GHAZIABAD DEVELOPMENT AUTHORITY ETC. ETC. A

v.

UNION OF INDIA AND ANR.

MAY 12, 2000

[S. RAJENDRA BABU AND R.C. LAHOTI, JJ.]

Contract Act, 1872-Breach of contract-Development Authority

advertised various schemes for allotment

of developed plots for construction

B

of apartments and/or flats for occupation by the allottees-Allottees Invested C

money for the scheme-Failure and unreasonable delay in handing over

possession

of plots-Held, in such cases rules as to remoteness of damage

would apply-Damages for mental agony

is not payable in cases of ordinary

commercial

contract-Hence,

MRTP Commission erred in awarding

compensation for mental agony-Remoteness

of damages-Tort-Monopolies

and Restrictive

Trade Practices Commission Act, 1969, Consumer Protection D

Act,

1986-Uttar Pradesh Urban Planning and Development Act, 1973.

Contract:

Breach

of contract-Assessment of damages-Principles of-Held,

broadly the principle underlying assessment of damages is to put the aggrieved E

party monetarily in the same position, as far as possible, in which it would

have been

if the contract had been performed-Types of damages-may be

liquidated or unliquidated.

Breach

of contract-Relationship governing the performance and

consequencesflowingfrom such

breac~Working of-Held, would be worked F

out under the provisions of the Contract Act or the Specific Relief Act except

to the extent governed by the law applicable to the Authority floating the

Scheme-Contract

Act, 1872, Section 73-Specific Relief Act, 1949.

Breach of contract-Loss suffered by a party-Held, such loss may be

compensated

as the parties could have contemplated at the time of entering G

into the contract, which directly flows, from its breach

lnte:-est:

Payment of-Where there is no express or implied contract for its H

447

448 SUPREME COURT REPORTS (2000) SUPP. I S.C.R.

A payment-Held, may be awarded on equitable grounds.

Payment oHcheme advertised by Authority had a stipulation in its

brochure that they were not liable

to pay any interest in the event of an

occasion arising for return

of the amount paid or deposited by the buyers

of the land-Held, such clause applicable to such cases in which the buyer

B is himself responsible for creating circumstances providing occasion for the

refund

Ghaziabad Development Authority promoted and advertised several

schemes for allotment

of developed plots for construction of apartments and/

or flats for occupation by the

allottees. Several persons who had subscribed

C to the schemes, approached different forums e.g. Monopolies and Restrictive

Trade Practices Commission, Consumer Forum and High Court, complaining

of failure or unreasonable delay in accomplishing the schemes. In all the cases

the Court

or Commission or Forum had found the appellant-Authority guilty

of having unreasonably delayed the completion of the scheme or guilty of

D failure to perform the promise held out to the

claimants and therefore directed

the amount paid

or deposited by the respective

claimants to be refunded along

with interest. MRTP Commission had also awarded an amount of Rs. 50,000

payable as compensation for 'mental agony' suffered by the claimants for

failure of the Authority to make available the plots as promised by it. Hence

this appeal.

E

Dismissing the appeal, this Court

HELD:

I.I. When a Development Authority announces a scheme for

allotment of plots, the brochure issued by it for public information is an

invitation to offer. Several members of the public may make applications for

F availing benefit of the scheme. Such applications are offers. Some of the offers

having been accepted, subject to rules

of priority or preference

laid down by

the Authority, result in a contract between the applicant and the Authority.

The legal relationship governing the performance and consequences flowing

from breach would be worked out

under the provisions of the Contract Act

G and the Specific

Relief Act except to the extent governed by the law applicable

to the Authority floating the scheme. In case

of breach of contract one party

may

claim damages from the other party. The damages may be liquidated or

unliquidated. Broadly the principle underlying assessment of damages is to

put the aggrieved party monetarily in the same position, as far as possible, in

which it would have been if the contract had been performed. Here the rule as

H to remoteness of damages comes into play.

