Supreme Court of India
CHANDIGARH HOUSING BOARDversusAVTAR SINGH AND OTHERS
- Citation
- 2010 INSC 636
- Decided
- 22 September 2010
- Disposal
- Dismissed
- Bench
- G S SINGHVI
Holding
Members of the co‑operative societies are consumers within the meaning of Section 2(d) of the Consumer Protection Act, 1986, and the Board’s refusal to refund the forfeited earnest money and interest amounts to deficiency in service, warranting refund.
Summary
The Supreme Court examined appeals by the Chandigarh Housing Board challenging orders of the National Consumer Disputes Redressal Commission which directed the Board to refund earnest money and interest to members of co‑operative housing societies. The Court held that the society members are the ultimate beneficiaries of the 1991 land‑allotment scheme and therefore qualify as "consumers" under Section 2(d) of the Consumer Protection Act, 1986. Consequently, the District Consumer Forum had jurisdiction to entertain their complaints regarding the forfeiture of 10% of the earnest money and the refusal to refund 18% interest. The Court found that the Board’s actions amounted to deficiency in service and an unfair trade practice, as the Finance Secretary’s memos exceeded the authority granted by the 1991 Scheme and the 1973 Rules. The Board was ordered to refund the full forfeited amount and interest within three months, and the appeals were dismissed.
Issues considered
- The applicability of the definition of "consumer" under the Consumer Protection Act, 1986 to members of co‑operative housing societies.
- Whether the District Consumer Forum had jurisdiction to entertain complaints for refund of earnest money and interest.
- Whether the forfeiture of 10% earnest money and non‑refund of 18% interest constitute deficiency in service or unfair trade practice.
- Whether the Finance Secretary’s memos dated 9‑June‑1993 and 9‑March‑2000 were within the legal powers conferred by the 1991 Scheme and the 1973 Rules.
Legislation cited
- Capital of Punjab (Development and Regulation) Act, 1952
- Chandigarh Lease Hold of Sites and Buildings Rules, 1973
- Consumer Protection Act, 1986s. 12, s. 2(1)(d), s. 2(1)(g), s. 2(1)(o)
Subjects
consumer protectionearnest moneyrefunddeficiency in servicehousing schemeco‑operative societiespublic authorityinterestunfair trade practice
Judgment
[2010] 12 S.C.R. 96
A CHANDIGARH HOUSING BOARD
V.
AVTAR SINGH AND OTHERS
(Civil Appeal No. 8203 of 2010)
SEPTEMBER 22, 2010
B
[G.S. SINGHVI AND ASOK KUMAR GANGULY, JJ.]
Consumer Protection Act, 1986 - s. 2(1)(d), (g), (o) and
s. 12 - Chandigarh Allotment of Land to Co-operative House
C Building Societies Scheme, 1991 - Envisaging allotment of
land by Chandigarh Administration to Co-operative House
Building Societies through Chandigarh Housing Board -
Construction of multistoried structures/dwellings for members
of Societies - Non-allotment of land to Societies - Complaint
o by members u/s. 12, for refund of 10% earnest money
forfeited by the Board and 18% interest paid by them -
Maintainability of - Held: Complaint is maintainable -
Members of the Societies were the real and ultimate
beneficiaries - Provisions in the Scheme regulated the
E relationship of the Societies with their members and also
made them jointly and severally responsible for payment of
the earnest money etc. - By making applications for
allotment of land, Societies would be deemed to have hired
or availed services of Chandigarh Administration and the
F Board in relation to housing construction, thus, members
covered by definition of 'consumer' uls. 2(d)(ii) and had right
to file such complaint - Even though Finance Secretary
decided to refund the earnest money, Board did not refund
the forfeited portion of the earnest money to the members of
G the Societies, thus, amounted to deficiency in service - 1952
Act, 1973 Rules and 1991 Scheme does not provide for levy
of 18% interest on the delayed payment of earnest money -
Chandigarh Administration and Board had no right to refuse
refund of 18% interest - Thus, .National Commission and
H 96
CHANDIGARH HOUSING BOARD v. AVTAR SINGH. 97
AND ORS.
State Commission justified in directing refund of the amount A
of interest - Board directed to refund the amount due to
complainant within the stipulated period - Chandigarh
Allotment of Land to Co-operative House Building Societies
Scheme, 1991 - Capital of Punjab (Development and
Regulation) Act, 1952 - Chandigarh Lease Hold of Sites and B
Buildings Rules, 1973.
The Chandigarh Administration framed the
'Chandigarh Allotment of Land to Co-operative House
Building Societies Scheme, 1991' through Chandigarh C
Housing Board for allotment of land to Co-operative
House Building Societies. Fifty three Societies
challenged the 1991 Scheme. The High Court dismissed
the writ petition. In terms of the order of the High Court
the members of the Societies paid the balance earnest
money and 18% interest, however, the Board did not take D
effective steps for allotment of land to the Societies.
Respondent No.1 and others-members, applied through
their respective Societies for refund of the amount paid
by them. The Secretary of the Board sent a letter to the
Finance Secretary, Chandigarh Administration for its E
decision However, the Chief Accounts Officer of the
Board suo motu remitted the atnount of earnest money
to the Societies after deducting 10% in accordance with
the memo dated 9.6.1993 issued by the Finance Secretary,
Meanwhile, the Finance Secretary issued a memo dated F
9.3.2000 directing that full earnest money would be
refunded to the societies/and its members, however, the
interest on the earnest money would not to be refunded.
The members of the Societies filed complaints under the
Consumer Protection Act, 1986 against the action of the G
Board to forfeit 10% earnest money and the direction
given by the Finance Secretary not to refund 18%
interest. The District Forum held that the forfeiture of 10%
earnest money in terms of the memo dated 9.6.1993 and
H
98 SUPREME COURT REPORTS (2010] 12 S.C.R.
A non-refund of 18% interest were contrary to the 1991
Scheme and the 1973 Rules and amounted to deficiency
in service and unfair trade practice. The State
Commission held that the Finance Secretary could not
have used the power for giving directions in violation of
B the Rules and the Scheme; that the memo dated 9.6.1993
was contrary to clause 8 of the 1991 Scheme; that once
the Finance Secretary had issued instructions vide memo
dated 9.3.2000 that full refund of earnest money would be
made to the Societies/and its members the Board should
c have refunded the remaining amount to the complainants
and its failure to do so amounted to deficiency in service;
that the instructions issued by the Finance Secretary not
to refund 18% interest deposited by the members of the
Society did not have any legal sanction. The State
Commission directed the Board to refund the amount to
0
the complainants along with interest @ 8% p.a. However,
the State Commission set aside the direction given by the
District Forum for payment of interest from the amount
of earnest money. The National Commission upheld the
E order passed by the State Commission. Therefore, the
appellants filed the instant appeals.
The question which arose for consideration in these
appeals were whether the members of the Societies, who
would have been benefited by allotment of land under the
F 1991 Scheme were 'consumer' within the meaning of
Section 2(d) of the Act; and whether the District Forum
had the jurisdiction to entertain the complaints filed by
the members of the Societies for refund of 10% earnest
money forfeited by the Board and 18% interest paid by
G them.
Dismissing the appeals, the Court
HELD: 1.1 Even though the Chandigarh Allotment of
Land to Co-operative House Building Societies Scheme,
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 99
AND ORS.
