Category Archives: Consumer Law

I.C. Sharma Vs. The Oriental Insurance Company Ltd [SC 2018 January]

KEYWORDS :- Consumer-Insurance policy-

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DATE :-January 10, 2018-

  • Under-insurance basically means that the insured has taken out an insurance policy in which he has valued the insured items for a sum which is less than the actual value of the insured item. In a country like India this is normally done to pay a lesser premium. This is, in fact, harmful to the policy holder and not to the Insurance Company because even if the entire insured property is lost, the policy holder will only get the maximum sum for which the property has been insured and not a paisa more than the sum insured.

SUPREME COURT OF INDIA

I.C. Sharma Vs. The Oriental Insurance Company Ltd.

[Civil Appeal No. 3167 of 2017]

Deepak Gupta J.

1. This appeal filed by the complainant/consumer is directed against the order dated 29.09.2014 passed by the National Consumer Disputes Redressal Commission (for short ‘the National Commission’), New Delhi, disposing of the revision petition filed by the parties and also against the order dated 22.02.2016 disposing of the review petition filed by the appellant.

2. Briefly stated the facts of the case are that the appellant had first purchased a householder insurance policy from the Oriental Insurance Company (‘the Insurance Company’ for short) on 23.12.2000. This policy was renewed till 22.12.2005. As per this policy the coverage of articles/items in the house of the appellant was “as per list”. It is not disputed that thereafter the Insurance Company discontinued “as per list” policies and instead started issuing policies for consolidated amounts. The original policy had expired on 22.12.2005 and fresh policy as per new scheme was taken out on 19.01.2006 and this was renewed from time to time. The last renewal was from 19.01.2007 to 18.01.2008.

3. The appellant had gone to the United Kingdom. Some time, between 27.01.2008 to 30.01.2008, a burglary took place inside the premises of the appellant, and he was informed about the same by a neighbor on 31.01.2008. The appellant requested his nephew to inform the Insurance Company and an FIR was also registered with the Mehrauli Police Station in South Delhi. The Insurance Company was also informed about the burglary on 31.01.2008 or on the next day. The police could not trace out the crime.

4. The Insurance Company first offered a sum of Rs. 3,500/- to the appellant sometime in November, 2008 which he refused to accept. He, thereafter, met certain higher officials of the Insurance Company and an amount of Rs.29,920/- was offered to him. Being dissatisfied, the appellant filed a claim before the District Consumer Disputes Redressal Forum (for short ‘the District Forum’), which was disposed of by the District Forum on the ground that the articles mentioned therein were not mentioned in the list. Thereafter, the appellant filed an appeal before the State Consumer Disputes Redressal Commission (for short ‘the State Commission’) which was allowed on 15.01.2014 and he was awarded a sum of Rs.4,03,150/-.

5. Revision petitions were filed both by the appellant claiming interest and compensation and by the Insurance Company against the order of the State Commission. The main ground in the petition filed by the Insurance Company was that a large number of items which had been claimed to be stolen were not insured and there was a lot of under-insurance.

The National Commission held that once the appellant had supplied a list of articles for the first policy, if there was any change he should have filed a fresh list and since a large number of articles were not mentioned in the list the claimant was only entitled to an amount of Rs.21,000/- towards the value of stolen gold articles; Rs.5,929/- towards the depreciated value of Citizen watch; Rs.7,000/- for repair of door latches etc.; and Rs.16,000/- towards the value of stolen clothes after making appropriate deduction for under-insurance of clothing.

The complainant was also awarded compensation of Rs.5,000/- towards the cost of litigation etc. The appellant filed an SLP before this Court and he was granted liberty to file a review petition before the National Commission mainly on the ground that the policy of 2008-2009 was not considered by the National Commission.

6. The National Commission in the review petition took into consideration the fact that the new insurance policy did not require a list of items to be given. It, thereafter, awarded amounts under various heads as follows:-

i) Jewellery and valuables – Claimant claimed that the jewellery lost was worth Rs.1,84,150/- but the insurance package was only for Rs.1,00,500/-. The National Commission ordered the Insurance Company to pay the amount after making adjustment for under-insurance;

ii) Two cutlery sets in silver valuing Rs.31,000/- – The National Commission held that these items were not insured and did not fall under the heading of ‘kitchenware/crockery/cutlery sets’.

iii) Clothing – The insured value of clothing was Rs.55,000/- and the claimant claimed Rs.87,000/-. The National Commission directed payment of this amount after making adjustment for under-insurance.

iv) Electrical/Mechanical appliances – The appellant claimed a sum of Rs.66,000/- for loss of electrical and mechanical appliances, as against the coverage of Rs.1,82,500/-. This claim was rejected on the ground that the claimant failed to produce bills of invoices towards this amount.

v) Miscellaneous items – The appellant claimed Rs.28,000/- for loss of miscellaneous items including watches valuing Rs.20,000/- as against the coverage of Rs.41,000/-. He has been awarded only Rs.8,000/- and the claim for watches of Rs.20,000/- has been rejected on the ground that he failed to produce purchase invoices.

vi) Repair of locks, doors, latches, safe etc. – The appellant was awarded Rs.7,000/- for repair of locks, doors, latches, safe etc., as claimed by him.

vii) The claimant was also awarded compensation of Rs.10,000/- and interest @ 9% per annum.

7. Aggrieved, the appellant is before this Court.

8. The only legal issue which arises for consideration is “what is under-insurance – and the effect thereof ?”.

Under-insurance basically means that the insured has taken out an insurance policy in which he has valued the insured items for a sum which is less than the actual value of the insured item. In a country like India this is normally done to pay a lesser premium. This is, in fact, harmful to the policy holder and not to the Insurance Company because even if the entire insured property is lost, the policy holder will only get the maximum sum for which the property has been insured and not a paisa more than the sum insured.

To give an example, in case a person takes out the householder policy covering fire insurance and gives the value of the structure of his house and goods stored therein at Rs.50,00,000/- even though the value of the same is Rs.1,00,00,000/- then even if the entire house and goods are completely lost in a fire, he cannot get an amount above Rs.50,00,000/- even though the value may be more.

9. If all the insured goods are lost then there is no problem. The insured is entitled to the amount for which the goods were insured even if that be less than the actual value of the goods. In case a person gets a painting insured for Rs.1,00,000/- though the value of the same is Rs.10,00,000/-, if the painting is lost the insured is entitled to Rs.1,00,000/- only. If all the insured goods falling under one head are stolen or lost then the insurance company cannot apply the principle of averaging out because, though the loss may be Rs.10,00,000/-, the claimant will get only one Rs.1,00,000/-as per the value assessed and the insurance premium paid by him.

10. The Insurance Company can however apply the principle of averaging out when all the goods are not destroyed. Supposing the entire house was insured for Rs.50,00,000/-, but on valuation it is found that the value of the structure and the goods was Rs.1,00,00,000/- and if the policy holder claims that he has suffered loss of Rs.40,00,000/- then he will be entitled to only Rs.20,00,000/-, by applying the principle of averaging out. What this means is that if the value of the goods is more than the sum for which they are insured then it is presumed that the policy holder has not taken out insurance policy for the un-insured value of the goods. The claim is allowed by applying the principle of averaging out, i.e. the insured is paid an amount proportionate to the extent of insurance as compared to the actual value of the goods insured.

11. To clarify the matter further, we may give another example. Supposing, the insurer owns two paintings of Rs.5,00,000/- each but pays premium for insurance cover of Rs.1,00,000/- for both the paintings. If one painting is lost, even though the value of the painting may Rs.5,00,000/- he will not get Rs.1,00,000/- but will get only Rs.50,000/-, as proportionate amount. Therefore, when a group of items is insured under one heading and only some of the items and not all items are lost/stolen then the principle of under-insurance will apply. However, if all or most of the items of value covered under the policy are stolen, then the insurance company is bound to pay the value of the goods insured.

12. Applying this principle we may now deal with this case.

i) Jewellery and valuables – The entire jewellery and valuables were insured for Rs.1,00,500/- but the claimant claimed that the value of jewellery stolen was Rs.1,84,150/-. In this case the entire jewellery was stolen. Therefore, the averaging out clause will not apply and the claimant is entitled to a sum of Rs.1,00,500/- under this head.

ii) Silver cutlery sets – The case of the claimant is that these were insured under the head of ‘kitchenware/crockery/ cutlery’ items. According to him, the value of these sets is Rs.31,000/-. Obviously kitchenware/crockery/cutlery will include many other items lying in the kitchen and in the dining room. Silver cutlery sets would normally fall under the head ‘jewellery and valuables’ and since the claimant has been awarded the maximum amount payable under that head, now he cannot divert the claim for silver cutlery to the head ‘kitchenware/crockery/cutlery’.

This Court can take judicial notice of the fact that in any middle class household kitchenware/crockery/cutlery would value more than Rs.18,000/-. It is obvious that silver cutlery valuing Rs.31,000/- could not be insured under the head kitchenware/crockery/cutlery’ which was valued only for Rs.18,000/-. Therefore, the National Commission was right in holding that there was no coverage for this item.

iii) Clothing – The appellant claims that he has suffered a loss of Rs.87,000/- , as against the coverage of Rs.55,000/-. However, on perusing the statement of the appellant himself we find that he has shown Rs.87,000/- to be the value of only six items of clothing. There must have been many other items of clothing in the house and when all the clothing has been insured under one heading, it will include clothing items of all types, both expensive and in-expensive. Admittedly, all items of clothing were not stolen and, therefore, in this case the principle of under-insurance will have to apply and the National Commission was right in directing that the payment be made after applying principle of under-insurance.

iv) Electrical/Mechanical appliances – The coverage under this head was Rs.1,82,500/- and the claimant claimed only Rs.66,000/- and he gave the details of the items. This claim has been rejected only on the ground that he had not produced invoices of the same. The case of the appellant was that those items were gifted by his son. The items such as CD changer, video camera, DVD player, Camera etc. could be found in any middle class household.

It is not the case of the Insurance Company that these items were not stolen. The claim should not have been rejected only on the ground that invoices were not produced. The affidavit of the appellant clearly indicates both the nature of the items lost and the value thereof. This is supported by corroborative evidence of the list of items given to the police. Once the insurance company itself changed its policy from ‘as per list policies’ to ‘policies for consolidated amounts’, then an insured is not expected to give the item-wise details along with the valuation.

We may also add that if the insurance company desires that item-wise valuation should be given for items over and above a certain value then it is the duty of the insurance company to advise the insured at the time of issuing the first policy of insurance and at the time of each renewal. The insurance company must at the time of accepting the premium advise the policy holder properly. The insurance company cannot accept the premium without asking for any details and later deny its liability on the ground that such details were not given. Therefore, we accept the claim of the claimant and he is entitled to Rs.66,000/- under this head.

v) Miscellaneous items – On the same reasoning as given for electrical/mechanical appliances we accept the claim of the appellant of Rs.20,000/- for loss of four watches and, therefore, he is entitled to Rs.28,000/- under this head.

vi) Repair of locks, doors, latches, safe etc. – The claimant has already been awarded Rs.7,000/-under this head.

13. In addition thereto, we are of the view that the claimant should be awarded Rs.25,000/-towards compensation and litigations expenses etc. On the aforesaid amounts the appellant shall be entitled to an interest @12% per annum w.e.f. 01.01.2009 till payment. The Insurance Company shall be entitled to adjust/deduct the amounts already paid/deposited by it.

14. The appeal is disposed of in the above terms. Pending applications, if any, shall also stand disposed of.

15. The Registry is directed to send a certified copy of this judgment to the appellant, who appeared in person.

 (Madan B. Lokur)

(Deepak Gupta)

New Delhi

January 10, 2018

Kusum Agarwal & ANR. Vs. M/s. Harsha Associates Pvt. Ltd.[2017SC]

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the conduct of the respondent clearly shows that he had not come to court with clean hands. In fact, in December, 2004 when a letter was written to the appellants offering them the commercial space in question, the same had already been sold to someone else. It would also be pertinent to mention that before the District Forum statement had been made by the counsel for the respondent that the shop in question was lying vacant and, therefore, the District Forum had passed the directions mentioned hereinabove.

KeyWords: Consumer Dispute Act-Possession of Commertial Space

Supreme Court of India

Kusum Agarwal & ANR. Vs. M/s. Harsha Associates Pvt. Ltd.

[Civil Appeal No. 16814/2017 arising out of SLP (C) No. 4520 of 2016]

Bench:   (Madan B. Lokur) . (S. Abdul Nazeer) . (Deepak Gupta)

Deepak Gupta, J.

1. Leave granted.

2. The respondent was building an office complex and issued an advertisement “Commercial space in Harsha Commercial Complex” to be constructed on Plot No.1, Local Shopping Centre, Gazipur, Delhi. The appellants who are the husband and wife jointly applied for one shop in the Complex which was offered to them by the respondent for a total consideration of Rs.4,80,000/-. Pursuant to this, an agreement was entered into between the parties on 25.01.2004, whereby one shop was agreed to be sold to the appellants for a total consideration of Rs.4,80,000/- to be paid in installments.

