The Supreme Court ruled that while consumer commissions can award compensation for deficiency in service, including mental harassment and litigation costs, they cannot award interest on a loan taken by the consumer in addition to the stipulated contractual interest (8% compounded annually) on the refunded amount. The Court emphasized that the awarded interest sufficiently compensates for the deprivation of investment, and awarding interest under multiple heads for the same default is unsustainable.
Facts Of The Case:
The Greater Mohali Area Development Authority (GMADA) launched a residential scheme called ‘Purab Premium Apartments’ in 2011. Anupam Garg and Rajiv Kumar (respondents) applied for flats, with Anupam Garg paying an earnest money of ₹5,50,000 for a 2-BHK + Servant Room apartment. They were successful in a ‘draw of lots’ on March 19, 2012, and received a Letter of Intent (LOI) on May 21, 2012, detailing payment schedules, ownership, and possession terms. The LOI stipulated possession within 36 months from its issuance, with a clause allowing the allottee to withdraw and receive a refund of the entire deposited amount with 8% compounded annual interest if GMADA failed to deliver possession within the stipulated period.The scheduled date for possession was May 21, 2015. However, upon visiting the site in May 2015, Anupam Garg found no significant development. He decided to opt out of the scheme, and while he was allegedly informed by an official that GMADA would pay the deposited amount with 8% interest from May 21, 2015, a formal document for this condition was not provided. GMADA later issued an allotment-cum-offer of possession letter on June 29, 2016, more than a year after the stipulated date. The respondents filed consumer complaints (CC No. 438 of 2017 and CC No. 439 of 2017) against GMADA, alleging delays and unilateral changes to the project. The State Consumer Disputes Redressal Commission, Punjab, partly allowed their complaints, directing GMADA to refund the entire deposited amount with 8% interest, plus compensation for mental harassment, litigation costs, and interest paid by the respondents on their bank loans. GMADA appealed to the National Consumer Disputes Redressal Commission (NCDRC), which dismissed the appeals. GMADA then appealed to the Supreme Court, with notice issued specifically on the part of the order awarding interest on the loan taken by the respondents in addition to the 8% compounded interest
Procedural History:
The procedural history of this case began with complaints filed by Anupam Garg (CC No. 438 of 2017) and Rajiv Kumar (CC No. 439 of 2017) against the Greater Mohali Area Development Authority (GMADA) before the State Consumer Disputes Redressal Commission, Punjab, Chandigarh (State Commission). The State Commission partly allowed their complaints on March 1, 2018, directing GMADA to refund the entire deposited amount with 8% interest, compounded annually, along with compensation for mental harassment, litigation costs, and the interest paid by the respondents on their bank loans.Aggrieved by this decision, GMADA appealed to the National Consumer Disputes Redressal Commission (NCDRC), New Delhi, in First Appeal Nos. 1852 of 2018 and 1853 of 2018. The NCDRC upheld the State Commission’s order, dismissing GMADA’s appeals on grounds of delay and merit, and also imposed costs of ₹20,000 each on GMADA to be paid to both respondents.Subsequently, GMADA challenged the NCDRC’s judgment and final order dated April 1, 2019, before the Supreme Court of India through Civil Appeal Nos. 27847-27848 of 2019. The Supreme Court issued notice on November 8, 2019, specifically limiting it to the part of the order that awarded interest on the loan taken by the respondent-Anupam Garg from the State Bank of India, in addition to the 8% compounded interest already granted
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Court Observation:
The Supreme Court observed that compensation for deficiency in service is undoubtedly due, but its form should align with the specific facts of each case. Referencing GDA v. Balbir Singh, the Court stated that compensation can reflect losses like foregone rent or actual rent paid if the consumer had to rent alternative accommodation. It emphasized that compensation should not be uniform; it should be higher when only a refund is granted, as the consumer loses the property and its potential appreciation.The Court deemed the State Commission and NCDRC’s reliance on Priyanka Nayyar as misplaced, clarifying that compensation in that case was influenced by loan interest but wasn’t a direct payment of that interest. It stressed that while commissions can consider a loan when computing compensation, they cannot mandate the housing authority to bear the entire loan interest. Citing DLF Homes Panchkula (P) Ltd. v. D.S. Dhanda, the Court asserted that consumer forums cannot arbitrarily award interest or compensation; “exceptional and strong reasons” are needed to exceed agreed-upon damages. The Court concluded that the 8% interest on the principal sufficiently compensates for the investment deprivation, and further interest on loans taken by consumers is not permissible. The Court clarified its intervention was limited to the loan interest component, not the general power to award compensation.
Final Decision & Judgement:
The Supreme Court allowed the appeals, modifying the High Court’s order regarding the award of interest on the loans taken by the respondents. The Court held that the Greater Mohali Area Development Authority (GMADA) was not required to pay the interest on the loans taken by the complainants from banks like the State Bank of India or State Bank of Hyderabad. The 8% interest compounded annually on the refunded amount, as stipulated in the Letter of Intent, was deemed sufficient compensation for the deprivation of the investment. The Court clarified that awarding compensation under multiple heads for the same default, such as both the contractual interest and interest on a loan, is unsustainable. However, the Court did not interfere with the award of amounts for mental agony and litigation costs. Consequently, the amount already deposited before the State Commission, which does not include the loan interest, is to be dispersed to the respondents, and GMADA is not required to make any further deposits.
Case Details:
Case Title: GREATER MOHALI AREA DEVELOPMENT AUTHORITY (GMADA) THROUGH ITS ESTATE OFFICER (H) VERSUS ANUPAM GARG ETC. Citation: 2025 INSC 808 Civil Appeal No.: Civil Appeal Nos. 27847-27848 of 2019 Date of Judgment: June 4, 2025 Judges/Justice Name: Sanjay Karol & Prasanna B. Varale
Download The Judgement Here