1991 was ostensibly framed for allotment of land to the A
Co-operative House Building Societies through the
agency of the Chandigarh Housing Board for
construction of multistoried structures (dwelling units/
flats) for their members and the Chandigarh
Administration and the Board had nothing to do with the B
members of the Societies, but a careful reading of
various clauses of the Scheme and the directives given
by the Finance Secretary from time to time leave little
room for doubt that the members of the Societies were
the real and ultimate beneficiaries. The provisions c
contained therein not only regulated the relationship of
the Societies with their members, but also made them
jointly and severally responsible for payment of the
earnest money etc. The Finance Secretary and the Board
issued directions from time to time for payment of the
0
earnest money and interest by the members of the
Societies. If the scheme had nothing to do with the
members of the Societies, then it would not have
contained provisions to regulate their eligibility and
entitlement to get dwelling units to be constructed on the
land allotted by the Board and made them jointly and E
severally responsible for payment of the premium etc. and
the Finance Secretary would not have issued directions
vide memos dated 9.6.1993 and 9.3.2000 in the matter of
refund of earnest money and interest. The Board too
would not have entertained the request made by the F
members of the Societies for refund of the earnest money
and remitted the amount to the Societies after deducting
10%. Thus, even though no formal contract had been
entered into between the Chandigarh Administration and
the Board on the one hand and the members of the G
Societies on the other hand, the former exercised
sufficient degree of control over the latter. [Paras 27 and
28] [129-B-C; 131-A-F]
H
100 SUPREME COURT REPORTS [2010] 12 S.C.R.
A 1.2 By making applications for allotment of land, the
Societies would be deemed to have hired or availed
services of Chandigarh Administration and the Board in
relation to housing construction. If the scheme had been
faithfully implemented and land had been allotted to the
B Societies, their members would have been the actual and
real beneficiaries. Therefore, they were certainly covered
by the definition of 'consumer' under Section 2(d)(ii) of
the Consumer Protection Act, 1986, the second part of
which includes any beneficiary of the services hired or
c availed for consideration which has been paid or
promised or partly paid and partly-promised. The
members of the Societies had every right to complain
against illegal, arbitrary and unjustified forfeiture of 10%
earnest money and non-refund of 18% interest and the
District Consumer Forum did not commit any
0
jurisdictional error by entertaining the complaints. [Para
28] [131-F-H; 132-A-B]
Lucknow Development Authority v. MK. Gupta (1994) 1
SCC 243; Ghaziabad Development Authority v. Balbir Singh
E (2004) 5 sec 65, relied on.
1.3 The submission that the Board had deducted
10% earnest money and declined to refund 18% interest
to the members of the Societies strictly in accordance
F with the directives given by the Finance Secretary and in
the absence of challenge to memos dated 9.6.1993 and
9.3.2000, the complainants were not entitled to any relief,
is meritless and cannot be accepted. In terms of clause
8 of the 1991 Scheme, a Society would have become
entitled to refund of the earnest money without any
G deduction if it were to cancel the demand before allotment
of land. This is also the spirit of Rule 8 of the Chandigarh
Lease Hold of Sites and Building Rules, 1973 which were
made applicable to the land allotted under the scheme.
[Para 29] [132-B-D]
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 1-01
AND ORS.
1.4 Rule 8 shows that an application for allotment of A
site or building by way of lease can be entertained only
if it is accompanied by 10% of the premium as earnest
money. The allottee is required to deposit 15% of the
premium within 30 days of allotment. The balance
amount is to be paid in accordance with Rule 12. An B
applicant who refuses to accept allotment within 30 days
is entitled to refund of the amount paid by him. If the
applicant neither refuses to accept the allotment nor
deposits 15% of the premium, the Estate Officer can
forfeit the whole or part of the earnest money. The C
provision relating to refund of the premium/earnest
money or forfeiture of the whole or part thereof gets
attracted only after the allotment is made and not before
that. [Para 30) [133-E-G]
1.5 On examining para V(i) of memo dated 9.6.1993 D
issued by the Finance Secretary in the light of the plain
language of Rule 8 of the 1973 Rules and clause 8 of the
1991 Scheme, it becomes clear that the concerned officer
exceeded his brief when he directed that 10% of 25% of
the premium/earnest money should be deducted if the E
members sought refund of the earnest money on any
ground whatsoever. By giving the said directive, the
concerned officer attempted to teach a lesson to the
members of the Societies who had filed writ petition and
succeeded in persuading the High Court to restrict F
payment of the earnest money to 10%. However, he must
have realized the folly committed by issuing a direction
in complete disregard of the spirit of Rule 8(5) of the 1973
Rules and clause 8 of the 1991 Scheme and this must
have been the reason why he made amendments by G
incorporating clause 7 in memo dated 9.3.2000 for full
refund of the earnest money without forfeiting 10%.
Unfortunately, it proved to be a half hearted attempt by
the Finance Secretary to redeem the wrong done earlier
because while directing refund of the earnest money H
102 SUPREME COURT REPORTS [2010] 12 S.C.R.
A without any deduction, he used the expression 'will
henceforth' in clause 7, which gave leverage to the Board
to decline the request of the members of the Societies for
full refund of the earnest money on the ground that 15%
had already been remitted to the Societies for being paid
8 to their members before the issue of memo dated
9.3.2000. Once the Finance Secretary took the corrective
step, which was in consonance with the spirit of Rule 8(5)
of the 1973 Rules and clause 8 of the 1991 Scheme, the
Board should have refunded the balance 10% amount to
C all the members who had applied for refund on finding
that land had not been allotted to the Societies and they
might have to wait for indefinite period to get the flats.
[Para 30] (133-G-H; 134-A-F]
1.6 On receipt of the applications made by the
D members of the Societies for refund of the earnest money
and interest, the Secretary of the Board wrote letter dated
11.12.1998 to the Finance Secretary seeking his guidance
in the matter. However, before the latter could take a
decision, the Chief Accounts Officer of the Board remitted
E the amount of earnest money to the Societies after
deducting 10% with a direction that the same be paid to
their members. The Board did not explain why its officers
did not wait for the decision of the Finance Secretary and
why the Chief Accounts Officer exhibited undue haste in
F remitting the amount of earnest money to the Societies
after deducting 10%. In any case, after the Finance
Secretary decided that earnest money would be
refunded to the Societies and their members without any
deduction, the Board should have refunded forfeited
G portion of the earnest money to the members of the
Societies and its failure to do so certainly amounted to
deficiency in service. [Para 31] [134-G-H; 135-A-B]
1.7 The Capital of Punjab (Development and
Regulation) Act, 1952 and the Chandigarh Lease Hold of
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 103
AND ORS.
Sites and Buildings Rules, 1973 do not provide .for levy A
of 18% interest on the delayed payment of earnest money
or a portion thereof. The 1991 Scheme also did not
provide for levy of such interest. Notwithstanding this,
the members of the Societies had to pay 18% interest
because while dismissing the writ petition, the High Court B
observed that the Societies who had deposited 10% of
the sale consideration and found eligible for allotment or
were allotted sites would be liable to pay the balance 15%
with a further interest at the rate of 18% per annum.
However, there was nothing either in the interim or the c
final order of the High Court from which it could be
inferred that the Chandigarh Administration or for that
reason the Board was authorised or empowered to
refuse refund of 18% interest to the members who did not
seek allotment of flat. If the final order passed by'the High D
Court is read in conjunction with interim order dated
11.5.1992, it becomes clear that the Societies were to
deposit the remaining amount with interest at the rate of
18% per annum only if they were to accept allotment of
flats under the Scheme. Although, the writ petitions were E
filed by the Societies, the language of the interim order
passed by the High Court shows that the judges were
thinking of imposing liability of 18% interest only on those
members who were to accept allotment of flats to be
constructed by the Societies. The members of the
Societies did not get an opportunity to accept the F
allotment because evan after deposit of full earnest
money and 18% interest, the Board did not allot land to
the Societies on which they could construct dwelling
units/flats. The Finance Secretary misinterpreted the
orders of the High Court and issued wholly arbitrary and G
unjust directive to the Board not to refund 18% interest
to the members of the Societies who had applied for
refund before allotment of land by the Board. The
'. Administration and the Board had no right
Chandigarh
to refuse refund of 18% interest and absence of direct H
104 SUPREME COURT REPORTS [2010] 12 S.C.R.
A challenge to clause 11 of memo dated 9.3.2000 was not
sufficient to legitimize indirect forfeiture of that amount
and the State Commission did not commit any error by
directing refund of the amount of interest by treating it to
be a case of deficiency in service and the National
s Commission rightly declined to interfere with the order of
the State Commission. The Board is directed to refund
the amount due to the complainants within the period
stipulated. [Paras 32 and 33] [135-C-H; 136-A-E]
Case Law Reference:
c
(1994) 1 sec 243 Relied on. Para 28
(2004) 5 sec 65 Referred to. Para 28
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
D 8203 of 2010.
