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K.L. Suneja & Anr. vs Dr. (Mrs.) Manjeet Kaur Monga (D) through her LR & Anr.

Civil Appeal · 2023 INSC 89Decided 31 Jan 2023
Civil Appeal No. 1401 of 2019
M.R. Shah · S. Ravindra Bhat · Dipankar Datta

Background

In 1989 a family booked a flat in the "Siddharth Shila Apartments" scheme in Vaishali, Ghaziabad, and paid seven instalments totalling Rs. 4,53,750 by October 1993. The developer did not build within the promised three years; in April 2005 it cancelled the allotment and sent a Citibank Pay Order refunding the Rs. 4,53,750. The buyer (Dr. Monga) returned the Pay Order, demanded possession and compensation, and filed a complaint under the MRTP Act; the Pay Order ended up filed with her complaint, unencashed, for over a decade. The COMPAT (in 2015) found the developer guilty of unfair trade practice and awarded 15% compound interest on each instalment up to 30 April 2005, which the Supreme Court upheld in 2017, while remanding one question: whether any interest was payable after 30 April 2005, given the un-encashed Pay Order. On remand the NCLAT awarded a further 15% compound interest from May 2005 until the money was finally received in May 2016. Both sides appealed.

Decision Breakdown

The Supreme Court allowed the developer's appeal and dismissed the complainant's. It found that when the developer took the Pay Order in April 2005, the amount was actually debited from its account and, per RBI rules, sat with Citibank earning no interest for anyone; the developer therefore did not enjoy the money after that date. Drawing on the principle in Order XXI Rule 1 of the CPC (that once a debtor tenders payment through a bank instrument, interest ceases to run) the Court held this embodies a sound general rule of prudence, and the developer could not be made to pay interest on Rs. 4,53,750 after 30 April 2005. The complainant knew the Pay Order had been tendered but simply filed it in the case without seeking any order to have the sum kept in an interest-bearing account; with no fault on the developer's side, equities were at best equal and "the loss must lie where it falls". The claim for interest from 1993 was also rejected as already concluded in the earlier round. The Court further recommended that every court and tribunal frame rules requiring amounts or instruments deposited in their registries to be placed in a bank so that such loss does not recur.

Lesson Learnt

If someone refunds you by a bank Pay Order or demand draft, the money has effectively left their hands, refusing or sitting on the instrument will not earn you interest against them. Protect your position by encashing it under protest or asking the court to keep the sum in an interest-bearing account while your dispute continues.

Official source (sci.gov.in)View Judgment (PDF)

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