3. On 06.12.2004, the respondent wrote a letter to appellant no.1 informing her that the shop is ready, requested the appellants to pay the balance amount of Rs.2,75,000/- and maintenance charges etc., i.e. a total amount of Rs.3,16,930.96/-on or before 15.12.2004. According to the appellants, though they were ready to pay this amount the shop was not handed over to them. The appellants sent a letter to the respondent on 19.04.2005 informing the respondent that Rs.2,05,000/- had already been paid and they are ready to take possession of the shop and pay the balance amount.

Since possession of the shop was not delivered, the appellants filed a complaint before the District Consumer Disputes Redressal Forum, Delhi (for short ‘District Forum’). Defence taken by the respondent was that the appellants were not ready and willing to pay the balance amount and, therefore, their amount had been forfeited. The District Forum directed the respondent to 3 handover the possession of the shop to the appellants on payment of the balance amount of Rs.2,45,000/- with interest @18% per annum from 28.03.2004 till the date of delivery of the possession along with other sundry charges. Thereafter, the appellants issued cheques for these amounts but the possession of shop was not delivered.

4. The respondent filed an appeal before the State Consumer Disputes Redressal Commission, New Delhi (for short ‘the State Commission’) and during the course of appeal it was disclosed by the respondent for the first time that the shop in question had already been sold prior to December, 2004 when letter was written to the appellants.

The State Commission noticed that Rs.1,95,000/- had been paid earlier and Rs.10,000/- had been paid later and, therefore, directed the repayment of this amount within a period of one month. No interest was awarded and the appellants, therefore, filed revision petition before the National Consumer Disputes Redressal Commission, New Delhi (for short ‘the National Commission’). The National Commission did not decide the matter on merits but held that the space was a commercial space and, therefore, the appellants were not consumers and dismissed the petition.

5. At the outset, we may notice that this was not a defence raised by the respondent either before the District Forum or before the State Commission. In fact, the respondent had not even challenged the order of the State Commission. In our view, the National Commission, in a revision petition filed by the complainant praying for increase of compensation and payment of interest, could not have dismissed the petition itself. We, therefore, set aside the order of the National Commission.

6. As far as the merits are concerned, the conduct of the respondent clearly shows that he had not come to court with clean hands. In fact, in December, 2004 when a letter was written to the appellants offering them the commercial space in question, the same had already been sold to someone else. It would also be pertinent to mention that before the District Forum statement had been made by the counsel for the respondent that the shop in question was lying vacant and, therefore, the District Forum had passed the directions mentioned hereinabove.

Later, it was stated that this statement had wrongly been made by the counsel due to mis-communication. The fact remains that the shop booked by the appellants was sold to another customer on 04.11.2004, even before the letter dated 06.12.2004 was sent to the appellants. It is, therefore, a clear-cut case of deficiency in service by the respondent.

7. In view of the above, the appeal is allowed. Judgment of the National Commission is set aside and the respondent is directed to refund the amount of Rs.2,05,000/- , along with damages of Rs.50,000/-, i.e., Rs,2,55,000/- in all along with interest @18% per annum payable from 06.12.2004 till payment of the entire amount.

8. The appeal is disposed of in the above terms.

………………………….J. (Madan B. Lokur)

………………………….J. (S. Abdul Nazeer)

………………………….J. (Deepak Gupta)

New Delhi

October 12, 2017

Ghaziabad Development Authority Versus Balbir Singh[SC 2004 March]

Keywords:- Compensation

Supreme Court-min

Concept that King can do no wrong has been abandoned in England itself and the State is now held responsible for tortuous act of its servants.

Ghaziabad Development Authority Versus Balbir Singh

The word ‘compensation’ is again of very wide connotation. It has not been defined in the Act. According to dictionary it means, ‘compensating or being compensated; thing given as recompense;’. In legal sense it may constitute actual loss or expected loss and may extend to physical mental or even emotional suffering, insult or injury or loss

It is now accepted both by this Court and English Courts that the State is liable to compensate for loss or injury suffered by a citizen due to arbitrary actions of its employees.

Even though the authority may have filed an Appeal/Revision, if no stay is obtained or if stay is refused the Order must be complied with.

AIR 2004 SC 2141 : (2004) 3 SCR 68 : (2004) 5 SCC 65 : JT 2004 (5) SC 17 : (2004) 3 SCALE 671

(SUPREME COURT OF INDIA)

Ghaziabad Development Authority Appellant
Versus
Balbir Singh Respondent

(Before : S. N. Variava And H. K. Sema, JJ.)

Civil Appeal Nos. 7173*of 2002 with 7391, 7793, 8400, 7700, 7288, 7792, 7788 of 2002 and etc. etc., Decided on : 17-03-2004.

Consumer Protection Act, 1986—Sections 17 and 21

order

1. In this batch of matters the question is whether grant of interest at the rate of 18% per annum by the Consumer Forums in all cases is justifiable. As facts are varying, at this stage, this Court is only dealing with the question of law. Thereafter this Court shall take up each case separately.

2. The National Consumer Disputes Redressal Commission considered a bunch of matters, the lead matter being the case of Haryana Urban Development Authority vs. Darsh Kumar. The Commission held, in those cases, that in cases, of decision of service by development authorities like HUDA and GDA, interest must be awarded at the rate of 18% per annum and that this would take into consideration the escalation in the cost of construction as well.

3. Pursuant to this judgment the National Commission has been disposing of all subsequent matters with a one paragraph order which, for all practical purposes, reads as under :-

“We have already taken a view in the case of Haryana Urban Development Authority vs. Darsh Kumar (Revision Petition No. 1197 of 1997), where we have upheld the award of interest at the rate of 18% per annum. We have provided for certain period during which the interest would not run. The impugned judgment is modified only to that extent. This Revision Petition is disposed of in terms of our judgment in the case of HUDA vs. Darsh Kumar”.

4. It has been shown to us that the facts are varying and different. Whilst facts of all cases cannot be set out by way of illustration it must be stated that in some cases even though monies had been paid and allotments had been made of flats/plots, the scheme itself got cancelled for some reason or the other. Possession was thus refused to be delivered of the flats/plots allotted to the allottees. In some cases, at a much later date, possession of some other flat/plot was offered at an increased rate. In some cases possession was offered but not taken by the party. In some cases even though the scheme was not cancelled and there was no refusal to deliver possession, yet possession was not delivered for a number of years even after monies had been received. In some cases the construction was of sub-standard quality or it was incomplete. In some of the cases the authority has demanded extra amounts from the party. In some cases the party had not paid the extra amounts whilst in some cases they had paid those amounts. The question, therefore, was of refund of those amounts wrongly collected. In some cases allotments were made and possession offered of flats/land which was encumbered or occupied by some other party. In some cases the party had asked for refund of amounts paid.

5. Irrespective of the type of case, irrespective of the amount of delay the National Commission has been granting/confirming interest at the rate of 18% per annum without even going into the facts of the case. It must be mentioned that in some of the matters before us it has been pointed out that the District and the State Forums had granted interest at a lower rate. Appeals had been filed only by the authority. Yet the National Commission has, in the Appeal filed by the authority, increased the rate of interest of 18% per annum.

6.The learned Attorney General submitted that the liability to pay interest only arises if there is any default or omission on the part of the Body which caused damage or prejudice to the allottee of the flat/plot. This submission requires to be accepted. However, in the context of the Consumer Protection Act the principles laid down in the case of Lucknow Development Authority vs. M. K. Gupta reported in (1994) 1 SCC 243 have to be kept in mind. In this case the question was whether a Development Authority rendered service to bring it within the purview of the Consumer Protection Act. It has been held that the Development Authority is rendering service. It has been also held as follows :-

“8. Having examined the wide reach of the Act and jurisdiction of the Commission to entertain a complaint not only against business or trading activity but even against service rendered by statutory and public authorities the stage is now set for determining if the Commission in exercise of its jurisdiction under the Act could award compensation and if such compensation could be for harassment and agony to a consumer. But these aspects specially the latter are of vital significance in the present day context. Still more important issue is the liability of payment. That is, should the society or the tax payer be burdened for oppressive and capricious act of the public officers or it be paid by those responsible for it. The administrative law of accountability of public authorities for their arbitrary and even ultra vires actions has taken many strides. It is now accepted both by this Court and English Courts that the State is liable to compensate for loss or injury suffered by a citizen due to arbitrary actions of its employees. In State of Gujarat vs. Memon Mahomed Haji Hasam (1967) 3 SCR 938 the order of the High Court directing payment of compensation for disposal of seized vehicles without waiting for the outcome of decision in appeal was upheld both on principle of bailee’s ‘legal obligation to preserve the property intact and also the obligation to take reasonable care of it…. to return it in the same condition in which it was seized’ and also because the Government was, ‘bound to return the said property by reason of its statutory obligation or to pay its value if it had disabled itself from returning it either by its own act or by act of its agents and servants’. It was extended further even to bona fide action of the authorities if it was contrary to law in Lala Bishambar Nath vs. Agra Nagar Mahapalika, Agra (1973) 1 SCC 788). It was held that where the authorities could not have taken any action against the dealer and their order was invalid, ‘it is immaterial that the respondents had acted bona fide and in the interest of preservation of public health. Their motive may be good but their orders are illegal. They would accordingly be liable for any loss caused to the appellants by their action.’ The theoretical concept that King can do no wrong has been abandoned in England itself and the State is now held responsible for tortuous act of its servants. The First Law Commission constituted after coming into force of the Constitution on liability of the State in tort, observed that the old distinciton between sovereing and non-sovereign functions should no longer be invoked to determine liability of the State. Friedmann observed :

“It is now increasingly necessary to abandon the lingering fiction of a legally indivisible State, and of a feudal conception of the Crown, and to substitute for it the principle of legal liability where the State, either directly or through incorporated public authorities, engages in activities of a commercial, industrial or managerial character. The proper test is not an impracticable distinction between governmental and non-governmental function, but the nature and form of the activity in question.”

Even Kasturi Lal Ralia Ram Jain vs. State of U. P. (1965) 1 SCR 375 did not provide any immunity for tortuous acts of public servants committed in discharge of statutory function if it was not referable to sovereign power. Since house construction or for that matter any service hired by a consumer or facility availed by him is not a soveraign function of the State the ratio of Kasturi Lal could not stand in way of the Commission awarding compensation. We respectfully agree with Mathew, J. in Shyam Sunder vs. State of Rajasthan (1974) 1 SCC 690 that it is not necessary, ‘to consider whether there is any rational dividing line between the so-called sovereign and proprietary or commercial functions for determining the liability of the State’ (SCC p. 695, para 20). In any case the law has always maintained that the public authorities who are entrusted with statutory function cannot act negligently. As far back as 1878 the law was succinctly explained in Geddis vs. Proprietors of Bann Reservoir (1878) 3 AC 430 thus :

“I take it, without citing cases, that it is now thoroughly well established that no action will lie for doing that which the legislature has authorised, if it be done without negligence, although it does occasion damage to anyone; but an action does lie for doing what the Legislature has authorised, if it be done negligently.”

Under our Constitution sovereignty vests in the people. Every limb of the constitutional machinery is obliged to be people oriented. No functionary in exercise of statutory power can claim immunity, except to the extent protected by the statute itself. Public authorities acting in violation of constitutional or statutory provisions oppressively are accountable for their behaviour before authorities created under the statute like the commission or the courts entrusted with responsibility of maintaining the rule of law. Each hierarchy in the Act is empowered to entertain a complaint by the consumer for value of the goods or services and compensation. The word ‘compensation’ is again of very wide connotation. It has not been defined in the Act. According to dictionary it means, ‘compensating or being compensated; thing given as recompense;’. In legal sense it may constitute actual loss or expected loss and may extend to physical mental or even emotional suffering, insult or injury or loss. Therefore, when the commission has been vested with the jurisdiction to award value of goods or services and compensation it has to be construed widely enabling the commission to determine compensation for any loss or damage suffered by a consumer which in law is otherwise included in wide meaning of compensation. The provision in our opinion enables a consumer to claim and empowers the Commission to redress any injustice done to him. Any other construction would defeat the very purpose of the Act. The Commission or the Forum in the Act is thus entitled to award not only value of the goods or services but also to compensate a consumer for injustice suffered by him.”

This Court then went to hold as follows :

“10. Who should pay the amount determined by the Commission for harassment and agony, the statutory authority or should it be realised from those who were responsible for it? Compensation as explained includes both the just equivalent for loss of goods or services and also for sufferance of injustice. For instance in Civil Appeal No…. of 1993 arising out of SlP (Civil) No. 659 of 1991 the Commission directed the Bangalore Development Authority to pay ` 2446 to the consumer for the expenses incurred by him in getting the lease-cum-sale agreement registered as it was additional expenditure for alternative site allotted to him. No misfeasance was found. The moment the authority came to know of the mistake committed by it, it took immediate action by allotting alternative site to the respondent. It was compensation for exact loss suffered by the respondent. It arose in due discharge of duties. For such acts or omissions the loss suffered has to be made good by the authority itself. But when the sufferance is due to mala fide or oppressive or capricious acts etc. of a public servant, then the nature of liability changes. The Commission under the Act could determine such amount if in its opinion the consumer suffered injury due to what is called misfeasance of the officers by the English Courts. Even in England where award of exemplary or aggravated damages for insult etc. to a person has now been held to be punitive, exception has been carved out if the injury is due to, ‘oppressive, arbitrary or unconstiutional action by servants of the Government’ (Salmond and Heuston on the Law of Torts). Misfeasance in public office is explained by Wade in his book on Administrative Law thus :

“Even where there is no ministerial duty as above, and even where no recognised tort such as trespass, nuisance, or negligence is committed, public authorities or officers may be liable in damages for malicious, deliberate or injurious wrong-doing. There is thus a tort which has been called misfeasance in public office, and which includes malicious abuse of power, deliberate maladministration, and perhaps also other unlawful acts causing injury.” (p. 777).

