MANU/SC/0414/2000

Equivalent Citation: AIR2000SC 2003, 2000(3)ALLMR(SC )639, 2000 (40) ALR 447, 2000(3)ARBLR170(SC ), 2000 3 AWC 2335SC ,
[2000]37C LA429(SC ), (2000)3C ompLJ402(SC ), II(2000)C PJ1(SC ), 2000(3)C TC 546, JT2000(7)SC 256, 2001-1-LW86, 2000(5)MPHT321,
2000(5)SC ALE59, (2000)6SC C 113, [2000]Supp1SC R447, (2000)3UPLBEC 2047

IN THE SUPREME COURT OF INDIA

C.A. No. 5329 of 1996 [With Con.P. 324/96, CA. 8316/95, 794/97, 4794/97, 2758/98,
5748/98, 5749/98, 5812/98, 234/99, 375/99, 2210/99, 187-188/2000, 6988/99,
2025/2000, 1422/2000, 5689/99, C.P. 428/98 CA 620/98, 2370/2000, 8482/97, 4174-
4175/99, 6239/1999
Decided On: 12.05.2000
Appellants:Ghaziabad Development Authority
Vs.
Respondent:Union of India (UOI) and Ors.
Hon'ble Judges/Coram:
S. Rajendra Babu and R.C. Lahoti, JJ.
Counsels:
For Appearing parties: Raju Ramachandran, Sr. Adv., Sudhir Kulshreshtha, Kamini
Jaiswal, Prashant Bhushan, Arvind Singh, C.V. Subba Rao, B.K. Prasad, P. Parmeswaran,
B.D. Sharma, Girish Chandra, Sanjay Parikh, Pravir Choudhary, Baldev Krishan Satija, S.
Prasad, Praveen Swarup, B.R. Sabharwal, R.U. Upadhyay, R.N. Keshwani, K.B. Sunder
Rajan,and Manjeet Chawla, Advs
Case Note:
(i) Property - refund - provision contained in brochure issued by development
authority that it shall not be liable to pay any interest on occasion arising for
return of amount - provision held to be applicable only to cases in which
claimant himself responsible for creating circumstances providing occasion for
refund - fault found with Authority - authority therefore cannot justify
resisting of refund of amount with interest.
(ii) Compensation - normally no damages in contract awarded for injury to
feelings or for mental distress, anguish, annoyance, loss of reputation or
social discredit caused by breach of contract - exception limited to contract
whose performance is to provide peace of mind or freedom from distress -
direction awarding compensation set aside.
Case Category:
COMPANY LAW, MRTP AND ALLIED MATTERS - APPEALS UNDER SECTION 55 OF THE
MRTP ACT, 1969
JUDGMENT
R.C. Lahoti, J.
1. Leave granted in SLP (C) No. 18897/99.
2. In this batch of appeals, Ghaziabad Development Authority constituted under Section

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4 of the Uttar Pradesh Urban Planning and Development Act, 1973 is the appellant. The
Authority has from time to time promoted and advertised several schemes for allotment
of developed plots for construction of apartments and/or flats for occupation by the
allottees. Several persons who had subscribed to the schemes approached different
forums complaining of failure or unreasonable delay in accomplishing the schemes.
Some have filed complaints before the Monopolies and Restrictive Trade Practices
Commission and some have raised disputes before the Consumer Disputes Redressal
Forum. In two cases Civil Writ Petitions under Article 226 of the Constitution were filed
before the High Court seeking refund of the amount paid or deposited by the petitioners
with the Authority. In all the cases under appeal the Court or Commission or Forum
concerned has found the appellant-Authority guilty of having unreasonably delayed the
accomplishment of the announced scheme or guilty of failure to perform the promise
held out to the claimants and therefore directed the amount paid or deposited by the
respective claimants to be returned along with interest. In the cases filed before the
High Court of Allahabad there was a term in the brochure issued by the Authority that in
the event of the applicant withdrawing its offer or surrendering the same no interest
whatsoever would be payable to the claimants. The High Court has held such term of
the brochure to be unconscionable and arbitrary and hence violative of Article 14 of the
Constitution. The High Court has directed the amount due and payable to be refunded
with interest calculated at the rate of 12 per cent per annum from the date of deposit to
the date of refund. In all the other appeals before us the impugned order passed by the
Commission or the Forum directs payment of the amount due and payable to the
respective claimants with interest at the rate of 18 per cent per annum. In Civil Appeal
No. 8316 of 1995, G.D.A. v. Brijesh Mehta, the MRTP Commission has held the
claimants entitled to an amount of Rs. 50,000/- payable as compensation for 'mental
agony' suffered by the claimants for failure of the Authority to make available the plot
as promised by it.
3 . As all these appeals raise the following common questions of law, they have been
heard together and are being disposed of by this common judgment. The questions
arising for decision are :
(i) Whether compensation can be awarded for 'mental agony' suffered by the
claimants?
(ii) Whether in the absence of any contract or promise held out by the
Ghaziabad Development Authority any amount by way of interest can be
directed to be paid on the amount found due and payable by the Authority to
the claimants?
(iii) If so, the rate at which the interest can be ordered to be paid?
4 . In C.A. 8316/1995, Ghaziabad Development Authority had announced a scheme for
allotment of developed plots which was known as "Indirapuram Scheme". The Authority
informed the claimants that a plot of 35 sc. metres was reserved for them, the
estimated cost of which was Rs. 4,20,000/- payable in specified installments. An
allotment of plot was also informed. Then at one point of time the claimants were
informed that due to some unavoidable reasons and the development work not having
been completed there has been delay in handing over possession. Having waited for an
unreasonable length of time the claimants approached the MRTP Commission.
5 . When a Development Authority announces a scheme for allotment of plots, the
brochure issued by it for public information is an invitation to offer. Several members of

