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M/S Suneja Towers Private Limited & Anr. vs. Anita Merchant (Civil Appeal Nos. 2892-2894 of 2023)

Civil Appeal · 2023 INSC 391Decided 18 Apr 2023
Civil Appeal Nos. 2892-2894 of 2023
Dinesh Maheshwari · Sanjay Kumar

Background

In 1989, a non-resident Indian buyer booked three flats in a Ghaziabad residential project developed by the appellant-builder and paid over 60% of the price in installments, but the builder failed to deliver possession even after 16 years. When she filed consumer complaints, the National and State Consumer Commissions relied on an earlier decision involving the same builder (Dr. Manjeet Kaur Monga's case) and directed the builder to refund her money with 14% compound interest. The builder appealed to the Supreme Court, challenging only the award of compound interest.

Decision Breakdown

The Supreme Court held that consumer fora do not have a general power to award "compound interest" as a shortcut form of compensation in money-refund cases, instead, they must assess appropriate compensation or punitive damages based on the actual facts, gravity of deficiency of service, and the consumer's genuine loss, giving reasons for the amount awarded. The Court found that the earlier "Dr. Monga" precedent, on which the lower fora had mechanically relied, did not lay down a general rule requiring compound interest, and that awarding it here without any real analysis would amount to unjust enrichment given how large the resulting sum was compared to the flats' actual worth. However, taking into account the peculiar facts (that the builder had at one point tried to refund money by cheque in 2005, which the buyer had declined) the Court disapproved the compound-interest approach in principle but, as an extraordinary one-off measure, allowed the buyer to keep the amount (about Rs. 2.48 crore) she had already received under an earlier interim order, while relieving the builder of any further payment.

Lesson Learnt

Consumer forums cannot award "compound interest" on a refund as an automatic or formulaic remedy; any compensation, including punitive damages, must be based on a reasoned assessment of the actual loss and circumstances of the case, not a mechanical application of a past decision's outcome to a different case.

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

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