In a recent legal dispute surrounding a property demolition case, the focus is on the contentious issue of interest compensation. The court’s legal analysis delves into the intricacies of whether flat-owners are entitled to interest on amounts paid to builders, considering factors such as possession duration and land ownership. This case raises important questions about compensation for deprivation of money and the implications of property investments. Follow along as the legal complexities unfold.
Facts
- Flat-owners have lost their residence due to the demolition of the building complexes.
- They are unable to purchase similar accommodation due to price escalation.
- State Government paid 25 lakhs as interim compensation, with the builder expected to pay the balance.
- Flat-owners are claiming interest on the amount paid to the builders.
- They are incurring rent expenses for alternative accommodation after vacating the demolished flats.
- Banks are charging high interest rates for loans taken to purchase now-demolished flats.
- Flat-owners invested life earnings in the demolished flats.
- Three out of four building complexes’ flat-owners received the determined amount, while Holy Faith H2O flat-owners received only 25 lakhs from the Government.
- No payments have been made by Holy Faith to the flat-owners as directed by the Committee.
- Jain Coral Cove Allottee’s Association members made payments between 2007-2013, received possession in 2013, and faced demolition in 2019.
- The Committee determined compensation based on the building portion, as the land share remains with flat-owners.
- Alfa Serene Flat Owners Association considers the payment as rehabilitation compensation for displacement.
- Flat-owners seek interest in addition to the refunded principal amount except for Holy Faith H2O residents.
- Miscellaneous Application Nos. 1808-1809 of 2019 initiated Suo Motu for monitoring compliance of the directions issued in the judgment dated 08.05.2019 in Civil Appeal Nos. 4784-4785 of 2019 and 4790-93 of 2019 in The Kerala State Coastal Zone Management Authority v. The State of Kerala Maradu Municipality & Ors.
- On 27.09.2019, the State Government directed to pay Rs.25 lakhs as interim compensation to each evicted flat-owner within four weeks.
- The compensation was to be recovered from the builders/promoters/officers responsible for illegal constructions.
- A Committee led by Justice K. Balakrishnan Nair, Retired Judge of the Kerala High Court was formed to oversee the payment to the flat-owners.
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Arguments
- Builders argue that possession was given to flat-owners between 2009-2013 and they have enjoyed the investment fruits till 2019.
- Flat-owners have undivided interest in the land with increasing market value and depreciation cost of the flats.
- Flat-owners were aware of show cause notices but still invested in the property.
- Builders open to compensating for undivided share of land.
- Flat-owners seek compound interest at 15% on land price paid.
- Associations seek interest on amounts paid to the builder as they were deprived of enjoying the flats.
- Some flat-owners are senior citizens and unable to construct any structure on the land.
- Difficulties in determining interest for flat-owners paid in installments and procedural issues in calculations.
- Amicus Curiae opines against blanket interest rate for all flat-owners citing possession and land ownership differences.
- Pertaining interest definition, compensation for deprivation of money, and CRZ-II category allowing construction on the land.
- Builders argue against further liability of interest payment as flat-owners still own undivided portion of land.
- Except Holy Faith builder, other builders have paid the balance amount to flat-owners
- Possession of flats was given to flat-owners between 2009-2013
- Flat-owners were in possession of the flats from 2009-2013 till 2019 when asked to vacate for demolition
- Rs.25 lakhs interim compensation paid by State Government in 2019
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Analysis
- A person is entitled to compensation for the deprivation of money due to the creditor, whether withheld by the debtor after the due date, in breach of legal rights.
- Interest serves as compensation, whether liquidated under an agreement or statute.
- In the case of Allahabad Bank v. Bengal Paper Mills Company Limited & Ors., applicants who enjoyed assets for 10 years were not entitled to interest as compensation for their deposit of the purchase price.
- Interest is compensation for the use of money the purchaser was deprived of, as established in Central Bank of India v. Ravindra.
- The fact that the purchaser obtained possession by depositing the purchase price is a relevant consideration in determining entitlement to interest on the purchase price.
- Flat-owners were paid only the amount they invested at the time of purchase
- Flat-owners benefitted from staying in the flats for 8-9 years on average
- Flat-owners jointly own the land, which has significantly increased in market value
- Flats taken possession of between 2009-2013 may have depreciated in value
- Flat-owners are not entitled to any interest on the amounts paid to the builders.
- Claim of interest by flat-owners is not justified based on the considerations mentioned.
Case Title: THE KERALA STATE COASTAL ZONE MANAGEMENT AUTHORITY MEMBER SECRETARY Vs. MARADU MUNICIPALITY (2022 INSC 569)
Case Number: MA-001808-001809 / 2019
