LUCKNOW DEVELOPMENT AUTHORITY A

v.
M.K. GUPTA

NOVEMBER 5, 1993

[KULDIP SINGH AND R.M. SAHAI, JJ.] B

Consumer Protection Act, 1986;-Social benefit oriented legisla-

tion-/'rovisions ofAct to be construed in favour of consume~urt to adopt
constructive approach.
.C
Consumner Protection Act, 1986-Sections 2(c) 11,2 and 16-Jurisdic-
tion of Commission-Word 'consumer'--Deficiency in service relating to im-
movable property--lurisdiction of Commission not ousted.

Consumer Protection Act, 198~Section 2(o}-Service-Meaning and

scope of-Words '~y· and 'potential'-Meaning of. D
Consumer Protection Act, 1986-Jurisdiction-Whether public
authorities are amenable to jurisdiction under Act-Held, ye.r-A government
or semi-government body or a local authority would be as much amenable
to the Act as any other private body rendering similar service. E
Consumer Protection Act, 198~Section 2(o}-Service-Expression
'housing construction'-whether housing construction or building activity was
service within meaning of Section 2(o) as it stood before 1993 amend-
ment-Held, yes.
F
Consumer Protection Act, 1986-Sections 11, 17 and 21-Jurisdiction
to award compensation-Compensation includes value of goods or services
and also for sufference of injustice.

Consumer Protection Act, 198~Section 14-Compen.!lation-Liability G

to pay-Misfeasance in. public office-Comp~nsation for harassment, mental .
agony or oppression to consumer-Amount to be recovered from officials of
department found responsible.

Words & Phrases : 'Housing Construction~ 'any' and 'potential'-

Meaning of in the context of Consumer Protection Act, 1986. H
615
 616 SUPREME COURT REPORTS (1993) SUPP. 3 S.Clt:.

A The appellant, Lucknow Development Authority undertook develop-

ment of land and formed plots of different categories/sizes and con·
structed dwelling units for people belonging to different income groups;
Applications were invited from persons desirous of purchasing plots or
dwelling house. The respondent applied fo~ registration for allotment of
B a flat in the category of Middle Income Group on cash down basis. Since
the number of applicants was more, the authority decided to draw lots
in which a flat was allotted to the respondent. The entire payment was
made in July 1988 and the. flat was registered in the name of the
respondent in August 1988 the development Authority directed its
C Executive Engineer to hand over the possession of the Oat to the
respondent. However, the flat was not delivered as the construction was
not complete. The respondent approached the authority but no steps
were. ta~n nor possession was handed over.

D · The respondent filed a complaint before the District ·Forum

alleging that even after payment of entire amount in respect of cash
down scheme the appellant was not handing over possession. The
Commissioner directed the Authority to pay 12% simple interest upon
the deposit made by the respondent for the period. The appellant was
further directed to hand over possession of the Oat without delay after
E completing construction work upto June 1990. The Commission further
directed that if it was not possible to complete the construction then the
-appellant should hand over possession of the Oat to the respondent by
5th April 1990 after determining the deficiencies and the estimated cost
of such deficient construction shall be refunded to the respondent by
F 20th April 1990. The appellant challenged this order before the National
Commission and raised the question of jurisdiction. The objection was
overruled and the appeal was dismissed. The cross appeal filed by the
respondent was allowed. The appellant was directed. to pay the !!Ost ·of
completing construction estimated by the architect of the appellant in
G October 1989. The Commission held that the action of the appellant
amounted to harassment, mental torture· and agony of the respondent,
therefore, it directed the Authority to pay a sum of Rs. 10,000 as
compensation. Bence these appeals.

H The questions of law which arose for consideration were whether

.,.
L.D.A v. M.K. GUPTA 617

the statutory authorities constituted under State Act to carry on planned · A

development of the cities were amenable to Consumer Protection Act,
1986 for any act or omission relating to housing activity such_ as delay
in delivery of possession of the houses to the allottees, non-completion
of the Oat within the stipulated time, or defective and faulty construc-
tion etc. and if the housing activity came within the purview of the B
Act only after its amendment by the ordiance No. 24 in 1993, whether
the Cqmmission could entertain a complaint for such_ violations even
before.

The appellant urged that the applicability of the Act having been
confined to moveable goods only a complaint filed for any defect in relation C
to immoveable goods such as a house or building or allotment of site could
not have been entertained by the Commission. It was argued that the local
authorities or government bodies while discharging their statutory func-
tion could not be subjected to provisions of the Act. The appellant sub-
mitted that the entire objective of the Act was to protect a consumer D
against malpractices in business. It was urged that inclusion of 'housing
construction' in clause (o) and 'avail' in clause (d) in 1993 indicated that
the Act as it stood prior to the amendment did not apply to hiring of
services in respect of housing construction and in absence of any expres·
sion making the amendment retrosi}ective it ~hould be held to be prospec· E
tive.

Dismissing the appeals, this Court

HELD 1.1. The provisions of the Consumer Protection Act, 1986 have F
to be construed in favour of the consumer to achieve the purpose of
enactment as it is a social benefit oriented legislation directed towards
achieving public benefit. The primary duty of the court while consturing
the provisions of such an Act is to adopt a constructive approach subject
to that it should not do violence to the language of the provisions and is
not contrary to attempted objecUve of the enactment. (622-E] G

1.2. In the instant case, the respondents were aggrieved by delay in

delivery of possession of house or use of sub- standared material etc. and
therefore they claimed deficiency in service rendered by the Lucknow
Development Authority. The jurisdiction ~f the Commission could not be H
 618 SUPREME COl!RT REPORTS (1993) SUPP. 3 S.C.R.

· A ousted because even though It was senice It related to immovable property. ..

