SUPREME COURT HOLDS COMPLAINANT NOT ENTITLED TO INTEREST ON PAY ORDER AMOUNT, AS THE RELIEF FOR INTEREST WAS NOT SOUGHT AT THE TIME OF FILING COMPLAINT

Recently, a two Judge Bench of the Supreme Court comprising of Justice M.R. Shah and Justice S Ravindra Bhat passed a Judgment dated 31.01.2023 in K. L. Suneja & Anr. vs. Dr. (Mrs.) Manjeet Kaur Monga (D) Through Her LR & Anr. in Civil Appeal No(S). 4530 of 2019, wherein the Bench held that as the Complainant failed to seek orders for deposit of the Pay Order amount in an interest-bearing account at the time of filing Complaint before the then Monopolies and Restrictive Trade Practices (MRTP) Commission, hence, the Developer cannot be held liable to pay interest on the said amount later. The Apex Court further directed all Courts and judicial forums to frame guidelines to ensure that amounts deposited with the Office or Registry of the Courts / Tribunals are mandatorily deposited in a bank or financial institution. The direction was issued to ensure that litigants do not face any future loss of interest on the amount deposited before Courts / Tribunals.

FACTS

i) In the present case, one, Smt. Gursharan Kaur (Complainant) was fighting a case against a Developer in respect of its delay in allotting flat to the Complainant. The Complainant, after paying up to 6 instalments, had refused to pay further instalments citing delay in progress of completion. On 30-04-2005, the Developer cancelled the allotment. Along with the said Cancellation Letter, the Developer enclosed a Pay Order dated 30-04-2005 for Rs. 4,53,750/- issued by Citibank towards full refund of payments made by the Complainant.

ii) Aggrieved by such cancellation of allotment, the Complainant filed a Complaint under Section 36 under the then Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) (Keeping of register) before the then Monopolies and Restrictive Trade Practices (MRTP) Commission, thereby, alleging unfair trade practice by the Developer and further sought possession of flat. The Complainant refused to accept the refund and did not encash the Pay Order. The Pay Order was also annexed with the Complaint filed before MRTP.

iii) But during the pendency of the matter, the Competition Act 2002 was introduced w.e.f. 01-09-2009 and thereby, MRTP Act was repealed. Hence, the matters pending before the MRTP Commission was transferred to the then Competition Appellate Tribunal (COMPAT).

Competition Appellate Tribunal’s Observations

i. The Ld. COMPAT passed an Order dated 03-08-2015 in Dr (Mrs) Manjeet Kaur Monga vs. Mr K.L. Suneja, Civil Appeal No. 39/2009, and held that the Developer had falsely represented to the general public (including the Complainant) the time within which the Project was to be completed, i.e., 3 years, but did not complete the construction for more than a decade.

ii. The Ld. COMPAT held the Developer guilty of unfair trade practice and also ruled that the Complainant was justified in not paying further instalments and that the Developer committed illegality by cancelling the allotment.

iii. The Ld. COMPAT further declined the relief of delivery of possession of the flat, as MRTP Commission could not assume the powers of a civil court to grant relief of specific performance to the Complainant.

iv. The Ld. COMPAT, however, directed the Developer to pay the compensation with compound interest @ 15% per annum to the Legal Representatives of the Complainant with interest calculated on each instalment from the date of its deposit till 30-04-2005, i.e., the date on which the allotment was cancelled. Further, the Developer and the Citibank were directed to pay the amount already invested by the Complainant, i.e. Rs. 4,53,750/-, to the Complainant’s Legal Representatives.

Supreme Court Observations

1) The Ld. COMPAT’s Order dated 03-08-2015 was challenged by both the Complainant and the Developer through separate Appeals filed before the Supreme Court, which by its Order dated 18-07-2017, upheld the compensation awarded to the Legal Representatives of the Complainant in terms of the formula adopted by the Ld. COMPAT.

2) The Apex Court vide Orders dated 08-04-2016 and 26-04-2016 further observed as follows:

i) That the contentions of the Developer were that when it had taken the Pay Order from Citibank on 30-04-2005, the amount of Rs. 4,53,750/- had been deducted from its Current Account. It was however not received by the Complainant-Payee. The Account Holder / Developer cancelled the Pay Order and requested for re-credit of the amount; which was done by Citibank on 22-06-2016. The Supreme Court also noted the contention of Citibank that the money deducted from Current Account of the Developer in April 2005, though not paid to the Payee, was not enjoyed by the Bank as the Pay Order could have been presented at any moment.

ii) However, the aforesaid issues pertaining to Pay Order had not been considered by the Ld. COMPAT, hence, the matter was remitted back to Ld. COMPAT and thereby disposed off the Appeals. The Supreme Court further directed the Developer to pay the compensation with compound interest @ 15% per annum to the Legal Representatives of the Complainant up to 30-04-2005.

COMPAT

(i) The Ld. COMPAT i.e. National Company Law Appellate Tribunal (NCLAT) under the Competition Act 2002, was to decide upon the issue whether any compensation is payable for the period after 30-04-2005 and whether Citibank is liable to pay any interest to the Developer.