Such loss may be compensated as

GHAZIABAD DEVELOPMENT AUTHORITY v. U.0.1. 449

the parties could have contemplated at the time of entering into the contract. A

The party held liable to compensate is obliged to compensate for such losses

as directly

flow from its breach. [451-H; 452-A-D]

1.2. The

ordinary heads of damages allowable in contract for sale of

land are settled. The vendor who breaks the contract by failing to convey the

land to the

purchaser is liable to pay damages for the purchaser's loss of B

bargain by paying the market value of the property at

*he time fixed for

completion

less the contract price. The purchaser may claim the loss of profit

he intended to make from a particular use

of the land if the vendor had actual

or imputed knowledge thereof. For delay in performance the normal nature

of damages is the value of the use of the land for the period of delay, viz. its C

rental value. It follows that compensation for mental agony could not have been

awarded as has been done by the Monopolies and Restrictive Trade Practices

Commission. [452-G-H; 453-A]

·

Chitty on Contracts, 27th Edn. Vol. 1 para 26.045, referred to.

Lucknow Development Authority v. M.K. Gupta, [1994] 1 SCC 243,

distinguished.

2. Interest on equitable grounds can be

awarded in appropriate case.

D

The rate of interest awarded in equity should neither be too high or too low.

Awarding interest

at the rate of 12 per cent per annum would be just and E

proper and would meet the ends of justice in the cases under consideration.

The provision contained in the brochure issued by the Development Authority

that it shall not be liable to pay any interest in the event of an occasion arising

for return of the

amount paid or deposited by a claimant, should be held to be

applicable to such cases

in which the claimant is himself responsible for F

creating circumstances providing occasion for the refund. In the instant case

the fault has been found with the Authority. The Authority does not, therefore,

have any justification for resisting refund

of the claimants' amount with

interest. [454-F-H; 455-A[

3. The direction made by the

MRTP Commission for payment of Rs. G

50,000 as compensation for mental agony suffered by the respondents/

cl11imants is set aside. In all the other cases the direction for payment of

interest at the rate of 18 per cent shall stand modified as 12 per cent per

annum. [455-BI

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5329of1996. H

450 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A From the Judgment and Order dated 29.12.95 of the Monopolies and

Restrictive Trade Practices, Commission, New Delhi in Compensation

Application No. 172 of 1994

WITH

B Con.

P. 324/96, CA 8316/95, 794/97, 4794/97, 2758/98, 5748/98, 5749/98,

5812/98, 234/99,

375199,

2210/99, 187-188/2000, 6988/99, 2025/2000, 142212000,

5689199, C.P. 428/98, CA 620/98, 2370/2000, 8422/97, 4174-4175/99, 6239/1999

& C.A. No. 3404/2000.

Raju Ramachandran, Sudhir Kulshreshtha, Ms. Kamini Jaiswal, Prashant

C Bhushan, Arvind Singh, C.V. Subba Rao, B.K. Prasad, P. Parmeswaran, B.D.

D

Sharma, Girish Chandra, San jay Parikh, Pravir Choudhary, 8.K. Satija, S. Prasad,

Praveen Swarup, B.R. Sabharwal, R.D. Upadhay, R.N. Keshwani, K.B. Sounder

Rajan and Manjeet Chawla for the appearing parties.

The Judgment

of the

Court was delivered by

R.C. LAHOTI, J. Leave granted in SLP(C) No.18897/99.

In this batch

of appeals, Ghaziabad Development Authority constituted

under

Section 4 of the Uttar Pradesh Urban Planning and Development Act,

E 1973 is the appellant. The Authority has from time to time promoted and

advertised several schemes for allotment

of developed plots for construction

of apartments and/or flats for occupation by the allottees.

Several persons

who had subscribed to the schemes, approached different forums complaining

of failure or unreasonable delay in accomplishing the schemes.

