In-depth analysis required before awarding compound interest: Supreme Court
On April 18, 2023, Supreme Court, in a case Pioneer Urban Land and Infrastructure Ltd. v. Swatanter Kumar, disapproved the award of compound interest without considering relevant factors such as uncertainties of the market and other imponderables. It held that if the Consumer Forum considered it proper to examine the time value of money, then an in-depth and thorough analysis would be required considering all the facts and material surrounding factors.
Facts : The booking of three flats by Swatanter Kumar/respondent with Pioneer Urban Land and Infrastructure Ltd. in the year 1989, which remained incomplete even after several years. Dissatisfied with the lack of progress in the project, Swatanter Kumar filed a complaint before the Consumer Forum seeking a refund of the amount paid with compound interest at the rate of 18% per annum. The Consumer Forum and the National Commission granted relief to Swatanter Kumar by awarding compound interest at the rate of 14% per annum.
Pioneer Urban Land and Infrastructure Ltd. challenged the orders passed by the Consumer Forum and the National Commission on several grounds, including the award of compound interest. The appellants contended that the award of compound interest was without any legal basis and had led to serious inconsistencies. On the other hand, the respondent argued that the excessive harassment and denial of the fruits of investment warranted the award of compound interest.
Contentions: The appellants argued that the respondent was not entitled to receive any compensation as she had not suffered any loss or injury. The respondent argued that her right to take possession of the flats was being infringed and that she was entitled to compensation. The appellants further argued that the State Commission’s order was bereft of any reasoning and that no foundation existed for the award of compound interest. The respondent argued that the award of compound interest was necessary to compensate for the loss and harassment caused to her.
Observed and Held
Supreme Court opined that awarding compound interest without examining the relevant factors would be unjustified and arbitrary. It further observed that the State and National Commission had passed assumptive orders on the basis of the decision in Dr. Monga’s case, which had led to serious inconsistencies. The Court held that the award of compound interest had neither any foundation in the record nor any backing in law.
Supreme Court observed that the award of compound interest in the present case had neither any foundation in the record nor any backing in law, and the Consumer Fora had failed to examine the contours of their jurisdiction and the requirements of proper assessment. The Court disapproved the award of compound interest by the Consumer Fora in cases of the present nature and held that the award as made could only lead to the unjust enrichment of the respondent in the name of disgorgement of benefits purportedly derived by the appellants.
Supreme Court set aside the impugned orders of the State and National Commission, disapproved of the proposition of awarding compound interest in such matters, and allowed the respondent to retain the amount already received by her as an extraordinary measure, only due to the peculiar circumstances of the case. The Court further held that the appellants were not required to make any further payment to the respondent towards refund, compensation, or interest.
M/S SUNEJA TOWERS PRIVATE LIMITED & ANR. VS ANITA MERCHANT
