IMPORTANT POINT
Interest, penal interest and penalty for violation of auction terms - leviable.

JUDGMENT

K.S. Radhakrishnan, J.-Leave granted.

2. The questions raised in both these appeals are the same, hence, we are disposing of both the appeals by a common judgment.

3. The question that has come up for consideration in these appeals is whether the respondents are legally obliged to pay the interest, penal interest and penalty on account of the delayed payment of installments after having accepted the allotment of commercial plots by way of auction. The High Court has taken the view that since there was delay on the part of the Punjab Urban Planning and Development Authority (for short “PUDA”) in providing the basic amenities like parking, lights, road, water, sewerage etc. in time, PUDA cannot legally claim the interest, penal interest as well as penalty on account of the delayed payment of installments. The High Court placed reliance on the judgment of this Court in Municipal Corporation, Chandigarh and Ors. v. Shantikunj Investment (P) Ltd. (2006) 4 SCC 109 to reach that conclusion.

4. We heard Mrs. Rachna Joshi, learned counsel appearing on behalf of PUDA as well as Shri P.S. Patwalia, learned senior counsel assisted by Mr. Tushar Bakshi, appearing for the respondents.

5. For the disposal of these appeals, we may refer to the facts of Civil Appeal No. …… of 2012 [arising out of SLP (Civil) No. 8732 of 2009], as follows: - PUDA, on 16.3.2001, conducted a public auction for sale of the commercial plots. Raghu Nath Gupta, the respondent was the successful bidder of a single storey shop no. 134 in Phase III BIT, for a total consideration of Rs.31,75,000/-. The possession of the said shop was handed over to the respondent on 25.5.2001 on payment of Rs.7,93,750/- being 25% of the total cost of site. Installment facility was extended to the respondent for paying the balance 75% of the amount, that was Rs.23,81,250/- The relevant clauses of the Allotment Letter dated 16.3.2011 are extracted below for easy reference:

“4. The sum of Rs.7,93,750/- being 25% of the total cost of the site deposited by you after the ….. been adjusted as 25% of the sale.

5. The balance amount i.e. Rs.23,81,250/- being 75% of above piece of the writ, can be paid in lump sum without interest within 60 days from the date of auction or in 4 equated yearly installments along with interest @ 15 % per annum.

6. The annual quoted installment with interest @ 15% per annum will be payable as per the following schedule:

Installment Due date Amount of Installment Interest Total amount payable

1st 16.3.2002 5,95,313/- 3,57,188/- 9,52,501/-

2nd 16.3.2003 5,95,313/- 2,67,891/- 8,52,501/-

3rd 16.3.2004 5,95,312/- 1,78,594/- 7,73,906/-

4th 16.3.2005 5,95,312/- 89,297/- 6,84,609/-

23,81,250/- 8,92,970/- 32,74,220/-

In case the installment is not paid on the 10th of the month following the month in which it falls due, PUDA can impose penalty. The penalty Clause 9 reads as follows:

“9. In case the installment is not paid by the 10th of the month following the month, in which it falls due, the Estate Officer shall proceed to take action for imposition of penalty charged @ 2% per month of the amount i.e. from the due date in addition to normal simple interest. In case of non-payment of the installment along with interest due thereon for a continuous period of 3 months, the whole or any part of the money paid in respect of the site shall be forfeited and the Estate Officer shall cancel the allotment and resume the site, after giving you appropriate notice and an opportunity of being heard shall continue to be charged in the whole due amount till the date of payment of amount due.”

6. Above mentioned conditions were accepted and the plot was allotted. On getting possession after payment of 25% of the total cost, respondent raised construction on the allotted site in the year 2002. PUDA completed the development work by 20.12.2002 and provided all the facilities for the enjoyment of the various commercial plots allotted.

7. Respondent filed CWP No