The jurisdiction and power of the courts to indemnify a citizen for injury suffered due to abuse of power by public authorities is founded as observed by Lord Hailsham in Cassell and Co. Ltd. vs. Broome (1972 AC 1027 on the principle that, ‘an award of exemplary damages can serve a useful purpose in vindicating the strength of law’. An ordinary citizen or a common man is hardly equipped to match the might of the State or its instrumentalities. That is provided by the rule of law. It acts as a check on arbitrary and capricious exercise of power. In Rookes vs. Barnard (1664 AC 1129 it was observed by Lord Devlin, ‘the servants of the government are also the servants of the people and the use of their power must always be subordinate to their duty of service’. a public functionary if he acts maliciously or oppressively and the exercise of powers results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. He who is responsible for it must suffer it. Compensation or damage as explained earlier may arise even when the officer discharges his duty honestly and bona fide. But when it arises due to arbitrary or capricious behaviour then it loses its individual character and assumes social significance. Harassment of a common man by public authorities is socially abhorring and legally impermissible. It may harm him personally but the injury to society is far more grievous. Crime and corruption thrive and prosper in the society due to lack of public resistance. Nothing is more damaging than the feeling of helplessness. An ordinary citizen instead of complaining and fighting succumbs to the pressure of undesirable functioning in offices instead of standing against it. Therefore the award of compensation for harassment by public authorities not only compensates the individual, satisfies him personally but helps in curing social evil. It may result in improving the work culture and help in changing the outlook. Wade in his book Administrative Law has observed that it is to the credit of public authorities that there are simply few reported English decisions on this form of malpractice, namely, misfeasance in public offices which includes malicious use of power, deliberate maladministration and perhaps also other unlawful acts causing injury. One of the reasons for this appears to be development of law which apart, from other factors succeeded in keeping a salutary check on the functioning in the Government or semi-government offices by holding the officers personally responsible for their capricious or even ultra vires action resulting in injury or loss to a citizen by awarding damages against them. Various decisions rendered from time to time have been referred to by Wade on Misfeasance by Public Authorities. We shall refer to some of them to demonstrate how necessary it is for our society. In Ashby vs. White (1703) 2 Ld Raym 938 the House of Lords invoked the principle of ubi jus ibi remedium in favour of an elector who was wrongfully prevented from voting and decreed the claim of damages.The ratio of this decision has been applied and extended by English Courts in various situations. In Roncarelli vs. Duplessis (1959) 16 DLR 2d 689 the Supreme Court of Canada awarded damages against the Prime Minister of Quebec personally for directing the cancellation of a restaurant-owner’s liquor licene solely because the licensee provided bail on many occasions for fellow members of the sect of Jehovah’s Witnesses, which was then unpopular with the authorities. It was observed that, ‘what could be more malicious than to punish this licensee for having done what he had an absolute right to do in a matter utterly irrelevant to the Alcoholic Liquor Act? Malice in the proper sense is simply acting for a reason and purpose knowingly foreign to the administration, to which was added here the element of intentional punishment by what was virtually vocation outlawry. In Smith vs. East Elloe Rural District Council (1956 AC 736 the House of Lords held that an action for damages might proceed against the clerk of a local authority personally on the ground that he had procured the compulsory purchase of the plaintiff’s property wrongfully and in bad faith. In Farrington vs. Thompson (1959 UR 286) the Supreme Court of Victoria awarded damages for exercising a power the authorities knew they did not possess. a licensing Inspector and a police officer ordered the plaintiff to close his hotel and cease supplying liquor. He obeyed and filed a suit for the resultant loss. The Court observed :

“Now I take it to be perfectly clear, that if a public officer abuses his office, either by an act of omission or commission, and the consequence of that is an injury to an individual, an action may be maintained against such public officer.”

In Wood vs. Blair (The Times, July 3, 4, 5, 1957 (Hallet J and Court of Appeal) a dairy farmer’s manageress contracted typhoid fever and the local authority served notices forbidding him to sell milk, except under certain conditions. These notices were void, and the farmer was awarded damages on the ground that the notices were invalid and that the plaintiff was entitled to damages for misfeasance. This was done even though the finding was that the officers had acted from the best motives.

11. Today the issue thus is not only of award of compensation but who should bear the brunt. The concept of authority and power exercised by public functionaries has many dimensions. It has undergone tremendous change with passage of time and chagne in socio-economic outlook. The authority empowered to function under a statute while exercising power discharges public duty. It has to act to subserve general welfare and common good. In discharging this duty honestly and bona fide, loss may accrue to any person. And he may claim compensation which may in circumstances be payable. But where the duty is performed capriciously or the exercise of power results in harassment and agony then the responsibility to pay the loss determined should be whose? In a modern society no authority can arrogate to itself the power to act in a manner which is arbitrary. It is unfortunate that matters which require immediate attention linger on and the man in the street is made to run from one end to other with no result. The culture of window clearance appears to be totally dead. Even in ordinary matters a common man who has neither the political backing nor the financial strength to match the inaction in public oriented departments gets frustrated and it erodes the credibility in the system. Public administration, no doubt involves a vast amount of administrative discretion which shields the action of administrative authority. But 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 a 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. It was never more necessary than today when even social obligations are regulated by grant of statutory powers. The test of permissive form of grant is over. It is now imperative and implicit in the exercise of power that it should be for the sake of society. When the Court directs payment of damages or compensation against the State the ultimate sufferer is the common man. It is the tax payers’ money which is paid for inaction of those who are entrusted under the Act to discharge their duties in accordance with law. It is, therefore, necessary that the Commission when it is satisfied that a complainant is entitled to compensation for harassment or mental agony or oppression, which finding of course should be recorded carefully on material and convicing circumstances and not lightly, then it should further direct the department concerned to pay the amount to the complainant from the public fund immediately but to recover the same from those who are found responsible for such unpardonable behaviour by dividing it proportionately where there are more than one functionaries.”

We are in full agreement with what is observed herein. Thus the law is that the Consumer Protection Act has a wide reach and the Commission has jurisdiction even in cases of service rendered by statutory and public authorities. Such authorities become liable to compensate for misfeasance in public office i.e. an act which is oppressive or capricious or arbitrary or negligent provided loss or injury is suffered by a citizen. The word compensation is of a very wide connotation. It may constitute actual loss or expected loss and may extend to compensation for physical, mental or even emotional suffering, insult or injury or loss. The provisions of the Consumer Protection Act enables a consumer to claim and empower the Commission to redress any injustice done. The Commission or the Forum is entitled to award not only value of goods or services but also to compensate a consumer for injustice suffered by him. The Commission/Forum must determine that such sufferance is due to mala fide or capricious or oppressive act. It can then determine amount for which the authority is liable to compensate the consumer for his sufferance due to misfeasance in public office by the officers. Such compensation is for vindicating the strength of law. It acts as a check on arbitrary and capricious exercise of power. It helps in curing social evil. It will hopefully result in improving the work culture and in changing the outlook of the officer/public servant. No authority can arrogate to itself the power to act in manner which is arbitrary. Matters which require immediate attention should not be allowed to linger on. The consumer must not be made to run from pillar to post. 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. If the Commission/Forum is satisfied that a complainant is entitled to compensation for loss or injury or for harassment or mental agony or oppression, then after recording a finding it must direct the authority to pay compensation and then also direct recovery from those found responsible for such unpardonable behaviour.

7.At this stage itself it must be mentioned that learned Attorney General had relied upon the case of Ghaziabad Development Authority vs. Union of India reported in (2000) 6 SCC 113 wherein, whilst considering a case of breach of contract under Section 73 of the Contract Act, it has been held that no damages are payable for mental agony in cases of breach of ordinary commercial contracts. This Court considered the case of Lucknow Development Authority (supra) and held that liability for mental agony had been fixed not within the realms of contract but under principles of administrative law. In this case the award towards mental agony was deleted on the ground that these were no pleadings to that effect and no finding on that point. This authority does not take a contrary view to the principles laid down in Lucknow Development Authority’s case but merely differentiates it on facts. Thus where there is a specific finding of misfeasance in public office compensation for mental agony can be granted. If there are findings of misfeasance in public office then the principles set out in this authority will have no application and the principles set out in Lucknow Development Authority’s case (supra) would apply. In such cases it would be open for the Commission/Forums to grant compensation for mental agony.

8. However, the power and duty to award compensation does not mean that irrespective of facts of the case compensation can be awarded in all matters at a uniform rate of 18% per annum. As seen above what is being awarded is compensation i.e. a recompense for the loss or injury. It therefore necessarily has to be based on a finding of loss or injury and has to correlate with the amount of loss or injury. Thus the Forum or the Commission must determine that there has been deficiency in service and/or misfeasance in public office which has resulted in loss or injury. No hard and fast rule can be laid down, however a few examples would be where an allotment is made, price is received/paid but possession is not given within the period set out in the brochure. The Commission/Forum would then need to determine the loss. Loss could be determined on basis of loss of rent which could have been earned if possession was given and the premises let out or if the consumer has had to stay in rented premises then on basis of rent actually paid by him. Along with recompensing the loss the Commission/Forum may also compensate for harassment/injury both mental and physical. Similarly compensation can be given if after allotment is made and there has been cancellation of scheme without any justifiable cause.

9. That compensation cannot be uniform and can best of illustrated by considering cases where possession is being directed to be delivered and cases where only monies are directed to be returned. In cases where possession is being directed to be delivered the compensation for harassment will necessarily have to be less because in a way that party is being compensated by increase in the value of the property he is getting. But in cases where monies are being simply returned then the party is suffering a loss inasmuch as he had deposited the money in the hope of getting a flat/plot. He is being deprived of that flat/plot. He has been deprived of the benefit of escalation of the price of that flat/plot. Therefore the compensation in such cases would necessarily have to be higher. Further if the construction is not of good quality or not complete, the compensation would be the cost of putting it in good shape or completing it along with some compensation for harassment. Similarly, if at the time of giving possession a higher price or other amounts is collected unjustifiably and without there being any provision for the same the direction would be to refund it with a reasonable rate of interest. If possession is refused or not given because the consumer has refused to pay the amount, then on the finding that the demand was unjustified the consumer can be compensated for harassment and a direction to deliver possession can be given. If a party who has paid the amount is told by the authority that they are not in a position to ascertain whether he has paid the amount and that party is made to run from pillar to post in order to show that he has paid the amount, there would be deficiency of service for which compensation for harassment must be awarded depending on the extent of harassment. Similarly, if after delivery of possession, the sale deeds or title deeds are not executed without any justifiable reasons, the compensation would depend on the amount of harassment suffered. We clarify that the above are mere examples. They are not exhaustive. The above shows that compensation cannot be the same in all cases irrespective of the type of loss or injury suffered by the consumer.

10. As has been set out hereinabove, the National Forum has been awarding interest at a flat rate of 18% per annum irrespective of the facts of each case. This, in our view, is unsustainable. Award of compensation must be under different separate heads and must vary from case to case depending on the facts of each case.

11. At this stage, it must be mentioned that the National Forum has, in its Judgment in Darsh Kumar’s case (supra) stated that the interest at the rate of 18% per annum takes into consideration the escalation in the cost of construction as well. Even if that be so the compensation cannot be at a uniform rate. If the delay is only of one or two years the escalation in the cost of construction will not be as much as in a case where the delay is of five years or more. Therefore, if compensation has to be awarded for escalation in the costs of construction, it must be done under that head after taking into consideration the amount of delay. Such compensation can be fixed on the basis of indexes of bodies like CPWD or PWD. Further, it must be noted that where a flat is allotted and possession given even though it is given belatedly there will be no question of escalation in the cost of construction. Yet, even in such cases interest at the rate 18% per annum including escalation in the cost of construction has been granted. Further in cases where the Commission/Forum has directed delivery of possession the party has to a certain extent has already got a benefit. The cost of the land/flat would have gone up in the meantime. Of course, even in cases where delivery of possession has been directed there could be compensation for the harassment/loss. But such compensation has to be worked out after looking into the facts of each case and after determining what is the amount of harassment loss which had been caused to the consumer.