Some have

filed complaints before the Monopoly and Restrictive Trade Practices

F Commission and some have raised disputes before the

Consumer Disputes

Redressal Forum.

In two cases civil writ petitions under Article 226 of the Constitution were filed before the High Court seeking refund of the amount

paid or deposited

by the petitioners with the Authority. In all the cases under

appeal the

Court or Commission or Forum concerned has found the appellant-

G Authority guilty of having unreasonably delayed the accomplishment of the

announced schemes or guilty

of failure to perform the promise held out to the

claimants and, therefore, directed the amount paid or deposited by the

respective claimants to be returned along with interest.

In the cases filed

before the High

Court of Allahabad there was a term in the brochure issued

by the Authority that

in the event of the applicant withdrawing its offer or

H surrendering the same no interest whatsoever would be payable to the claimants.

GHAZ!ABAD DEVELOPMENT AUTHORITY v. U.O.l. [R.C. LAHOT!, J.] 451

The High Court has held such tenn of the brochure to be unconscionable and A

arbitrary and hence violative of Article 14 of the Constitution. The High Court

has directed the amount due and payable to be refunded with interest

calculated at the rate

of 12 per cent per annum from the date of deposit to

the date

of refund. In all the other appeals before us the impugned order

passed by the

Commission or the Forum directs payment of the amount due B

and payable to the respective claimants with interest at the rate of 18 per cent

per annum.

In

Civil Appeal No. 8316 of 1995, G.D.A. v. Brijesh Mehta, the

MRTP Commission has held the claimants entitled to an amount of Rs.50,000

payable as compensation for 'mental agony' suffered by the claimants for

failure

of the Authority to make available the plot as promised by it.

As all these appeals raise the following common questions

of law, they

have been heard together and are being disposed

of by this common judgment.

The questions arising for decision are :

(0 Whether compensation can be awarded for 'mental agony'

c

suffered by the claimants? D

(ii) Whether in the absence of any contract or promise held out by

the Ghaziabad Development Authority any amount by way

of

interest can be directed to be paid on the amount found due and

payable by the Authority to the claimants?

(iii) If so, the rate at which the interest can be ordered to be paid?

E

In

C.A. No. 8316/1995, Ghaziabad Development Authority had

announced a scheme for allotment of developed plots which was known as

"lndirapuram Scheme''. The Authority infonned the claimants that a plot of

35 sq. metres was reserved for them, the estimated cost of which plot was Rs. F

4,20,000 payable in specified instalments. An allotment of plot was also

infonned. Then at one point

of time the claimants were infonned that due to

some unavoidable reasons and the development work not having been

completed, there has been delay

in handing over possession. Having waited

for an unreasonable length

of time the claimants approached the

MRTP G

Commission.

When a Development Authority announces a scheme for allotment

of

plots, the brochure issued by it for public infonnation is an invitation to offer.

Several members of public may make applications for availing benefit of the

scheme. Such applications are offers. Some of the offers having been accepted H

452 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A subject to rules of priority or preference laid down by the Authority result

into a contract between the applicant and the Authority. The legal relationship

governing the performance and consequences flowing from breach would

be

worked out under the provisions of the

Contract Act and the Specific Relief

Act except to the extent governed by the

Jaw applicable to the Authority

floating the scheme.

In case of breach of contract damages may be claimed

B by one party from the other who has broken its contractual obligation in some

way or the other. The damages may be liquidated or unliquidated. Liquidated

damages are such damages as have been agreed upon and fixed by the parties

in anticipation of the breach.

Un liquidated damages are such damages as are

required to be assessed. Broadly the principle underlying assessment

of

C damages is to put the aggrieved party monetarily in the same position as far

as possible

in which it would have been if the contract would have been

performed. Here the rule as to remoteness

of damages comes into play.