[625-B]

1.3. The word 'any' and 'potential' used in clause (o) of Section 2 of
the Consumer Protection Act, are of wide amplitude. The word 'any'
dlctlonarlly means 'one or same or all'. The use of the word 'any' in the
B context It has been used In clause (o) Indicates that it has been used In
•
I

wider sense extending from one to all. The word 'potential' Is defined as
'capable of ~omlng into being, possibility'. In other words senice which ls
not only extended to actual users but those who are capable of using it are
covered in the definition. The clause ls thus very wide and extends to any
C or all actual or potential users. (625·0, 626-A·CJ

1.4. A government or semi-government body or a local authority is

as much amenable to the Consumer Protection Act as any other private
body rendering similar service. The Act requires provider of service to be
D more objective and caretaldng. It ls. still more in public services. The
legislature expanded the meaning of the word 'service' in modern sense by
atendlng it· to even such facilities as are available to a consumer in
connection with banking, llnancing etc. Each of these are wide ranging ·
acdvities in day to day life. They are discharged both by statutory and
. E private bodies. In absence of any lndl~tion, express or implied there ls no
reason to hold that authorities created by the statutes are beyond purview
of the Act. The legislative intention ls thu!I clear to protect a consumer
against services renclerecl even by statutory bodies. The test is not if a
person against whom complaint ls made ls a statutory body but whether ...
F the nature of the duty and function performed by it ls service or even
facility. (627-E, 626-B, 627·A, 626-C·FJ

1.S. Housing construction or building activity carried on by a private

or statutory body was service within meaning or clause (o) of section 2 of
the Act as it stood prior to inclusion of the expression housing construe·
G tion in the definition of 'service' by Ordinance No. 24 of 1993. Construction
of a house or Oat ls for the benefit of person for whom-it is constructed.
Be may do it himself or hire services of a builder or contractor. The latter
being for consideration ls service as defined tn the Act. Similarly when a
statutory authority develops land or allots a site or constructs a house for.
H the beneftt of common man it ls as much service as by a builder or
 LO.Av. M.K. GUPTA 619

contractor. The one is contractual service and other statutory service. If A

the service is defective or it is not what was represented then it would be
unfair trade practice as defined in the Act. Any defect in construction
activity would be denial of comfort and service to a consumer. When
possession of property is not delivered within stipulated period the delay
so caused is denial of service. Such disputes or claims are deficiency in B
rendering of service of particular standard, quality or grade. When a
statutory authority undertakes to construct building or allot houses or
building sites to citii.ens of the State either as amenity or as benefit then
it amounts to rendering of service and will be covered in the expression
'service made available to potential users'. A person who applies for
allotment of a building site or for a ftat constructed by the development C
authority or enters into an agreement with a builder or a contractor is a
p~tential user and natuft of transaction is covered In the expression
'service of any description'. Since housing activity ls a service it ~
covered in the clause as it stood before 1993. The legislature while amend·
ing the law in 1993 added the word 'avail' in clause (d) more to qualify D
than to add something new. (627-F-H, 628-G-H, 629·A·B, H] :.r

1.6. Each hieran:by in the Act is empowered to entertBio a complaint

by the consum~r for value of the goods or services and compensation. The
word 'compensation' is of very wide connotation. It includes both the just E
equivalent for loss of goods or services and also for suft'erance of injustice.
The provision enables a cobsumer to claim and emponrs the Commission
to redress any injustice done to him. (631·8, 632-A-C]

State of Gujarat v. Memon Mohomed Haji Hasam, AIR· (1967) SC

1885; Lala Bishamber Nath v. Agra Nagar Mahapalika, Agra, AIR (1973) F
SC 1289; Mis Kasturi Lal Ralia Ram lain v. State of Uttar Pradesh, AIR
(1965) SC 1039; Shyam Sunder v. State of Rajasthan, [1974) 1 SCC 690
and Geddies v. Proprietors of Bahn Reservoir, (1878) 3 App. Cas 430,
relied on.
G
1.7. When a citii.en seeks to recover compensation from a public
authority in respect of injuries suffered by him for capricious exercise of
power and the National Commission finds it duly proved then It has a
statutory obligation to award the same. It is necessary that the Conunis·
sion when It ls satisfied that a complainant ls entitled to compensation for H
 620 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R..

A harassment or mental agony or oppression, then it should further direct

the department concerned to pay the amount to the complainant from the
public fund immediately but to recover the same from those who ~re found
responsible for such unpardonable beha\'lour by dividing it proportionate·
ly whery there are more than one functionaries. (636-H, 637-BC]

B Cassell & Co. Ltd. v. Broome & Anr., (1972) AC 1027; Rookes v.
Barnard and Ors., (1964) AC 1129;Ashby v. White, (1703) 2 Ld Raym 938;
Roncarelli v. DUplessis, (1959) 16 DLR (28) 689; Smith v. East Ellore Rural
District Counci~ (1956) AC 736; Penington v. Thomson, (1959) VR 286 and
Wood v. Blaire, 'lbe 'Dmes 3, 4, 5, July 1957, relied on.
c
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 61:37 of
1990.

From the Judgment and Order dt. 13.7.1990 of the National Con·
sumer Disputes Redressal Com.mission, New Delhi in First A~peal No. 24
D of 1990.

. Mis Sabarya &. Co., Surya Kant, Anil Kr. Gupta S.A. Syed, VJ.
Francis, K.V. Mohan, A.K. Gupta Naresh K. Sharma, Rajiv Gupta, Ms.
Bina Gupta, S.K. Garg and R.K. Vmnani for the appearing parties.
E The Judgment of the Court was delivered by

R.M. SARAI, J. The question of law that arises for consideration in

these appeals, directed against orders passed by the National Consumer
Disputes Redrcssal Com.mission (referred hereinafter as National Commis·
F sion), New Delhi is if the statutory authorities such as Lucknow Develop-
ment Authority or Delhi Development Authority or Bangalore
Development Authority constituted under State Acts to carry on planned
development of the cities in the State are amenable to ConsUm.er Protec-
tion Act 1986 (hereinafter referred to as 'the Act') for any act or omission
G relating to housing activity such as delay in delivery of possession of the
houses to the allottees, non-completion of the flat within the stipulated
time, or defective and faulty construction etc. Another aspect of this issue ·
is if the housing activity carried on by the statutory authority or private
builder or contractor came within the purview of the Act only after its
amendment by the Ordinance No. 24 in 1993 or the Commission could
H entertain a comp~ for such violations even before.·
 LO.Av. M.K. GUPTA (SAHA!, J.] 621

