Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1994 OF 2006

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

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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 &

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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.

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(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

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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.

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(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

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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.

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[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 1

st

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.

9

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

10

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

11

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.

12

- 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.

11.1In 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. xxxxxTherefore if such authority

undertakes to construct building or allot houses or building sites to citizens

13

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).

11.2In 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

14

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

15

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

16

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

17

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’

18

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,

19

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.

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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

21

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

22

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.

23

(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.

24

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.

25

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,

26

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

27

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

28

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

29

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

30

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

31

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

32

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

33

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

34

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

35

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]

36

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

37