12.The National Forum in the lead judgment has considered the authorities of this Court in the case of Ghaziabad Development Authority vs. Dhanesh Chand Goel (SLP (Civil) No. 11315/2000) decided on 12th January, 2001 arising from the order of the MRTP Commission dated 22nd February, 2000) and the case of Haryana Urban Development Authority vs. Rajnish Chander Sharde reported in JT 2000 (8) SC 154. From these decisions, the National Forum has concluded that award of interest at the rate of 18% per annum on amount deposited by the allottee where there is a delay in handing over possession is reasonble and could be awarded on equitable grounds. In our view, this conclusion of the National Forum is not correct. In Dhanesh Chand Goel’s case (supra) the facts were gross. Those facts have been set out in the order of the National Forum itself. Those facts show that GDA started a scheme for allotment of houses in Governdpuram. Dhanesh Chand had applied for allotment. He had paid the amount. He had been intimated on 16th November, 1993 that he had been allotted a house, as per the draw held on 20th October, 1993. Thereafter in 1996 he was informed that there was an increase in the price. He did not pay the increased amount and therefore possession was not given to him. It appears that the flat which had been allotted to him was thereafter allotted to one Shanti Suraksha Bal. Shri Dhanesh Chand was asked to give his option for allotment in some other scheme at a different place. It is under those circumstances that refund was directed with interest at the rate of 18% per annum. This Court while dismissing the Special Leave Petition was careful enough to record that the rate of 18% interest per annum was reasonable given the facts recorded by the lower authority. Thus, this case shows that if the facts are gross then 18% interest could be given but the Forum must first conclude that the facts justified grant of interest at such a rate. Similarly, in Rajnish Chander Sharde’s case (supra), the facts were such that they justified a grant of interest at the rate of 18% per annum. This Court has noted that there was delay in delivery of possession and in the meantime the complainant had been compelled to live in rented accommodation and pay ` 1600/- per month. This Court has noted that interest at 18% was given instead of directing the body to compensate for the loss caused i.e. at the rate of ` 1600/- per month. It is on facts this Court upheld the grant of interest @ 18% per annum. For from showing that these authorities justify grant of interest at 18% in all cases irrespective of the facts, the authorities of this Court clearly indicate that interest at such rate is to be granted only when the facts so justify.

13. The learned Attorney General submitted that interest is to be awarded taking into consideration the rates of interest which would be payable by Financial Institutions if amounts are deposited with them. He submitted that the Interest Act, 1978 is applicable even to a Tribunal. He pointed out that under the Interest Act the “current rate of interest” would mean the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued by the Reserve Bank of India under the Banking Regulations Act, 1949. He relied on Section 3 of the Interest Act which provides that in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest. He submitted that the Commission whilst awarding interest has to follow the provisions of the Interest Act. He submitted that the same principles apply under Section 34 of the Code of Civil Procedure.

14.The learned Attorney General relied upon the case of Central Bank of India vs. Ravindra reported in (2002) 1 SCC 367, wherein interest has been defined as follows :

“37. Black’s Law Dictionary (7th Edn.) defines “interest” inter alia as the compensation fixed by agreement or allowed by law for the use or detention of money, or for the loss of money by one who is entitled to its use; especially, the amount owed to a lender in return for the use of the borrowed money. According to Stroud’s Judicial Dictionary of Words and Phrases (5th Edn.) interest means, inter alia, compensation paid by the borrower to the lender for deprivation of the use of his money. In Secy., Irrigation Deptt., Govt. of Orissa vs. G. C. Roy (1992) 1 SCC 508 the Constitution Bench opined that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be a called interest, compensation or damages…..this is the principles of Section 34 of the Civil Procedure Code. In Sham Lal Narula (Dr) vs. CIT (1964) 7 SCR 668 this Court held that interest is paid for the deprivation of the use of the money. The essence of interest in the opinion if Lord Wright in Riches vs. Westminister Bank Ltd. (1947) 1 All ER 469 : 1947 AC 390 (HL) All ER at p. 472 is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had the use of the money, or, conversely, the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation; the money due to the creditor was not paid, or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation whether the compensation was liquidated under an agreement or statute. A Division Bench of the High Court of Punjab speaking through Tek Chand J. in I CIT vs. Dr. Sham Lal Narula (1963) 50 ITR 513) thus articulated the cocnept of interest.

“8. The words ‘interest’ and ‘compensation’ are sometimes used interchangeably and on other occasions they have distinct connotation. ‘Interest’ in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, ‘interest’ is understood to mean the amount which one has contracted to pay for use of borrowed money. … In whatever category ‘interest’ in a particular case may be put, it is a consideration paid either for the use of money or for forbearance in demanding it, after it has fallen due, and thus, it is a charge for the use or forbearance of money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage, for use of money, belonging to another, or for the delay in paying money after it has become payable.”

In this case it is also observed that the Reserve Bank of India has supervisory role over banking. It is observed that Reserve Bank of India has been issuing directions/circulars dealing with rates of interest. It is held that the Reserve Bank of India circulars can be treated as standards regarding rates of interest.

15.The learned Attorney General then referred to the case of In Defence of Arnit Das vs. State of Bihar reported in (2001) 2 SCC 9 wherein, in the context of a claim under the Motor Vehicles Act, this Court has noted that with the change in economy and policy of Reserve Bank of India the interest rates are lowered. Interest at the rate of 9% was granted on the footing that nationalised banks now grant interest at that rate on fixed deposits for one year. It was pointed out that this reasoning was approved by this Court in the case of United India Insurance Co. Ltd. vs. Patricia Jean Mahajan reported in (2002) 6 SCC 281.

16. The learned Attorney General also relied on the case of Bihar State Housing Board vs. Prio Ranjan Roy reported in (1997) 6 SCC 487, wherein it is held that where damages are awarded there must be assessment thereof. It is held that the Order awarding damages must contain an indication of the basis upon which the amount awarded is arrived at. It was held that in the Order there must be some statement about the relationship between the amount awarded and the default and unjustifiable delay and harassment found to have been caused. This Court then remitted the matter back to National Commission for consideration of the aspect of compensation dehors. It was directed that if damages are awarded reasons must be set out.

17.The learned Attorney General also relied upon the case of Prashant Kumar Shahi vs. Ghaziabad Development Authority reported in (2000) 4 SCC 120 . In this case it has been held that facts would have to be looked into to ascertain whether the authority or the allottee was responsible for the alleged delay.

18. There can be no dispute to the principles laid down in Prashant Kumar Shahi’s case and Bihar State Housing Board’s case (supra). It is on these principles that it is already held that awarding interest at a flat rate of 18% is not justified. It is clear that in all these cases interest is being awarded as and by way of compensation/damages. Whilst so awarding it must be shown that there is relationship between the amount awarded and the default/unjustifiable delay/harassment. It is thus necessary that there be separate awards under each such head with reasons why such award is justified. However, the principles that interest must be granted at the current rate of interest is only applicable where the proceeding are for recovery of debt or damages. They apply where a refund of amount is being claimed and the direction is to refund amounts with interest. The principles which govern grant of interest do not apply to grant of compensation. For this reason also it becomes necessary to consider facts and award damage/compensation under various heads.

19. That brings to the question as to the date from which interest would be payable. Normally in cases of refund interest will be payable from the date the monies were deposited with the body till they are returned either by payment to that party or deposited in a Court. In cases where compensation is directed to be paid, the Commission/Forum must direct payment within a particular period and further direct that if payment is not made within that time the authority will also pay interest. Such interest must be based on the current rate of interest.

20. Now we come to the question as to what is to be done in all these matters where the Commission/Forum has already passed the stereo-type order set out above. To remit all matters back to the Commission would cause undue hardship and unnecessary costs to the Consumer, many of whom are appearing in person as they cannot afford a lawyer. In all future matters the Commission/Forum must now award compensation under various heads if it concludes that there has been deficiency of service or misfeasance in public office. So far as this bunch of matters is concerned instead of remitting them back we consider it expedient to take up each matter ourselves. If we find that the Forum/Commission has on facts found deficiency of service or misfeasance in public office, then depending on facts of that case we may not interfere with the award of interest. We will then treat it to be in lieu of compensation. We may however vary the rate of interest depending on facts of each case. Just by way of example we take two instances set out below.

21. In a Scheme known as “Karpuripuram Scheme” plots were allotted, monies collected. However thereafter the scheme was cancelled. In some of the matters we have seen that the District Forum has recorded that the authority could give no explanation as to why the Scheme was cancelled. Before us some sort of explanation is sought to be given. In our view, irrespective of whether there was genuine reason to cancel or not, the monies must be returned with interest at the rate of 18%. We say so because it is clear that even if the body has not already floated another scheme on the same land it is clear that the body is going to derive great profit from this land and therefore compensating the allottee with interest at 18% per annum is just and fair.

22. In Civil Appeal No. 7224 of 2002 the respondent had applied for a house in a scheme floated in 1992. He had paid the entire cost. He had been allotted a flat and issued a reservation letter. Yet no possession was given. Thereafter, in 1996 the respondent was informed that for unavoidable reasons the house has been allotted to somebody else and if he desires, he can obtain an alternate flat at a much higher price. This therefore is also a case where absolutely no justifiable reason why the party has not been delivered possession of the flat which had been allotted to him nor has any offer been made to return his money with interest. Instead the body has asked the party to apply for an alternate flat at a higher rate. In our view, on these facts the award of interest at the rate 18% is justified. It is not just interest on the amount invested but is also compensation for the harassment and agony caused to the allottee. We have given these two instances only by way of illustrations.

23. As stated above the interest, in both these cases, will be payable from the date the monies were paid till they are retained or deposited in Court/Tribunal. We however clarify that merely because we are maintaining awards of interest it must not be taken to mean that in future the Commission/Forum must not work out compensation under various heads and that they can continue to grant interest only by way of damage/compensation.

24. We clarify that in all cases where interest has already been paid @ 18% irrespective of the above order, the authority will not be entitled to call upon the party to refund the amount which have already been paid.

25.Another point also requires consideration at this stage. In the lead Judgment the National Commission has held that no interest is payable for the period 24-4-1991 to 16-12-1993 as during that period there was a stay order passed by the Allahabad High Court in operation. Some of the allottees have filed Appeals challenging that portion of the Order. It is contended, on their behalf that there was no stay order in respect of the plots allotted to them. It was contended that the authority cannot justify non-delivery to them. As against this it is pointed out that this Court has already in the case of G.D.A. vs. Sanchar Vihar Sahkari Avas Samiti Ltd. reported in (1996) 9 SCC 314 upheld the view of the National Commission in refusing interest or damages for the period during which the stay operated. It is also pointed out that the Commission had deputed the Vice-Chairman to enquire and report whether the authority was prevented from delivering possession to all due to the stay order. It is pointed out that the Vice-Chairman had submitted a report pointing out that even though the stay Order was not in respect of all plots, yet the authority could not deliver possession of any plot as well the pipelines and other infrastructural work had to be taken through the plots in respect of which the stay order operated. As per the Report of the Vice-Chairman the authority was prevented, by the stay order, from delivering possession to anybody. The National Commission has accepted this Report. We see no reason to take a different view, particularly when another Bench has already refused to interfere on this aspect.

26. Before we part with this Order, we have to mention that many parties complained to us that even the undisputed amounts had not been paid to them. This was disputed on behalf of the authorities. However, it is clear that the amounts were paid/deposited belatedly. We therefore clarify that unless there is a stay obtained from a higher forum, the mere fact of filing of an Appeal/Revision will not entitle the authority to not comply with the Order of the Forum. Even though the authority may have filed an Appeal/Revision, if no stay is obtained or if stay is refused the Order must be complied with. In such cases the higher forum should, before entertaining the Appeal/Revision, ensure that the Order is first complied with.