From the Judgment & Order dated 12.7.2007 of the
National Consumer Disputes Redressal Commission in R.P.
No. 734 of 2004.
E WITH
C.A. 8204, 8205, 8206, 8207, 8208, 8209, 8210, 8211,
8212,8213,8214, 8215,8216,8217,8218,8219,8220,8221,
8222, 8223, 8224, 8225, 8226 & 8227 of 2010.
F
Rachana Joshi lssar, Nidhi Tiwari for the Appellant.
Anil Nag, S.S. Khetarpal, H.K. Chaturvedi, Syed Ahmad
Saud, M.M. Abbasi, Shakil Ahmed Syed for the Respondent.
G The Judgment of the Court was delivered by
G.S. SINGHVI, J. 1. Leave granted.
2. With a view to promote private housing and optimum
utilisation of the land in Chandigarh by constructing multi-
H storeyed structures, the Administrator, Union Territory,
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 105
AND ORS. [G.S. SINGHVI, J.]
Chandigarh framed a scheme called "Chandigarh Allotment of A
Land to Co-operative House Building Societies Scheme, 1991"
(for short, 'the 1991 Scheme') for allotment of land to Co-
operative House Building Societies (for short, 'the Societies')
through Chandigarh Housing Board (for short, 'the Board'). The
opening paragraph of the 1991 Scheme and clauses 3, 4 and B
6 to 12 thereof read as under:
"No. UTFl(3)-91/5214 - With view to promote private
housing and optimum utilization of land by constructing
multistoried structures, the Administrator, Union Territory, C
Chandigarh, is pleaded to intake the following scheme
regulating allotment of land to the Co-operative House
Building Societies, in the Union Territory, Chandigarh,
namely:-
1. )()()( )()()( )()()( D
2. )()()( )()()( )()()(
2. )()()( )()()( )()()(
3. The Chandigarh Administration may conduct survey to E
assess the demand by inviting applications on prescribed
forms available from the Chief Executive Officer,
Chandigarh Housing Board alongwith 25% of the premium
of land to be applied for as earnest money and proof that
the Society has sufficient funds and resources to pay the F
balance of premium of land and to undertake construction
work on the land if allotted to them through the Chandigarh
Housing Board. Such Survey shall, however, not be
construed as a commitment for allotment of land in any
w~. G
4. The Chandigarh Administration shall allot land on chunk
basis to the Chandigarh Housing Board for its further
allotment to the eligible Co-operative House Building
Societies from whom applications were invited under
clause 3 above, having sufficient funds and resources to H
106 SUPREME COURT REPORTS (2010] 12 S.C.R.
A the satisfaction of the Estate Officer, on Lease Hold Basis
for 99 years for the construction of multistoreyed
structures/dwelling units (hereinafter called DU) and their
allotment to its eligible members on the terms and
conditions to be laid down in the allotment letter and lease
B deed. The land so allotted shall be planned in consultation
with the Chief Architect and Secretary, Architecture
Department, Union Territory, Chandigarh and developed
by the Engineering Department as usual. The proposed
land shall be got sanctioned from the Chief Administrator,
c Chandigarh as per the provisions of the Punjab Capital
(Development and Regulation) Building Rules, 1952 as
amended to date. The seniority of society may be
determined from registration Number and date. The
Administrator may allot land to the societies within the
limits of Union Territory, Chandigarh subject to the
D
fulfillment of provisions of the Scheme and the Capital of
Punjab (Development and Regulation) Act, 1952 as
amended from time to time and the rules made thereunder
including the Chandigarh Lease Hold of Sites and Building
Rules, 1973 (as amended from time to time). The society
E and its members shall be jointly and severely
responsible for payment of premium including
instalments and ground rent and for complying with terms
and conditions, rules and regulations and the provisions
of the Act referred to above. The minimum quantum of
F land that can be allotted is one acre and 40 to 60 number
of Dwelling Units (as proved by the Chief Architect) are
to be provided by the Society per acre. The Chandigarh
Administration may fix cut off date for the purpose of
allotment of land to the Societies as well as to members.
G
6. Eligibility. - A society may be considered eligible for
allotment of land if it is duly registered with the Registrar,
Co-operative Societies, Union Territory, Chandigarh
functioning property having sufficient funds/resources to
H pay the premium, to undertake the construction work, to
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 107
AND ORS. [G.S. SINGHVI, J.]
complete it is stipulated period, and that each of its A
members fulfills the following conditions:-
(i) He is a bona fide resident of the Union Territory
of Chandigarh and should be residing in Union
Territory, Chandigarh atleast for last two years on~
8
the date of the allotment of land to the Society;
(ii) He is an employee of the Central Government/
Corporation owned or controlled by Central
Government stationed at Chandigarh on the date .
of notification of Scheme or has served in the past C
at Chandigarh, or
(iii) He is an employee of Union Territory
Administration or the States of Punjab and Haryana
or any Corporation owned or controlled by Union D
Territory or State Governments referred to above
and is either serving at Chandigarh on the date of
notification of the Scheme or has served in the past;
or
(iv) He is a retired from the Government or E
Corporation referred to at (ii) and (iii) above and
residing at Chandigarh.
An applicant member may be eligible for allotment of
dwelling unit in accordance with his monthly income i.e. F
one dwelling unit out of the dwelling units constructed per
acre, as per category given below:-
A.(1) 25 Dwelling Units per acre Category "A"
(2)35 Dwelling Units per acre Category "B" G
(3)45 Dwelling Units per acre
Category "C"
(The density shall not in total exceed 40% of the covered
area) H
108 SUPREME COURT REPORTS [2010) 12 S.C.R.
A B. Income Group
Members having monthly income of Rs.5,0001 and above
"A"
Members having monthly income of Rs.2,0001 to 5,000
B "B"
Members having monthly income upto Rs.2,000
Provided that no society shall be eligible for allotment of
c a site under this scheme if any of its members, their
spouses or dependent children already owns, either on
free-hold, lease-hold or hire purchase basis, a dwelling unit
or a residential house/site/flat at Chandigarh, Manimajra,
Panchkula and S.A.S. Nagar (Mohali).
D
Provided further that not more than one member of a family
shall be a member of any such Society and no more than
one dwelling unit shall be allotted to one family.
Provided further that no individual/Society shall part with
E
the possession of the land or dwelling unit before the expiry
of atleast 5 years from the date of allotment.
7. Grouping of Society/Enrolment of new members.- If any
Society has less than 50 members, these shall be grouped
F together so as to enable the Chandigarh Housing Board
to allot atleast one acre of land to a group of Societies.
8. Refund of Earnest Money.- The earnest money shall·
be refunded to the Society, if any Society cancels its
demand before allotment of land. Earnest money shall
G
also be refunded to un-accommodated Societies, if any.
No interest shall, however, be payable on any amount
which remained deposited with the Estate Officer under
this Scheme.
H 9. Operation of Account/Check thereon.- Every member
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 109
AND ORS. [G.S. SINGHVI, J.]
who applied/have applied to the Society for allotment of A
a dwelling unit under this Scheme shall pay all the
amount in this respect demanded by the Society by
means of crossed demand draft payable to the Society.
The Society shall deposit it in their account maintained
in the Chandigarh State Co-operative Bank Ltd., Sector B
22, Chandigarh only. The Society shall not be competent
to withdraw any amount so deposited without the prior
approval of the Registrar, Co-operative Societies,
Chandigarh Administration, to-Clischarge .liabilities of
payment of earnest money, instalments, ground rent and c
for construction purpose in respect of the· 1and to be
allotted/allotted to the Society.
10. Construction of dwelling units and allotment thereof.-
The Society shall be responsible for completion of
building i.e. dwelling units within 3 years from the date of D
allotment and further allotment of these to their members
by draw of lots. However, grouping can be allowed by the
Society. Draw of lost shall be witnessed by the authorised
officer/officials of Co-operative Department and Estate
Office, Chandigarh Administration. E
11. Apart from the provisions of this scheme, provision
of the Chandigarh Lease Hold of Sites and Building
Rules, 1973, as amended from time to time, shall be
applicable to the land allotted under this scheme. F
12. If at any time any difficulty arises in giving effect to the
provisions of this scheme, the Chief Administrator may give
directions consistent with the provisions of the scheme as
he/she may deem appropriate."
