LUCKNOW DEVELOPMENT AUTHORITY

v.

M.K. GUPTA

NOVEMBER 5, 1993

[KULDIP SINGH AND R.M. SAHAI, JJ.]

Consumer Protection Act, 1986;-Social benefit oriented legisla­

tion-/'rovisions of Act to be construed in favour of consume~urt to adopt

constructive approach.

A

B

.C

Consumner Protection Act, 1986-Sections 2(c) 11,2 and 16-Jurisdic-

tion of Commission-Word 'consumer'--Deficiency in service relating to im­

movable property--lurisdiction of Commission not ousted.

Consumer Protection Act, 198~Section 2(o}-Service-Meaning and

scope of-Words '~y· and 'potential'-Meaning of.

Consumer Protection Act, 1986-Jurisdiction-Whether public

authorities are amenable to jurisdiction under Act-Held, ye.r-A government

or semi-government body or a local authority would be as much amenable

to the Act as any other private body rendering similar service.

Consumer Protection Act, 198~Section 2(o}-Service-Expression

'housing construction'-whether housing construction or building activity was

service within meaning of Section 2(o) as it stood before 1993 amend­

ment-Held, yes.

Consumer Protection Act, 1986-Sections 11, 17 and 21-Jurisdiction

to award compensation-Compensation includes value of goods or services

and also for suff erence of injustice.

D

E

F

Consumer Protection Act, 198~Section 14-Compen.!lation-Liability G

to pay-Misfeasance in. public office-Comp~nsation for harassment, mental .

agony or oppression to consumer-Amount to be recovered from officials of

department found responsible.

Words & Phrases : 'Housing Construction~ 'any' and 'potential'-

Meaning of in the context of Consumer Protection Act, 1986. H

615

616 SUPREME COURT REPORTS (1993) SUPP. 3 S.Clt:.

A The appellant, Lucknow Development Authority undertook develop-

ment of land

and formed plots of different categories/sizes and

con·

structed dwelling units for people belonging to different income groups;

Applications were invited from persons desirous of purchasing plots or

dwelling house. The respondent applied fo~ registration for allotment of

B a flat in the category of Middle Income Group on cash down basis. Since

the number of applicants

was more, the authority decided to draw lots

in which a flat was allotted to the respondent.

The entire payment was

made in July 1988 and the. flat was registered in the name of the

respondent in August

1988 the development Authority directed its

C Executive Engineer to hand over the possession of the

Oat to the

respondent. However, the flat was not delivered as the construction was

not complete. The respondent approached the authority but no steps

were. ta~n nor possession was handed over.

D · The respondent filed a complaint before the District ·Forum

alleging

that

even after payment of entire amount in respect of cash

down scheme the appellant was not handing over possession. The

Commissioner directed the Authority to pay 12% simple interest upon

the deposit made

by the respondent for the period. The appellant was

further directed to hand over possession of the

Oat without delay after

E completing construction work upto June 1990. The Commission further

directed

that if it was not possible to complete the construction then the -appellant should hand over possession of the Oat to the respondent by

5th April 1990 after determining the deficiencies and the estimated cost

of such deficient construction shall be refunded to the respondent

by

F

20th April 1990. The appellant challenged this order before the National

Commission

and raised the question of jurisdiction.

The objection was

overruled

and the appeal was dismissed.

The cross appeal filed by the

respondent was allowed. The appellant was directed. to pay the !!Ost ·of

completing construction estimated

by the architect of the appellant in

G October 1989. The Commission held that the action of the appellant

amounted to harassment, mental

torture· and agony of the respondent,

therefore,

it directed the Authority to pay a sum of Rs.

10,000 as

compensation. Bence these appeals.

H The questions of law which arose for consideration were whether

.,.

L.D.A v. M.K. GUPTA 617

the statutory authorities constituted under State Act to carry on planned · A

development of the cities were amenable to Consumer Protection Act,

1986 for any act or omission relating to housing activity such_ as delay

in delivery of possession of the houses to the allottees, non-completion

of the Oat within the stipulated time, or defective and faulty construc-

tion etc. and if the housing activity came within the purview of the

B

Act only after its amendment by the ordiance No. 24 in 1993, whether

the

Cqmmission could entertain a complaint for such_ violations even

before.

The appellant urged that the applicability of the Act having been

confined to moveable goods only a complaint filed for any defect in relation C

to immoveable goods such as a house or building or allotment of site could

not have

been entertained by the Commission. It was argued that the local

authorities or government bodies

while discharging their statutory

func­

tion could not be subjected to provisions of the Act. The appellant sub­

mitted that the entire objective of the Act was to protect a consumer D

against malpractices in business. It was urged that inclusion of 'housing

construction' in clause

(o) and 'avail' in clause (d) in 1993 indicated that

the

Act as it stood prior to the amendment did not apply to hiring of

services in respect of housing construction and

in absence of any

expres·

sion making the amendment retrosi}ective it ~hould be held to be prospec· E

tive.

Dismissing the appeals, this Court

HELD

1.1. The provisions of the Consumer Protection Act, 1986 have F

to be construed in favour of the consumer to achieve the purpose of

enactment as

it is a social benefit oriented legislation directed towards

achieving

public benefit. The primary duty of the court while consturing

the provisions of such an

Act is to adopt a constructive approach subject

to that

it should not do violence to the language of the provisions and is

not contrary to attempted

objecUve of the enactment. (622-E] G

1.2. In the instant case, the respondents were aggrieved by delay in

delivery of possession of house or use of sub-standared material etc. and

therefore they claimed deficiency in service rendered by the Lucknow

Development Authority. The jurisdiction ~f the Commission could not be H

618 SUPREME COl!RT REPORTS (1993) SUPP. 3 S.C.R.

· A ousted because even though It was senice It related to immovable property.

[625-B]

1.3. The word 'any' and 'potential' used in clause (o) of Section 2 of

the Consumer Protection Act, are of wide amplitude. The word 'any'

dlctlonarlly means 'one or same or all'. The use of the word 'any' in the

B context It has been used In clause (o) Indicates that it has been used In

wider sense extending from one to all. The word 'potential' Is defined as

'capable of ~omlng into being, possibility'. In other words senice which ls

not only extended to actual users

but those who are capable of using it are

covered in the definition.

