Compound interest cannot be charged over 18 per cent interest from the allottees,HC tells HUDA
In a crucial judgment,the Punjab and Haryana High Court on Tuesday ruled that lack of basic amenities by Haryana Urban Development Authority (HUDA) is no ground for an allottee to refuse payment of installment.
Also,a division bench has made it clear that HUDA cannot charge compound interest on 18 per cent interest from allottees in default of payment of installment.
The rate of interest at the rate of 18 percent cannot be compounded as there is no provision either in the Act or in the Regulations or in the circular for compounding of such interest, a division bench comprising Justice Hemant Gupta and Justice R N Raina on Tuesday ruled.
The Bench further ruled that lack of amenities cannot be made a ground for not making the payment of installments in terms of the letter of allotment. Holding this,the division bench on Tuesday set aside an order by a single bench and allowed an appeal filed by HUDA.
The dispute in the bunch of cases was about the levy of interest,compound interest and the penalty for not making the payment of installments in terms of the conditions of letter of allotment. Senior lawyer Anupam Gupta,appearing on behalf of HUDA,had challenged the order by a single bench.
The allottees,who were allotted commercial properties in Panchkula by HUDA in 1986,had challenged the levy of interest from HUDA and had alleged that since basic amenities were not made available at the site,HUDA was unfair in charging interest from the date of grant of possession.
The allottees had contended that the water connection and the sewerage connections were sanctioned to the petitioner on January 19,1988 and November 9,1989 respectively,whereas the Damp Proof Course (DPC) Certificate was issued on February 9,1988. The interest on installments of the deferred payment of the sale consideration alone is chargeable from the date of offer of possession, the allottees had averred.
The High Court had appointed B R Gupta,Advocate,as Local Commissioner to visit the subject urban estates/areas and submit a fact finding report regarding the status of the development works vide an order dated April 22,2002.
In the report dated December 18,2002 it was reported by the Local Commissioner that the facility of water supply and sewerage were made available at the time of allotment itself,whereas the roads in the front and back of the pocket covering SCOs number 1 to 34 have been constructed in June 1992.
Therefore,the Single Judge returned a finding that the work was completed in June 1992 and that in terms of the conditions of the letter of allotment,the interest can be charged from the date the giving of the amenities was completed.
Therefore,the allottees are liable to pay interest from June 1,1992. This was challenged by HUDA before a division bench.
Setting aside the single Benchs order,the division bench today ruled that lack of amenities cannot be made a ground for not making the payment of installments in terms of the letter of allotment.
The interest on installments of the deferred payment of the sale consideration alone is chargeable from the date of offer of possession. Since the possession was offered and construction raised,the allottees are liable to pay interest on the amount of installments from the date of offer of possession itself.
The judgment further reads in the event of non-payment of installments along with interest thereon,the Authority is justified in charging interest at the rate of 18% p.a. Such interest is to ensure the timely payment of the installments and is aimed at mitigating the extreme hardship which may result from resorting to the last measure of resumption of land or building.
However,the rate of interest at the rate of 18% cannot be compounded,as there is no provision either in the Act or in the Regulations or in the Circular for compounding of such interest, the judgement goes on to say.
The concluding para reads the Authority is competent to charge interest,as it has the authority to levy penalty. The charging of interest is a policy adopted by the Authority short of resorting to the extreme remedy of resumption. Therefore,such policy is in fact designed for the benefit of the allottees.