How the dispute arose in different appeals is not of any consequence A

except for two appeals which shall be adv··rted later, for determining right
and power of the Commission lo award exemplary damages and account·
ability of the statutory authorities. We therefore CL..1e straightaway to the
legal issue involved in these appeals. But before doing so and examining
the question of jurisdiction of the District Forum or State or National. B
Commission to entertain a complaint under the Act, it appears appropriate
to ascertain the purpose of the Act, the objective it seeks to achieve and
the nature of social purpose it seeks to promote as it shall facilitate in
comprehending the issue involved and assist in construing various
provisions of the Act effectively. To begin with the preamble of the Act,
which can afford useful assistance to ascertain the legislative intention, it C
was enacted, 'to provide for the protection of the interest of consumers'.
Use of the word 'protection' furnishes key to the minds of makers of the
Act. Various definitions and provisions which elaborately attempt to
achieve this objective have to be construed in this light without departing
from the settled view that a preamble cannot control otherwise plain D
meaning of a provision. In fact the law meets long felt necessity of protect-
ing the common man from such wrongs for which the remedy under
ordinary law for various reasons has become illusory. Various legislations
and regulations permitting the State to intervene and protect interest of
the consumers have become a haven for unscrupulous ones and the enfor- E
cement machinery either does not move or it moves ineffectively, ineffi-
ciently ·and for reasons which are not necessary to be stated. The
importance of the Act lies in promoting welfare of the society by enabling
the consumer to participate directly in the market' economy. It attempts to
remove the helplessness of a consumer which be faces against powerful
F
business, described as, 'a network of rackets' or a society in which,
'producers have secured power' to 'rob the rest' and the might of public
bodies which are degenerating into store house of inaction where papers
do not move from one desk to another as a matter of duty and respon-
sibility but for extraneous consideration leaving the common man helpless,
bewildered and shocked. The malady is becoming so rampant, widespread G
and deep that the society instead of bothering, complaining and fighting
for it, is accepting it as part of life. The enactment in these unbelievable
yet harsh realities appears to be a silver lining, which may in course of time
succeed in checking the rotine. A scrutiny of various definitions such as
'consumer', 'service', 'trader', 'unfair' trade practice indicates that legisla- H

v
 622 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

A ture has attempted to widen the reach of the Act. Each of these definitions
are in two parts, one, explanatory and the other expandatory. The ex-
planatory or the main part itself uses expressions of wide amplitude
indicating clearly its wide sweep then its ambit is widened to such things
which otherwise would have been beyond its natural import. Manner of
construing an inclusive clause and its widening effect has been explained
B in Dilworth v. Commissioner of Stamps, [1899) A.C. 99 as under:

'"include' is very generally used interpretation clauses in order to

enlarge the meaning of the words or phrases occurring in the body
of the statute, and when it is so used these words or phrases must
C be construed as comprehending, not only such things as they signify
according to their natural, import, but also those things which the
definitfon clause declares that they shall include."

It has been approved by this C~urt in Regional Director, Employees' State

D Insurance Corporation v. Highland Coffee Works of P.F.X. Saldanha and
Sons & Anr., [1991) 3 SCC 617; C./. T., Andhra Pradesh v. Mis Taj Mahal
Hote~ Secunderabad, [1971) 3 SCC 550 and The State of Bombay and others
v. The Hospital Mazdoor Sabha and others, AIR (1960) SC 610. The
provisions of the Act thus have to be construed in favour of the consumer
to achieve the purpose of enactment as it is a social benefit oriented
E legislation. The primary duty of the court while construing the provisions
of such an Act is to adopt a constructive approach subject to that it should
not do violence to the language of the provisions and is not contrary to
attempted objective of the enactment.

F Although the legislation is a milestone in history of socio- economic

legislation and is directed towards achieving public benefit we shall first
examine if on a plain reading of the provisions unaided by any external aid
. of interpretation it applies to building or construction activity carried on
by the statutory authority or private' builder or contractor and extends even
to such bodies whose ancillary function is to allot a plot or construct a flat.
G In other words could the authorities constituted under the Act entertain a
complaint by a consumer for any defect or deficiency in relation to con-
struction activity against a private builder or statutory authority. That shall
depend on ascertaining the jurisdiction of the Commission. How extensive
it is? A National or a State Commission under Sections 21 and 16 and it
H coaaumer forum under Section 11 of the· Act is entitled to entertain a
 LO.A. v. M.K. GUPTA [SAHA!, J.) 623

complaint depending on valuation of goods or services and compensation A

claimed. l'he nature of, 'complaint' which can be filed, according to cla~
(c) of Section 2 of the Act is for unfair trade practice or restrictive trade
practice adopted by any trader or for the defects suffered for the goods
bought .or agreed to be bought and for deficiency in the service hired or
availed of or agreed to be hired or availed of, by a 'complainant' who under B
clause (b) of the definition clause means a consQJDer or any volentary
consumer association registered under the Co~ ACt 1956 or under
any law fot the time being in force or the Central Government or any State
Government or where there arc one or more consumers having the 111DC
interest then a complaint by such conswilcrs. The right thus to approach
the Conimission or the forum vests in consumer for unfair trade practice C
or defect in supply of goods or deficiency in service. The word 'consumer'
is a comprehensive expression. It extends from a person who. buys any- ,.,
commodity to consume either as eatable or otherwise from a shop, business
house, corporation, store, fair price shop to use of private or public
services. In Oxford Dictionary a consumer is defined as a. 'pur~r of b
goods or services'. In Black's Law Dictionary it is explained to mean, 'one
who consumes. Individuals who purchlsc, use, maintain, and dispose of
products and services. A member of that broad class of people who arc
affected by pricing policies, financing practices, quality of goods and
services, credit reporting, debt collection, and other trade practices for
which state and federal consumer protection laws arc enacted.' The Act E
opts for no less wider definition. It reads· aa under :

""Consumer" means any person who, •

(i) buys any goods for a consideration which bas been paid or p
promised or partly paid and partly promised, or \IDdcr any system
of deferred payment and includes any user of such goods other
that the person who (buys such goods for consideration paid or
promised or partly paid or partly promised or um:ter and system
of deferred payment when such use is made with the approval of
such person but docs not include a.t>craon who obtains such goods G
for resale or for any commercial purpose; or

(ii) hires or avails of any scnices for a consideration which baa

been paid or promised or partly paid and partly promised, or under
any system. of deferred payment and includes any beDcfidary of H
 624 SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R.