The clause ls thus very wide and extends to any

C or all actual or potential users. (625·0, 626-A·CJ

1.4. A government or semi-government body or a local authority is

as much amenable to the Consumer Protection Act as any other private

body rendering similar service. The Act requires provider of service to be

D more objective and caretaldng. It ls. still more in public services. The

legislature expanded the meaning of the word 'service' in modern sense by

atendlng it· to even such facilities as are available to a consumer in

connection with banking, llnancing etc. Each of these are wide ranging ·

acdvities in day to day life. They are discharged both by statutory and

. E private bodies. In absence of any lndl~tion, express or implied there ls no

reason to hold that authorities created by the statutes are beyond purview

of the Act. The legislative intention ls thu!I clear to protect a consumer

against services renclerecl even by statutory bodies. The test is not if a

person against whom complaint ls made ls a statutory body but whether

F the nature of the duty and function performed by it ls service or even

facility. (627-E, 626-B, 627·A, 626-C·FJ

1.S. Housing construction or building activity carried on by a private

or statutory body was service within meaning or clause (o) of section 2 of

the Act as it stood prior to inclusion of the expression housing construe·

G tion in the definition of 'service' by Ordinance No. 24 of 1993. Construction

of a house or Oat ls for the benefit of person for whom-it is constructed.

Be may do it himself or hire services of a builder or contractor. The latter

being for consideration ls service as defined tn the Act. Similarly when a

statutory authority develops land or allots a site or constructs a house for.

H the beneftt of common man it ls as much service as by a builder or

..

I

•

...

LO.Av. M.K. GUPTA 619

contractor. The one is contractual service and other statutory service. If A

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 deficiency in B

rendering of service of particular standard, quality or grade. When a

statutory authority undertakes to construct building

or allot houses or

building

sites to citii.ens 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 ftat constructed by the development C

authority or enters into an agreement with a builder or a contractor is a

p~tential user and natuft of transaction is covered In the expression

'service of any description'. Since housing activity ls a service it ~

covered in the clause as it stood before 1993. The legislature while amend·

ing the law in 1993 added the word 'avail' in clause (d) more to qualify D

than to add something new. (627-F-H, 628-G-H, 629·A·B, H] :.r

1.6. Each hieran:by in the Act is empowered to entertBio a complaint

by the consum~r for value of the goods or services and compensation. The

word 'compensation' is of very wide connotation. It includes both the just E

equivalent for loss of goods or services and also for suft'erance of injustice.

The provision enables a cobsumer to claim and emponrs the Commission

to redress any injustice done to him. (631·8, 632-A-C]

State of Gujarat v. Memon Mohomed Haji Hasam, AIR· (1967) SC

1885; Lala Bishamber Nath v. Agra Nagar Mahapalika, Agra, AIR (1973) F

SC 1289; Mis Kasturi Lal Ralia Ram lain v. State of Uttar Pradesh, AIR

(1965) SC 1039; Shyam Sunder v. State of Rajasthan, [1974) 1 SCC 690

and Geddies v. Proprietors of Bahn Reservoir, (1878) 3 App. Cas 430,

relied on.

G

1.7. When a citii.en seeks to recover compensation from a public

authority in respect

of injuries

suffered by him for capricious exercise of

power and the National Commission finds it duly proved then It has a

statutory obligation to award the same. It is necessary that the Conunis·

sion when It ls satisfied that a complainant ls entitled to compensation for H

620 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R ..

A harassment or mental agony or oppression, then it should further direct

the department concerned to pay the amount to the complainant from the

public fund immediately but to recover the same from those who ~re found

responsible for such unpardonable beha\'lour by dividing it proportionate·

ly whery there are more than one functionaries. (636-H, 637-BC]

B Cassell & Co. Ltd. v. Broome & Anr., (1972) AC 1027; Rookes v.

c

Barnard and Ors., (1964) AC 1129;Ashby v. White, (1703) 2 Ld Raym 938;

Roncarelli v. DUplessis, (1959) 16 DLR (28) 689; Smith v. East Ellore Rural

District Counci~ (1956) AC 736; Penington v. Thomson, (1959) VR 286 and

Wood v. Blaire, 'lbe 'Dmes 3, 4, 5, July 1957, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 61:37 of

1990.

From the Judgment and Order dt. 13.7.1990 of the National Con·

sumer Disputes Redressal Com.mission, New Delhi in First A~peal No. 24

D of 1990.

E

. Mis Sabarya &. Co., Surya Kant, Anil Kr. Gupta S.A. Syed, VJ.

Francis, K. V. Mohan, A.K. Gupta Naresh K. Sharma, Rajiv Gupta, Ms.

Bina Gupta, S.K. Garg and R.K. Vmnani for the appearing parties.

The Judgment

of the

Court was delivered by

R.M. SARAI, J. The question of law that arises for consideration in

these appeals, directed against orders passed by the National Consumer

Disputes Redrcssal Com.mission (referred hereinafter as National Commis·

F sion), New Delhi is if the statutory authorities such as Lucknow Develop­

ment Authority or Delhi Development Authority or Bangalore

Development Authority constituted under State Acts to carry on planned

development of the cities in the State are amenable to ConsUm.er Protec­

tion Act 1986 (hereinafter referred to as 'the Act') for any act or omission

G relating to housing activity such as delay in delivery of possession of the

houses to the allottees, non-completion of the flat within the stipulated

time,

or defective and faulty construction etc. Another aspect of this issue

·

is if the housing activity carried on by the statutory authority or private

builder

or contractor came within the purview of the Act

only after its

amendment by the Ordinance No. 24 in 1993 or the Commission could

H entertain a comp~ for such violations even before.·

v

LO.Av. M.K. GUPTA (SAHA!, J.] 621

How the dispute arose in different appeals is not of any consequence A

except for two appeals which shall be adv··rted later, for determining right

and power of the Commission lo award exemplary damages and account·

ability of the statutory authorities. We therefore CL..1e straightaway to the

legal issue involved

in these appeals. But before doing so and examining

the question of jurisdiction of the District Forum or

State or National. B

Commission to entertain a complaint under the Act, it appears appropriate

to ascertain the purpose of the Act, the objective it seeks to achieve and

the nature

of social purpose it seeks to promote as it shall facilitate in

comprehending

the issue involved and assist in construing various

provisions of the Act effectively.