G
(emphasis supplied)
3. Fifty three Societies challenged the 1991 Scheme in
Writ Petition No.1454 of 1992 filed in the Punjab and Haryana
High Court with the following prayer: H
110 SUPREME COURT REPORTS [2010] 12 S.C.R.
A (i.) Writ of Certiorari or any other appropriate writ, order
of direction in the nature of Certiorari, may be
issued thereby quashing the impugned notification
No.UTFI (3)-91/5214 dated 28th May, 1991
(Annexure P.4) issued by the Finance Secretary
B (respondent No.2).
(ii.) Further a writ of Mandamus be issued to the
respondent with a direction to give individual and
developed plots to the members of the petitioner
societies in view of the Scheme of 1983 which is
c still operative under which plots were/shall be given.
4. By an interim order dated 11.5.1992, the Division Bench
of the High Court permitted the Societies to deposit 10% of
D the tentative price and also recorded the undertaking given by
them that if the writ petition is dismissed, they shall deposit the
balance amount with interest@ 18% per annum, if they were
to accept allotment of flats under the new scheme. The relevant
portion of that order is extracted below:
E
"Learned counsel for the petitioner contends that the rules
provide for deposit of only 10% of the amount of the
tentative price and the remaining 15% is to be deposited
if plots/flats are allotted. In view of this, learned Counsel
for the State-Union Territory, Chandigarh does not oppose
F the prayer of the petitioners for stay to the extent of deposit
of 15% of the tentative price. The petitioner shall deposit
10% of the tentative price within the time extended by this
court vide order dated 30.5.1992. The petitioners
underlake that if the writ petition is dismissed, they shall
G deposit the remaining amount with interest @ 18% per
annum if they accept allotment of flats under the scheme.
The Chandigarh Administration shall also refund the
amount deposited by the petitioner with interest at the
same rate to those petitioners who are not interested in
H the allotment of flats."
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 111
AND ORS. [G.S. SINGHVI, J.]
(emphasis supplied) A
5. In view of the aforesaid order, the Societies collected
10% of the tentative price from their members and deposited
the same in the bank specified in the 1991 Scheme.
Thereafter, the Chief Executive Officer of the Board issued B
circular-letters dated 3.11.1992 to the Societies indicating the
amount deposited by them towards 10% of the earnest money/
premium, the total amount payable by them and also called
upon them to furnish the list of eligible members and details
of the deposits made on behalf of each member category-wise.
This is evident from the following paragraphs of one such letter C
sent to the Progressive Co-operative House Building Society
Limited (respondent No.2 in the lead appeal):
"1. xxx xxx xxx
D
2. All the co-operative House Building Societies were
requested to apply on the prescribed forms and deposit
earnest money equal to 25% of the premium on behalf of
eligible members for the allotment of land. However, in
view of the Hon'ble Punjab & Haryana High Court's order E
in your case you were required to deposit 10% of the
· tentative price by 31.5.1992.
3. xxx xxx xxx
4. Your society has deposited a sum of Rs.9,50,000/- F
representing 10% in respect of 933 members as per
details given below:-
Categorv
A 345 G
B 529
c ~
933
5. For the purpose of assessment of land requirement the
strength of your society has been taken as 933 which is H
112 SUPREME COURT REPORTS [2010] 12 S.C.R.
A the number of members on behalf of whom your society
has reportedly deposited at least 10% by 1.6.92. This
assessment of land is purely tentative and subject to
revision in case any member of your society is found to
have not been declared eligible by the screening
8 Committee or to have not deposited at least 10% of the
premium by 1.6.1992.
6. On the basis of the said strength of the society the land
requirement of your society has tentatively been assessed
as 125379.05 Sq. Yd. provided that if the final assessment
c shows that the total number of eligible members in your
society is less tan the number required for allotment in
terms of the category-wise density specified per acre, your
society shall be clubbed with one or more of the Societies
to attain the optimum number required for allotment of land.
D
7. The total premium of this land works out to
Rs.9,40,34,287/-@ Rs.750/- per Sq. yd.
8. With a view to finalize the matter relating to the allotment
E of land, the following information may kindly be furnished
within 30 days:-
(i) List of eligible members i.e. of the members duly
approved by Registrar Co-operative Society/Screening
Committee.
F
(ii) List of each member giving details of deposits made
on his behalf (as on 1.6.1992) category-wise.
9. )()()( )()()( )()()(
G 10. In view of the above position, you are requested to
furnish the information, as indicated in para 8 above,
within 30 days from the date of issue of this letter for the
•purpose of finalizing the assessment of the land
requirement of your society.
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 113
AND ORS. [G.S. SINGHVI, J.]
11.xxx xxx xxx. A
A copy of the local plan where land is tentatively proposed
to be allotted to your society is also enclosed for
information."
B
6. After seven months, the Finance Secretary, Chandigarh
Administration (hereinafter referred to as 'the Finance
Secretary') issued memo dated 9.6.1993 and directed that
if any member of the Society was to seek refund, then 10%
out of 25% of the earnest money should be deducted as
calculated on reduced density. The relevant clause of that C
memo is reproduced below:
"V(i) 10% of 25% of the premium amount as calculated
on reduced density shall be deducted in case members
seek refund on any ground what so ever their earnest D .
money deposited with the Chandigarh Housing Board."
7. The writ petition was finally dismissed by the High Court
vide judgment dated 18.12.1996. The last paragraph of the
judgment on which the appellant has heavily relied in support E
of its plea that the members of the Societies are not entitled
to claim refund of 18% interest reads as under:
"Before parting, we may observe that in view of the interim
order passed by this Court wherein the petitioners were
allowed to deposit 10% of the sale consideration while F
applying for the allotment of plots, the Societies who had
deposited 10% of the sale consideration and found eligible
for allotment or have been allotted the sites, would be liable
to pay the balance 15% of the amount so as to make it
25% as per terms and conditions of the allotment as G
agreed upon by them, with a further interest at the rate of
18% per annum."
8. By taking cue from the observations made by the High
Court, the Finance Secretary sent memo dated 6.11.1997 to
H
114 SUPREME COURT REPORTS [2010] 12 S.C.R.
A the Chairperson of the Board with the request to accept the
balance 15% earnest money from the Societies along with
interest at the rate of 18%. Paragraphs 2 and 3 of that letter
read as under:
"2. You are requested to accept the balance amount of
B
15% to complete the 25% earnest money along with the
interest @18% p.a. up to date of the High Court order i.e.
18.12.96, from the petitioners of the Co-operative House
Building Societies who jointly filed CWP No.1454 of 1992
in the Punjab and Haryana High Court, calculation and
c imposition of interest would, therefore, be stopped till the
possession of land is offered to the Societies.
3. Balance of 25% of the earnest money may be accepted
at the original rate. However, it may be made clear to the
D Societies that balance amount of the premium shall be
determined at the rate applicable at the time of actual
allotment of land to the Societies."
9. Thereafter, the Board vide ·its letter dated 15.12.1997
E directed the Societies to deposit the balance 15% earnest
money along with 18% interest. The Societies complied with
the Board's directive and deposited the amount after collecting
the same from their members.
10. Although, the members of the Societies paid the
F balance earnest money and 18% interest, the Board did not
take effective steps for allotment of land to the Societies. This
naturally gave rise to an apprehension in their mind that they
may .have to wait indefinitely for getting the flats. Therefore,
some of them including Lieutenant Colonel Avtar Singh
G (respondent No.1 in the lead appeal) applied through their
. respective Societies for refund of the amount paid by them by
clearly indicating that they were no longer interested in the flats.
The Societies forwarded their applications to the Board.
Thereupon, Secretary of the Board sent letter dated 11.12.1998
H to the Finance Secretary seeking his guidance in the matter.
CHANDIGARH HOUSING BOARD v. AVTAR S,INGH 115
AND ORS. [G.S. SINGHVI, J.]
That letter reads as under: A
"CHANDIGARH HOUSING BOARD
CHANDIGARH
No.HB(s)-GAO-AOl-98/22741 Dated:11/12/98
To B
The Finance Secretary,
Chandigarh Administration,
Chandigarh.