A such services other than the person who hires or avails of the
service for consideration paid or promised, or partly paid and
partly promised, or under any system of deferred payment, when
such services are availed of with the approval of the first mentioned
person:

B (Explanation - For the purposes of sub-clause (i) "commercial

purpose" does not include use by a consumer of goods bought and
used by him exclusively for the purpose of earning his livelihood,
by means of self-employment;)"

C It is in two parts. The first deals with goods and the other with services.
Both parts first declare the meaning of goods and services by use of wide
expressions. Their ambit is further enlarged by use of inclusive clause. For
instance, it is not only purchaser of goods or hirer of services but even
those who use the goods or who are.beneficiaries of services with approval
of the person who purchased the goods or who hired services are included
D in it. The legislature has taken precaution not only to define 'complaint',
'complainant', 'consumer' but even to mention in detail what would amount
to unfair trade practice by.giving an elaborate definition in clause (r) and
even to define 'defect' and 'deficiency' by clauses (f) and (g) for which a
consumer can approach the Commission. The Act thus aims to protect the
E economic interest of a consumer as understood in commercial sense as a
purchaser of goods and in the larger sense of user of services. The common
characteristics of goods and services are that they are supplied at a price
to cover the costs and generate profit or income for the seller of goods or
provider of services. But the defect in one and deficiency in other may have
to be removed and compensated differently. The former is, normally,
F capable of being replaced and repaired whereas the other may be required
to be compensated by award of the just equivalent of the value or damages
for loss. 'Goods' have been defined by Clause (i) and have been assigned
the same meaning as in Sale of Goods Act, 1930 which reads as under :

""goods" means every kind of movable property other than ac-

G
tionable claims and money; and mcludes stock and shares, growing
crops, grass, and things attached fo or forming part of the land
which are agreed to be served before sale or under the contract
of sale".

H It was therefore urged.that the applicability of the·Act having been con-

 L.D.A v. M.K. GUPTA[SAHAl,J.) 625
•
fined to moveable goods ·only a complaint filed for any defect in relation A
to immoveable goods such as a house or building or allotm.ent of site could
not have been entertained by the Commission. The submission does not -·
appear to be well founded. The respondents were aggrieved either by delay
in delivery of possession of house or use of sub-standard material etc. and
therefore they claimed deficiency in service rendered by the appellants. B
Whether they were justified in their complaint and if such act or omission
could be held to be denial of service in the Act shall be examined presently
b\lt the jurisdiction of the Commission could not be ousted because even
though it was service it related to immoveable property.

What is the meaning of the word 'service'? Does it extend to deficien- C

cy in the building of a house or flat? Can a complaint be filed under the
Act against the statutory authority or a builder or contractor for any
deficiency in respect of given property. The answer to all this shall under-
standing of the word 'service'. The term has variety of meanings. It may
mean any benefit or any act resulting in promdng interest or happiness. D
It may be contractual, professional, public, domestic, legal, statutory etc.
The concept of service thus is very wide. How it should be understood and
what it means depends in the context in which it has heen used in an
enactment. Clause (o) of the definition section defines it as under :

""Service" means service of any description which is made available E

to potential users and includes the provision of facilities in con-
nection with banking, financing, insurance, transport, processing,
supply of electrical or other energy, board or loading or both
(housing construction) entertainment, amusement or the purveying

- of news or other information, but does not include the rendering

of any service free of charge or under contract of personal service."
p

It is in three parts. The main part is followed by inclusive clause and ends

- by exclusionary clause. The main clause itself is very wide. It applies to any
service made available to potential users. The words 'any' and 'potential'
are significant. Both are of wide amplitude. The word 'any' dictionarily
means 'one or same or all'. In Black's Law Dictionary it is explained thus,
G

word "any" has a diversity of meaning and may be employed to indicate

"all" or "every" as well as "same" or "one" and its meaning in a given statute
depends upon the context and subject matter of the statute'. The use of
the word 'any' in the context it has been used in clause (o) indicates that H
 626 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

A it has been used in wider sense extending from one to all. The other word
'potential' is again. very wide. In Oxford Dictionary it is defined as 'capable'
of coming into being, possibility'. In Black's Law Dictionary it is defined
as 'exteiiding in possibility but not in act. Naturally and probably expected
to come into existence at some future time, though not now existing; for
example, the future product of grain or trees already planted, or the
B · successive future instalments or payments on a contract o.r engagement,
already made.' In other words service which is not only extended to actual
users but those who are capable of using it are covered in the definition.
The clause is thus very wide and extends to any or all actual or potential
users. But the legislature did not stop there. It expended the meaning of
C the word further in modem sense by extending it to even sucJi facilities as
are available to a consumer in connection with banking, financing etc. Each
of these are wide tanging activities in day to day life. They are discharged
~by statutory and private bodies. In absence of any indication, expre~
or implied there is no reason to hold that authorities created by the statute
D •e beyond purview of the Act. When ~anks advance loan or accept deposit
or provide facility of locker they undoubtedly render service. A State Bank
ot aation8lised bank renders as much service as private bank. No distiac-
. tion can be drawn in private and public transport or insurance companies.
Even the supply of electricity or gas which throughout the country is being
made,· mainly, by statutory authorities is included in it. The legislative
E intention is thus clear to protect a consumer against services rendered even
by statutory bodies. The test, therefore, is not if a person against who
complaint is made is a statutory body but whether the nature of the duty
and function performed by it is service or even facility.