To begin with the preamble of the Act,

which can afford useful assistance to ascertain the legislative intention, it

C

was enacted, 'to provide for the protection of the interest of consumers'.

Use of the word 'protection' furnishes key to the minds of makers of the

Act. Various definitions and provisions which elaborately attempt

to

achieve this objective have to be construed in this light without departing

from the settled

view that a preamble cannot control otherwise plain D

meaning of a provision. In fact the law meets long felt necessity of protect-

ing the common man from such wrongs for which the remedy under

ordinary law for various reasons has become illusory. Various legislations

and regulations permitting the

State to intervene and protect interest of

the consumers have become a haven for unscrupulous ones and the enfor- E

cement machinery either does not move or it moves ineffectively, ineffi­

ciently ·and for reasons which are not necessary to be stated. The

importance of the Act lies in promoting welfare of the society by enabling

the consumer to participate directly in the market' economy. It attempts to

remove the helplessness of a consumer which be faces against powerful

business, described as,

'a network of rackets' or a society in which,

'producers have secured power' to 'rob the rest' and the might of public

bodies which are degenerating into store house of inaction where papers

F

do not move from one desk to another as a matter of duty and

respon­

sibility but for extraneous consideration leaving the common man helpless,

bewildered and shocked. The malady

is becoming so rampant, widespread G

and deep that the society instead of bothering, complaining and fighting

for it,

is accepting it as part of life. The enactment in these unbelievable

yet harsh realities appears to

be a silver lining, which may in course of time

succeed in checking the rotine. A scrutiny of various definitions such

as

'consumer', 'service', 'trader', 'unfair' trade practice indicates that legisla- H

622 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

A ture has attempted to widen the reach of the Act. Each of these definitions

are in two parts, one, explanatory and the other expandatory. The ex­

planatory

or the main part itself uses expressions of wide amplitude

indicating clearly its wide sweep then its ambit

is widened to such things

which otherwise would have

been beyond its natural import. Manner of

B

construing an inclusive clause and its widening effect has been explained

in

Dilworth v. Commissioner of

Stamps, [1899) A.C. 99 as under:

'"include' is very generally used interpretation clauses in order to

enlarge the meaning of the words or phrases occurring in the body

of the statute, and when it is so used these words or phrases must

C be construed as comprehending, not only such things as they signify

according

to their natural, import, but also those things which the definitfon clause declares that they shall include."

It has been approved by this C~urt in Regional Director, Employees' State

D Insurance Corporation v. Highland Coffee Works of P.F.X. Saldanha and

Sons & Anr., [1991) 3 SCC 617; C./. T., Andhra Pradesh v. Mis Taj Mahal

Hote~ Secunderabad, [1971) 3 SCC 550 and The State of Bombay and others

v. The Hospital Mazdoor Sabha and others, AIR (1960) SC 610. The

provisions of the Act thus have to be construed in favour of the consumer

to achieve the

purpose of enactment as it is a social benefit oriented

E legislation. The primary duty of the court while construing the provisions

of such an Act is to adopt a constructive approach subject to that it should

not do violence to the language of the provisions and is not contrary to

attempted objective of the enactment.

F Although the legislation is a milestone in history of socio-economic

legislation

and is directed towards achieving public benefit we shall first

examine

if on a plain reading of the provisions unaided by any external aid

. of interpretation it applies to building or construction activity carried on

by the statutory authority or private' builder or contractor and extends even

to such bodies whose ancillary function is to allot a plot or construct a flat.

G In other words could the authorities constituted under the Act entertain a

complaint by a consumer for any defect

or deficiency in relation to

con­

struction activity against a private builder or statutory authority. That shall

depend on ascertaining the jurisdiction of the Commission. How extensive

it

is? A National or a

State Commission under Sections 21 and 16 and it

H coaaumer forum under Section 11 of the· Act is entitled to entertain a

LO.A. v. M.K. GUPTA [SAHA!, J.) 623

complaint depending on valuation of goods or services and compensation A

claimed. l'he nature of, 'complaint' which can be filed, according to cla~

(c) of Section 2 of the Act is for unfair trade practice or restrictive trade

practice adopted

by any trader or for the defects suffered for the goods

bought . or agreed to be bought and for deficiency in the service hired or

availed of or agreed to be hired or availed of, by a 'complainant' who under B clause (b) of the definition clause means a consQJDer or any volentary

consumer association registered under the Co~ ACt 1956 or under

any law fot the time being in force or the Central Government or any State

Government or where there arc one or more consumers having the 111DC

interest then a complaint by such conswilcrs. The right thus to approach

the Conimission or the forum vests in consumer for unfair trade practice C

or defect in supply of goods or deficiency in service. The word 'consumer'

is a comprehensive expression. It extends from a person who. buys any-,.,

commodity to consume either as eatable or otherwise from a shop, business

house, corporation, store, fair price shop to use of private or public

services. In Oxford Dictionary a consumer is defined as a. 'pur~r of b

goods or services'. In Black's Law Dictionary it is explained to mean, 'one

who consumes. Individuals who purchlsc, use, maintain, and dispose of

products and services. A member of that broad class of people who arc

affected by pricing policies, financing practices, quality of goods and

services, credit reporting, debt collection, and other trade practices for

which state and federal consumer protection laws arc enacted.' The Act E

opts for no less wider definition. It reads· aa under :

""Consumer" means any person who, •

(i) buys any goods for a consideration which bas been paid or p

promised or partly paid and partly promised, or \IDdcr any system

of deferred payment and includes any user of such goods other

that the person who (buys such goods for consideration paid or

promised or partly paid or partly promised or um:ter and system

of deferred payment when such use is made with the approval of

such person but docs not include a.t>craon who obtains such goods G

for resale or for any commercial purpose; or

(ii) hires or avails of any scnices for a consideration which baa

been paid or promised or partly paid and partly promised, or under

any system. of deferred payment and includes any beDcfidary of H

624

A

SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R.

such services other than the person who hires or avails of the

service for consideration paid or promised, or partly paid and

partly promised, or under any system of deferred payment, when

such services are availed of with the approval of the first mentioned

person:

B (Explanation -For

the purposes of sub-clause (i) "commercial

purpose" does not include use

by a consumer of goods bought and

used by

him exclusively for the purpose of earning his livelihood,

by means

of self-employment;)"

C It is in two parts. The first deals with goods and the other with services.