Such

loss may be compensated as the parties could have contemplated at the time

of entering into the contract. The party held liable to compensation shall be

obliged to compensate for such losses as directly flow from its breach. Chitty

D on Contracts (27th Edition, Vol.I, para 26.041) states : "Normally, no damages

in contract will be awarded for injury to the plaintiffs feelings, or for his

mental distress, anguish, annoyance,

Joss of reputation or social discredit

caused by the breach

of contract; .............. The exception is limited to contract

whose

performance is

"to provide piece of mind or freedom from

E distress" ............. Damages may also be awarded for nervous shock or an

anxiety state (an actual breakdown

in health) suffered by the plaintiff, if that

was, at the time the contract was made, within the contemplation

of the parties

as a not unlikely consequence

of the breach of contract. Despite these

developments, however, the

Court of Appeal has refused to award damages

for injured feelings to a wrongfully dismissed employee, and collfirmed that

F damages for anguish and vexation caused by breach of contract cannot be

awarded in an ordinary commercial contract."

The ordinary heads of damages allowable in contracts for sale of land

are settled. A vendor who breaks the contract

by failing to convey the land

G to the purchaser, is liable to damages for

the purchaser's loss of bargain by

paying the market value

of the property at the fixed time for completion less

the contract price. The purchaser may claim the loss

of profit he intended to

make from a particular use

of the land if the vendor had actual or imputed

knowledge thereof. For delay

in performance the normal nature of damages

is the value of the use of the land for the period of delay, viz. usually its rental

H value

(See Chitty on Contracts, ibid, para 26.045).

.~

....

GHAZIABAD DEVELOPMENT AUTHORITY v. U.0.1. [R.C. LAHOTL J.) 453

In our opinion, compensation for mental agony could not have been A

awarded as has been done by the MRTP Commission.

However, the learned counsel for the respondents has invited our

attention

to Lucknow

Development Authority v. MK. Gupta, [1994] I SCC

243 wherein this Court has upheld the award by the Commission of a

compensation

of Rs. I

0,000 for mental harassment. The basis for such award B

is to be found in paras I 0 and I I wherein this Court has stated inter alia -

"Where it is found that exercise of discretion was ma/a fide and the complainant

is entitled to compensation for mental and physical harassment, then the

officer can

no more claim to be under protective cover. When the citizen seeks

to recover compensation from a public authority

in respect of injuries suffered C

by him for capricious exercise of power and the National Commission finds

it duly proved, then it has a statutory obligation to award

11e same." The

Court has further directed the responsibility for the wrong done to the citizens

to be fixed on the officers who were responsible for causing harassment and

agony to the claimants and then recover the amount

of compensation from

the salary

of officers found responsible. The judgment clearly shows the D

liability having been fixed not within the realm of the law of contracts but

under the principles

of adminstrative law. We do not find any such case

having been pleaded much less made out before the Commission. Indeed, no

such finding has been arrived at by the Commission as was reached by this

Court in the case

of Lucknow

Development Authority (Supra). The award of E

compensation of Rs. 50,000 for mental agony suffered by the claimants is held

liable to be set aside.

The next question is the award

of interest and the rate thereof. It is true

that the terms

of the brochure issued by the Authority relevant to any of the

cases under appeal and the correspondence between the parties do not make

F

out an express or implied contract for payment of interest by the Authority

to the claimants. Any provision contained

in the Consumer Protection Act,

1986, the Monopolies and Restrictive Trade Practices Act, 1969 and

U.P.

Urban Planning and Development Act, 1973 enabling the award of such

interest has not been brought to our notice. The learned counsel for the

G

claimants have placed reliance on a recent decision of this Court in Sovintorg

(India)

Ltd. v.