27. The matters are adjourned for two weeks.


Counsel for the Parties:

Soli J. Sorabjee, Attorney General; K. B. Sinha; Sr. Advocate, Sudhir Kulshreshta; Manish Singhvi, Rakesh Uttamchandra Upadhyaya, Santosh Kumar, A. S. Rawat, P. Narasimhan, K. N. Nagpal, Varinder Kumar Sharma, Pramod Swarup, Y. Prabhakara Rao, Ashok K. Srivastava, Ravindra Kumar Neeraj Kumar Jain, Aditya Kumar Choudhary, Bharat Singh, Amit Pawan, Ugra Shankar Prasad, Anil Nag, Krishnanand Pandeya, Shibashish Misra, Devesh Singh, Paraney Ranjan, Praneet Ranjan, S. C. Paul, Manok Kulshreshtha, Ashok Yadav, Ms. Chanchal Goyal, C.I. Bashal, Mrs. Rekha Pandey, Himanshu Shekhar, Prasenjit Keswani, Prashant Choudhary, S. P. Sharma, Abhishek Atrey, Shishir Singh, Ashwani Bhardwaj, Satinder S. Gulati, Dr. Kailash Chand, Satish Aggarwal, Rajesh K. Sharma, Ms. Shalu Sharma, Irshad Ahmad, Avatar Singh Rawat, Ms. Hemantika Wahi, Lakshmi Raman Singh. S. L. Aneja Mohd. Tahir Siddiqui, Devendra Singh. B. C. Pandey, Rakesh K. Sharma, M. C. Dhingra, P. N. Puri, V. Sudeer M. B. Rama Subba Raju, Balaji Srinivasan, Ms. S. Sunita, S. Srinivasan, Debasis Misra, P. D. Sharma, Snil Mittal, P. K. Agrawal, Ranjan Mukherjee, Uma Datta, Rakesh K. Knanna, Mrs. Rashmi Khanna, Shashank Shekhar, Surya Kant, Syed Ali Ahmed, Syed Tanweer Ahmed, R. D. Upadhayay, Anil Kumar Jha Suresh C. Gupta, A. Guneshwar Sharma, J. K. Pali, Kamal Mohan Gupta, Chandra Prakash Pandey, Rameshwar Prasad Goyal, B. R. Sharma, Rajeev K. Singh, P. N. Ramalingam, S. K. Nandy, Alok Gupta, Ms. Indra Sawhney, Ms. Amita Gupta, Pramjeet Singh Lamba, Ms. Neelam Tiwari, Ms. Manjula Gupta, M. P. Shorawala, K. L. Janjani, Pankaj Kumar Singh, Dr. Vinod Tiwary, Rakesh K. Khanna, Pradeep Misra, Sandeep Kumar, Dr. I. B. Gaur, Jitendra Mohan Sharma, K. S. Rana, A. K. Sen Gupta, M. Jayasree, Rajiv Mehta, K. C. Kaushik, Gulshan Bajwa, Advocate (NP) Mrs. V. D. Khanna, Dr. Meera Agarwal, Ramesh Chadnra Mishra, Ashutosh Verma, Amit Singh, Amit Kumar, Kuldip Singh, Prabhijit Jauhar, S. S. Jauhar, Ms. S. Narang, Raj Kumar Mehta, Prashant Kumar, Himinder Lal, S. B. Sinha, Ramesh Babu M. R., Raj Kumar Gupta, Sheo Kumar Gupta, Mrs. Anuja A. N. Baradaiyar, Ravi Prakash Mehrotra, Mrs. Deepti R. Mehrotra, Garvesh Kabra, Mahesh Srivastava, Advocate for M/s. L. M. Nanavati Associates, Vimal Chandra S. Dave Brij Bhushan, Ranjit Khatri, Abhijat P. Medh. I. C. Goyal, A. S. Rawat Javed Mahmud Rao, Advocates with them, for Appearing Parties.

Jose Philip Mampillil Versus M/s. Premier Automobiles Ltd. and another[SC 2004 January]

27-01-2004

Supreme Court-min

Appellant suffered mental agony in taking delivery of a defective car after having paid for a brand new car and in taking the car again and again to the dealer for repairs

Jose Philip Mampillil Versus M/s. Premier Automobiles Ltd. and another

Keywords:-Mental agony

In our view, it is shameful that a defective car was sought to be sold as a brand new car.

Had this defect occurred by virtue of the Appellant’s misusing the car, 2nd Respondent would never have accepted responsibility for repair of the piston rings.

AIR 2004 SC 1529 : (2004) 1 SCR 1095 : (2004) 2 SCC 278 : JT 2004 (2) SC 549 : (2004) 2 SCALE 100

(SUPREME COURT OF INDIA)

Jose Philip Mampillil Appellant
Versus
M/s. Premier Automobiles Ltd. and another Respondent

(Before : S. N. Variava And H. K. Sema, JJ.)

Civil Appeal No. 3611 of 2002*, Decided on : 27-01-2004.

Consumer Protection Act, 1986—Section 2(1)(g)

Counsel for the Parties:

Appellant-in-person; Siddharth Dave, Senthil Jagadeesan, V. Ramasubramanian, Ramesh Singh, Ms. Bina Gupta, Ms. Vanita Bhargava and Ms. Nina Gupta, Advocates, for Respondents.

Judgment

S. N. Variava, J—This Appeal has been filed by a party-in-person, against the Order of the National Consumer Disputes Redressal Commission dated 7th December, 2000.

2. Briefly stated the facts are as follows :

The Appellant had placed an order for purchase of a Premier 1.38 Diesel Car manufactured by the 1st Respondent. The full price was paid by the Appellant. The 2nd Respondent was the Dealer of the 1st Respondent at Kottayam. When the Appellant went to take delivery of the car he found defects in the paint of the car. He, therefore, complained to 2nd Respondent. 2nd Respondent promised to rectify the defects and called him again after some days. The Appellant went after some days. He found that the defects had not been cured. Therefore, he was not willing to take delivery of the car. However, he was persuaded to take delivery of the car on the assurance that all defects would be cured. At this stage, it was also noticed that the piston rings of the engine were defective and that there was heavy leakage of oil. Thereafter the car was repeatedly sent to the dealer for repairs. Each time it was returned claiming that the defects had been cured. However, in fact the defects were not cured.

3. The Appellant, therefore, filed a complaint before the District Consumer Disputes Redressal Forum claiming that there should be an order directing the Respondent to take back the car and to replace it with a brand new defectless car or to refund the total value with 24% interest thereon. He also claimed compensation for hardship and mental agony and for costs. The District Forum appointed a Commissioner to inspect the car. The Inspection was done in the presence of the 2nd Respondent. The Commissioner notes that the notice had been given to the 1st Respondent. However, nobody from 1st Respondent remained present presumably because their agent was present. The Commissioner in his report has set out that a large number of defects were found in the car. The District Forum acting on this report directed repair of the car free of cost and replacement of the engine.

4. Both the Appellant as well as the 1st Respondent went in Appeal to the State Consumer Disputes Redressal Forum. The State Consumer Forum dismissed the Appeal of the Appellant. The State Consumer Forum by its Order dated 16th February, 1998, in the Appeal of the 1st Respondent, came to the conclusion that there was no need to replace the engine, but directed repair of the car free of cost.

5. The Appellant then filed a Revision before the National Consumer Disputes Redressal Commission which has been summarily dismissed by the impugned Order.

6. We have heard the parties at great length. We have seen the material on record. From the material on record, it is clear that the car was defective at the time of delivery. There is no doubt that there were defects in the paint and that the piston rings of the engine had gone. The submission that the piston rings got spoiled after the delivery was taken cannot be accepted. The agent of the 1st Respondent, i.e. 2nd Respondent, had acknowledged that the piston rings were defective. They would not have so acknowledged unless it was a defect at the time of the delivery. Had this defect occurred by virtue of the Appellant’s misusing the car, 2nd Respondent would never have accepted responsibility for repair of the piston rings.

7. It must be remembered that these cars were manufactured in Maharashtra. During those days the cars used to be driven down to various places in India by drivers hired by the 1st Respondent. It is a well known fact that many drivers drove the cars rashly and negligently. The piston rings of a diesel engine could only have gone if the car had been run for a long distance without proper lubricants and/or if it was driven rashly. The piston rings of a diesel engine could never have gone in the small amount of running which the Appellant did after he took delivery. If by rash and negligent driving the piston rings of a new car got spoiled, the effect on other parts of the car would also be severe. Therefore, it is quite believable that the suspension would also have got spoilt. This has been so noted by the Commissioner.

8. In our view, it is shameful that a defective car was sought to be sold as a brand new car. It is further regrettable that, instead of acknowledging the defects, the 1st Respondent chose to deny liability and has contested this matter. For this failure in service the Appellant is entitled to the following reliefs :

(a) The Appellant will get the car repaired from any reputed garage or mechanic, at Kottayam, of his choice. A notice will be given by Registered post with acknowledgment due to the 1st and 2nd Respondent intimating them the name and address of the garage where the car has been given for repairs. Within a week of receipt of the notice they shall inspect the car. The repair work will then be done and the cost thereof will be paid by the Respondents. The liability to pay the repair cost will be joint and several of both the Respondents. The 2nd Respondent is being held jointly liable as it was the duty of the 2nd Respondent to have refused to deliver a defective car and in any case to have properly repaired the car during the warranty period. It is clarified that the Garage to whom the car is given will decide what repair work is to be carried out. Undoubtedly the work of complete overhaul of engine and full body paint with necessary tin work on the body must be carried out. It will not be open to the Respondents to dispute the nature of the work or repairs to be carried out. The purpose of granting them inspection is merely to enable them to know that the car has been given to a Garage for repair and not for the purpose of enabling them to dispute the nature of the work required to be done.

(b) After the car is got repaired the Appellant shall, before taking delivery of the car, give a notice to the Respondents that the repairs are carried out. They shall within a week of the receipt of that notice inspect the car to ensure that the work claimed to have been done has been done. They shall then forthwith pay the amount claimed by the Garage for repairs. The Appellant shall be entitled to take delivery of the car. It is clarified that the liability to pay is, as stated above, joint and several. In the event of the amount not being paid forthwith, the District Forum shall ensure execution expeditiously and immediately, if necessary, by making 2nd Respondent pay initially. It will then be for the 2nd Respondent to claim reimbursement from the 1st Respondent, if in law they are entitled to do so.

(c) There is no doubt that the Appellant has had to suffer mental agony in taking delivery of a defective car after having paid for a brand new car and in taking the car again and again to the dealer for repairs. For this mental agony and torture, we direct that the Appellant shall be entitled to a sum of ` 40,000/-. The liability to pay this amount shall also be joint and several of both the Respondents. This amount is to be paid within a period of one month from today. The District Forum shall ensure payment, if necessary, by execution.

(d) 1st Respondent had unnecessarily filed an Appeal before the State Forum. 1st Respondent is, therefore, responsible for the expenses incurred by the Appellant in having to contest the matter all the way to this Court. The Appellant claims that he has spend more than ` 3,00,000/- by way of legal expenses. He, however, has no proof that he has spent so much amount. He, however, would have spent at least ` 50,000/-. We, therefore, direct the 1st Respondent to pay to the Appellant by way of costs a sum of ` 50,000/-. The same to be paid within one month from today. The District Forum to ensure payment, if necessary, by execution.

With these directions the Appeal stands disposed of.

 

Tata Engineering and Locomotive Co. Ltd. and another vs Gajanan Y. Mandrekar[SC 1997 March]

Keywords:-Damages-Proportionate deduction-

Supreme Court-min

  • Proportionate deduction for use of the vehicle would have been given in Consumer case
  • When the vehicle was being used with the same defects as pointed out, necessarily the purchaser is required to be compensated for not delivering the vehicle in good condition as per the warranty after deduction towards the use of the vehicle.

Challenge: Vindicate the principle on which the damages are awarded in such type of complaints

AIR 1997 SC 2774 : (1997) 1 Suppl. SCR 80 : (1997) 5 SCC 507 : JT 1997 (6) SC 20 : (1997) 4 SCALE 296

(SUPREME COURT OF INDIA)

Tata Engineering and Locomotive Co. Ltd. and another Appellant
Versus
Gajanan Y. Mandrekar Respondent

(Before: K. Ramaswamy And D. P. Wadhwa, JJ.)

Civil Appeal No. 3620 of 1997 (arising out of S.L.P. (C) No. 2392 of 1997), Decided on: 05-05-1997.

Constitution of India, 1950—Article 132.[ Appeal by special leave]

Counsel for the Parties:

F. S. Nariman, Sr. Advocate, Ravinder Narain, Aditya Narain, Amitab Marwah, Advocates-Counsel for JBD and Co., for Appellants

A. K. Goel and Mrs. Sheela Goel, Advocates, for Respondent.

order

1. Leave granted. We have heard the counsel on both sides.

2. This appeal by special leave arises from the Order, made on September 23, 1996 passed by the National Consumer Disputes Redressal Commission in F.A. No. 784/94.

3. The respondent had booked commercial vehicle, more commonly known as a ‘Tipper Truck’ with registration No. SK 1210/B/36 on May 7, 1991. He purchased the vehicle after securing loans from a nationalised Bank on usual commercial rate of interest. After running the vehicle as driver-cum-owner for 9000 kms., it was found that the tyres were worn out completely, front axil pins of the vehicle were not fixed properly; at a speed of 40 kms. per hour the vibration of the vehicle (empty) was very high as the cabin was completely loose etc. He mentioned these defects in his letter dated March 10, 1992, after eight months. Subsequently, he reiterated the same in his different letters addressed to the agent, through whom he had purchased the vehicle. Finally, by letter dated May 2, 1992, after intimating that in spite of running the vehicle for 18000 to 18500 kms., despite repairs, the vehicle continue to give the same trouble. In spite of the warranty of service, the trouble was not done away. Accordingly, he filed a complaint with the State Commission. The Commission after considering the evidence and hearing the counsel on both sides, found that the appellant was liable to pay a total amount of ` 4,81, 132-17 with interest at the rate of 18% per annum w.e.f. July 28, 1992. That was confirmed on appeal by the National Commission. Thus this appeal by special leave.