Both parts first declare the meaning

of goods and services by use of wide

expressions. Their ambit

is further enlarged by use of inclusive clause. For

instance, it

is not only purchaser of goods or hirer of services but even

those who use the goods

or who are.beneficiaries of services with approval

of the person who

purchased the goods or who hired services are included

D in it. The legislature has taken precaution not only to define 'complaint',

'complainant', 'consumer' but even to mention in detail what would amount

to unfair trade practice by.giving an elaborate definition in clause (r) and

even to define 'defect' and 'deficiency' by clauses

(f) and (g) for which a

consumer can approach the Commission. The

Act thus aims to protect the

E economic interest of a consumer as understood in commercial sense as a

purchaser of goods and in the larger sense of user of services. The common

characteristics

of goods and services are that they are supplied at a price

to cover the costs and generate profit

or income for the seller of goods or

provider of services. But the defect in one and deficiency in other may have

to

be removed and compensated differently. The former is, normally,

F capable of being replaced and repaired whereas the other may be required

to

be compensated by award of the just equivalent of the value or damages

for loss. 'Goods' have been defined by Clause (i) and have been assigned

the same meaning as in Sale

of Goods Act,

1930 which reads as under :

G

""goods" means every kind of movable property other than ac­

tionable claims and money; and mcludes stock and shares, growing

crops, grass, and things attached fo or forming part of the land

which are agreed to be served before sale or under the contract

of sale".

H

It was therefore urged.that the applicability of the·Act having been con-

-

-

L.D.A v. M.K. GUPTA[SAHAl,J.) 625

•

fined to moveable goods ·only a complaint filed for any defect in relation A

to immoveable goods such as a house or building or allotm.ent of site could

not have been entertained by the Commission. The submission does not -·

appear to be well founded. The respondents were aggrieved either by delay

in delivery of possession of house or use of sub-standard material etc. and

therefore they claimed deficiency in service rendered by the appellants.

B

Whether they were justified in their complaint and if such act or omission

could be held to be denial of service in the Act shall be examined presently

b\lt the jurisdiction of the Commission could not be ousted because even

though it was service it related to immoveable property.

What

is the meaning of the word 'service'? Does it extend to deficien- C

cy in the building of a house or flat? Can a complaint be filed under the

Act against the statutory authority or a builder or

contractor for any

deficiency in respect of given property. The answer to

all this shall

under­

standing of the word 'service'. The term has variety of meanings. It may

mean any benefit or any act resulting in promdng interest or happiness. D

It may be contractual, professional, public, domestic, legal, statutory etc.

The concept of service thus

is very wide. How it should be understood and

what it means depends in the context

in which it has

heen used in an

enactment. Clause ( o) of the definition section defines it as under :

""Service" means service of any description which is made available E

to potential users and includes the provision of facilities in

con­

nection with banking, financing, insurance, transport, processing,

supply of electrical or other energy, board or loading or both

(housing construction) entertainment, amusement or the purveying

of news or other information, but does not include the rendering

p

of any service free of charge or under contract of personal service."

It is in three parts. The main part is followed by inclusive clause and ends

by exclusionary clause. The main clause itself

is very wide. It applies to any

service made available to potential users. The words 'any' and 'potential'

are significant. Both are of wide amplitude. The word 'any' dictionarily

G

means 'one or same or all'. In Black's Law Dictionary it is explained thus,

word

"any" has a diversity of meaning and may be employed to indicate

"all" or "every" as well as "same" or "one" and its meaning in a given statute

depends upon the context and subject matter of the statute'. The use of

the word 'any' in the context it

has been used in clause (o) indicates that H

626 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

A it has been used in wider sense extending from one to all. The other word

'potential' is again. very wide. In Oxford Dictionary it is defined as 'capable'

of

coming into being, possibility'. In Black's Law Dictionary it is defined

as

'exteiiding in possibility but not in act. Naturally and probably expected

to

come into existence at some future time, though not now existing; for

example, the future product of grain or trees already planted, or the

B

· successive future instalments or payments on a contract o.r engagement,

already made.' In other

words service which is not only extended to actual users but those who are capable of using it are covered in the definition.

The clause is thus very wide and extends to any or all actual or potential

users. But the legislature did not stop there. It expended the meaning of

C the word further in modem sense by extending it to even sucJi facilities as

are available to a consumer in connection with banking, financing etc. Each

of these are

wide tanging activities in day to day life. They are discharged ~by statutory and private bodies. In absence of any indication, expre~

or implied there is no reason to hold that authorities created by the statute

D •e beyond purview of the Act. When ~anks advance loan or accept deposit

or provide facility of locker they undoubtedly render

service. A

State Bank

ot aation8lised bank renders as much service as private bank. No distiac­

. tion can be drawn in private and public transport or insurance companies.

Even the supply of electricity or gas which throughout the country is being

made,· mainly, by statutory authorities is included in it. The legislative

E intention is thus clear to protect a consumer against services rendered even

by statutory bodies. The test, therefore, is not if a person against who

complaint is made is a statutory body but whether the nature of the duty

and function performed by it is service or even facility.

F This takes us to the larger issue if the public authorities under

different enactments are amenable

to jurisdiction under the Act. It was

vehemently argued that the local authorities or government bodies develop

land. and construct houses in discharge of their statutory function,

there­

fore, they could not be subjected to provisions of the Act. The learned

counsel ~ged that if the ambitOf the Act would be widened to include

G even such authorities it would vitally affect functioning of official bodies.

