Interest On Deposited Amounts Should Be Restitutionary And Compensatory: NCDRC

Brief Facts of the Case

The complainant had booked a plot in the Omaxe Chandigarh Extension project for Rs. 71,62,295.70 from the developer. An allotment letter for plot was prepared, stating the delivery of the plot within 24 months. However, the developer did not complete the development and conveyance of possession as agreed by the required date and construction as well as other permissions. The complainant under the time-linked payment plan paid Rs. 59,38,800 and was shifted to a smaller plot as the original plot was not available. The complainant was allocated plot through provisional allotment but no writing agreement was signed. The developer made further attempts to demand more money from the complainant for the two plots, the complainant demanded his refund as he has not been delivered the possession. Consequently, the complainant filed a complaint before the State Commission of Chandigarh which allowed the complaint. It directed the developer to refund of an amount of Rs.50,89,642 along with 12% interest alongwith Rs.1,50,000 compensation and Rs.35,000 cost of litigation. Aggrieved, the developer appealed before the National Commission.

Contentions of the Developer

The developer argued that the deposited amount has already been returned, with only the amount of compensation being argued on. They claimed that an interest rate of 12% per annum on the deposited amount is highly unreasonably. The developer acknowleged that the complainant has received their principal amount and Rs. 1.85 lakhs and Rs. 91,06,666.03 with further interest. Furthermore, it alleged that compensation cannot be allowed under several heads and contested the Rs. 1.85 lakhs compensation awarded by the State Commission.

Observations by the National Commission

The National Commission observed that the key issue was whether there was a deficiency in service by the developer. The commission highlighted that the developer failed to explain the delay, indicating a deficiency in service on their part. Regarding the interest rate, the Supreme Court in Experion Developers Pvt. Ltd. Vs. Sushma Ashok Shiroor held that interest on deposited amounts should be restitutionary and compensatory and is payable from the date of deposit. Hence, the commission ruled that the interest rate of 9% was reasonable and justified. However, the compensation for mental agony claimed was Rs. 1,85,000 which was considered unsustainable by the State Commission.

Consequently, The National Commission modified the State Commission's order to require the developer to pay 9% interest on Rs. 50,89,642 . However, the direction to pay ₹1,85,000 for mental agony was set aside.

Case Title: M/S. Omaxe Chandigarh Extension Developers Private Limited & Anr. Vs. Lakhbir Singh

Case Number: F.A. No. 233/2021