Subject: Refund of Earnest Money. c
Sir,
It is stated that the Board has been making refunds
to the members of societies by deducting 10% of the
revised density in terms of the Chandigarh Administration D
letter No.30/11/FTl-31-93/5149 dated (copy enclosed).
As per instruction issued vide your letter No.5158-
UTIF (4) 97/20685 dated 6.11.1997, the Board demanded
balance 15% to complete 25% earnest money alongwith E
interest @ 18% p.a. for the period from 1.6.1992 to
18.12.1996 from the petitioner societies. Now some of the
societies after paying the above amount of earnest money
and interest have sought refund in respect of their certain
members. The instructions of Chandigarh Administration
F
dated 9.6.1993 provide for refund of earnest money after
forfeiting 10% of revised density but no guidelines are
available with the Board whether it should also refund the
interest paid by the members for the period 1.6.1992 to
18.12.1996 or not. You are requested to decide the matter
and decision taken may kindly be conveyed at the earliest G
to decide such pending cases.
Yours faithfully,
Secretary,
Chandigarh Housing Board."
H
116 SUPREME COURT REPORTS (2010] 12 S.C.R.
A 11. However without waiting for the decision of the Finance
Secretary, the Chief Accounts Officer of the Board suo motu
remitted the amount of earnest money to the Societies after
deducting 10% in accordance with the instructions issued by
the Finance Secretary vide memo dated 9.6.1993 and directed
B that the same be paid to the members.
12. In the meanwhile, the Finance Secretary constituted a
committee consisting of Chief Executive Officer of the Board,
Officer on Special Duty (CP}, Chandigarh Administration and
Joint Registrar, Co-operative Societies, Chandigarh to look into
C various pending issues of the Societies. After considering the
recommendations of the committee and guidelines given by the
Deputy Commissioner-cum-Estate Officer, the Finance
Secretary issued memo dated 9.3.2000, the relevant portions
of which are reproduced below:
D
"7. Full refund of earnest money will hence forth be made
to the societies/and its members without forfeiting 10% of
the 25% earnest money deposited.
11. The interest paid by the Societies on the earnest money
E
deposited with the Board in pursuance of High Court's
judgment dated 18.12.96 is not to be refunded if the
Society seek refund of earnest money as a whole or in
respect of any member, as it is not part of the earnest
money."
F
13. The members of the Societies, who felt aggrieved by
the action of the Board to forfeit 10% earnest money and the
direction given by the Finance Secretary not to refund 18%
interest, filed complaints under Section 12 of the Consumer
G Protection Act, 1986 (for short, 'the Act'). They specifically
averred that till the making of applications for refund, the Board
had not allotted land to the Societies. They pleaded that action
and decision complained against were not only contrary to the
provisions of the Chandigarh Lease Hold of Sites and Buildings
H Rules, 1973 (for short, 'the 1973 Rules'), the 1991 Scheme but
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 117
AND ORS. [G.S. SINGHVI, J.]
were also discriminatory inasmuch as the applications made A
by Kuldip Singh son of Gurdin Singh and Smt. Subh Lata w/o
Shri Tarlochan Singh for refund of the amount was accepted
without any deduction but in their cases 10% of the earnest
money and 18% interest were arbitrarily forfeited.
B
14. The Finance Secretary, Chandigarh Administration,
through whom the Union of India was impleaded as a party to
the complaints did not file written statement and it was left to
the Board to contest the complaints. In the written statement
filed on behalf of the Board, an objection was raised to the very C
maintainability of the complaints on the ground that there was
no privity of contract between the complainants and the Board.
On merits, it was pleaded that there was no deficiency in
service or negligence on the Board's part and the provisions
of the Act cannot be invoked by the complainants. It was further
pleaded that the decision of the Chandigarh Administration not D
to refund 18% amount paid by the members of the Societies
was in consonance with the 1991 Scheme and without
challenging the same, the complainants were not entitled to any
relief. Another plea taken by the Board was that 18% interest
was not refunded because it did not form part of the earnest E
money. The allegation of discrimination was controverted by
asserting that in the cases of Shri Kuldip Singh and Smt. Subh
Lata, 10% of the 25% earnest money was forfeited in
accordance with the instructions dated 29. 7.1993 issued by the
Finance Secretary but the amount was refunded to them in the F
month of March 1998.
15. The District Forum noted that till the making of
applications by the complainants for refund of the earnest
money and 18% interest by specifically mentioning that they G
were no longer interested in the flats, the Board had not allotted
land to the Societies and held that forfeiture of 10% earnest
money in terms of the decision contained in memo dated
9.6.1993 and non-refund of 18% interest were contrary to the
1991 Scheme and the 1973 Rules and the same amounted to
H
118 SUPREME COURT REPORTS (2010] 12 S.C.R.
A deficiency in service and unfair trade practice. The District
Forum also accepted the plea of discrimination and observed:
"The complainant has also alleged discrimination against
him vis-a-vis two other applicants members of OP-2
namely Sh. Kuldeep Singh and Smt. Subh Lata to her. The
B
interest component of their deposits was refunded without
its forfeiture. On this point the reply of the OP-1 is round
about. It is stated that 10% of 25% of the earnest money
of these members was also forfeited as per the
instructions dated 29.7.1993 and the refund was made to
c them in March 1998. The refund to them had been made
vide the OP-1 letters dated 30.3.1998 (Annexure H) and
letter dated 17.3.1998 (Annexure I). If we compare these
letters with each other and with the pleadings of the
complainant and the pleadings of the OP. We find that only
D 10% of 25% of the earnest money of Smt. Subh Lata and
Sh. Kuldeep Singh had been forfeited and not the interest
component of their deposits. Therefore, to this extent, the
complainant was discriminated against by OP1 vis-a-vis
Kuldeep Singh and Subh Lata."
E
16. Before the State Commission, it was argued on behalf
of the Board that District Forum did not have the jurisdiction to
entertain the complaints because it had acted strictly in
accordance with the directions given by the Finance Secretary.
F While rejecting this contention, the State Commission observed
that in terms of clause 12 of the 1991 Scheme, the Finance
Secretary could give directions in case of difficulty arising in
the implementation of the Scheme but he could not have used
that power for giving directions in violation of the Rules and the
G Scheme. The State Commission then held that memo dated
9.6.1993 issued by the Finance Secretary authorizing the
Board to deduct 10% of the earnest money was contrary to
clause 8 of the 1991 Scheme, which provided for refund of the
earnest money without any deduction if the Society was to
cancel the demand before allotment of land. The State
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 119
AND ORS. [G.S. SINGHVI, J.]
Commission further held that once the Finance Secretary had A
issued instructions vide memo dated 9.3.2000 that full refund
of earnest money will henceforth be made to the Societies/and
its members without forfeiting 10% of the earnest money
already deposited, the Board should have refunded the
remaining amount to thB complainants and its failure to do so B
amounted to deficiency in service. The State Commission also
opined that the instructions issy~d by the Finance Secretary to
the Board not to refund 18% interest deposited by the fl!embers
of the Society did not have any legal sanction and the Board
committed an illegality by refusing to refund the amount of c
interest by relying upon clause 11 of memo dated 9.3.2000. In
conclusion, the State Commission directed the Board to refund -
the amount to the complainants along with interest @ 8% per
annum. However, the direction given by the District Forum for
payment of interest from the amount of earnest money was set 0
aside by the State Commission.
17. The National Commission agreed with the findings and
conclusion recorded by the State Commission and dismissed
the revisions filed by the Board. The National Commission
referred to letter dated 11.12.1998 and Memo dated 9.3.2000 E
issued by the Finance Secretary, Rule 8 of the 1973 Rules and
observed:
"From the letter dated 11.12.1998 and Memo dated
9.3.2000 extracted above, it may be seen that the issue F
of forfeiture of 10% of 25% of earnest money was under
consideration of the Chandigarh Administration since
1998 and the final decision taken is incorporated in the
said Memo. The petitioner Housing Board cannot take
benefit of the delay on their part in finalizing the said issue G
to the disadvantage of respondent No.1/complainants.