The learned counsel submitted that the entire objective of the Act is to

protect a consumer against malpractices in business. The argument

proceeded on complete misapprehension of the purpose of Act and even

its explicit language. In fact the Act requires provider of serviee to be more

H objectiVe and caretaking. It is still more in public services. When private

-

L.D.A v. M.K. GUPTA(SAHAI,J.] 627

undertakings are taken over by the government or corporations are created A

to discharge what is otherwise State's function, one of the inherent objec­

tives of such social welfare measures is to provide better, efficient and the

cheaper services to the people. Any attempt, therefore, to exclude services

offered

by statutory or official bodies to the common man would be against

the provisions of the Act and spirit behind it.

It is indeed unfortunate that

since enforcement of the Act there

is a demand and even political pressure

is built up to exclude one or the other class from operation of the Act.

How ironical it

is that official or semi-official bodies which insist on

numerous benefits, which are otherwise available in private sector, succeed

B

in bargaining for it on threat of strike mainly because of larger income

accruing due to rise in number of consumers and not due to better

and C

efficient functioning claim exclusion when it comes to accountability from

operation of the Act.

The spirit of consumerism is so feeble and dormant

that

no association, public or private spirited, raises any finger on regular

hike in prices not because it

is necessary but either beacuse it has not been

done for sometime or beacuse the operational cost has gone up irrespective D

of the efficiency without any regard to its impact on the common man. In

our opinion, the entire argument found on being statutory does not appear

to have any substance. A government or semi-government body or a local

authority

is as much amenable to the Act as any other private body

rendering similar service. Truly speaking it would

be a service to the society

if such bodies instead of claiming exclusion subject themselves to the Act E

and let their acts and omissions scrutinised as public accountability is

necessary for healthy growth of society.

What remains to

be examined is if housing construction or building

activity carried on by a private or statutory body was service within meaning

of clause ( o) of Section 2 of the Act as it stood prior to inclusion of the

expression 'housing construction' in the definition of "service" by Ordinance

F

No. 24 of 1993. As pointed out earlier the entire purpose of widening the

definition

is to include in it not only day to day buying and selling activity

undertaken by a common man but even to such activities which are

otherwise not commercial in nature yet they partake of a character in which

G

some benefit is conferred on the consumer. Contruction 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 considera-

tion

is service as defined in the Act. Similarly when a statutory authority

H

628 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R ..

A develops land or allots a site or conslructs 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

B comfort and servic;e 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 immoveable property as

argued but deficiency in

renqering of service of particular standard, quality

or grade. Such deficiencies or omissions are defined in sub-clause (ii) .of

C Clause (r) of Section 2 as unfair trade practice. If a builder of a ho.use uses

sub-standard material in construction of a building or makes false or

misleading representation about the condition of the house then it

is denial

of the facility or benefit of which a consumer

is entitled to

claim value

under the Act. When the contractor or builder undertakes to erect a house

D or flat then it is inherent in it that he shall perform his obligati9n as agreed

to. A flat with a leaking roof, or cracking

wall or sub-standard floor is

denial of service. Similarly when a statutory authority undertakes to

develop land and frame housing scheme, it, while performing statutory duty

renders service to the society in general and individual in particular. The

E entire approach of the learned counsel for the development authority in

emphasising that power exercised under a

Statute could not be stretched

to mean service proceeded on misconception. It is incorrect understanding

of

the statutory functions under a social legislation .. A development

authority while developing the land

or framing a scheme _ for housing

F

discharges statutory duty the purpose and objective of which is service to

the citizens.

As pointed out earlier the entire purpose of widening the

definitions is to include in it not

only day to day buying of goods by a

common man but even to such activities which are otherwise not commer­

cial but professional or service oriented in nature. The provisions in the

Acts, namely, Lucknow Development Act. Delhi Development Act or

G Bangalore Development Act clearly provide for preparing plan,

develop­

ment of land, and framing of scheme etc. 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

H potential users'. A person who applies for allotment of_ a building site or

-

L.D.A. v. M.K. GUPTA (SAHAI, J.) 629

for a flat constructed by the development authority or enters into an A

agreement with a builder or a contractor is a potential ·user and nature of

transaction

is covered in the expression 'service of 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 B

or under a constraint of personal service is included in it. Since housing

activity

is a service it was covered in the clause as it stood before 1993.

In Appeal. No 2954 filed by a builder it was urged that inclusion of

'housing construction' in clause (o) and 'avail' in clause (d) in 1993 would

indicate that the Act as it stood prior to the amendment did not apply to

C

hiring of services in respect of housing construction. Learned counsel

submitted that in absence

of any expression making the amendment

retrospective it should be held to be prospective as it

is settled that any

law including amendments which materially affect the vested rights

or

duties or obligations in respect of past transactions should remain un- D

touched. Reliance was placed on Jose Da Costa

& Anr. v. Bascora Sadasiva :;

Sinai Narcomim & Ors., (1976) 2 SCC 917; State of Madhya Pradesh & Ors.

v. Rameshwar Rathod, AIR (1990) SC 1849 and Re Pu/borough School

Board Election Case (1891) 94 All ER 834. It was also argued that when

definition of 'service' in Monopolies and Restrictive Trade Practices Act

was amended in

1991 it was made retrospective. Therefore, in absence of E

use of similar expression in .this Act it should be deemed to be prospective.