F This takes us to the larger issue if the public authorities under

different enactments are amenable to jurisdiction under the Act. It was
vehemently argued that the local authorities or government bodies develop
land. and construct houses in discharge of their statutory function, there-
-
fore, they could not be subjected to provisions of the Act. The learned
counsel ~ged that if the ambitOf the Act would be widened to include
G even such authorities it would vitally affect functioning of official bodies.
The learned counsel submitted that the entire objective of the Act is to
protect a consumer against malpractices in business. The argument
proceeded on complete misapprehension of the purpose of Act and even
its explicit language. In fact the Act requires provider of serviee to be more
H objectiVe and caretaking. It is still more in public services. When private
 L.D.A v. M.K. GUPTA(SAHAI,J.] 627

undertakings are taken over by the government or corporations are created A

to discharge what is otherwise State's function, one of the inherent objec-
tives of such social welfare measures is to provide better, efficient and the
cheaper services to the people. Any attempt, therefore, to exclude services
offered by statutory or official bodies to the common man would be against
the provisions of the Act and spirit behind it. It is indeed unfortunate that
B
since enforcement of the Act there is a demand and even political pressure
is built up to exclude one or the other class from operation of the Act.
How ironical it is that official or semi-official bodies which insist on
numerous benefits, which are otherwise available in private sector, succeed
in bargaining for it on threat of strike mainly because of larger income
accruing due to rise in number of consumers and not due to better and C
efficient functioning claim exclusion when it comes to accountability from
operation of the Act. The spirit of consumerism is so feeble and dormant
that no association, public or private spirited, raises any finger on regular
hike in prices not because it is necessary but either beacuse it has not been
done for sometime or beacuse the operational cost has gone up irrespective D
of the efficiency without any regard to its impact on the common man. In
our opinion, the entire argument found on being statutory does not appear
to have any substance. A government or semi-government body or a local
authority is as much amenable to the Act as any other private body
rendering similar service. Truly speaking it would be a service to the society
if such bodies instead of claiming exclusion subject themselves to the Act E
and let their acts and omissions scrutinised as public accountability is
necessary for healthy growth of society.

What remains to be examined is if housing construction or building

activity carried on by a private or statutory body was service within meaning
of clause ( o) of Section 2 of the Act as it stood prior to inclusion of the
F
expression 'housing construction' in the definition of "service" by Ordinance
No. 24 of 1993. As pointed out earlier the entire purpose of widening the
definition is to include in it not only day to day buying and selling activity
undertaken by a common man but even to such activities which are
otherwise not commercial in nature yet they partake of a character in which G
some benefit is conferred on the consumer. Contruction of a house or flat
is for the benefit of person for whom it is constructed. He may do it himself
or hire services of a builder or contractor. The latter being for considera-
tion is service as defined in the Act. Similarly when a statutory authority
H
A
628 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R ..

develops land or allots a site or conslructs a house for the benefit of

common man it is as much service as by a builder or contractor. The one
-
is contractual service and other statutory service. If the service is defective
or it is not what was represented then it would be unfair trade practice as
defined- in the Act. Any defect in construction activity would be denial of
B comfort and servic;e to a consumer. When possession of property-is not
delivered within stipulated period the delay so caused is denial of service.
Such disputes or claims are not in respect of immoveable property as
argued but deficiency in renqering of service of particular standard, quality
or grade. Such deficiencies or omissions are defined in sub-clause (ii) .of
C Clause (r) of Section 2 as unfair trade practice. If a builder of a ho.use uses
sub-standard material in construction of a building or makes false or
misleading representation about the condition of the house then it is denial
of the facility or benefit of which a consumer is entitled to claim value
under the Act. When the contractor or builder undertakes to erect a house
D or flat then it is inherent in it that he shall perform his obligati9n as agreed
to. A flat with a leaking roof, or cracking wall or sub-standard floor is
denial of service. Similarly when a statutory authority undertakes to
develop land and frame housing scheme, it, while performing statutory duty
renders service to the society in general and individual in particular. The
E entire approach of the learned counsel for the development authority in
emphasising that power exercised under a Statute could not be stretched
to mean service proceeded on misconception. It is incorrect understanding
of the statutory functions under a social legislation .. A development
authority while developing the land or framing a scheme _for housing
discharges statutory duty the purpose and objective of which is service to
F the citizens. As pointed out earlier the entire purpose of widening the
definitions is to include in it not only day to day buying of goods by a
common man but even to such activities which are otherwise not commer-
cial but professional or service oriented in nature. The provisions in the
Acts, namely, Lucknow Development Act. Delhi Development Act or
G Bangalore Development Act clearly provide for preparing plan, develop-
ment of land, and framing of scheme etc. Therefore if such authority
undertakes to construct building or allot houses or building sites to citizens
of the State either as amenity or as benefit then it amounts to rendering of
service and will be covered in the expression 'service made available to
H potential users'. A person who applies for allotment of_ a building site or
 L.D.A. v. M.K. GUPTA (SAHAI, J.) 629

for a flat constructed by the development authority or enters into an A

agreement with a builder or a contractor is a potential ·user and nature of
transaction is covered in the expression 'service of any description'. It
further indicates that the definition is not exhaustive. The inclusive clause-..
succeeded in widening its scope but not exhausting the services which could
be covered in earlier part. So any service except when it is free of charge B
or under a constraint of personal service is included in it. Since housing
activity is a service it was covered in the clause as it stood before 1993.

