Vivek Sondhi vs N.D.M.C.
2002 Latest Caselaw 756 Del

JUDGMENT

C.K. Mahajan, J.

1. With the consent of counsel for the parties, I propose to dispose of the petition.

2. The petition raises a pure question of law as to whether the Estate Officer while passing an order under Section 7 of the Public Premises {Eviction of Unauthorised Occupants) Act, 1971 (for short the "Act") is empowered to award interest at the contractual rate or in terms of Section 7(2A) of the Act. The matter in controversy lies in a narrow compass.

3. The petitioner assails the order of the Addl. District Judge dated 27th April 2000 awarding interest @ 24% being the contractual rate of interest contrary to the spirit of Section 7(2A) of the Act providing for payment of current interest.

4. Briefly stated the facts are that shop No. 3 at Safdar Hashmi Marg was allotted to the petitioner w.e.f. 24.5.1994 at a license fee of Rs. 7,056/- per month. The license deed was executed on 10.5.1994. The petitioner defaulted in payment of license fee. The license deed was cancelled on 14.12.1995. The petitioner vacated the shop on 31.7.1996. Eviction proceedings were initiated against the petitioner by the Estate Officer. By order dated 6th April 1998, the petitioner was directed to pay a sum of Rs. 1,69,089.90 towards arrears of license fee and damages. The petitioner was directed to pay the arrears of license fee from July 1994 to December 1995 and damages from December 1995 to February 1996 along with interest @ 24% per annum till the payment of the amount. The petitioner was directed to pay damages @ Rs. 9,173/- per month instead of Rs. 7,056/- per month amount. The petitioner preferred an appeal against the order of the Estate Officer before the Addl. District Judge and the order was modified and the petitioner was directed to pay damages @ Rs. 7,056/- per month instead of Rs. 9,173/- per month. The petitioner deposited a sum of Rs. 1,42,941/- on 31.8.2000.

5. This Court on 19.9.2000 stayed the operation of the impugned order subject to deposit of interest @ 11%. The order was made without prejudice to the rights and contentions of the parties. The said amount was deposited.

6. It is contended by the petitioner that the Estate Officer was not empowered to award interest exceeding the current rate of interest as defined in Section 2(b) of the Interest Act read with Section 7(2A) of the Act. The Estate Officer while passing the order under the said Act was empowered to award only current rate of interest. The contractual rate of interest could only be demanded by the Licensor as long as the license deed was an existence. After the revocation/cancellation/termination of the license deed, the terms and conditions of the license deed came to an end. The Estate Officer being a quasi judicial authority acted in excess of his jurisdiction in awarding interest which is circumscribed in terms of Section 7(2A) of the said Act.

7. The respondent opposed the petition. It is contended that there is no error in the order of the Addl. District Judge. The rate of interest was provided in the contract/license deed and the same was binding on the parties.

8. I have heard learned counsel for the parties.

Section 7(2A) of the said Act reads as under :-

"While making an order under Sub-Section (1) or Sub-Section (2), the Estate Officer may direct that the arrears of rent or, as the case may be, damages shall be payable together with simple interest at such rate as may be prescribed, not being a rate exceeding the current rate of interest within the meaning of the Interest Act, 1978 (14 of 1978).

Section 2(b) of the Interest Act, 1978 reads as under :-

"Current rate of interest" means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949 (10 of 1949).

9. On a reading of the aforesaid sections, it is quite clear that the Estate Officer could award interest not exceeding the rate of interest as defined in Section 2(b) of the Interest Act. The contractual rate of interest coutd be awarded if the license deed was subsisting. On the revocation/cancellation of the license deed, the terms and conditions of the license deed came to an end. The levy of interest at the agreed rate ceases to have effect. The terms and conditions are no longer binding on the parties.

10. Section 7(2A) of the Public Premises Act which was inserted by an amending Act of 1980 circumscribes the powers of the Estate Officer so far as the maximum rate of interest is concerned. The maximum rate of interest awardable is the 'current rate of interest' as defined in the Interest Act. The Interest Act defines the expression "current rate of interest" by Section 2(b).

11. The introduction of changing rate of interest indicated the intention of the Legislature to charge interest from the defaulters if he remains in arrears of rent or damages. The introduction of the rate of interest further indicates that there should be some penalty levied on a person who is irregular in payment of rent or damages. However, the Legislature intended to provide for charging rates of interest at par with the rates of interest charged by the banks and other commercial and recognised institutions instead of charging interest at exorbitant rates. It is in this connection that the words "current rate of interest" assumes greater significance.