True, the ordinance does not make the definition retrospective in

opera­

tion. But it was not necessary. In fact it appears to have been added by way

of abundant caution as housing construction being service was included

even earlier. Apart from that what was the vested right of the contractor

under the agreement to construct the defective house

or to render deficient F

service? A legislation which is enacted to protect public interest from

undesirable activities cannot

be construed in such narrow manner as to

frustrate its objective. Nor

is there any merit in the submission that in

absence of the word 'avail

or in the definition of 'consumer' such activity

could not

be included in service. A perusal of the definition of 'service' as G

it stood prior to 1993 would indicate that the word 'facility' was already

there. Therefore the legislature while amending the law in

1993 added the

word in clause (

d} to dispel any doubt that consumer in the Act would

mean a person who not only hires but avails

of any facility for

considera­

tion. It in fact indicates that these words were added more to clarify than

to add something new. · H ·

A

B

c

630 SUPREME COURT REPORTS {1993) SUPP. 3 S.C.R.

Having examined wide reach of the Act and jurisdiction of the

Commission to entertain complaint not only against business or trading

activity but even to service rendered

by statutory and public authorities the

stage

is now set for determining if the Commission in ,exercise of its

jurisdiction under the Act could award compensation and if such compen-

sation could be for harassment and agony to a consumer. Both these

aspects specially the

lect~r are of vital significance in the present day

context. Still more important issue is the liability of payment. That is should

the society

or the tax payer be burdened for oppressive and

capricioas act

of the public officers

or it be paid by those responsible for it. The ad-

ministrative law

of accountability of public authorities for their arbitrary

and even

ultra vires actions has taken many .strides. It is now accepted both

by this Court and English courts that the

State is liable to compensate for

loss or injury suffered by a citizen due to arbitrary actions

of its employees.

In

State of Gujarat v. Memon Mahomed Haji Hasam, AIR (1967)

SC 1885

the order of the High Court directing payment of compensation for dis-

D posal of seized vehicles without waiting for the outcome of decision in

appeal was upheld

both on principle of bailee's, 'legal obligation to

preserve the property intact and also the obligation to take reasonable care

of it to return it in same condition in which it was seized' and also because

the government was, 'bound to return the said property by reason

of its

statutory obligation

or to pay its value if it had

disabled itself from return-

. · E ing it either by its own act or by act of its agents and servants'. It was

extended further even to

bonafide action of the authorities if it was contrary

to law in

Lala Bishambar Nath v.

The Agra Nagar Mahapalika, Agra, AIR

(1973) SC 1289. It was held that where the authorities could not have taken

any action against the dealer

and their order was invalid, 'it is immeterial

F that the respondents had acted bona fide and in the interest of preservation

of public health. Their motive may

be good but their orders are illegal.

They would accordingly

be liable for any loss caused to the appellants by

their action.'

The theoritical concept that King can do no wrong has been

abandoned in England itself and the

State is now held responsible for

tortuous act

of its servants. The first Law Commission constituted after

G coming into force of the Constitution on liability of the

State in Tort,

observed that the old distinction between sovereign

and non-sovereign

functions should no longer

be invoked to determine liability of the

State.

Friedmann observed,

H "It is now increasingly necessary to abandon the lingering fiction

L.D.A. v. M.K. GUPTA [SARAI, J.1 631

of a legally indivisible State, and of a feudal conception of the A

Crown, and to substitute for it the principle of legal liability where

the State, either directly or through incorporated public

authorities, engages in activities of a commercial, industrial or

. managerial character. The proper test is not an impracticable

distinction between government and non-governmental functional,

B

but the nature and form of the activity in question."

Even

Mis Kasturi Lal Ralia Ram Jain v. State of Uttar Pradesh, AIR (1965)

SC 1039 did not provide any immunity for tortuous acts of public servants

committed in discharge

of statutory

function if it was not referable to .

sovereign power. Since house construction or for that matter any service C

hired by a consumer or facility availed by him is not a sovereign function

of the State the ratio of Kasturi Lal (supra) could not stand in way of the

Commission awarding compensation.

We respectfully agree with Mathew,

J., in

Shyam Sunder v. State of Rajasthan, (1974) 1

SCC 690 that it is ~ot

necessary, 'to consider whether there is any rational dividing line between · D

the so-called sovereign and properietary and commercial functions for

determining the liability

of the

State'. In any case the law has always

maintained that the public authorities who

are entrusted with statutory

function cannot act negligently.

As far back as 1878 the law was succinctly

explained

in

Geddis v. Proprietors of Bann Reservoir, (1878) 3 App. Cas.

~- E

"I take it, without citing cases, that it is now throughly well estab­

lished that no action will lie for doing that which the Legislature

has authorised,

if it be done without negligence, although it does occasion damage to anyone; but an action does lie for doing what p

the Legislature has authorised, if it be done negligently."

Under our Constitution sovereignty vests in the people. Every limb of the

constitutional machinery

is obliged to be people oriented. No functionary

in exercise of

statutory power can claim .immunity, except to the extent.

protected by the Statute itself. Public authorities acting in violation of G

constitutional or statutory provisions oppressively are accountable for their

behaviour before authorities created under

theStatute like the Commission

or the courts entrusted with responsibility of maintaining the rule of law.

Each hierarchy in the Act is empowered to entertain a complaint by the

consumer for

valqe of the goods or services and compensation. The word H

..

632 SUPREME COURT REPORTS [1993] SUPP. 3 S.C.R.

A 'compensation' is again of very wide connotation. It has not been defined

in the Act. According

to dictionary it means, 'compensating or being

compensated; thing given

as recompense;'. In legal sense it may constitute

actual loss or expected loss and may extend

to physical, mental or even

emotional suffering,

insult or injury or loss. Therefore, when the Commis-

B

sion has been vested with the. jurisdiction to award value of goods or

services and compensation it has to be construed ·widely enabling the

Commission to determine compensation for any loss or damage suffered

by a consumer which in law is otherwise included in wide meaning of

compensation. The provision in our opinion enables a consumer to claim

and empowers the Commission to redress any injustice done to him Any

C other construction would defeat the very purpose of the Act. The

Commis­

sion or the forum in the Act is thus entitled to award not only value of the

goods or services but also to compensate a consumer for injustice suffered

by him.

D Facts in Civil Appeal No. 6237 of

1990 may now be adverted as it is

the only appeal in which the National Commission while exercising its

appellate power under the Act not only affirmed the finding of State

Commission directing the appellant to pay ·the value of deficiency in service

but even directed to pay compensation for harassment and agony to the

respondent. The Lucknow Development Authority with a

view to ease the

E acute housing problem in the city of Lucknow undertook development of

land and formed plots of different categories/sizes and

constructed· dwell-

1ng units for people belonging to different income groups. After the Con­

struction was complete the authority invited applications from persons

desirous

of purchasing plots or dwelling house. The respondent applied on p the prescribed form for registration for allotment of a flat in the category

of Middle Income Group (M.I.G.) in Gomti Nagar Scheme in Luckn9:w-01t· ·

cash down basis. Since the number of applicants was more, t~authority

decided to draw lots in which flat no. 11/75 in Vinay Khand-II'was allotted

to the respondent on 26th April

1988. He deposited a sum of Rs. 6132 on

G July 2, 1988 and a sum of Rs.

