The Kerala State Coastal Zone Management Authority Member Secretary vs Maradu Municipality & Ors.

The Kerala State Coastal Zone Management Authority Member Secretary vs Maradu Municipality & Ors.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

MA No. 1808-1809 of 2019
Civil Appeal Nos. 4784-85 of 2019
Civil Appeal Nos.4786-89 of 2019
Civil Appeal Nos. 4790-93 of 2019
The Kerala State Coastal Zone Management
Authority Member Secretary
 ... Appellant(s)
Maradu Municipality & Ors.
 ... Respondent(s)
Issue No. 3: Claim of interest by the flat-owners
1. One of the issues that was brought to the notice of
this Court by the learned Amicus Curiae pertains to the
interest claimed by the flat-owners on the amount they
paid to the Builders. After the demolition of four building
complexes situated in Ernakulam, Kerala, Miscellaneous
Application Nos.1808-1809 of 2019 was initiated Suo
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Motu by this Court for monitoring the compliance of the
directions issued by this Court in its 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.
2. On 27.09.2019, this Court directed the State
Government to pay an amount of Rs.25 lakhs as interim
compensation to each of the flat-owners who were
evicted at the time of demotion, within a period of four
weeks. The said amount was to be recovered from the
builders/promoters/persons /officers responsible for
raising the illegal constructions. A Committee headed by
Justice K. Balakrishnan Nair, Retired Judge of the Kerala
High Court was constituted to look after the payment of
the amounts to each flat-owners. The Committee has
determined only the amount to which the flat-owners are
entitled for the building portion of each apartment, as
the undivided share in the land has been retained by the
respective flat-owners. Based on the amount that was
1 (2019) 7 SCC 248
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determined by the Committee, while 25 lakhs have
already been paid by the State Government as interim
compensation, the balance amount was to be paid by
the builder to the flat-owners. The flat-owners of three
out of four building complexes have received the amount
paid by them for the flat, as determined by the
Committee. Flat-owners of the building Holy Faith H2O
have received only Rs. 25 lakhs/- that the State
Government was directed to pay as interim
compensation. No monies have been paid by Holy Faith
to the flat-owners, as determined by the Committee.
3. Apart from the refund of the principal amount that
was paid by the flat-owners to the builders which has
already been paid except to the residents of Holy Faith
H2O, the flat-owners are also seeking interest on such
principal amount. On behalf of the flat-owners, it was
submitted that they have invested their life earnings in
the flats which have now been demolished. Resultantly,
they have lost their place of residence and in view of the
price escalation, they are not in a position to purchase a
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similar accommodation for the amounts they have
invested in these building complexes. In addition, after
vacating the flats which were demolished later, the flatowners have to bear the expenditure towards rent to
stay in an alternate accommodation.
4. On behalf of Jain Coral Cove Allottee’s Association,
it was submitted that the flat-owners had made payment
in instalments between 2007-2013. They were given
possession in the year 2013 and the demolition took
place in the year 2019. It was argued on their behalf
that the amount that was directed to be paid to them by
the Committee is not the actual market value but only
the amount that was paid by them for purchasing the
flats. The Association has brought to our notice that for
the loans that were taken for purchasing the flats, banks
are charging a higher rate of interest at 17 per cent for
its repayment as the collateral does not exist anymore.
5. Further, the Alfa Serene Flat Owners Association
contended that the amount that was paid to them on
determination of the committee should be treated as a
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rehabilitation compensation or solatium against their
displacement from their flats. According to the flatowners, no development or construction activity can
take place on the underlying land and therefore it has no
worth and does not carry any market value. It was
submitted that they are open to giving up the undivided
share in the land in question to the builder or the
government against just and proper compensation. They
have sought for compound interest at the rate of 15 per
cent on the land price paid by them to the Builder at the
time of purchase of flat.
6. The Golden Kayaloram Residents Association and
H2O Apartment Owners Association have also sought
interest on the amounts that were disbursed by them to
the builder as they have been deprived of enjoying the
flats which they had purchased more than a decade
back. On behalf of the flat-owners, it was submitted that
most of them are senior citizens and are not in a position
to construct any structure on the undivided portion of
the land.
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7. On the other hand, the builders submitted that all
the flat-owners are not similarly situated. Some of the
flat-owners have paid the amount towards the cost of
the flats in full and the others would have been paying
the amounts till the date of demolition. Therefore, a
blanket rate of interest cannot be determined by this
Court to be paid to all the flat-owners. It was argued on
behalf of the builders that there is no dispute that
possession has been given to the flat-owners of the four
building complexes between 2009 to 2013 and they
have enjoyed the fruits of their investment from thereon
till 2019. The builders contended that the flat-owners
have the undivided interest in the said land till date and
that the market value of the land has increased
exponentially. As the flat-owners have resided in their
apartment for 6 to 10 years, the depreciation cost of the
flats also has to be taken into consideration. It was
contended on behalf of one of the builders that the flatowners were well aware of the show cause notices
issued by the authorities, and even then, they proceeded
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to invest in the property and reside therein. It was
further contended on behalf of the builders that while
the four building complexes might have been
demolished in 2020, construction is permitted on the
land as it now falls under the CRZ-II category. It is open
to the flat-owners to get a new structure constructed on
the land that is owned by them. Therefore, according to
the builders they cannot be mulcted with any further
liability of payment of interest to the flat-owners when
the amount that was paid by each flat-owner for the
purchase of flats has already been disbursed and the
ownership in the undivided potion of the land still rests
with the flat-owners.
8. The report that has been submitted in this Court by
Justice K. Balakrishnan Nair Committee, observed that it
would be difficult to determine the market value of the
flats since the furnishing and interior of each flat is
different. Therefore, assessment of the market value
after their demolition in 2019 is not possible as it would
have varied substantially. The Committee further
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observed that the particulars of the payment made in
instalments by the flat-owner was not available and,
therefore, it is difficult to determine the calculation of
interest in respect of at least 1/3rd of the flat-owners. In
so far as the remaining flat-owners are concerned, the
Committee held that it is not easy to calculate the
interest that has to be paid. The committee pointed out
the procedural difficulties and also mentioned that if it
was to do this exercise, all the cases will have to be reopened with notices to the Builders and the flat-owners
of each flat and the entire exercise would take at least 6
months to materialize, not to mention the further
unforeseen complications that might arise due to lack of
material data on record.
9. In the opinion of the learned Amicus Curiae, the
flat-owners are not entitled to interest at the rate of 12
per cent per annum on the amount which they paid to
the builder for the purchase of flat, as was granted by
this Court in Supertech Limited v. Emerald Court
Owner Resident Welfare Association
. The learned
2 (2021) 10 SCC 1
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Amicus Curiae submitted that in the case of Supertech
Limited (supra) neither the possession of the flats was
handed over by the builder to the flat-owners nor the
ownership of the undivided interest in the land was
transferred. While in this case, the flat-owners have
been given the possession of the flats which they have
enjoyed for a period of approximately 6 to 10 years. The
learned Amicus Curie was also of the opinion that the
value of the land which belongs to the flat-owners have
increased substantially.
10. “Interest” as defined in Black’s Law Dictionary is
the compensation fixed by agreement or allowed by law
for the use or detention of money, or for the loss of
money by one who is entitled to its use; especially, the
amount owed to a lender in return for the use of the
borrowed money. A person deprived of the use of money
to which he is legitimately entitled has a right to be
compensated for the deprivation, call it by any name3
3 Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy (1992) 1
SCC 508
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11. In Central Bank of India v. Ravindra
, this Court
observed that a person is entitled for compensation for
the deprivation of the money due to the creditor which
was not paid, or, in other words, was withheld from him
by the debtor after the time when payment should have
been made, in breach of his legal rights, and interest
was a compensation whether the compensation was
liquidated under an agreement or statute.
12. While rejecting the claim of payment of interest by
the Applicants who have been handed over possession
of the assets, this Court in Allahabad Bank v. Bengal
Paper Mills Company Limited & Ors.
, held that the
Applicants were not entitled for any interest as
compensation in view of their enjoyment of assets for 10
years on deposit of the purchase price. While relying on
the observations of this Court in Central Bank of India
v. Ravindra, it was held that interest was really
compensation for the use of the money which the
purchaser was deprived of, and that the fact that the
4 (2002) 1 SCC 367
5 (2004) 8 SCC 236
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obtaining of possession by the purchaser on deposit of
the purchase price was a consideration relevant in
deciding whether or not the purchaser would be entitled
to interest on the purchaser price as claimed.

