against the appellant. Four currency notes of Rs.100/- denomination and two notes of Rs.50/- denomination, i.e. total amounting to Rs.500/-, were arranged by the complainant for payment to the appellant. The Bureau employees then treated the currency notes with phenolphthalein powder which were kept in the left side pocket of the complainant’s shirt who was instructed not to touch the money any more and the same shall be handed over to the appellant on his demand. The complainant was asked to give a signal to the members of the trapping party soon after payment of money to the appellant by putting his hand on his turban. The witnesses were also instructed to stand close by to the complainant to enable the police party to apprehend the appellant red handed. Thereafter, the trapping party reached near Gulbadiwali Haveli at Raisinghnagar where the appellant was residing. The appellant at that time was sitting with two or three persons in his house, but the complainant asked him to come outside the room on the first floor of the house and the members of the trapping party remained standing downstairs. Thereafter, upon signal being received from the complainant, the members of the trapping party immediately reached near to the appellant where PW-8 questioned him in the presence of the witnesses present there if he had accepted Rs.500/- as bribe from
complainant Gurmukh Singh. The appellant’s first stand was that Gurmukh Singh had given him Rs.500/- for
making a favourable report on his application for allotment of land to him, but then hesitatingly he turned around and replied that Rs.500/- was paid to him as loan amount. The complainant reiterated and reasserted that on demand made by the appellant, he had given Rs.500/- as an illegal gratification to the appellant for doing his work. He stated that the appellant had accepted the amount and after counting the currency notes he pocketed them in left side pocket of his bushirt. The police constable immediately held both the wrists of the appellant and that appellant’s hands turned pink when dipped in sodium carbonate solution, as a result whereof the solution also turned pink colour. The appellant was asked to take out the money from the pocket of his bushirt and on counting the currency notes they were found to be the same which were paid by the complainant to the appellant. On personal search of the appellant, a sum of Rs.227/- was also found in his pocket, besides Rs.500/- the bribe money. The bushirt of the appellant was dipped in the solution of sodium carbonate which also turned into pink colour and was taken into possession as an evidence. The relevant record was also taken in possession from the appellant. Site Plan was prepared after conducting search of the room occupied by the appellant. The materials seized as evidence were kept in the Malkhana. FIR (Ex.P-16) was prepared and registered against the appellant in the police station at Head Office at Jaipur. The sample bottles were sent to Forensic Laboratory, Jaipur, and on receipt of the report (Exhibit P-17) and after completion of all the required formalities, charge sheet was presented against the appellant in the court.
2.3] The appellant during the trial denied the charges and claimed to be tried. The prosecution examined as many as ten witnesses and produced 19 documents and 12 articles as exhibits. The appellant in his statement recorded under Section 313 of the Code of Criminal Procedure, 1973 denied his involvement in the commission of the offence. He pleaded that there was some dispute regarding felling of a tree from the field of one Gorai which on spot inspection of the appellant was found lying in the field of the complainant and, therefore, it was in this background that an attempt was made by the complainant to involve the appellant in a false case. He, examined Ramchandra (DW-1) in his defence and got two documents exhibited as D-1 and D-2.
3. Learned trial judge, on analysis of the entire oral and documentary evidence on record, found the appellant not guilty of the charges under Sections 7 and 13 (1) (d) read with Section 13 (2) of the P.C. Act, 1988 and accordingly acquitted him.
4. The State of Rajasthan, being dissatisfied with the acquittal of the appellant, preferred S.B. Criminal Appeal No. 673 of 1999 in the High Court of Rajasthan at Jodhpur Bench. By judgment and order dated 22.12.2000, a learned Single Judge of the High Court has set aside the order of the trial court and held the appellant guilty of offences under Sections 7 and 13 (1) (d) read with Section 13 (2) of the P.C. Act of 1988 and imposed the aforesaid sentence upon him.
5. Aggrieved thereby, the appellant is before us by way of this appeal.
6. Mr. Manoj Prasad, learned counsel for the appellant, contended that the judgment of the High Court reversing the well-reasoned order of acquittal passed by the trial court is erroneous in law being against the well-established principles with regard to interference in appeal under Section 378 of the Criminal Procedure Code. In support of the contentions, reliance is placed on two decisions of this Court in Kalyan Singh v.. State of M.P. [(2006) 13 SCC 303] and T. Subramanian v. State of T.N. [(2006) 1 SCC 401]. We have gone through the said decisions. There cannot be any quarrel with the settled propositions of law that if on appraisal of the evidence and on considering relevant attending circumstances it is found that two views are possible one as held by the trial court for acquitting the accused and the other for convicting the accused, in such a situation, the rule of prudence should guide the High Court not to disturb the order of acquittal made by the trial court. It is also equally well-settled that where the material on record leads to a sole and inescapable conclusion of guilt of the accused, the judgment of acquittal will call for interference by the appellate court.
7. The learned counsel for the appellant next contended that the prosecution has miserably failed to prove beyond reasonable doubt that the appellant had made any demand of bribe from the complainant as alleged by him and therefore, the presumption as contemplated under Section 20 of the P.C. Act, 1988 has wrongly been applied by the High Court against the appellant and in favour of the prosecution. In support of this submission, reliance is placed on a decision of this Court in T. Subramanian v. State of T.N. [(2006) 1 SCC 401]. This Court in the above cited case, while considering the case of the accused for offences under Section Ss. 5(1)(d) read with Section 5(2) of Prevention of Corruption Act, 1947, has held that the accused had offered reasonable and probable explanation based on the evidence that the money was accepted by him as lease rent arrears and not illegal gratification.