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public may make applications for availing benefit of the scheme. Such applications are
offers. Some of the offers having been accepted subject to rules of priority or
preference laid down by the Authority result into a contract between the applicant and
the Authority. The legal relationship governing the performance and consequences
flowing from breach would be worked out under the provisions of the Contract Act and
the Specific Relief Act except to the extent governed by the law applicable to the
Authority floating the scheme. In case of breach of contract damages may be claimed by
one party from the other who has broken its contractual obligation in some way or the
other. The damages may be liquidated or unliquidated. Liquidated damages are such
damages as have been agreed upon and fixed by the parties in anticipation of the
breach. Unliquidated damages are such damages as are required to be assessed.
Broadly the principle underlying assessment of damages is to put the aggrieved party
monetarily in the same position as far as possible in which it would have been if the
contract would have been performed. Here the rule as to remoteness of damages comes
into play. Such loss may be compensated as the parties could have contemplated at the
time of entering into the contract. The party held liable to compensation shall be
obliged to compensate for such losses as directly flow from its breach. Chitty on
Contracts (27th Edition, Vol. 1, Para 26.041) states..."Normally, no damages in contract
will be awarded for injury to the plaintiff's feeling, or for his mental distress, anguish,
annoyance, loss of reputation or social discredit caused by the breach of contract; The
exception is limited to contract whose performance is "to provide peace of mind or
freedom from distress"....Damages may also be awarded for nervous shock or an
anxiety state (an actual breakdown in health) suffered by the plaintiff, if that was, at the
time the contract was made, within the contemplation of the parties as a not unlikely
consequence of the breach of contract. Despite these development, however, the Court
of Appeal has refused to award damages for injured feelings to a wrongfully dismissed
employee, and confirmed that damages for anguish and vexation caused by breach of
contract cannot be awarded in an ordinary commercial contract.
6. The ordinary heads of damages allowable in contracts for sale of land are settled. A
vendor who breaks the contract by failing to convey the land to the purchaser is liable
to damages for the purchasers' loss of bargain by paying the market value of the
property at the fixed time for completion less the contract price. The purchaser may
claim the loss of profit he intended to make from a particular use of the land if the
vendor had actual or imputed knowledge thereof. For delay in performance the normal
nature of damages is the value of the use of the land for the period of delay, viz.
usually its rental value (See Chitty on Contracts, ibid, para 26.045).
7. In our opinion, compensation for mental agony could not have been awarded as has
been done by the MRTP Commission.
8 . However, the learned Counsel for the respondents has invited our attention to
Lucknow Development Authority v. M.K. Gupta MANU/SC/0178/1994 : AIR1994SC787
wherein this Court has upheld the award by the Commission of a compensation of Rs.
10,000/- for mental harassment. The basis for such award is to be found in paras 10
and 11 wherein this Court has stated inter alia - "Where it is found that exercise of
discretion was mala fide and the complainant is entitled to compensation for mental and
physical harassment then the officer can no more claim to be under protective cover.
When the citizen seeks to recover compensation from a public authority in respect of
injuries suffered by him for capricious exercise of power and the National Commission
finds it duly proved then it has a statutory obligation to award the same." The Court has
further directed the responsibility for the wrong done to the citizens to be fixed on the
officers who were responsible for causing harassment and agony to the claimants and