Submission advanced on their behalf about Clause No.7
of the Memo being prospective, therefore, deserves to be
repelled being without any merit. At the cost of repetition
it may be mentioned that Clause 7 of the Memo permits H
120 SUPREME COURT REPORTS [201 O] 12 S.C.R.
A full refund of the earnest money to the society and/or to its
members. Instructions contained in the letter dated 9.6.93
have no relevance.
Coming to interest issue, by virtue of para 11 of the
Scheme of 1991 the Rules of 1973 have been made
B
applicable to the land allotted to the Societies. Neither
Rules, 1973 nor Scheme, 1991 vest in the petitioner
Housing Board the power to forfeit the interest paid.
Moreover there seems to be no justification in forfeiting the
interest amount paid on late deposit of 15% of earnest
c money when the entire amount of earnest money was
decided to be paid to the Society and/or its members
under the Memo dated 9.3.2000. Amount of interest paid
by respondent No.1/Complainant will not fall in the category
of interest referred to in para No.8 of the Scheme, 1991.
D Fora below had thus rightly made the order for refund of
the interest amount."
18. The first and foremost argument of Ms. Rachana Joshi
lssar, learned counsel for the Board is that the District Forum
E did not have the jurisdiction to entertain the complaints filed by
the members of the Societies because there was no privity of
contract between them and the Board. She pointed out that the
1991 Scheme envisaged allotment of land to the Societies and
not to their members and argued that they cannot be treated
F as consumers within the meaning of Section 2(d) of the Act and
the Board cannot be held liable for any deficiency in service
because it had not entered into any agreement with the
members of the Societies for allotment of land/flats. Learned
counsel emphasized that the Board had acted in accordance
G with the directives given by the Finance Secretary vide memos
dated 9.6.1993 and 9.3.2000 and argued that the consumer
foras committed serious error by granting relief to the members
of the Societies ignoring that they had not challenged the
offending clauses of those memos. She further argued that the
H members of the Society did not have the locus to complain
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 121
AND ORS. [G.S. SINGHVI, J.]
against non-refund of 18% interest because they had taken A
advantage of the interim order passed by the High Court and
avoided payment of 15% earnest money.
19. Shri S.S. Khetrapal, learned counsel for the
complainants argued that the District Forum did not commit B
illegality by entertaining the complaints because they were the
direct beneficiaries of the 1991 Scheme. Learned counsel
submitted that the members of the Societies were compelled
to file complaints because the Board did not allot land to the
Societies even after deposit of the balance earnest money and C
18% interest. Shri Khetrapal emphasized that the Chandigarh
Administration and the Board were not empowered to forfeit
10% earnest money or withhold refund of 18% interest because
the land had not been allotted to the Societies till the making
of applications for refund and filing of the complaints. Learned
counsel relied upon clause 7 of memo dated 9.3.2000 in terms D
of which the Board was required to refund the earnest money
to the Societies/their members without forfeiting any portion
thereof and argued that the direction given by the State
Commission for refund of the forfeited portion of the earnest
money and 18% interest, which was upheld by the National E
Commission does not suffer from any legal infirmity.
20. Before proceeding further, we deem it proper to
mention that arguments in these appeals were heard and the
judgment was reserved on 16.8.2010. Thereafter, the case was F
listed in ·the mentioning list on 7.9.2010 because the Court
wanted to find out from the learned counsel for the Board
whether land had been allotted to the Societies till the making
of applications by their members for refund of the earnest
money and 18% interest. On 7.9.2010, the case was adjourned G
to 9.9.2010 at the request of learned counsel for the Board. On
the next date, learned counsel produced xerox copy of letter
dated 3.11.1992 sent by the Board to the President,
Progressive Co-operative House Building Society and a three-
page note. She also disclosed that allotment letters were
issued to the Societies sometime in 2002. H
122 SUPREME COURT REPORTS [201 O] 12 S.C.R.
A 21. We have considered the respective arguments and
submissions. The question which calls for determination in
these appeals is whether the members of the Societies, who
would have been benefited by allotment of land under the 1991
Scheme were consumer within the meaning of Section 2(d) of
B the Act and the District Forum had the jurisdiction to entertain
the complaints filed by them for refund of 10% earnest money
forfeited by the Board and 18% interest paid by them in the
light of the orders passed by the High Court in Writ Petition
No.1454/1992.
c 22. The definitions of the terms 'consumer', 'deficiency'
and 'service' contained in Section 2(d), (g) and (o), which have
bearing on the decision of these appeals read as under:
"2. Definitions. - (1) In this Act, unless the context otherwise
D requires,-
(d) "consumer" means any person who-
(i) buys any goods for a consideration which has been paid
or promised or partly paid and partly promised, or under
E any system of deferred payment and includes any user of
such goods other than the person who buys such goods
for consideration paid or promised or partly paid or partly
promised, or under any system of deferred payment, when
such use is made with the approval of such person, but
F does not include a person who obtains such goods for
resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which
has been paid or promised or partly paid and partly prom-
G ised, or under any system of deferred payment and
includes any beneficiary of such services other than the
person who hires or avails of the services 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
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 123
AND ORS. [G.S. SINGHVI, J.]
mentioned person but does not include a person who A
avails of such services for any commercial purposes;
Explanation.- For the purposes of this clause,
"commercial purpose" does not include use by a person
of goods bought and used by him and services availed by 8
him exclusively for the purposes of earning his livelihood
by means of self-employment
(g) "deficiency" means any fault, imperfection, shortcoming
or inadequacy in the quality; nature and manner of
performance which is required to be maintained by or C
under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of
a contract or otherwise in relation to any service
(o) "service" means service of any description which is D
made available to potential users and includes, but not
limited to, the provision of facilities in connection with
banking, financing insurance, transport, processing, supply
of electrical or other energy, board or l_odging or both,
housing construction, entertainment, amusement or the E
purveying of news or other information, but does not
include the rendering of any service free of charge or under
a contract of personal service"
23. The first part of the definition of 'consumer' refers to
the buyer of goods and user thereof by a person other than F
buyer but does not include a person who obtains such goods
for resale or for any commercial purpose. The second part of
the definition refers to a person who hires or avails of any
services for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of G
deferred payment and includes the beneficiary of such services
other than the person who hires or avails of the services but
does not include a person who avails such services for
commercial purpose. The term 'deficiency' means any fault,
imperfection, shortcoming or inadequacy in the quality, nature H
124 SUPREME COURT REPORTS [2010] 12 S.C.R.
A and manner of performance which is required to be maintained
by or under any law by a person in pursuance of a contract or
otherwise in relation to any service. The term 'service' means
service of any description which is made available to potential
users and includes the provision of facilities in relation to
B banking, financing, insurance, transport, processing, supply of
electrical and other energy, boarding or lodging, housing
construction, entertainment, amusement etc. However, the
services rendered free of charge or under a contract of
personal service are excluded from the definition of term
c 'service'.
24. The question whether the consumer foras can entertain
a complaint in the matter of allotment of plot or construction of
a flat by statutory authority was considered by a two-Judge
Bench of this Court in Lucknow Development Authority v. MK.
D Gupta (1994) 1 SCC 243, in the backdrop of challenge to the
orders passed by the National Commission which had awarded
damages to the respondents on account of delayed delivery of
possession of the houses. The Bench observed that the nature
of 'complaint' which can be filed under clause 2(c) of the Act
E 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 service hired or
availed of or agreed to be hired or availed of, by a complainant
i.e. a consumer or any voluntary consumer association
F r€'gistered under the Companies Act, 1956 or under any law
for the time being in force or the Central Government or any
State Government. The Bench then noted that the definition of
·consumer' is in two parts and proceeded to observe:
"The first deals with goods and the other with services.
G
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
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 125
AND ORS. [G.S. SINGHVI, J.]
approval of the person who purchased the goods or who A
hired services are included 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 B
'deficiency' by clauses (f) and (g) for which a consumer can
approach the Commission. The Act thus aims to protect
the economic interest of a consumer as understood in
a
commercial sense as purchaser of goods and in the
larger sense of user of services. The common c·
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, D'
normally, 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."