1,09,975 on July 29, 1988. Since the entire

paynient

was made in July 1988 the flat was registered on 18th August 1988.

Thereafter the appellant by a letter dated 23rd August 1988 directed its

Executive Engineer-VII to hand over the possession of the flat to the

respondent. This information

was given.to him on

30th November 1988, yet

the flat was not delivered as the construction work was not complete. The

H respondent approached the authority but no steps were taken nor posses-

•

-

..

L.D.A v. M.K. GUPTA[SAHAI,J.) 633

sion was handed over. Consequently he filed a complaint before the A

District Forum that even after payment of entire amount in respect of cash

down scheme the appellant

was not handing over possession nor they were

completing the formalities and the work

was still incomplete. The

State

Commission by its order dated 15th February 1990 directed the appellant

to pay 12% annual simple interest upon the deposit made by the respon­

dent for the period 1.1.89 to 15.2.90. The appellant was further directed to

handov.er possession of the flat without delay after completing construction

work upto June 1990. The Commission further directed that if it was not

possible for the appellant to complete the construction then it should hand

B

over possession of the flat to the respondent by

$th April 1990 after

determining the deficiencies and the estimated cost of such deficient

C

construction shall be refunded to the respondent latest by

20th April 1990.

The appellant instead of complying with the order aproached the National

Commission and raised the question of jurisdiction.

It was overruled. And

the appeal was dismissed. But the cross appeal of the respondent was

allowed and it was directed that since the architect

of the appellant had D

estimated in

October 1989 the cost of completing construction at Rs. 44615

the appellant shall pay the same to the respondent. The Commission

further held that the action

of the appellant amounted to harassment

mental torture and agony

of the respondent, therefore, it directed the

appellant to pay a sum of Rs.

10,000 as compensation.

Who should pay the amount determined by the Commission for

harassment and agony, the statutory authority or it should be realised from

those

who were responsible for it. Compensation as explained includes

both the just equivalent for las

.. ..>f goods or services and also for sufferance

E

of injustice. For instance in Civil Appeal No ................... of 1993 arising out F

of S.L.P. (civil) No. 659 of 1991 the Commission directed the Bangalc:e

Development Authority to pay Rs.

2,446 to the consumer for the expenses

incurred

by him in getting the lease-cum-sale agreement registerd as it was

additional expenditure for alternative site allotted to him. No misfeasance

was found. The moment the authority came to know of the mistake

com­

mitted by it it took immediate action by alloting alternative site to the G

respondent. It was compensation for exact loss suffered by the respondent.

It arose in due discharge of duties. For such acts or omissions the loss

suffered has to be made good by the authority itself. But when the suf­

ferance is due to malafide or oppressive or capricious acts etc. of a public

servant, then the nature

of liability changes. The Commission under the H

634 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

A Act could determine such amount if in its opinion the consumer suffered

injury to what

is called misfeasance of the officers by the English courts.

Even

in England where award of exemplary or aggravated damages for

insult etc. to a person has now been held to be punitive exception has

carved out if the injury

is due to, 'oppresive, arbitrary or unconstitutional

action

by servants of the government' (Salmond and Heuston on the Law

B of Torts). Misfeasance in public office is explained by Wade in his book

on Adininistrative Law thus.

Even where there is no ministerial duty

as above, and even where

no recognised tort such

as trespass, nuisance, or negligence is

C committed, public authorities or officers may be liable in damages

for malicious, deliberate or injurious wrong-doing. There is thus a

tort which·has been called misfeasance in public office, and which

includes malicious· abuse of power, deliberate maladministration,

and perhaps also other unlawful acts causing injury." ·

D

... E

F

The jurisdiction and power of the courts to indemnify a citizen for injury

suffered due to abuse of power by public authorities

is founded as observed

by

Lord Hailsham in Cassell & Co. Ltd. v. Broome & Anr., (1972) AC 1027

on the principle that, 'an award of exemplary damages can serve a useful

purpose in vindicating the strength of law'.

An ordinary citizen or a

common man

is hardly equipped to match

the might of the State or its

·instrumentalities. That iS provided bythe rule of law. It acts as a check an

arbitrary and capricious exercise of power. In Rookers v. Barnard & Ors.,

(1964) AC 1129 it was observed by Lord Devlin, 'the servants of the

government are also the servants of the people and the use of their power

must

always be suboruinate to their duty of service'. A public functionary

if he acts maliciously or oppressively and the exercise of power results in

harassment and agony then it is

not an exercise of power but its abuse. No

law provides protection against

it. He who is responsible for it must suffer

it. Compensation or damage

as explained earlier may arise even when the

officer discharges

.his duty honestly and bonafide. But when it arises due

G to arbitrary or

ca__pricious . behaviour then it loses its individual character

and &Ssuines social significance. Harassment of a common man by public

authorities

is socially abhorring and legally impermissible. It may harm-him

personally but the injury to society is far more grievous. Crime and

corrup­

tion thrive and prosper in the society due to lack of public resistance.

H Nothing' is more damaging than the feeling of helplessness. ·An ordinary

..

L.D.A. v. M.K. GUPTA(SAHAl,J.] 635

citizen instead of complaining and fighting succumbs to the pressure of A

undesirable functioning in offices instead of standing against it. Therefore

the award of compensation

for harassment by public authorities not only

compensates the individual, satisfies him personally but helps in curing

social

evil. It may result in improving the work culture and held in changing

the

outlook ,, ' ·~p in his book 'Administrative Law' has observed that it is B

to the credit of public authorities that there are simply few reported

English decisions on this form of malpractice, namely, misfeasance in

public offices

which includes malicious use of power, deliberate

malad­

ministration and perhaps also other unlawful acts causing injury. One of

the reasons for this appears to be development of law which, apart, from

other factors succeeded in keeping a salutary check on the functioning in

C

the government or .semi-government offices by holding the officers

per­

sonally responsible for their capricious or even ultra vires action resulting

in injury or loss to a citizen

by awarded damages against them. Various

decisions rendered from time to time have been referred

by Wade on

Misfeasance by Public Authorities. We shall refer to some of them to

D

demonstrate how necessary it is for our society.