8. In the light of the above settled propositions of law, we have made independent scrutiny of the evidence in the present case to find out whether the High Court’s order of conviction of the appellant can be sustained or not.
9. Gurumukh Singh (PW-2) has proved on record that on demand of the appellant, he had paid Rs.500 /- to him as illegal gratification, for recording favourable report on the application marked to the appellant by Tehsildar for allotment of permanent lease to the complainant. Four currency notes of Rs.100/- denomination and two currency notes of Rs.50/- denomination were handed over to the appellant by PW-2 on the day of the incident, which before giving to him were treated by the trapping party with phenolphthalein powder. The trapping party on search of the pocket of bushirt of the appellant recovered those currency notes from his personal possession. At the first instance, the appellant had admitted his guilt, but recovering swiftly he changed his stand and stated to the Investigating Officer that the money was handed over to him by the complainant as loan amount on behalf of DW-1. It is the evidence of DW-1 that except the money in question no money transaction ever took place between him and the appellant. Thus, it is proved that a sum of Rs.500/-was recovered by the officials of Anti-Corruption Bureau [for short “ACB”] from the bushirt pocket of the appellant on the day of incident. Once it is proved that the money was recovered from the possession of the appellant, the burden of presumption as contemplated under Section 20 of the P.C. Act, 1988 shifts upon the appellant, which he could not rebut through cross-examination of the prosecution witnesses or by adducing reliable and convincing evidence to prove that DW-1 advanced Rs.500/- as loan to the appellant through the complainant. DW-1 Ram Chandra, has not given any reason why he chose the complainant alone to deliver a sum of Rs.500/- to the appellant on the day when he was apprehended by the Anti Corruption Team. In these circumstances, the High Court has rightly concluded that the explanation given by the appellant was not probable and reasonable. The currency notes of Rs.500/- were recovered from the possession of the appellant which were got treated with phenolphthalein powder by PW Hazari Lal-Inspector in the presence of the witnesses. The members of the trapping party alongwith complainant went to the house of the appellant at Raisingh Nagar where the bribe money was handed over to the appellant by the complainant. PW-8 introduced himself to the appellant and asked him if he had accepted bribe money from the complainant, the appellant replied that it was not bribe money but the amount of loan repayment. The complainant has categorically stated that it was not loan amount but bribe money demanded by the appellant from him. The appellant took out the currency notes of Rs.500/- from the pocket of his bushirt in presence of the witnesses. The numbers of the notes recovered had matched with the numbers noted in the ACB office before the complainant handed over them to the appellant. The bushirt worn by the appellant was washed in sodium carbonate solution and same turned into pink colour. The evidence of the complainant is found to be consistent and impeachable regarding the demand of Rs.500/- by the appellant as bribe money for giving favourable report in regard to the grant of permanent lease holder rights of the land to the complainant. His evidence is supported by contemporaneous documents prepared by the Investigating Officer before the money was delivered to the appellant. The complainant empathetically denied the suggestion of the appellant that Rs.500/- was sent to the appellant by DW-1 as repayment of the loan amount. The complainant, the Investigating Officer and other witnesses who were present when the appellant was caught red handed by the Anti Corruption Team have been cross-examined at length by the defence, but nothing tangible has been extracted from their evidence to create any shadow of doubt that they are not truthful witnesses. They have given reliable and consistent version of the crime and their evidence inspires confidence. 10. In State represented by Inspector of Police,
Pudukottai, T.N. v. A. Parthiban [(2006) 11 SCC 473] this Court has held that every acceptance of illegal gratification, whether preceded by a demand or not, would be covered by Section 7 of the Act. But, if the acceptance of an illegal gratification is in pursuance of a demand by the public servant, then it would also fall under Section 13(1)(d) of the
P.C. Act.
11. Having regard to the entire evidence discussed above and
having carefully and closely considered the judgments of the trial court and the High Court, it appears that the view taken by the trial court drawn on the evidence on record is found to be unreasonable and perverse and the High Court has rightly interfered with the order of acquittal and convicted the appellant under Sections 7 and 13(1)(d) read with Section 13 (2) of the P.C. Act, 1988.
12. The learned Single Judge of the High Court, instead of imposing separate sentence upon the appellant under Sections 7 and 13(1)(d) of P.C. Act, 1988, has in his wisdom imposed sentence of one year rigorous imprisonment with a fine of Rs. 500/- upon the appellant under Section 13 (2) of the P.C. Act, 1988 and in default of payment of fine, the appellant shall undergo two months further simple imprisonment.
13. No other point has been raised by the appellant. We, thus, find no merit and substance in any of the submissions made on behalf of the appellant.
14. In the result, for the afore-stated reasons, there is no merit in this appeal and it is, accordingly, dismissed.
15. The accused appellant is on bail, granted by this Court by order dated 30th March, 2001. He shall be taken into custody forthwith to serve out the remaining part of the substantive sentence.

J.
(Lokeshwar Singh Panta)
J.
(B. Sudershan Reddy)
New Delhi, March 17, 2009.

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