The Court repelled the argument that the Act is confined -
to movable goods only and observed that the consumer foras E
have jurisdiction to deal with complaints of deficiency of service
in relation to immoveable properties. The Court referred to the
definition of term 'service' as amended in 1993 to cover
'housing construction' and observed:
F
"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' G
dictionarily means 'one or some 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 'some' or 'one' and its meaning in a given
statute depends upon the context and the subject-matter
of the statute". The use of the word 'any' in the context it H
126 SUPREME COURT REPORTS [2010] 12 S.C.R.
A has been used in clause (o) indicates that 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 "existing in
B 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 successive future installments or
payments on a contract or engagement already made." In
c 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 expanded the meaning
of the word further in modern sense by extending it to
D
even such facilities as are available to a consumer in
connection with banking, financing etc. Each of these are
wide-ranging activities in day to day life. They are
discharged both by statutory and private bodies. In
absence of any indication, express or implied there is no
E reason to hold that authorities created by the statute are
beyond purview of the Act. When banks advance loan or
accept deposit or provide facility of locker they
undoubtedly render service. A State Bank or nationalised
bank renders as much service as private bank. No
F distinction 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
intention is thus clear to protect a consumer against
G services rendered even by statutory bodies. The test,
therefore, is not if a person against whom complaint is
made is a statutory body but whether the nature of the duty
and function performed by it is service or even facility."
H (emphasis supplied)
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 127
AND ORS. [G.S. SINGHVI, J.]
,
The Court then considered the question whether public A
authorities are amenable to the jurisdiction of the consumer
foras and answered the same in affirmative. An ancillary issue
considered by the Court was whether housing construction or
building activity carried on by a private or statutory body was
service within the meaning of Section 2(o) as it stood prior to B
inclusion of the expression 'housing construction' in the
definition and it was observed:
"As pointed out earlier the entire purpose of widening the
definition is to include in it not only day to day buying and C
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 0
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 E
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 den,ial of comfort
and service to a consumer. When possession of property F
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 rendering of service of particular standard,
quality or grade. Such deficiencies or omissions are G
defined in sub-clause (ii) of clause (r) of Section 2 as
unfair trade practice ... ..... A development authority while
developing the land or framing a scheme for housing
discharges statutory duty the purpose and objective of
which is service to the citizens. As pointed out earlier the H
128 SUPREME COURT REPORTS [2010] 12 S.C.R.
A 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 such activities which are otherwise not commercial
but professional or service-oriented in nature. The
provisions in the Acts, namely, Lucknow Development Act,
B Delhi Development Act or Bangalore Development Act
clearly provide for preparing plan, development 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
c 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
D
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 or under a
E 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."
(emphasis supplied)
F
25. The judgment in M.K. Gupta's case was relied upon
in Ghaziabad Development Authority v. Balbir Singh (2004)
5 SCC 65 and it was held that the Act has a wide reach and
the Commission has jurisdiction even in cases of service
G rendered by statutory and public authorities. The Court
observed that 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.
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 129
AND ORS. [G.S. SINGHVI, J.)
26. We shall now consider whether the members of the A
Societies were consumer of the service rendered by the
· C,handigarh Administration and the Board in the matter of
,ayotm~t of land to the Societies under the 1991 Scheme and
the complaints filed by them were maintainable.
B
27. A cursory reading of the 1991 Scheme may give an
impression that the sole object thereof was to allot land to the
Societies through the agency of the Board for construction of
multistoried structures and the Chandigarh Administration and
the Board had nothing to do with the members of the Societies, C
but a careful reading of various clauses of the Scheme and the
directives given by the Finance Secretary from time to time
leave little room for doubt that the members of the Societies
were the real and ultimate beneficiaries. This is evident from
the following:
D
(i) Clause 4 of the Scheme envisaged allotment of land by
the Chandigarh Administration to the Board on chunk
basis for its further allotment to the eligible Societies so
as to enable them to construct multistoried structures/
dwelling units for their members. The Societies and their E
members were made jointly and severely responsible for
payment of premium including installments and ground
rent. By clause 4, a duty was cast upon the Societies and
their members to comply with the provisions of the Capital
of Punjab (Development and Regulation) Act, 1952 and the F
rules and regulations framed thereunder. Clause 6 of the
Scheme enumerated the conditions of eligibility and
entitlement of the members for allotment of dwelling units
of different categories. Clause 8 provided for refund of
earnest money to a Society, if it were to cancel the demand G
before allotment of land. In terms of clause 9, every
member of the Society was required to pay the amount to
the Society by means of crossed demand draft and the
latter was to deposit the same in its account maintained
in the Chandigarh State Co-operative Bank Limited.
H
130 SUPREME COURT REPORTS [2010] 12 S.C.R.
A Clause 10 provided for construction of dwelling units by the
Societies within three years from the date of allotment. By
clause 11, the provisions of the 1973 Rules were made/
applicable to the land allotted under the 1991 Scheme.
B (ii) In view of the interim order passed by the High Court
in Writ Petition No.1454/1992, the Board accepted 10%
earnest money and then called upon the Societies to give
the particulars of their members and the amount deposited
by them.
c .(iii) Vide memo dated 9.6.1993, the Finance Secretary
directed that in case the members of the Societies seek
refund of the earnest money, then 10% of 25% amount
deposited by them shall be deducted.
D (iv) After dismissal of the writ petition by the High Court
with an observation that the Societies who had deposited
... 10% of the sale consideration and found eligible for
allotment, would be liable to pay balance 15% with a further
interest at the rate of 18% per annum, the Finance
Secretary issued memo dated 6.11.1997 and asked the
E
Board to accept the balance 15% earnest money with 18%
interest.
(v) When the members of the Societies demanded refund
of the amount paid by them by indicating that they were
F no longer interested in the flats, the Board requested the
Finance Secretary to give guidance in the matter. The
latter constituted a committee of three officers and on
receipt of the recommendations of the committee, he
issued memo dated 9.3.2000 for refund of earnest money
G to the Societies and their members without forfeiting 10%
of the earnest money but, at the same time, he directed
that interest paid pursuant to the High Court's judgment be
not refunded because the same did not form part of the
earnest money.
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 131
AND ORS. [G.S. SINGHVI, J.]
28. From what we have noted above, it is crystal clear that A
even though the 1991 Scheme was ostensibly framed for
allotment of land to the Societies for construction of multistoried
structures (dwelling units/flats) for their members, but the
provisions contained therein not only regulated the relationship
of the Societies with their members, but also made them jointly B
and severally responsible for payment of the earnest money etc.
The Finance Secretary and the Board issued directions from
time to time for payment of the earnest money and interest by
the· members of the Societies. If the scheme had nothing to do
with the members of the Societies, then it would not have c
contained provisions to regulate their eligibility and entitlement
to get dwelling units to be constructed on the land allotted by
the Board and made them jointly and severally responsible for
payment of the premium etc. and the Finance Secretary would
.. not have issued directions vide memos dated 9.6.1993 and
D
9.3.2000 in the matter of refund of earnest money and interest.
The Board too would not have entertained the request made
by the members of the Societies for refund of the earnest
. money and remitted the amount to the Societies after deducting
10%. Thus, even though no formal contract had been entered
into between the Chandigarh Administration and the Board on
E
the one hand and the members of the Societies on the other
hand, the former exercised sufficient degree of control over the
latter. By making applications for allotment of land, the
Societies will be deemed to have hired or availed the services
of the Chandigarh Administration and the Board in relation to F
housing construction as elucidated and explained in M.K.
Gupta's case and Balbir Singh's case. If the scheme had been
faithfully implemented and land had been allotted to the
Societies, their members would have been the actual and real
beneficiaries. Therefore, they were certainly covered by the G
definition of 'consumer' under Section 2(d)(ii), the second part
of which includes any beneficiary of the services hired or availed
for consideration which has been paid or promised or partly
paid and partly promised. As a sequel to this, it must be held
that the members of the Societies had every right to complain H
132 SUPREME COURT REPORTS [2010] 12 S.C.R.
A against illegal, arbitrary and unjustified forfeiture of 10% earnest
money and non-refund of 18% interest and the District
Consumer Forum did not commit any jurisdictional error by
entertaining the complaints.