In)(tshby v. White, (1703)

2 Ld.

Raym. 938 the House of Lords invoked the principle of ubi jus ibi

remedium in favour of an elector who was wrongfully prevented from voting

and decreed the claim c: damages. The ratio of this decision has

been

applied and ·extended by English courts in various situations. In Roncarelli E

v. Duplessis, (1959) 16 DLR (2d) 689 the Supreme Court of Canada

awarded damages against the Prime Minister of Quebec personally for

directing the cancellation of a restaurant-owner's liquor licence solely

because the licensee provided bail on many occasions for fellow members

of the sect of Jehovah's Witnesses, which

was then unpopular with the

authorities.

It was observed that 'what could be more malicious than to

punish this licensee for having done what he had an absolute right to do

F

in a matter utterly irrelevant to the Alcoholic Liquor Act? Malice in the

proper sense

is simply acting for a reason and purpose knowingly foreign

to the administration, to which

was

add~ here the element of intentional

punishment by what

was virtually vocation outlawry.' In

Smith v. East Elloe G

Rural District Council, (1956) AC 736 the House of Lords held that an

action fo~ damages might proceed against the clerk of a local authority

personally on the ground that he had procured the compulsory purchase

of the plaintiffs property wrongfully and

in bad faith. In Perrington v.

Thomson, (1959) VR 236 the

Supreme Court of Victoria awarded damages H

636 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R,

I

A for exercising a power the authorities knew they did not possess. A licens­

ing inspecto.r and a police officer ordered the plaintiff to close

.his hotel

and cease supplying

liquor~ He obeyed and filed a suit for the resultant

loss. The Court observed, 'Now I take it tQ be perfectly clear, that if a

B

. public officer abuses his office, either by an act of omission or commission,

and the consequence of that

is an injury to an individual, an action may be

maintained against such public officer'. In

Wood v. Blaire, The Times, 3, 4,

5 July 1957 a dairy farmer's manageress contracted typhoid fever and the

local authority served notices forbidding

him to sell milk, except under

certain conditions. These notices were void, and the farmer

was awarded

damages on the ground that the notices were

in~alid and that the plaintiff

C was entitled to damages· of misfeasance.' This was done even though the

fmding was that the officers had acted from the best motives.

Today the issue thus is not only

of

award of compensation but who

should bear the brunt. The concept

of authority and power exercised. by

D public functionaries has many dimensions. It has undergone tremendous

change with passage of time and change in socio-economic outlook. The

authority empowered to function under a

Statute while exercising power

discharges public duty.

It has to act to subserve general welfare and

common good. In discharging this duty honestly and

bonafide loss may

accrue to any person.

And he may claim compensation which may in

E circumstances be payable. But where the duty is performed capriciously

or

the exercise of power results in harassment and agony then the respon­

"Sibility to pay the lose determined should be whose? In a modem society

no authority can arrogate to itself the power to act in a manner which is

arbitrary. It is unfortunate that .matters which require immediate attention

F linger on and the man in the street is made to run from one end to other

with no result. The culture

of window

clearance appears to be totally dead.

Even in ordinary matters . a common man who has neither the political

backing nor the fmancial strength to match the inaction in public oriented

departments gets frustrated and it erodes the credibility in the system.

Public administration, no doubt involves a vast amount of administrative

G discretion which shields the action of administrative authority. But where

it is found that exercise

of discretion was malafide and the complainant is

entitled to compensation for mental and physical harassment then the

officer can no niore claim to

be under protective cover. When a citizen

seeks to recover compensation from a public authority in respect

of injuries

H

· suffered by him for capricious exercise of power and the National Com-

L.D.A v. M.K. GUPTA[SAHAI,J.] 637.

mission finds it duly proved then it has a statutory obligation to award the A

same? It was never more necessary than today when even social 'obligations

are regulated by grant of statutory powers. The test of "permissive form of

grant are

over. It is now imperative and implicit in the exercise of power

that

it should be for the. sake of society. When the Court

di~ects payment

of damages or compensation against the State the ultimate sufferer is the B

common man. It is the tax payers' money which is paid for inaction of those

who are entrusted under the Act to discharge t~eir duties in accordance

with

law: It is, therefore, necessary that the Commission when it is

satisfied

that a complainant is entitled to compensation for harassment or mental

agony or oppression, which finding of oourse should be recorded carefully.

on material and convincing circumstances and not lightly, then is should C

further direct the department concerned to pay the amount to the com­

plainant from the public fund immediately but to recover the. same from

those who are found responsible for such unpardonable behaviour by

dividing it proportionately where there are more than one functionaries.

For these reasons

all the appeals are dismissed. In Appeal No.

6'1:37 D

of 1990 it is further directed that the Lucknow Development Authority

shall

fix the responsibility of the officers who

were responsible for causing

harassment and

agony to the respondent within a period of six months from

the a copy of

this order is produced or served on it. The amount of

compensation of Rs.

10,000 awarded by the Commission for mental harass- E

ment shall be recovered from such officers proportionately from their

salary. Compliance

of this order shall be reported to this Court within one

month after

expiry of the period granted for determining the responsibilty.

The Registrar General

is directed to send a copy of this order to the

Secretary, Lucknow Development Authority immediately.

In Appeal Nos.

6'1:37 of 1990, 5257 of 1990, 3963 of 1989 and 2954-

59 of 1992 the appellant shall pay costs to the contesting respondents which

is assessed at Rs. 5,000 in each case. Since the respondents have not put

in appearance in other appeals there shall be

no order

as to costs.

F

A.G. Appeals dismissed. G

"·