13. In the present case, the facts that are not in dispute
are that flat-owners have purchased their apartments by
paying instalments somewhere between 2007 to 2013
depending on the construction of the particular building
complex. Possession of the flats was handed over to the
flat-owners between 2009-2013 and admittedly, the flatowners were in possession of the flats since 2009-2013
till 2019 when they were asked to vacate the flats for the
demolition of the buildings. There is no dispute that the
amount of Rs.25 lakhs has been paid as interim
compensation by the State Government in 2019 itself. It
is also admitted that except Holy Faith builder, the other
builders have also paid the balance amount to which the
flat-owners were entitled. It is no doubt true that the
flat-owners were paid only the amount that was invested
by them at the time of purchase of flats. However, it is
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relevant to take into account the fact that the flatowners had the benefit of staying in the flats for a period
of 8-9 years on an average and also that the land
belongs to the flat-owners as joint owners the market
value of which has increased substantially. It is also to
be noted that flats that were taken possession of in the
years between 2009-2013 would have depreciated in
14. Therefore, in view of the position as stated above,
we are of the considered view that the flat-owners are
not entitled for any interest on the amounts paid by
them to the builders.
15. For the aforementioned reasons, the third issue
pertaining to claim of interest by the flat-owners is
answered accordingly.

 [B. R. GAVAI]
New Delhi,
May 13, 2022
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