29. The argument of Mrs. Rachana Joshi lssar that the
8
Board had deducted. 10% earnest money and declined to
refund 18% interest to the members of the Societies strictly in
accordance with the directives given by the Finance Secretary
and in the absence of challenge to memos dated 9.6.1993 and
9.3.2000, the complainants were not entitled to any relief is
C meritless and deserves to be rejected. At the cost of repetition,
we may observe that in terms of clause 8 of the 1991 Scheme,
a Society would have become entitle~ to refund of the earnest
money without any deduction if it were to cancel the demand
before allotment of land. This is also the spirit of Rule 8 of the
D 1973 Rules which were made applicable to the land allotted
under the scheme. That rule reads as under:
"8. Lease by allotment, Procedure for.- (1) In case of
allotment of site or building the intending lessee shall make
E an application to the Estate Officer in Form 'A'.
(2) No application under sub-rule (1) shall be valid unless
it is accompanied by 10 per cent of the premium as
earnest money in the prescribed mode of payment.
F (3) When 10 per cent of the premium has been so tendered
the Estate Officer shall, subject to such directions as may
be issued by the Chief Administrator in this behalf, allot a
site of the size applied for or a building of which particulars
are given in the application and shall intimate, by registered
G post the number, sector, approximate area, premium and
the rent of the site or building allotted to the applicant.
(4) The applicant shall, unless he refuses to accept the
allotment within 30 days of the date of the receipt of the
allotment order, deposit within that period and in the
H
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 133
AND ORS. [G.S. SINGHVI, J.]
prescribed mode of payment, further 15 per cent of the A
premium. The remaining 75 per cent of the per cent of the
premium shall be paid as provided in rule 12.
(5) If the applicant refuses to accept the allotment within
said period of 30 days, he will be entitled to the refund of B
the amount paid by him. The refusal shall be communicated
to the Estate Officer by a registered letter
(acknowledgement due). The refund shall be made by
means of a cheque payable at the State Bank of India at
Chandigarh and the applicant shall bear the collection C
charges for the same.
(6) If the applicant fails to communicate his refusal to
accept the allotment within 30 days and also fails to
deposit 15 per cent of the premium under sub-rule (4) the
Estate Officer may forfeit the whole or part of the earnest D
money."
30. An analysis of the above reproduced rule would show
that an application for allotment of site or building by way of
lease can be entertained only if it is accompanied by 10% of E
the premium as earnest money. The allottee is required to
deposit 15% of the premium within 30 days of allotment. The
balance amount is to be paid in accordance with Rule 12. An
applicant who refuses to accept allotment within 30 days is
entitled to refund of the amount paid by him. If the applicant F
neither refuses to accept the allotment nor deposits 15% of the
premium, the Estate Officer can forfeit the whole or part of the
earnest money. The provision relating to refund of the premium/
earnest money or forfeiture of the whole or part thereof gets
attracted only after the allotment is made and not before that.
G
If para V(i) of memo dated 9.6.1993 issued by the
Finance Secretary is examined in the light of the plain language
of Rule 8 of the 1973 Rules and clause 8 of the 1991 Scheme,
it becomes clear that the concerned officer had exceeded his
brief when he directed that 10% of 25% of the premium/earnest H
'134 SUPREME COURT REPORTS (201 OJ 12 S.C.R.
A money should be deducted if the members seek refund of the
earnest money on any ground whatsoever. By giving this
directive, the concerned officer indulged in arm twisting and
attempted to teach a lesson to the members of the Societies
who had filed writ petition and succeeded in persuading the
B High Court to restrict payment of the earnest money to 10%.
However, he must have realized the folly committed by issuing
a direction in complete disregard of the spirit of Rule 8(5) of
the 1973 Rules and clause 8 of the 1991 Scheme and this must
have been the reason why he made amends by incorporating
c clause 7 in memo dated 9.3.2000 for full refund of the earnest
money without forfeiting 10%. Unfortunately, it proved to be a
half hearted attempt by the Finance Secretary to redeem the
wrong done earlier because while directing refund of the
earnest money without any deduction, he used the expression
'will henceforth' in clause 7, which gave leverage to the Board
0
to decline the request of the members of the Societies for full
refund of the earnest money on the ground that 15% had
already been remitted to the Societies for being paid to their
members before the issue of memo dated 9.3.2000. In our
view, once the Finance Secretary took the corrective step,
E which was in consonance with the spirit of Rule 8(5) of the 1973
Rules and clause 8 of the 1991 Scheme, the Board should have
refunded the balance 10% amount to all the members who had
applied for refund on finding that land had not been allotted to
the Societies and they may have to wait for indefinite period
F to get the flats.
31. It is also worth noticing that on receipt of the
applications made by the members of the Societies for refund
of the earnest money and interest, the Secretary of the Board
G had written letter dated 11.12.1998 to the Finance Secretary
seeking his guidance in the matter. However, before the latter
could take a decision, the Chief Accounts Officer of the Board
remitted the amount of earnest money to the Societies after
de,ducting 10% with a direction that the same be paid to their
H members. The Board has not explained why its officers did not
CHANDIGARH HOUSING BOARD v. AVTAR SINGH 135
AND ORS. [G.S. SINGHVI, J.]
wait for the decision of the Finance Secretary and why the Chief A
Accounts Officer exhibited undue haste in remitting the amount
of earnest money to the Societies after deducting 10%. In any
case, after the Finance Secretary decided that earnest money
will be refunded to the Societies and their members without any
deduction, the Board should have refunded forfeited portion of B
the earnest money to the members of the Societies and its
failure to do so certainly amounted to deficiency in service.
32. The issue which remains to be examined is whether
the Chandigarh Administration and the Board were justified in C
refusing to refund 18% interest paid by the members of the
Societies in view of the observations made by the High Court.
The consideration of this issue needs to be prefaced with a
comment that the 1952 Act and the 1973 Rules do not provide
for levy of 18% interest on the delayed payment of earnest D
money or a portion thereof. The 1991 Scheme also did not
provide for levy of such interest. Notwithstanding this, the·
members of the Societies had to pay 18% interest because
while dismissing the writ petition, the High Court observed that
the Societies who had deposited 10% of the sale consideration
and found eligible for allotment or have been allotted sites would E
be liable to pay the balance 15% with a further interest at the
rate of 18% per annum. However, there was nothing either in
the interim or the final order of the High Court from which it can
be inferred that the Chandigarh Administration or for that reason
the Board was authorised or empowered to refuse refund of F
18% interest to the members who did not seek allotment of flat.
If the final order passed by the High Court is read in conjunction
with interim order dated 11.5.1992, it becomes clear that the
Societies were to deposit the remaining amount with interest
at the rate of 18% per annum only if they were to accept G
allotment of flats under the Scheme. Although, the writ petitions
were filed by the Societies, the language of the interim order
passed by the High Court shows that the learned Judges were
thinking of imposing liability of 18% interest only on those
members who were to accept allotment of flats to be H
136 SUPREME COURT REPORTS [201 OJ 12 S.C.R.
A constructed by the Societies. The members of the Societies
did not get an opportunity to accept the allotment because even
after deposit of full earnest money and 18% interest, the Board
did not allot land to the Societies on which they could construct
dwelling units/flats. The Finance Secretary misinterpreted the
B orders of the High Court and issued wholly arbitrary and unjust
directive to the Board not to refund 18% interest to the
members of the Societies who had applied for refund before
allotment of land by the Board. In our view, the Chandigarh
Administration and the Board had no right to refuse refund of
c 18% interest and absence of direct challenge to clause 11 of
memo dated 9.3.2000 was not sufficient to legitimize indirect
forfeiture of that amount and the State Commission did not
commit any error by directing refund of the amount of interest
by treating it to be a case of deficiency in service and the
National Commission rightly declined to interfere with the order
0
of the State Commission.
33. In the result, the appeals are dismissed. The Board is
directed to refund the amount due to the complainants within a
period of three months from the date of receipUproduction of
E copy of this judgment. Within that period, the Board shall also
pay litigation cost of Rs.25,000/- to each of the complainants.
N.•J. Appeals dismissed.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "consumer protection"Sign in to search