State Bank of India, New Delhi, [I 999] 6 SCC 406 wherein in

similar circumstances the National Consumer Disputes Redressal Commission

directed the amount deposited by the claimants to be returned with interest

at the rate

of 12 per cent per annum. This Court enhanced the rate of interest

to

15 per cent per annum. To sustain the direction for payment of interest H

454 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A reliance was placed on behalf of the claimants on Section 34 of the CPC and

payment

of interest at the rate at which moneys are lent or advanced by

national banks in relation to commercial transactions, was demanded. This

Court did not agree. However, it was observed :

B

c

D

E

"There was no contract between the parties regarding payment of

interest on delayed deposit or on account of delay on the part of the

opposite party

to render the services. Interest cannot be claimed

under

Section 34 of the Civil Procedure Code as its provisions have

not been specifically made applicable

to the proceedings under the

Act.

We, however, find that the general provision of

Section 34 being

based upon justice, equity and good conscience would authorise the

Redressal Forums and Commissions to also grant interest appropriately

under the circumstances

of each case. Interest may also be awarded

in lieu of compensation or damages inappropriate cases. The interest

can also be awarded on

~quitable grounds."

"The State Commission as well as the National Commission were,

therefore, justified

in awarding the interest to the appellant but in the

circumstances

of the case we feel that grant of interest at the rate of

12% was inadequate as admittedly the appellant was deprived of the

user

of a sum of Rs. one lakh for over a period of seven years. During

the aforesaid period, the appellant had to suffer the winding-up

proceedings under the Companies Act, allegedly

on the ground of

financial crunch. We are of the opinion that awarding interest at the

rate

of 15 per cent per annum would have served the ends of

justice."

We are, therefore, of the opinion that interest on equitable grounds can

be awarded

in appropriate cases. In

Sovlntorg (India) Ltd. 's case the rate of

F IS per cent per annum was considered adequate to serve the ends of justice.

The Court was apparently influenced

by the fact that the claimant had to

suffer winding-up proceedings under the Companies Act and the defendant

must

be made to share part of the blame. However, in the cases before us,

the parties have not tendered any evidence enabling formation

of opinion on

G the rate of interest which can be considered ideal to be adopted. The rate of

interest awarded in equity should neither be too high nor too low. In our

opinion awarding interest at the rate

of 12 per cent per annum would be just

and proper and meet the ends

of justice in the cases under consideration. The

provision contained

in the brochure issued by the Development Authority

that it shall not

be liable to pay any interest in the event of an occasion

H arising for return of the amount should be held to be applicable only to such

•

•

GHAZIABAD DEVELOPMENT AUTHORITY v. U.0.1. [R.C. LAHOTI, J.) 455

cases in whic~ the claimant is itself responsible for creating circumstances A

providing occasion for the refund. In the cases under appeal the fault has

been found with the Authority. The Authority does not, therefore, have any

justification for resisting refund

of the claimants' amount with interest.

For

the foregoing reasons, the direction made by the

MRTP Commission

for payment

of Rs.

50,000 as compensation for mental agony suffered by the B

claimants-respondents in Civil Appeal No. 8316/1995 is set aside. In all the

other cases the direction for payment

of interest at the rate of 18 per cent shall

stand modified to pay interest at the rate

of 12 per cent per annum.

Civil Appeal No.848211997

c

This case relates to allotment of a flat. The

MRTP Commissi ''1 has held

the claimant entitled to allotment

of a flat. An option has been given to the

claimant.

If the claimant may refuse to take the flat in terms of the direction

made

by the Commission, he will be entitled to the refund of the amounts

deposited by

him with interest at the rate of 18 per cent per annum from the D

dates of deposit of the various amounts by the claimant. During the course

of hearing before this court the possibility of the claim being satisfied by

allotment

of an alternative flat was explored but that could not materialise as

the claimant was not agreeable to accept the flat offered by the Authority,

submitting that

it was located in a deserted area and was heavily priced. That

being the position the direction

of the Commission for refund of the amount E

shall stand though the rate of interest shall be 12 per cent and not 18 per cent.

All the appeals and contempt petitions stand disposed

of accordingly.

No order

as to the costs.

R.K.S. Appeals/Contempt petitions dismissed. F