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then recover the amount of compensation from the salary of officers found responsible.
The judgment clearly shows the liability having been fixed not within the realm of the
law of contracts but under the principles of administrative law. We do not find any such
case having been pleaded much less made out before the Commission. Indeed, no such
finding has been arrived at by the Commission as was reached by this Court in case of
Lucknow Development Authority (supra). The award of compensation of Rs. 50,000/-for
mental agony suffered by the claimants is held liable to be set aside.
9 . The next question is the award of interest and the rate thereof. It is true that the
terms of the brochure issued by the Authority relevant to any of the cases under appeal
and the correspondence between the parties do not make out an express or implied
contract for payment of interest by the Authority to the claimants. Any provision
contained in the Consumer Protection Act, 1986 the Monopolies and Restrictive Trade
Practices Act, 1969 and U.P. Urban Planning and Development Act, 1973 enabling the
award of such interest has not been brought to our notice. The learned Counsel for the
claimants have placed reliance on a recent decision of this Court in Sovintorg (India)
Ltd. v. State Bank of India, New Delhi MANU/SC/0464/1999 : AIR1999SC2963 wherein
in similar circumstances the National Consumer Disputes Redressal Commission directed
the amount deposited by the claimants to be returned with interest at the rate of 12 per
cent per annum. This Court enhanced the rate of interest to 15 per cent per annum. To
sustain the direction for payment of interest reliance was placed on behalf of the
claimants on Section 34 of the CPC and payment of interest at the rate at which moneys
are lent or advanced by National Banks in relation to commercial transactions was
demanded. This Court did not agree. However, it was observed :-
There was no contract between the parties regarding payment of interest on
delayed deposit or on account of delay on the part of the opposite party to
render the services. Interest cannot be claimed under Section 34 of the Civil
Procedure Code as its provisions have not been specifically made applicable to
the proceedings under the Act. We, however, find that the general provision of
Section 34 being based upon justice, equity and good conscience would
authorise the Redressal Forums and Commissions to also grant interest
appropriately under the circumstance of each case. Interest may also be
awarded in lieu of compensation or damages in appropriate cases. The interest
can also be awarded on equitable grounds.
The State Commission as well as the National Commission were, therefore,
justified in awarding the interest to the appellant but in the circumstances of
the case we feel that grant of interest at the rate of 12% was inadequate as
admittedly the appellant was deprived of the user of a sum of Rs. one lakh for
over a period of seven years. During the aforesaid period, the appellant had to
suffer the winding-up proceedings under the Companies Act, allegedly on the
ground of financial crunch. We are of the opinion that awarding interest at the
rate of 15 per cent per annum would have served the ends of justice.
10. We are therefore of the opinion that interest on equitable grounds can be awarded
in appropriate cases. In Sovintorg (India) Ltd.'s case the rate of 15 per cent per annum
was considered adequate to serve the ends of justice. The Court was apparently
influenced by the fact that the claimant had to suffer winding-up proceedings under the
Companies Act and the defendant must be made to share part of the blame. However, in
the cases before us, the parties have not tendered any evidence enabling formation of
opinion on the rate of interest which can be considered ideal to be adopted. The rate of
interest awarded in equity should neither be too high nor too low. In our opinion

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awarding interest at the rate of 12 per cent per annum would be just and proper and
meet the ends of justice in the cases under consideration. The provision contained in
the brochure issued by the Development Authority that it shall not be liable to pay any
interest in the event of an occasion arising for return of the amount should be held to
be applicable only to such cases in which the claimant is itself responsible for creating
circumstances providing occasion for the refund. In the cases under appeal the fault has
been found with the Authority. The Authority does not therefore have any justification
for resisting refund of the claimants' amount with interest.
1 1 . For the foregoing reasons, the direction made by the MRTP Commission for
payment of Rs. 50,0007- as compensation for mental agony suffered by the claimants-
respondents in Civil Appeal No. 8316/1995 is set aside. In all the other cases the
direction for payment of interest at the rate of 18 per cent shall stand modified to pay
interest at the rate of 12 per cent per annum. Civil Appeal No. 8482/1997
12. This case relates to allotment of a flat. The MRTP Commission has held the claimant
entitled to allotment of a flat. An option has been given to the claimant. If the claimant
may refuse to take the flat in terms of the direction made by the Commission he will be
entitled to the refund of the amounts deposited by him with interest at the rate of 18
per cent per annum from the dates of deposit of the various amounts by the claimant.
During the course of hearing before this Court the possibility of the claim being
satisfied by allotment of an alternative flat was explored but that could not materialise
as the claimant was not agreeable to accept the flat offered by the Authority submitting
that it was located in a deserted area and was heavily priced. That being the position
the direction of the Commission for refund of the amount shall stand though the rate of
interest shall be 12 per cent and not 18 per cent.
13. All the appeals and contempt petitions stand disposed of accordingly. No order as
to the costs.

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