In Appeal. No 2954 filed by a builder it was urged that inclusion of

'housing construction' in clause (o) and 'avail' in clause (d) in 1993 would
indicate that the Act as it stood prior to the amendment did not apply to C
hiring of services in respect of housing construction. Learned counsel
submitted that in absence of any expression making the amendment
retrospective it should be held to be prospective as it is settled that any
law including amendments which materially affect the vested rights or
duties or obligations in respect of past transactions should remain un- D
touched. Reliance was placed on Jose Da Costa & Anr. v. Bascora Sadasiva :;
Sinai Narcomim & Ors., (1976) 2 SCC 917; State of Madhya Pradesh & Ors.
v. Rameshwar Rathod, AIR (1990) SC 1849 and Re Pu/borough School
Board Election Case (1891) 94 All ER 834. It was also argued that when
definition of 'service' in Monopolies and Restrictive Trade Practices Act
was amended in 1991 it was made retrospective. Therefore, in absence of E
use of similar expression in .this Act it should be deemed to be prospective.
True, the ordinance does not make the definition retrospective in opera-
tion. But it was not necessary. In fact it appears to have been added by way
of abundant caution as housing construction being service was included
even earlier. Apart from that what was the vested right of the contractor
under the agreement to construct the defective house or to render deficient F
service? A legislation which is enacted to protect public interest from
undesirable activities cannot be construed in such narrow manner as to
frustrate its objective. Nor is there any merit in the submission that in
absence of the word 'avail or in the definition of 'consumer' such activity
could not be included in service. A perusal of the definition of 'service' as G
it stood prior to 1993 would indicate that the word 'facility' was already
there. Therefore the legislature while amending the law in 1993 added the
word in clause ( d} to dispel any doubt that consumer in the Act would
mean a person who not only hires but avails of any facility for considera-
tion. It in fact indicates that these words were added more to clarify than
to add something new. · H ·
 630 SUPREME COURT REPORTS {1993) SUPP. 3 S.C.R.

A Having examined wide reach of the Act and jurisdiction of the

Commission to entertain complaint not only against business or trading
activity but even to service rendered by statutory and public authorities the
stage is now set for determining if the Commission in ,exercise of its
jurisdiction under the Act could award compensation and if such compen-
sation could be for harassment and agony to a consumer. Both these
B aspects specially the lect~r are of vital significance in the present day
context. Still more important issue is the liability of payment. That is should
the society or the tax payer be burdened for oppressive and capricioas act
of the public officers or it be paid by those responsible for it. The ad-
ministrative law of accountability of public authorities for their arbitrary
c and even ultra vires actions has taken many .strides. It is now accepted both
by this Court and English courts that the State is liable to compensate for
loss or injury suffered by a citizen due to arbitrary actions of its employees.
In State of Gujarat v. Memon Mahomed Haji Hasam, AIR (1967) SC 1885
the order of the High Court directing payment of compensation for dis-
D posal of seized vehicles without waiting for the outcome of decision in
appeal was upheld both on principle of bailee's, 'legal obligation to
preserve the property intact and also the obligation to take reasonable care
of it to return it in same condition in which it was seized' and also because
the government was, 'bound to return the said property by reason of its
statutory obligation or to pay its value if it had disabled itself from return-
.· E ing it either by its own act or by act of its agents and servants'. It was
extended further even to bonafide action of the authorities if it was contrary
to law in Lala Bishambar Nath v. The Agra Nagar Mahapalika, Agra, AIR
(1973) SC 1289. It was held that where the authorities could not have taken
any action against the dealer and their order was invalid, 'it is immeterial
F that the respondents had acted bona fide and in the interest of preservation
of public health. Their motive may be good but their orders are illegal.
They would accordingly be liable for any loss caused to the appellants by
their action.' The theoritical concept that King can do no wrong has been
abandoned in England itself and the State is now held responsible for
tortuous act of its servants. The first Law Commission constituted after
G coming into force of the Constitution on liability of the State in Tort,
observed that the old distinction between sovereign and non-sovereign
functions should no longer be invoked to determine liability of the State.
Friedmann observed,

H "It is now increasingly necessary to abandon the lingering fiction

 L.D.A. v. M.K. GUPTA [SARAI, J.1 631

of a legally indivisible State, and of a feudal conception of the A

Crown, and to substitute for it the principle of legal liability where
the State, either directly or through incorporated public
authorities, engages in activities of a commercial, industrial or
. managerial character. The proper test is not an impracticable
distinction between government and non-governmental functional, B
but the nature and form of the activity in question."

Even Mis Kasturi Lal Ralia Ram Jain v. State of Uttar Pradesh, AIR (1965)
SC 1039 did not provide any immunity for tortuous acts of public servants
committed in discharge of statutory function if it was not referable to .
sovereign power. Since house construction or for that matter any service C
hired by a consumer or facility availed by him is not a sovereign function
of the State the ratio of Kasturi Lal (supra) could not stand in way of the
Commission awarding compensation. We respectfully agree with Mathew,
J., in Shyam Sunder v. State of Rajasthan, (1974) 1 SCC 690 that it is ~ot
necessary, 'to consider whether there is any rational dividing line between · D
the so-called sovereign and properietary and commercial functions for
determining the liability of the State'. In any case the law has always
maintained that the public authorities who are entrusted with statutory
function cannot act negligently. As far back as 1878 the law was succinctly
explained in Geddis v. Proprietors of Bann Reservoir, (1878) 3 App. Cas.
~- E
"I take it, without citing cases, that it is now throughly well estab-
lished that no action will lie for doing that which the Legislature
has authorised, if it be done without negligence, although it does
occasion damage to anyone; but an action does lie for doing what p
the Legislature has authorised, if it be done negligently."

Under our Constitution sovereignty vests in the people. Every limb of the
constitutional machinery is obliged to be people oriented. No functionary
in exercise of statutory power can claim .immunity, except to the extent.
protected by the Statute itself. Public authorities acting in violation of G
constitutional or statutory provisions oppressively are accountable for their
behaviour before authorities created under theStatute like the Commission
or the courts entrusted with responsibility of maintaining the rule of law.
Each hierarchy in the Act is empowered to entertain a complaint by the
consumer for valqe of the goods or services and compensation. The word H

.
 632 SUPREME COURT REPORTS [1993] SUPP. 3 S.C.R.