(ii) After remand, the Complainant impleaded Citibank as a respondent before NCLAT.

(iii) The NCLAT observed that the Legal Representatives of the Complainant did not get the refund of Rs. 4,53,750/- in terms of Ld. COMPAT Order dated 03-08-2015, as the funds were credited back to the Developer’s Account by Citibank on 16-06-2016 and a fresh Pay Order dated 16-06-2016 was issued by Citibank. Meanwhile, the said amount was made over to the Complainant on 07-05-2016, in compliance with the Supreme Court’s Orders dated 08-04-2016 and 26-04-2016.

(iv) Thus, as Ld. COMPAT’s Order was not complied with till 07-05-2016, hence NCLAT vide Judgment dated 19-12-2018 held that the Complainant’s Legal Representatives would be entitled to “further compensation in the form of compound interest @ 15% per annum on the principal amount of Rs.4,53,750/- w.e.f. 1st May, 2005 till 7th May, 2016 further entitled to pendente lite and future interest till realization of the accumulated arrears from Respondents No. 1 and 2. (i.e., the developer)”

(v) The NCLAT further held that the Citibank is not liable to pay interest, as there was no fault on the part of the Banker.

REASONING AND ANALYSIS

Aggrieved by the NCLAT Judgement dated 19-12-2018, two Civil Appeals were preferred under Article 133 of the Constitution of India (Appellate jurisdiction of Supreme Court in regard to Civil Matters) by the Complainant’s Legal Representatives and the Developer. The Apex Court vide Judgment dated 31-01-2023 observed as follows:

(1) That the Complainant had only filed the original Pay Order before the MRTP Commission and did not seek any order for interest on the said the Pay Order amount of Rs.4,53,750/- at the time of filing Complaint.

(2) That the Complainant may have been under the impression that by filing the original Pay Order before the MRTP Commission, she indicated that she was not interested in receiving refund, but was interested only to secure possession of the flat.

(3) But in case the Complainant was interested in seeking interest on the Pay Order amount, she ought to have applied through her Counsel for an appropriate order at the relevant time to ensure that the amount was deposited in an interest-bearing account with the MRTP Commission, which was not done by the Complainant.

(4) In fact, as per Citibank, the Pay Order had become stale and hence, its proceeds / funds were moved to its ‘Unclaimed Sundry Account’, and thus, it did not attract any interest in terms of the RBI directions.

(5) In this regard, the Supreme Court applied the principles in Order 21 of the Code of Civil Procedure 1908 (Execution of Decrees and Orders), that “if the amount is deposited, or paid to the decree holder or person entitled to it, the person entitled to the amount cannot later seek interest on it”.

(6) The Apex Court further observed that:

“This is a rule of prudence, inasmuch as the debtor, or person required to pay or refund the amount, is under an obligation to ensure that the amount payable is placed at the disposal of the person entitled to receive it. Once that is complete (in the form of payment, through different modes, including tendering a Banker’s Cheque, or Pay Order or Demand Draft, all of which require the account holder / debtor to pay the bank, which would then issue the instrument) the tender, or ‘payment’ is complete.”

(7) Thus, the Supreme Court held that as the Complainant failed to seek interest on the Pay Order amount of Rs.4,53,750/- at the time of filing Complaint before Ld. MRTP Commission, hence, the Developer cannot be held liable to pay interest on the sum of Rs. 4,53,750/- after 30-04-2005.

(8) The Apex Court also issued a direction to all the courts that:

“All courts and judicial forums should frame guidelines in cases where amounts are deposited with the office / registry of the court / tribunal, that such amounts should mandatorily be deposited in a bank or some financial institution, to ensure that no loss is caused in the future. Such guidelines should also cover situations where the concerned litigant merely files the instrument (Pay Order, Demand Draft, Banker’s Cheque, etc.) without seeking any order, so as to avoid situations like the present case. These guidelines should be embodied in the form of appropriate rules, or regulations of each court, tribunal, commission, authority, agency, etc. exercising adjudicatory power.”

CONCLUSION

Thus, based on the aforesaid observations, the Apex Court observed that the Complainant ought to have adopted any of the following courses:

1. She could have sought for a deposit of the proceeds of the Pay Order in an account, to be maintained by the Registrar of the MRTP Commission.
2. She could have sought for a ‘without prejudice’ order enabling her to encash the amount, and at the same time ensure that her claim was not defeated on that score.
3. She could also have sought for appropriate orders that the amount be maintained by the Developer, who could, in the event it became necessary, be directed to pay the principal along with such interest as the MRTP Commission or the Tribunal deemed appropriate and in the interests of justice.

Since none of these choices were opted for, and also having regard to the fact that the amount in question was undoubtedly debited from the Developer’s Current Account, the Apex Court held that the Developer cannot be held liable to pay interest on the Pay Order amount of Rs. 4,53,750/- after 30-04-2005. Hence, the Developer’s Appeal was allowed and the Complainant’s Appeal was dismissed.

Devashish Kakkar

Legal Associate

The Indian Lawyer