12. Admittedly, the Estate Officer is fully empowered to award interest but for the "maximum" rate of interest. The Estate Officer under the aforesaid provision has to look into the Interest Act. A conjoint reading of Sub-section 2(A) of Section 7 of the Public Premises Act and Sub-section (b) of Section 2 of the Interest Act makes it clear that the Estate Officer can charge interest at the highest of the maximum rate at which interest may be paid by the scheduled banks in accordance with the instructions of the Reserve Bank of India under the Banking Regulations Act, 1949. The Estate Officer cannot charge anything beyond this.

13. It is not the petitioner's case that rate of interest has not been prescribed as envisaged in Sub-section (2A) of Section 7. Even if rate has not been prescribed, the Estate Officer cannot travel beyond the maximum rate of interest as stipulated in Section 2(b) of the Interest Act. Even if that was to be the contention, the same stand settled by a judgment of this Court in Apeejay Surrendra Park Hotels Limited v. New Delhi Municipal Council and Anr.,

14. The law makers while inserting Sub-section (2A) in 1980 put fetters on the powers of the Estate Officer with regard to the maximum rate of interest to the maximum rate of interest which he can charge and as such the Estate Officer is not vested with any discretionary powers in this regard. His powers are limited and he has to act within his limitation, it is also relevant in this context to note that the aforesaid Sub-section (2A) of Section 7 of the Public Premises Act contains no reference to the Interest Act except the maximum rate of interest and therefore it is not necessary to look to other provisions contained in the interest Act by the Estate Officer.

15. Learned counsel for the respondents, however, contends that Section 3 of the interest Act 1978 is also applicable to the petitioner's case. Whether or not Section 3 is applicable, it is necessary to see whether the Estate Officer exercised its powers under the Public Premises Act or under the Interest Act or under both. - In the instant case by virtue of the powers vested in him under Section 7 of the Public Premises Act and in exercise of his powers under Sub-sections (1) and (2) thereof has passed order directing the petitioner to pay the arrears of rent and damages within the time allowed.

16. Coming back to the question of interest, Sub-section (2A) is required to be examined intimately/closely. The said Sub-section (2A) provides, as stated above, that while making an order under Section 5(1) or (2), the Estate Officer may direct that arrears of rent or, as the case may be, damages shall be payable, with simple interest at such rate as may be prescribed not being a rate exceeding the current rate of interest within the meaning of the Interest Act, 1978. The examination of the sub-clause makes it abundantly clear without any ambiguity that the Estate Officer exercised his powers under the Public Premises Act alone while ordering payment of interest and not under the Interest Act. Thus the contention of the respondent that Section 3 of the Interest Act is applicable is without any force and is not tenable.

17. Sub-Section (2A) while giving powers to the Estate Officer to order payment of interest on arrears on rent and damages restricts his powers so far the upper limit of the rate of interest is concerned. With regard to payment of the interest by the defaulter, the Estate Officer is fully empowered to pass orders that the arrears of rent or damages shall be paid by the defaulter with simple interest and at such rates as may be prescribed which cannot exceed the current rate of interest within the meaning of the Interest Act. Thus the Estate Officer can pass orders for payment of interest by the defaulter at a rate which may be lower than of if at par with the current rate of interest within the meaning of the Interest Act the Estate Officer is not vested with any powers to award interest which is more than the current rate of interest under the Interest Act. As to what is current rate of interest, the Estate Officer is required to look to its definition contained in Section 2(b) of the Interest Act. Apparently, the rate of interest at the rate of 24% exceeds the maximum rate in terms of Section 2(b) of the Interest Act and is beyond the powers of the Estate Officer to direct the petitioner to pay the same.

18. In light of the aforesaid discussion, I am of the firm view that the order of the Estate Officer dated 6th April 1998 to the extent of payment of interest at the rate of 24% is not sustainable and is modified with directions that he shall direct the petitioner to pay interest at the highest of the maximum rate at which the interest is paid on different classes of deposits by the scheduled banks in accordance with the directions given by the Reserve Bank of India as stipulated in Section 2(b) of the Interest Act. The Estate Officer shall calculate the interest within a period of one month and the petitioner shall pay the same within a period of two months thereafter.

19. Consequently, the order of the Addl. District Judge is also set aside.

20. Petition disposed of with the aforesaid directions.