A 'compensation' is again of very wide connotation. It has not been defined

in the Act. According to dictionary it means, 'compensating or being
compensated; thing given as recompense;'. In legal sense it may constitute
actual loss or expected loss and may extend to physical, mental or even
emotional suffering, insult or injury or loss. Therefore, when the Commis-
sion has been vested with the. jurisdiction to award value of goods or
B services and compensation it has to be construed ·widely enabling the
Commission to determine compensation for any loss or damage suffered
by a consumer which in law is otherwise included in wide meaning of
compensation. The provision in our opinion enables a consumer to claim
and empowers the Commission to redress any injustice done to him Any
C other construction would defeat the very purpose of the Act. The Commis-
sion or the forum in the Act is thus entitled to award not only value of the
goods or services but also to compensate a consumer for injustice suffered
by him.

D Facts in Civil Appeal No. 6237 of 1990 may now be adverted as it is

the only appeal in which the National Commission while exercising its
appellate power under the Act not only affirmed the finding of State
Commission directing the appellant to pay ·the value of deficiency in service
but even directed to pay compensation for harassment and agony to the
respondent. The Lucknow Development Authority with a view to ease the
E acute housing problem in the city of Lucknow undertook development of
land and formed plots of different categories/sizes and constructed· dwell-
1ng units for people belonging to different income groups. After the Con-
struction was complete the authority invited applications from persons
desirous of purchasing plots or dwelling house. The respondent applied on
p the prescribed form for registration for allotment of a flat in the category
of Middle Income Group (M.I.G.) in Gomti Nagar Scheme in Luckn9:w-01t· ·
cash down basis. Since the number of applicants was more, t~authority
decided to draw lots in which flat no. 11/75 in Vinay Khand-II'was allotted
to the respondent on 26th April 1988. He deposited a sum of Rs. 6132 on
G July 2, 1988 and a sum of Rs. 1,09,975 on July 29, 1988. Since the entire
paynient was made in July 1988 the flat was registered on 18th August 1988.
Thereafter the appellant by a letter dated 23rd August 1988 directed its
Executive Engineer-VII to hand over the possession of the flat to the
respondent. This information was given.to him on 30th November 1988, yet
the flat was not delivered as the construction work was not complete. The
H respondent approached the authority but no steps were taken nor posses-

•
-\
 L.D.A v. M.K. GUPTA[SAHAI,J.) 633

sion was handed over. Consequently he filed a complaint before the A

District Forum that even after payment of entire amount in respect of cash
down scheme the appellant was not handing over possession nor they were
completing the formalities and the work was still incomplete. The State

. Commission by its order dated 15th February 1990 directed the appellant
to pay 12% annual simple interest upon the deposit made by the respon-
B
dent for the period 1.1.89 to 15.2.90. The appellant was further directed to
handov.er possession of the flat without delay after completing construction
work upto June 1990. The Commission further directed that if it was not
possible for the appellant to complete the construction then it should hand
over possession of the flat to the respondent by $th April 1990 after
determining the deficiencies and the estimated cost of such deficient C
construction shall be refunded to the respondent latest by 20th April 1990.
The appellant instead of complying with the order aproached the National
Commission and raised the question of jurisdiction. It was overruled. And
the appeal was dismissed. But the cross appeal of the respondent was
allowed and it was directed that since the architect of the appellant had D
estimated in October 1989 the cost of completing construction at Rs. 44615
the appellant shall pay the same to the respondent. The Commission
further held that the action of the appellant amounted to harassment
mental torture and agony of the respondent, therefore, it directed the
appellant to pay a sum of Rs. 10,000 as compensation.
E
Who should pay the amount determined by the Commission for
harassment and agony, the statutory authority or it should be realised from
those who were responsible for it. Compensation as explained includes
both the just equivalent for las.. ..>f goods or services and also for sufferance
of injustice. For instance in Civil Appeal No................... of 1993 arising out F
of S.L.P. (civil) No. 659 of 1991 the Commission directed the Bangalc:e
Development Authority to pay Rs. 2,446 to the consumer for the expenses
incurred by him in getting the lease-cum-sale agreement registerd as it was
additional expenditure for alternative site allotted to him. No misfeasance
was found. The moment the authority came to know of the mistake com-
mitted by it it took immediate action by alloting alternative site to the G
respondent. It was compensation for exact loss suffered by the respondent.
It arose in due discharge of duties. For such acts or omissions the loss
suffered has to be made good by the authority itself. But when the suf-
ferance is due to malafide or oppressive or capricious acts etc. of a public
servant, then the nature of liability changes. The Commission under the H
 A
634 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

Act could determine such amount if in its opinion the consumer suffered
..
injury to what is called misfeasance of the officers by the English courts.
Even in England where award of exemplary or aggravated damages for
insult etc. to a person has now been held to be punitive exception has
carved out if the injury is due to, 'oppresive, arbitrary or unconstitutional
action by servants of the government' (Salmond and Heuston on the Law
B of Torts). Misfeasance in public office is explained by Wade in his book
on Adininistrative Law thus.

Even where there is no ministerial duty as above, and even where

no recognised tort such as trespass, nuisance, or negligence is
C committed, public authorities or officers may be liable in damages
for malicious, deliberate or injurious wrong-doing. There is thus a
tort which·has been called misfeasance in public office, and which
includes malicious· abuse of power, deliberate maladministration,
and perhaps also other unlawful acts causing injury." ·
D
The jurisdiction and power of the courts to indemnify a citizen for injury
suffered due to abuse of power by public authorities is founded as observed
by Lord Hailsham in Cassell & Co. Ltd. v. Broome & Anr., (1972) AC 1027
on the principle that, 'an award of exemplary damages can serve a useful
... E purpose in vindicating the strength of law'. An ordinary citizen or a
common man is hardly equipped to match the might of the State or its
·instrumentalities. That iS provided bythe rule of law. It acts as a check an
arbitrary and capricious exercise of power. In Rookers v. Barnard & Ors.,
(1964) AC 1129 it was observed by Lord Devlin, 'the servants of the
government are also the servants of the people and the use of their power
F must always be suboruinate to their duty of service'. A public functionary
if he acts maliciously or oppressively and the exercise of power results in
harassment and agony then it is not an exercise of power but its abuse. No
law provides protection against it. He who is responsible for it must suffer
it. Compensation or damage as explained earlier may arise even when the
officer discharges .his duty honestly and bonafide. But when it arises due
G to arbitrary or ca__pricious .behaviour then it loses its individual character
and &Ssuines social significance. Harassment of a common man by public
authorities is socially abhorring and legally impermissible. It may harm-him
personally but the injury to society is far more grievous. Crime and corrup-
tion thrive and prosper in the society due to lack of public resistance.
H Nothing' is more damaging than the feeling of helplessness. ·An ordinary
 L.D.A. v. M.K. GUPTA(SAHAl,J.] 635