4. Shri F. S. Nariman, learned Senior Counsel appearing for the appellant contends that the appellant is not so much on the quantification of the damages awarded in this case; rather, they want to vindicate the principle on which the damages are awarded in such type of complaints. According to him, the complaint was laid after 8 months from the date of the delivery; that too after the vehicle was used to cover a distance of 18000 to 18500 kms.; the complaint was laid in August 1992. When the Commissioner appointed gave his report on April 10, 1993, the vehicle had covered a distance of 65000 Kms. The State Commission passed the order on September 24, 1994 by which date a further distance of more than another 25000 to 30000 Kms. would have been run. Under these circumstances, proportionate deduction for use of the vehicle would have been given. We find force in the contention. It is not the case that during the said period the vehicle was kept used. When the vehicle was being used with the same defects as pointed out, necessarily the purchaser is required to be compensated for not delivering the vehicle in good condition as per the warranty after deduction towards the use of the vehicle. In view of the facts and circumstances, we think that 1/3rd of the compensation awarded by the Commission may be deducted towards the user of the vehicle for the period in question. For the rest of the amount, the order of the Commission is confirmed.

5. The appeal is accordingly allowed in part. No costs.

Maruti Udyog Ltd. Versus Susheel Kumar Gabgotra and another

29-03-2006

Supreme Court-min

Keywords:-Financial loss-Warranty Obligation-

If the manufacturing defect was established, then replacement of the entire item or the replacement of the defective parts, is only called for.

Principle adopted: On a sale of a motor vehicle by a manufacturer to dealer there may be an implied warranty that it is reasonably fit for, or adapted to, the uses for which it is made and sold; and such a warranty is not excluded by the silence of the contract of sale as to warranties.

AIR 2006 SC 1586 : (2006) 3 SCR 603 : (2006) 4 SCC 644 : JT 2006 (4) SC 113 : (2006) 3 SCALE 611

(SUPREME COURT OF INDIA)

Maruti Udyog Ltd. Appellant
Versus
Susheel Kumar Gabgotra and ANOTHER Respondent

(Before : A. Pasayat And Tarun Chatterjee, JJ.)

Civil Appeal No. 3734 of 2000, Decided on : 29-03-2006.

Section 17 of the Jammu and Kashmir Consumers Protection Act, 1988

Counsel for the Parties:

Raju Ramachandran, Sr. Advocate and Pramod Dayal, Advocate with him, for Appellant

T. S. Doabia, Sr. Advocate, Manpreet Singh, Ms. Manjula Gupta and N. Ganpathy, Advocates with him, for Respondents.

Judgment

Arijit Pasayat, J—Challenge in this appeal is to the judgment rendered by a Division Bench of the J. and K. High Court at Jammu dismissing the appeal filed by the appellant under Section 17 of the J.andK. Consumers Protection Act, 1988 (in short the ‘Act’). Challenge in the said appeal was to the order dated 9.11.1998 passed by the J.andK. State Consumer Redressal Commission (in short the ‘Commission’) on a complaint filed by respondent No.1. In the complaint appellant and respondent No.2 were impleaded as the opposite parties.

2. The factual background in a nutshell is as follows :

Respondent-complainant filed a complaint before the Commission seeking a direction to the appellant herein to take back the Maruti car back and repay an amount of Rs.1,97,460.37 being the cost of the car supplied to him, along with interest at the rate of 18 per cent with effect from 27.11.1996, as the car was defective. He also sought compensation for the loss at his place of work and coaching charges approximately Rs.60,000/-; Rs.1,00,000/- towards mental agony, physical deterioration and emotional stress, Rs.15,000/- for his trip to Karnal on the mistaken direction of the appellant and also Rs.2,500/- towards the costs of litigation and legal consultation.

3. Respondent No.1 complainant had purchased a Maruti Car on 27.11.1996 from the appellant through its authorized dealer, respondent No.2 herein, on payment of Rs.1,97,460.37 as sale price. After delivery of the car, the complainant noticed that the clutch of the car was not functioning properly as it developed unusual noise/jerks on running of the engine. The defect was brought to the notice of respondent No.2, whose engineer after examining the defect told the complainant that the clutch is behaving erratically because of the new engine and it will automatically adjust/become defect- free after covering some mileage. But it did not happen that way and on the other hand problem increased. He again reported to respondent No.2 whereupon he was assured that the defect will disappear after the first service which was done on 19.12.1996. But the defect continued. The complainant again approached respondent No.2 and was told that the engine will have to be brought down to locate the trouble which the engineers failed to pinpoint. The complainant objected to it as the defect had developed within the warranty period and approached the Head Office (Marketing) of the appellant at Gurgaon. He wrote letter dated 19.2.1997 bringing to the appellant’s notice about the inherent manufacturing defect in the car and requested for its replacement. The appellant vide its letter dated 5.3.1997, advised the complainant to take the car to Modern Automobiles, Karnal, for getting the needful done. He took the car to Karnal on 10.3.1997. But the said concern did not test the vehicle on the ground that the same had been delivered by respondent No.2 who was responsible and can repair the vehicle. The complainant came back to Jammu. On 13.3.1997 the appellant conceded to have wrongly advised the complainant to take the car to Karnal and asked him to again approach respondent No.2 at Jammu. On 21.3.1997 Mr. H.S. Chahal, Senior Engineer, Regional Office, Chandigarh, examined the car but the defect could not be removed which continued to give trouble. The matter was again reported to the appellant and the complainant again visited respondent No.2 on 17.4.1997 but had to return with persisting defect. On 21.4.1997 the complainant addressed a letter to the Chairman-cum-Managing Director of the appellant-company about the manufacturing defect in the car sold to him and requested for its replacement. No reply to the said letter was received. The complainant suffered financial loss not only because of the callous and careless attitude of the appellant but also on account of the appellant having sold defective car to the complainant, defects whereof could not be removed thereby leaving him to face emotional stress, mental agony and to drive the defective car posing a risk to his life.With these grievances complainant approached the Commission.

4. Respondents filed their replies before the Commission stating therein that their obligation under the warranty was only to repair or replace any part found to be defective. The appellant and its authorized dealer (Respondent No.2) have attended to the vehicle during the warranty period free of charges and had carried out necessary repairs and replacement of the components on 21.3.1997 to the satisfaction of the complainant. The vehicle was again inspected on 29.5.1997 and the complainant was advised to leave the vehicle at the workshop of the dealer of the appellant at Jammu for inspection and carrying out necessary repairs to which the complainant did not agree. The correspondence between the parties has not been denied by the appellant and their dealer (Respondent No.2). The appellant has claimed that it is not under any obligation to take back the Maruti car or repay the sale price to the complainant.

5.The High Court held that the warranty condition relied upon by the appellant did not warrant interpretation that only the defective part was to be replaced and not the car itself. Reference was made to certain observations in the Corpus Juris Secundum, Volume 77, page 1198. It was held that the booklet containing warranty clearly indicates promise of service and replacement with certain conditions. It was observed that the Commission was justified in its conclusion that the appellant had agreed to replace the vehicle and had admitted that there was manufacturing defect in the concerned part. Reliance was also placed on a decision of this Court in Tata Engineering and Locomotive Co. Ltd. vs. Gajanan Y. Mandrekar (1997) 5 SCC 507). Therefore, the appellant was directed to replace the car or repay the amount received by it as sale price with interest @ 18% p.a. w.e.f. 27.11.1996 with costs awarded by the Commission.

6. In support of the appeal, learned counsel for the appellant submitted that both the Commission and the High Court erred in holding that there was an admission to replace the car and/or admission of any manufacturing defect. The warranty condition clearly refers to the replacement of the defective part and not of the car. Observations made in the Corpus Juris Secundum had been read out of context. It was stated that at the most the Commission and the High Court could have asked for the replacement of the defective part or to pay the cost thereof.

7. Learned counsel for the respondent No.1 supported the orders of the Commission and the High Court.

8. The obligation under clause (3) of the Manual reads as under :

“(3) Maruti’s Warranty Obligation :

If any defect(s) should be found in a Maruti Vehicle within the term stipulated above, Maruti’s only obligation is to repair or replace at its sole discretion any part shown to be defective with a new part of the equivalent at no cost to the owner for parts or labour, when Maruti acknowledges that such a defect is attributable to faulty material or workmanship at the time of manufacture. The owner is responsible for any repair or replacement which are not covered by this warranty.”

9. The Commission and the High Court have relied on so called admission of the appellant in para 3 of the objections filed before the Commission. In various documents, more particularly letter dated 19.2.1997 written by respondent No.1 to the appellant, it is clearly stated that appellant had indicated that downing of the engine was necessary to trace the problem. There was no agreement to replace the engine system. Additionally, it is not disputed by learned counsel for the respondent No.1 that when appellant had asked the vehicle to be brought for the aforesaid purpose the respondent No.1 had not done so. To infer that there was any manufacturing defect in the said background is without any foundation.

10. In Corpus Juris Secundum the observations to which reference was made by the High Court read as follows:

“On a sale of a motor vehicle by a manufacturer to dealer there may be an implied warranty that it is reasonably fit for, or adapted to, the uses for which it is made and sold; and such a warranty is not excluded by the silence of the contract of sale as to warranties.”

11. The principles stated above can never be doubted. But what is relevant in the case at hand is that the warranty conditions were specially stated. This is not a case of silence of a contract of sale as to warranty. Therefore, the High Court was not justified in directing replacement of the vehicle.

12. But on the peculiar fact of the case relief to the respondent No.1 has to be moulded. In almost a similar case certain directions were given in Jose Phillip Mampillil vs. Automobiles Ltd. (2004) 2 SCC 278). Premier line with what has been stated in the aforesaid case, we direct as follows:-

13. In (1) On respondent No.1 taking the vehicle in question to the authorized service centre of the appellant at Jammu within three weeks, the defective part that is clutches assembly shall be replaced. Respondent No.1 shall not be required to pay any charge for the replacement.

(2) In addition, respondent No.1 shall be entitled to receive a consolidated sum of Rs.50,000/- (rupees fifty thousand only) from the appellant for cost of travel to Karnal which admittedly was wrongly advised by the appellant, for the inconvenience caused to respondent No.1 on account of the acts of the appellant and the respondent No.2 and the cost of litigation.

14. The appeal is allowed to the aforesaid extent. There shall be no order as to costs.

 

when the deficiency began to manifest themselves it was the duty of the suppliers to attend to such deficiencies immediately and if the supplier was unable to attend to the deficiencies and malfunctioning of the system soon after installation, it would amount to “deficiency of service”.

24-02-2006

Supreme Court-min

Indochem Electronic and another vs Addl. Collector of Customs

 

Keywords:-Period of warranty-System installed-Sale of Goods-Compensation

Where a stipulation in a contract of sale is a warranty, its breach may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated; but, where a stipulation in a contract of sale is a condition, its breach may give rise not only to a claim for damages but also generally to a right to treat the contract as repudiated

JT 2006 (3) SC 174 : (2006) 2 SCALE 565 : (2006) 3 SCC 721

(SUPREME COURT OF INDIA)

Indochem Electronic and ANOTHER Appellant
Versus
Addl. Collector of Customs, ANDHRA PRADESH Respondent

(Before : S. B. Sinha and P. K. Balasubramanyan, JJ. )

Civil Appeal No. 1273 of 2006 (Arising out of SLP (Civil) No. 24699 of 2003); Decided On: 24-02-2006

  • Consumer Protection Act, 1986—Sections 14(1)(c), 2(e) and 2(g)
  • Sale of Goods Act, 1930—Section 12.

Counsel for Parties:

K.V. Mohan, Adv

P. Parmeswaran, Adv.

JUDGMENT

S.B. Sinha, J—Leave granted.

2. The appellants supplied EPABX telephone system to the respondent in the month of March, 1990. The said system was installed in the office of the respondent on 18th March, 1990 at a cost of ` 1,87,599/-. In terms of the contract of sale entered into by and between the parties, a warranty for a period of 1 year was issued for the said equipments. The appellants during negotiations agreed that a service center at Vishakhapatnam would be opened for convenience of the said office and other customers. The said assurance was categorically given in the offer of the respondent dated 14.2.1990. At the relevant time furthermore approval of the Telecommunication Department for installation of the EPABX system in the respondent’s office had not been given. The respondent was informed, on a query made in that behalf by the Chief General Manager of the Telecommunication Department, that the EPABX system supplied by the appellants was not in department’s approved list. Such approval was, however, granted only on 25.3.1991.

3. On or about 13.9.1990 a letter of complaint was issued by the complainant to the appellants herein inter alia stating that:

It is registered (sic) to note that the 32 instruments supplied by you in the month of March, 1990 are not working properly. Main drawbacks are as under:

a. Getting wrong numbers is a frequent complaint.

b. The conversations are being interrupted and we hear some music and the conversations stop.

c. Instruments with key pad lock system supplied are not at all working with the result that instruments of the Telecom Department has been fixed removing the instruments supplied by you.

You may recall that at the time of submitting the tender, it was assured that you will supply fault-less EPABX and intercom facilities. However, EPABX and intercom facilities supplied by you are not working properly and not upto the mark.

You may also recall that you have promised to keep a permanent resident engineer at Visakhapatnam to avoid such defects. However, no such arrangements has been made.

You are, therefore, requested to immediately send your engineer to inspect all the instruments and EPABX and rectify all the defects immediately. You are also requested to post a permanent resident engineer at Visakhapatnam.

4. Allegedly, on receipt of the said complaint, the defects pointed out in the system were rectified. According to the respondent the system was found to have several defects. Locking arrangement did not work with the result that the respondent had to pay excess amount for two telephone instruments, without getting any utility out of them.

