H.U.D.A versus RAJ SINGH RANA

Citation: [2008] 10 S.C.R. 1034 · Decided: 16-07-2008 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Case Allowed

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Judgment (excerpt)

[2008] 10 S.C.R. 1034 
1-"I 
A 
H.U.D.A. 
.; 
v. 
RAJ SINGH RANA 
(Civil Appeal No. 4436 of 2008) 
8 
JULY 16, 2008 
1- .... ; 
[ALTAMAS KABIR AND MARKANDEY KATJU, JJ] 
Consumer Protection Act, 1986 - Housing - Rate of in-
terest - Demand of enhanced compensation on account of 
c increase in acquisition cost of land - Default in payment of 
,_ 
additional amount - Charging of simple interest @ 7% and 
15% p.a. as a/so compound interest@ 15% p.a. for different 
periods - Allottee paid the amount under protest - Complaint 
seeking refund of excess amount of interest charged - Fo-
D rums below awarding interest @ 7% p.a. holding that the de-
f ' 
mand made by Authority at the higher rate contrary to the 
. ...,. 
mutual agreement in the allotment letter - Correctness of -
Held: Not correct - Allotment letter stipulated rate of interest 
only with regard to payment of total tentative sale price and 
E not as regard default in payment of enhanced compensation 
- Authority can adopt a policy, for imposing deterrent rate of 
interest .on default committed by allottee in payment, such im-
position has to be as per s. 3 of the 1978 Act and in a reason-
able manner - Orders by Forums below set aside - Authority 
F 
directed to impose simple interest on basis of the prevailing 
current rate of interest and refund the excess amount - Inter-
r 
est Act, 1978- s.3. 
B was allotted a residential plot in Urban Estate, 
Karnal. The said plot was transferred to the respondent. 
G The allotment letter contained certain conditions with re-
gard to the payment. Respondent paid the tentative sale 
price as also the enhanced compensation for the plot. 
+·-
However, the Estate Officer, HUDA raised an additional 
demand of Rs.71,800/- by imposing simple interest@ 10 
H 
1034 
f, 
' 
H.U.D.A. v. RAJ SINGH RANA 
1035 
-- r 
per cent per annum up to 31.3.1987, 15 per cent per an-
A 
num up to 15.1.1988, compound interest@ 15 per cent 
up to 31.8.2000 and thereafter again simple interest@ 15% 
per annum up to 31.8.2001. The respondent paid the 
amount under protest. Respondent then filed a complaint 
>· -f 
before the District Consumer Disputes Redressal Forum 
B 
for refund of Rs.35,200/-, as excess amount of interest 
charged over and above the rate of interest at 7 % as stipu-
lated in the allotment letter. It also sought interest @ 12 % 
on the refund amount from the date the interest amount 
was demanded until repayment. The District Forum al- c 
lowed the compliant and held that the appellant could 
charge interest @ 7% p.a. It directed the appellant to re-
fund the extra amount charged to the complainant/respon-
dent with interest@ 7 % from the date of the complaint till 
-
its refund. The State Commission upheld the order. The D 
~ 
National Commission· also upheld the order as to the rate 
of interest and held that the appellant was not entitled to 
charge compound interest @ 15 % p.a. from 16.1.1988 to 
31.8.2000. Hence the present appeal. 
Allowing the appeal, the Court 
E 
HELD: 1.1 The concept of levying or allowing inter-
est is available in almost all statutes involving financial 
deals and commercial transactions, but the provision em-
powering Courts to allow interest is contained in the In-
terest Act, 1978. Section 3 of the Act, inter alia, provides 
F 
that in any proceeding for the recovery of any debt or dam-
ages or in any proceeding in which a claim for interest in 
respect of debt or damage already paid is made, the Court 
may, if it thinks fit, allow interest to the person entitled to 
the debt or damages or to the person making such claim, G 
as the case may be, at a rate not exceeding the current 
. -+ 
rate of interest, for the whole or part of the periods indi-
\ 
.cated in the said Section. What is important is the men-
tion of allowing the interest at a rate not exceeding the 
current rate of interest. Where there is an agreement be-
H 
1036 
SUPREME COURT REPORTS 
[2008] 10 S.C.R. 
-1 __.. 
A tween the parties to payment of interest at a certain stipu-
lated rate, the same will have the precedence over the 
provision contained in sub-section (1) of s. 3. [Paras 10 
and 11] [1045-A,B,C & D] 
B 
1.2 Section 34 CPC provides that where and insofar 
as a decree is for the payment of money, the Court may in 
't- --"'-. 
the decree order interest at such rate as the Court deems 
reasonable to be paid on the principal sum adjudged, from 
the date of the suit, till the date of the decree in addition to 
any interest adjud

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