The Supreme Court on Tuesday called for courts and tribunals across the country to frame guidelines to ensure that amounts deposited with them during the pendency of litigation are mandatorily kept in banks or other financial institutions [KL Suneja and anr vs Dr Manjeet Kaur Monga].
A bench of Justices MR Shah and S Ravindra Bhat observed that this was needed to avoid any possible loss.
"All courts and judicial forums should frame guidelines in cases where amounts are deposited with the office / registry of the court / tribunal, that such amounts should mandatorily be deposited in a bank or some financial institution, to ensure that no loss is caused in the future. Such guidelines should also cover situations where the concerned litigant merely files the instrument (Pay Order, Demand Draft, Banker’s Cheque, etc.) without seeking any order, so as to avoid situations like the present case," the Court said.
Such guidelines should be in the form of appropriate rules or regulations of any forum exercising adjudicatory power, the bench added.
The Court made the observation while disposing of a challenge to an order of the National Company Law Appellate Tribunal (NCLAT) in a case concerning compensation payable to a homebuyer for cancelling a flat allotment.
Whereas the homebuyer alleged that the developer had delayed the project and indulged in unfair trade practices, the developer claimed that the allotment was cancelled due to defaults by the homebuyer in paying installments.
The Competition Appellate Tribunal (COMPAT) had ruled in the homebuyer's favour and directed the payment of compensation in the form of interest at the rate of 15 percent on the amounts of installments paid by the homebuyer between 1993 and 2005. This part of the order was upheld by the Supreme Court in 2017.
However, at the time, the Supreme Court noted there remained an issue of whether the developer was liable to pay any amount as further compensation after April 2005. On this limited aspect, the top court remanded the matter back to the COMPAT, which was abolished in 2017 and whose functions were taken over by the NCLAT.
Pertinently, the homebuyer in this case, had returned a pay order issued by the bank of the developer dated April 30, 2005, by which the developer had sought to refund an amount of ₹ 4,53,750 which was stated to have been the full amount of installments paid by the homebuyer until then. Instead, the homebuyer had offered to pay the full amount due for the allotment of the flat.
As such, the developer asserted that no liability remained on its part since it had immediately issued the refund after notifying the buyer of default.
The NCLAT, however, ordered that the homebuyer was entitled to further compensation for the period from May 1, 2005 till May 7, 2016 as well, since the compensation earlier ordered for was not paid until then.
This order was challenged by the developer, and matter reached the Supreme Court again in 2019. The apex court, in turn, noted that the NCLAT seemed to have been 'completely swayed' by the plight of the complainant-homebuyer rather than basing its findings on law.
The Supreme Court pointed out that the NCLAT had failed to duly consider that after the developer's bank issued the April 2005 pay order, ₹ 4,53,750 was debited from the account of the developer.
After the pay order became stale, the funds were moved to the bank's ‘Unclaimed Sundry Account’ and did not attract any interest, in line with the Reserve Bank of India (RBI) guidelines.
Therefore, neither the bank nor the developer enjoyed any interest on the said amount between April 2005 and May 2016, the Court observed.
In this backdrop, the bench opined that the complainant-homebuyer had failed to take steps to protect her interests.
The complainant could have chosen to encash and keep the pay order money in an interest-bearing account, without prejudice to her rights to claim interest on it later, the bench pointed out.
In the alternative, the Court noted that the complainant could have deposited the pay order money with the registrar of the adjudicating commission or sought an order directing that the amount be maintained by the developer until the developer is directed to pay the same as compensation along with interest.
Instead, the Court found that the complainant "for reasons best known to her, filed the original pay order due to perhaps lack of proper advice or instruction."
Referring to Order XXI of the Civil Procedure Code (CPC), the judges also pointed out that once an amount is deposited or paid to a decree-holder or anyone entitled to it, they cannot later seek interest on the same.
"This is a rule of prudence, inasmuch as the debtor, or person required to pay or refund the amount, is under an obligation to ensure that the amount payable is placed at the disposal of the person entitled to receive it."
The Court proceeded to reject the complainant’s contention that she was entitled to receive further interest on account of the wrongs of the developer.
"The records nowhere disclose any fault on the part of the developer; on the other hand, the complainant did not take steps to protect her interests ... In these circumstances, no equities can be extended to her aid," the Court said.
Therefore, the developer's appeal was allowed and the Court ruled that the builder could not be made to pay interest on the period after offering the refund (i.e. after April 2005).
Senior Advocate Meenakshi Arora with advocates Mohit Paul and Rangoli Seth appeared for the appellants.
Senior Advocate Nikhil Nayyar with advocates Aditya Parolia, Piyush Singh, Akshay Srivastava, Priyal Sarawagi, Naveen Hegde, Rajesh Kumar, Gaurav Goel, Vinay Prakash Singh, Chanchal Kumar Ganguli, and Suruchi Suri, briefed by Suri & Company represented the respondents.
[Read judgment]