5. The appellants did not attend to the requirements for giving maintenance and service of the said system. When the warranty period was about to come to an end, the respondent categorically stated that the system had not been functioning for the past 6 months and requested the appellant to extend the warranty period for another 3 to 6 months. Later on, it was further noticed that the night service system had not been functioning properly insofar as outside calls during the closure of the office on holidays, after office hours and on working days were not being received at the reception. Despite night switch having been put on by the telephone operator while leaving his office, calls were not being received in the reception, resulting in snapping/cutting of the communication. Allegedly, the respondent had to seek help of another firm for keeping the system operational. The appellants, however, were insisting on ‘annual maintenance services’ for attending to the said complaints of the respondent to which the latter did not agree.

6. On the aforementioned allegations a complaint petition was filed before the State Consumer Disputes Redressal Commission, Hyderabad. The said complaint petition was marked as CD 86/92 wherein it was prayed that a direction be issued for repayment of full cost of EPABX system amounting to ` 1,87,559/-.

7. In the said proceedings the contention of the appellants, on the other hand, was that during the period of warranty and even thereafter all the complaints had been attended to. The appellants could not maintain a separate service center at Vizag as the proposal became highly uneconomical and disproportionate to the installations in the region and, thus, they had to cater to the service requirements from their Hyderabad Office with prior intimation to the appellants. The said services had been rendered even on 14.5.91, 14.7.91, 19.8.91 and 18.9.91 without any service charges and although, the respondent did not agree to have an annual maintenance contract for service thereof after the period of warranty expired. As during the period of warranty, the respondent got the system attended to by the local mechanic, the same constituted breach of the contract of warranty.

8. The parties filed affidavits before the State Commission in support of their respective cases.By a judgment and order dated 23.2.2001 the State Commission arrived at the following findings:

We shall now consider whether the system installed in the office of the complainant in the month of March, 1990 was working as expected. A reading of Exs. A-1 to A-3 show that the system was giving poor performance and the complainant was trying frantically requesting for the assistance of a mechanic. Ex. A-2 letter dated 16.4.1991 shows even within a month after its installation there is breakdown of the system. In that letter the complainant stated that the system is not at all working and the instruments are often going out of order. The fuse is often blown out. The stand by battery installed by the opposite party proved to be worthless. As and when there is break down automatic switching on to the battery is not working. Hence its performance is disappointing. This letter gives an indication that from the beginning the system is giving poor show. It continued so as seen by telex message dated 6.5.1991 marked Ex. A-3. In view of this correspondence we have no hesitation to come to a conclusion that the system is a failure. The opposite party no doubt made some effort to set it right as seen from Exs. B-4 to B-10. Though some repairs were attended to during the month of April and May, it is clear that the performance was not satisfactory. It is clearly indicated in Ex. B-7 dated 15.5.91 that repairs were made subject to further observation. In contra distinction to this the attitude of the opposite party is one of perseverance for entering into a service contract under letters dated 9.10.1991 and 22.10.1991 marked Ex. B-11 and Ex. B-3. therefore, the record clearly depicts that the system was not functioning from the beginning, complaints were made continuously and although the technician was deputed and made some repairs still it could not be rectified satisfactorily and on the top of it, the opposite party was more anxious to enter into a service contract rather than to see that the system sold and supplied by it works satisfactorily.

The appellants, in term of the said findings, were directed to refund a sum of Rs.1,87,559/- with interest @ 12% from the date of the filing of the complaint till the date of payment after taking back the system supplied by it.

9. An appeal preferred by the appellants herein before the National Commission was dismissed by reason of the impugned judgment. Mr. K.V. Mohan, learned Counsel appearing on behalf of the appellants in assailing the said orders of the State Commission and the National Commission submitted that in terms of the contract of warranty the appellants were required to maintain the system free of cost only for a period of one year and it was not at all necessary for them to provide free services and/or to maintain the system thereafter. As the liability of the appellants was to maintain the system only during the period of warranty, it was argued, the State Commission acted illegally in directing the appellants to pay the prices thereof with interest. It was, furthermore, submitted that the breach of contract of warranty would not enable the appellants to reject the entire contract and claim the price of goods supplied, particularly, when in the instant case the period of warranty had expired.

10. Mr. Gopal Subramanium, learned Addl. Solicitor General, on the other hand, would support the judgment urging that such a relief could be granted in terms of Section 14(1)(c) of the Consumer Protection Act, 1986. The learned Counsel drew our attention to the statements made in paragraph 7 of the written statement wherein the appellants had categorically admitted that in terms of the contract of supply, no service center was opened. Such service center came to be opened only on 21st September, 1990 i.e. after the complaint was made by the respondent and that too was discontinued.

11. Before adverting to the rival contentions raised herein we may notice certain admitted facts. The parties entered into a contract of supply of EPABX system subject to the conditions mentioned therein. The appellants received the entire price for installation of the said system.

12. At the relevant time the said system was not approved by the Department of Telecommunication. No service center was opened and only upon receipt of the complaint, the same was opened in September, 1990. The said service center was later on discontinued. In September, 1990 the respondent admittedly complained about the working/functioning of the said system as early as possible on 13.9.1990. Just before the expiry of the period of contract of warranty the respondent complained that as the said system had not been functioning properly for the past 6 months, the warranty period should be extended, which request was not accepted by the appellants.

13. The Consumer Protection Act, 1986 (herein after referred to as ‘the Act’) was enacted inter alia to provide for better protection of the interests of the consumers. The applicability of the said Act in the instant case is not in dispute. The dispute between the parties, is admittedly a ‘consumer dispute’ within the meaning of Section 2(e) of the Act. It has further not been disputed that there has been a ‘deficiency of services’. ‘Deficiency’ has been defined in Section 2(g) of the Act to mean:

deficiency’ means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or 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.

The provisions of the said Act are in addition to and not in derogation of the provisions of any other law.

14. Section 14 of the Act provides for powers of the Forum to issue an order to the opposite party directing him to do one or more of the things satisfied therein including:

(b) to replace the goods with new goods of similar description which shall be free from any defect;

(c) to return to the complainant the price, or, as the case may be, the charges paid by the complainant.

The State Commission as well as the National Commission which are created under the said Act exercise special jurisdiction.

15. The defects in the system pointed out by the respondent in the instant case started within the period of warranty. As noticed hereinbefore, certain breaches of contract of supply are admitted. Telephone is a means of communication. The communication system was required to be run effectively and efficiently by the appellants having regard to the statutory duties they were required to perform.

16. The deficiencies in EPABX system supplied by the appellants were such as were required to be attended to immediately. If the appellants had not been able to attend thereto immediately, there would be a ‘deficiency of services’ on the part of the appellants as immediate attention to such complaints was a part of the contract.

17. The State Commission as well as the National Commission have arrived at findings of fact as regard nature of deficiencies of service complained of by the respondent in terms of the provisions of the contract. If such breaches of conditions of warranty admittedly had taken place during the period of warranty, no exception can be taken to the judgment and order passed by the State Commission as also the National Commission.

18. The Appellant had all along been aware that the system installed by it had not been functioning properly. On its own showing, it had been attending to the complaints made by the Respondent relating to the functioning of the system. It has categorically been stated by the Appellant itself that despite expiry of the period of warranty it had been attending to the complaints as and when made by the respondent which were of serious nature

19. From the aforementioned conduct of the Appellant itself, it may be inferred that it voluntarily undertook to meet the requirements of the Respondent relating to mal-functioning etc. of the said system despite expiry of the period of warranty. For all intent and purport, the period of warranty, thus, stood extended. As the defects in the system including manufacturing defects, if any, were found not only during the period of warranty but also during the extended period, and as the Appellant itself undertook to attend to the complaints received in that behalf, in our opinion, it is too late for it now to contend that in view of the fact that the period of contract or warranty expired, it had no liability therefor.

20. By reason of its own conduct, the Appellant made representation to the Respondent that despite expiry of period of warranty, maintenance of the system to the Respondent’s satisfaction was its contractual obligation. The contract in view of such representation on the part of the Respondent does not come to an end. The contract, if looked in the light of the surrounding circumstances evidently pointed to the intention of the parties and as gathered from the contract itself that the representation of the Appellant should have been treated as warranty for an expended period. Even in a case where the goods are accepted, it is well known, the buyer will have a remedy for damages for the breach of it.

Section 12 of the Sale of Goods Act, reads as under:

Section 12 – Condition and warranty – (1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

(2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.

(3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

(4) Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.

21. Although in terms of Sub-section (3) of Section 12 no right accrues to a purchaser to reject the goods on breach of stipulation of warranty, the same would not mean that the extent of damages cannot be equivalent to the price of the goods inasmuch as such a power has specifically been conferred upon the Commission.

22. It is true, where a stipulation in a contract of sale is a warranty, its breach may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated; but, where a stipulation in a contract of sale is a condition, its breach may give rise not only to a claim for damages but also generally to a right to treat the contract as repudiated. (See Halsbury’s Laws of England, Fourth Edition Reissue (41) Para 64)

23. In Ghaziabad Development Authority v. Balabir Singh AIR 2004 SC 2141 this Court opined that under the law, the Consumer Protection Act, 1986 has a wide reach and the Commission has jurisdiction even in cases of service rendered by statutory and public authorities, holding:

…The word compensation is of a very wide connotation. It may constitute actual loss or expected loss and may extend to compensation for physical, mental or even emotional suffering, insult or injury or loss. The provisions of the Consumer Protection Act enable a consumer to claim and empower the Commission to redress any injustice done. The Commission or the Forum is entitled to award not only value of goods or services but also to compensate a consumer for injustice suffered by him. The Commission/Forum must determine that such sufferance is due to mala fide or capricious or oppressive act. It can then determine amount for which the authority is liable to compensate the consumer for his sufferance due to misfeasance in public office by the officers. Such compensation is for vindicating the strength of law….

24. In view of our findings aforementioned and keeping in view the fact that the State Commission and National Commission cannot be said to have acted without jurisdiction, we are of the opinion that no case has been made out for interference with the impugned judgment. The appeal is accordingly dismissed.

25. However, in the facts and circumstances of the case, there shall be no order as to costs.

 

C.N. Anantharam Versus Fiat India Ltd. and OTHERS-

24-11-2010

Supreme Court-min

Keywords: Manufacturing defects- Replacement-Deficiency of service-Special Leave Petition

whether the manufacturing company and by extension the dealer/agent was under any compulsion to replace the vehicle itself when the engine of the vehicle from which certain noises were allegedly emanating had been replaced. we direct that if the independent technical expert is of the opinion that there are inherent

AIR 2011 SC 523 : JT 2011 (1) SC 202 : (2010) 12 SCALE 359 : (2011) 1 SCC 460

(SUPREME COURT OF INDIA)

C.N. Anantharam Appellant
Versus
Fiat India Ltd. and OTHERS Respondent

(Before : Altamas Kabir and Cyriac Joseph, JJ.)

Special Leave Petition (C) Nos. 21178-21180 of 2009; Decided On: 24-11-2010

  • Consumer Protection Act, 1986—Sections 14 and 14(1)(c)
  • Sale of Goods Act, 1930—Section 12(3).

JUDGMENT

Altamas Kabir, J—On 31st October, 2002, the Petitioner herein purchased a Fiat Siena Weekender diesel vehicle from M/s Sundaram Automobiles, Bangalore, the common Respondent in all these three Special Leave Petitions and agent of M/s Fiat India Ltd., the manufacturer of the said vehicle. The Petitioner paid a sum of ` 7,69,187/- towards the Ex-showroom price of the vehicle, together with a sum of ` 56,537/- towards lifetime road tax and ` 28,964/- as insurance. The vehicle was duly registered in the name of the Petitioner on 25th November, 2002, when the vehicle was delivered.

2. According to the Petitioner, immediately after registration of the vehicle, it was taken out for a drive when certain defects, particularly in the engine, began to manifest themselves. The same day, the Petitioner left the vehicle with the dealer for removing the defects. On the very same day, the Respondent No. 2, M/s Sundaram Automobiles, wrote back to the Petitioner stating that the vehicle was in good condition and the noise was on account of the operational characteristics of the engine. Thereafter, on several occasions, the Petitioner left the vehicle with the agent and various parts, including the engine itself, were completely replaced. The Petitioner, however, was not satisfied with the performance of the vehicle and came to the conclusion that the vehicle had inherent defects and could not be repaired. He, accordingly, insisted that the vehicle be replaced with a new vehicle or the amount paid by him as sale price be refunded, together with expenses incurred in trying to rectify the defects in the vehicle.

3. Not getting any response, the Petitioner filed Complaint No. 474 of 2003 before the IVth Additional District Consumer Disputes Redressal Forum, Bangalore Urban, on 17th April, 2003. The complaint was heard by the District Forum, which allowed the same by its order dated 20th February, 2004, and directed the Respondents 1 and 2 to refund a sum of ` 9,15,536/-, as claimed by the Petitioner, together with interest at the rate of 12% per annum and a further sum of ` 5,000/- towards cost of the legal proceedings. The claim against Respondent No. 3, M/s Fiat Sundaram Auto Finance Ltd. was rejected.

4. Aggrieved by the said order, the Respondents 1 and 2 herein filed two separate appeals, being Nos. 513 of 2004 and 397 of 2004, respectively, before the Karnataka State Consumer Disputes Redressal Commission, Bangalore. On 15th June, 2006, the State Commission disposed of the said Appeals modifying the order of the District Forum by directing the Appellants (Respondents 1 and 2 herein) to replace the Petitioner’s vehicle with a brand new vehicle or on their failure to do so to refund ` 7,69,187/-, along with life time tax paid and the monthly instalments which had been paid by the Petitioner, to M/s Sundaram Automobiles, together with interest @ 12% per annum from the date of the order and also the cost of ` 5,000/-.

5. The matter was, thereafter, taken to the National Consumer Disputes Redressal Commission, New Delhi, hereinafter referred to as “the National Commission”, by the Respondent No. 1 in Revision Petition No. 2431 of 2006. The Respondent No. 2 (agent) filed Revision Petition No. 1585 of 2006. The Petitioner, in his turn, filed Revision Petition No. 1713 of 2006, before the National Commission. The National Commission, while admitting the Revision Petition No. 1585 of 2006 on 25th July, 2006, only on the point of the monthly instalments (EMI) paid and the quantum of interest, directed the Revision Petitioner to deposit its share with interest at the rate of 9%. Aggrieved by the said order, the Respondent No. 2 filed Special Leave Petition (Civil) No. 13201 of 2006 before this Court on 4th August, 2006, and the same was dismissed on 22nd February, 2008. Revision Petition Nos. 2431 of 2006, 1585 of 2006 and 1713 of 2006 were finally disposed of by the National Commission through a common order dated 17th April, 2009. In the said order, the National Commission held as follows:

…Therefore, while we hold that the complainant has not been able to prove any manufacturing defect, all the same, the dealer and the manufacturer are directed to remove the defect, if any, in the vehicle make it roadworthy, if necessary by reconditioning the vehicle and deliver it to the complainant in the presence of an independent technical expert mutually agreed upon by the complainant and opposite parties and for this purpose any of the party may apply to the District Forum for appointing such expert if it is not mutually agreed upon by the parties. The expert shall certify that the vehicle is free from any defect which shall be final for all purposes. This should be done within a period of three months. The Ops, thereafter, to provide a warranty for one year from the date of delivery. The revision petitions are accordingly disposed of in these terms. Under the peculiar facts of the case, there would be no order as to costs.

Thereafter, the Petitioner filed the instant Special Leave Petitions challenging the order of the National Commission.

6. The issues which fall for decision in these Petitions are:

(i) Whether it can be said that the manufacturing defect of the vehicle was such that it warranted replacement, and whether the refund of ` 7,69,186/- and 12; interest as ordered by the State Commission was justified?; and

(ii) Whether both the dealer and the manufacturer are jointly and severally liable in regard to deficiency of service?

7. Appearing for the Petitioner in all the three Special Leave Petitions, Ms. Kiran Suri, learned Advocate, urged that from the very day on which the vehicle was delivered to the Petitioner, it was obvious that there were several manufacturing defects in the vehicle, which could not be removed. The said position was duly appreciated both by the District Forum as well as the State Commission which directed the Respondents to replace the vehicle or to refund the amounts which had been expended by the Petitioner for purchase and to make the vehicle operational and roadworthy. The National Commission struck a different note upon holding that there was no worthwhile evidence to indicate that the vehicle had suffered from any serious manufacturing defect and that in any case the allegation of noise emanating from the engine even after its replacement with a new engine, could not be believed. Ms. Suri also questioned the view of the National Commission that the obligation of the manufacturer/dealer is only to repair/replace any part of the vehicle found to be defective, even during the warranty period, free of charge, but that the question of replacing the vehicle with a new vehicle was not justified.

8. Ms. Suri lastly submitted that the finding of the National Commission that the Complainant/Petitioner had not been able to prove any manufacturing defect, was perverse and contrary to the evidence adduced by the parties and the materials on record. Ms. Suri also questioned the finding that the refund of the cost of the vehicle would also not be justified, since the Petitioner had not taken the vehicle from the dealer despite their letter certifying that the vehicle had no defect. Ms. Suri submitted that further direction given by the National Commission to remove any defects and to make the vehicle roadworthy, if necessary, by reconditioning the vehicle and to deliver the same to the Petitioner in the presence of an independent technical expert mutually agreed upon, was wholly misconceived and could not be sustained.

9. In support of her submissions, Ms. Suri referred to a decision of this Court in Indochem Electronic v. Addl. Collector of Customs, (2006) 3 SCC 721, wherein while considering the provisions of Sections 3 and, (2006) 3 SCC 721, wherein while considering the provisions of Sections 3 and 14 of the Consumer Protection Act, 1986, this Court was of the view that when the deficiency began to manifest themselves it was the duty of the suppliers to attend to such deficiencies immediately and if the supplier was unable to attend to the deficiencies and malfunctioning of the system soon after installation, it would amount to “deficiency of service”. Furthermore, when the deficiencies in the system continued to persist during the warranty period, including the extended period, the suppliers were rightly held to be liable for deficiency in service by the State and National Commission. It was also held that in the light of the specific power conferred under Section 14 of the Consumer Protection Act, 1986, this Court was of the view that when the deficiency began to manifest themselves it was the duty of the suppliers to attend to such deficiencies immediately and if the supplier was unable to attend to the deficiencies and malfunctioning of the system soon after installation, it would amount to “deficiency of service”. Furthermore, when the deficiencies in the system continued to persist during the warranty period, including the extended period, the suppliers were rightly held to be liable for deficiency in service by the State and National Commission. It was also held that in the light of the specific power conferred under Section 14(1)(c) of the aforesaid Act, damages equivalent to price of goods could be awarded, despite the provisions of Section 12(3) of the Sale of Goods Act, 1930, as the provisions of the 1986 Act are in addition to and not in derogation of any other provision of law.

10. Mr. Vijay Kumar, learned Advocate, who appeared for M/s Fiat India Ltd., urged that the complaint made by the Petitioner herein was without any basis as the vehicle was fully roadworthy and it was the Petitioner who made continuous complaints which, the Respondent attended to for the sake of maintaining good business relations. It was submitted that the manufacturer company went to the extent of even replacing the engine and parts of the gear box to give the Petitioner complete satisfaction. However, there was absolutely no justification for the Petitioner to demand that the vehicle be replaced or that the value thereof, together with the expenses incurred be refunded. It was also urged that the vehicle had been duly certified to be completely roadworthy and it was the Petitioner who was at fault for not having taken delivery of the same, despite the same being ready. It was submitted that the decision of the National Commission did not call for any interference and the Petition was liable to be dismissed.

11. On behalf of the Respondents it was contended that everything possible was done to meet the repeated complaints made by the Petitioner, which even involved the replacement of the engine and other parts. However, instead of taking delivery of the vehicle, the Petitioner continued to insist on replacement of the vehicle which was not contemplated under the warranty given by the manufacturing company when the vehicle was delivered to the Petitioner.

12. It was also submitted that, in any event, the agent of a vehicle manufacturer would not be made liable for the defects, if any, in the vehicle and the relief prayed for against Respondent No. 2 was entirely misconceived.

13. In support of the aforesaid submissions, reference was made to the decision of this Court in Maruti Udyog Ltd. v. Susheel Kumar Gabgotra, (2006) 4 SCC 644, in which it was, inter alia, held that if the manufacturing defect was established, then replacement of the entire item or the replacement of the defective parts, is only called for. In fact, reference was made to the warranty condition which referred only to replacement of only the defective parts and not the car itself. This Court held that from the various documents exhibited it would appear that the manufacturer had indicated that it was necessary to download the engine to trace the problem which has been complained of, but there was no agreement to replace the engine. Moreover, when the manufacturer asked for the vehicle to be brought in for the purpose of downloading the engine, the Respondent did not do so and, accordingly, to infer that there was any manufacturing defect in the said background was without any foundation. However, the relief was moulded so that the defective part could be replaced without requiring the purchaser to pay any charge.

14. Reference was then made to the decision of this Court in Hindustan Motors Ltd. v. N. Siva Kumar, (2000) 10 SCC 654, in which it was held that when it became impossible to comply with the National Commission’s order directing replacement of the Respondent’s defective vehicle, since the manufacturer had stopped manufacturing the said model, this Court directed that the money along with interest, compensation and costs were to be paid to the purchaser.

15. Having considered the various submissions made on behalf of respective parties, what emerges is the question as to whether the manufacturing company and by extension the dealer/agent was under any compulsion to replace the vehicle itself when the engine of the vehicle from which certain noises were allegedly emanating had been replaced. It has been explained that an engine operating on diesel makes a rattling noise which does not occur in petrol driven engines and that there was really no manufacturing defect in the vehicle as complained of by the purchaser.

16. In such circumstances, the order passed by the National Commission, impugned in these Special Leave Petitions, does not appear to be unreasonable. For whatever reason, except for a mere 800 kilometers the Petitioner has not used the vehicle after it was delivered and has, on the other hand, made several complaints in an attempt to prove that there were manufacturing defects in the vehicle. The National Commission has taken all these matters into consideration in giving the impugned directions regarding delivery of the vehicle to the Petitioner after having the same properly checked by an independent technical expert who would have to certify that the vehicle was free from any defect when it is delivered.

17. From the facts as disclosed, it appears that apart from the complaint relating to noise from the engine and the gear box, there was no other major defect which made the vehicle incapable of operation, particularly when the engine was replaced with a new one. However, in addition to the directions given by the National Commission, we direct that if the independent technical expert is of the opinion that there are inherent manufacturing defects in the vehicle, the petitioner will be entitled to refund of the price of the vehicle and the lifetime tax and EMI along with interest @ 12% per annum and costs, as directed by the State Commission.

18. In such circumstances, the Special Leave Petitions are disposed of with the above directions.

 

Misleading Advertisement and Consumer complaint

Law Poster

Keywords:-Media-Food safety-Real Estate

Misleading Advertisement

Misleading advertisement Complaint filing with The Advertising Standards Council Of India( ASCI)

ASCI serves as an effective pre-emptive step to statutory provisions in the sphere of media regulation for TV and radio programs in India.

Laws Governing Media, Society and the Consumer

  • The Press Council Act 1978
  • Cable Television Network Rules, 1994
  • Code for Commercial Advertising on Doordarshan and All India Radio
  • Electronic Media Monitoring Centre (EMMC)
  • Norms for Journalist Conduct issued by the Press Council of India
  • Code of Conduct of the News Broadcasters Association
  • Emblems and Names (Prevention of Improper Use) Act, 1950
  • Young Persons (Harmful Publications) Act, 1956
  • Companies Act, 1956
  • Standards of Weight & Measures Act, 1976
  • Indecent Representation of Women (Prohibition) Act, 1986♣
  • Laws related to intellectual property rights.

♥FSSAI signs an MOU with ASCI

The Food Safety and Standards Authority of India (FSSAI) signed a MoU partnering with the Advertising Standard Council of India (ASCI) for addressing misleading advertisements in the Food and Beverage sector, thereby  ASCI will comprehensively monitor these advertisements across various media and to process the complaint. ASCI receive complaint through GAMA Portal: Grievances Against Misleading Advertisements (GAMA)

♣MAHARASHTRA REAL ESTATE REGULATORY AUTHORITY

The Maharashtra Real Estate Regulatory Authority (MahaRERA), on June 5, 2017, imposed a fine of Rs 1,20,000 on Sai Estate Consultants, for advertising an unregistered real estate project of Haware Builders and thereby, misleading the consumers. The agent has also been asked to tender an apology and refrain from indulging in such misleading advertisements [Read The Judgment

♣ Misleading Advertisement under Food Safety and Standards Act, 2006

Section 24. Restrictions of advertisement and prohibition as to unfair trade practices.
(1) No advertisement shall be made of any food which is misleading or deceiving or contravenes the provisions of this Act, the rules and regulations made thereunder.

(2) No person shall engage himself in any unfair trade practice for purpose of  promoting the sale, supply, use and consumption of articles of food or adopt any unfair
or
deceptive practice including the practice of making any statement, whether orally or in writing or by visible representation which –
(a) falsely represents that the foods are of a particular standard, quality, quantity or grade-composition;
(b) makes a false or misleading representation concerning the need for, or the  usefulness; 26
(c) gives to the public any guarantee of the efficacy that is not based on an adequate or scientific justification thereof:
Provided that where a defence is raised to the effect that such guarantee is based on adequate or scientific justification, the burden of proof of such defence shall lie on the person raising such defence.

Section 53. The penalty for misleading advertisement.
 (1) Any person who publishes, or is a party to the publication of an advertisement,
 which–
 (a) falsely describes any food, or
(b) is likely to mislead as to the nature or substance or quality of any food or gives false guarantee, shall be liable to a penalty which may extend to ten lakh rupees.

(2) In any proceeding the fact that a label or advertisement relating to any article of food in respect of which the contravention is alleged to have been committed contained an accurate statement of the composition of the food shall not preclude the court from finding that the contravention was committed.