citizen instead of complaining and fighting succumbs to the pressure of A

undesirable functioning in offices instead of standing against it. Therefore
the award of compensation for harassment by public authorities not only
compensates the individual, satisfies him personally but helps in curing
social evil. It may result in improving the work culture and held in changing
the outlook ,, ' ·~p in his book 'Administrative Law' has observed that it is B
to the credit of public authorities that there are simply few reported
English decisions on this form of malpractice, namely, misfeasance in
public offices which includes malicious use of power, deliberate malad-
ministration and perhaps also other unlawful acts causing injury. One of
the reasons for this appears to be development of law which, apart, from
other factors succeeded in keeping a salutary check on the functioning in C
the government or .semi- government offices by holding the officers per-
sonally responsible for their capricious or even ultra vires action resulting
in injury or loss to a citizen by awarded damages against them. Various
decisions rendered from time to time have been referred by Wade on
Misfeasance by Public Authorities. We shall refer to some of them to D
demonstrate how necessary it is for our society. In)(tshby v. White, (1703)
2 Ld. Raym. 938 the House of Lords invoked the principle of ubi jus ibi
remedium in favour of an elector who was wrongfully prevented from voting
and decreed the claim c: damages. The ratio of this decision has been
applied and ·extended by English courts in various situations. In Roncarelli E
v. Duplessis, (1959) 16 DLR (2d) 689 the Supreme Court of Canada
awarded damages against the Prime Minister of Quebec personally for
directing the cancellation of a restaurant-owner's liquor licence solely
because the licensee provided bail on many occasions for fellow members
of the sect of Jehovah's Witnesses, which was then unpopular with the
authorities. It was observed that 'what could be more malicious than to
F
punish this licensee for having done what he had an absolute right to do
in a matter utterly irrelevant to the Alcoholic Liquor Act? Malice in the
proper sense is simply acting for a reason and purpose knowingly foreign
to the administration, to which was add~ here the element of intentional
punishment by what was virtually vocation outlawry.' In Smith v. East Elloe G
Rural District Council, (1956) AC 736 the House of Lords held that an
action fo~ damages might proceed against the clerk of a local authority
personally on the ground that he had procured the compulsory purchase
of the plaintiffs property wrongfully and in bad faith. In Perrington v.
Thomson, (1959) VR 236 the Supreme Court of Victoria awarded damages H
 636 I
SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R,

A for exercising a power the authorities knew they did not possess. A licens-
ing inspecto.r and a police officer ordered the plaintiff to close .his hotel
and cease supplying liquor~ He obeyed and filed a suit for the resultant
loss. The Court observed, 'Now I take it tQ be perfectly clear, that if a
. public officer abuses his office, either by an act of omission or commission,
and the consequence of that is an injury to an individual, an action may be
B maintained against such public officer'. In Wood v. Blaire, The Times, 3, 4,
5 July 1957 a dairy farmer's manageress contracted typhoid fever and the
local authority served notices forbidding him to sell milk, except under
certain conditions. These notices were void, and the farmer was awarded
damages on the ground that the notices were in~alid and that the plaintiff
C was entitled to damages· of misfeasance.' This was done even though the
fmding was that the officers had acted from the best motives.

Today the issue thus is not only of award of compensation but who
should bear the brunt. The concept of authority and power exercised. by
D public functionaries has many dimensions. It has undergone tremendous
change with passage of time and change in socio-economic outlook. The
authority empowered to function under a Statute while exercising power
discharges public duty. It has to act to subserve general welfare and
common good. In discharging this duty honestly and bonafide loss may
accrue to any person. And he may claim compensation which may in
E circumstances be payable. But where the duty is performed capriciously or
the exercise of power results in harassment and agony then the respon-
"Sibility to pay the lose determined should be whose? In a modem society
no authority can arrogate to itself the power to act in a manner which is
arbitrary. It is unfortunate that .matters which require immediate attention
F linger on and the man in the street is made to run from one end to other
with no result. The culture of window clearance appears to be totally dead.
Even in ordinary matters .a common man who has neither the political
backing nor the fmancial strength to match the inaction in public oriented
departments gets frustrated and it erodes the credibility in the system.
Public administration, no doubt involves a vast amount of administrative
G discretion which shields the action of administrative authority. But where
it is found that exercise of discretion was malafide and the complainant is
entitled to compensation for mental and physical harassment then the
officer can no niore claim to be under protective cover. When a citizen
seeks to recover compensation from a public authority in respect of injuries
H · suffered by him for capricious exercise of power and the National Com-
 L.D.A v. M.K. GUPTA[SAHAI,J.] 637.

mission finds it duly proved then it has a statutory obligation to award the A
same? It was never more necessary than today when even social 'obligations
are regulated by grant of statutory powers. The test of "permissive form of
grant are over. It is now imperative and implicit in the exercise of power
that it should be for the. sake of society. When the Court di~ects payment
of damages or compensation against the State the ultimate sufferer is the B
common man. It is the tax payers' money which is paid for inaction of those
who are entrusted under the Act to discharge t~eir duties in accordance
with law: It is, therefore, necessary that the Commission when it is satisfied
that a complainant is entitled to compensation for harassment or mental
agony or oppression, which finding of oourse should be recorded carefully.
on material and convincing circumstances and not lightly, then is should C
further direct the department concerned to pay the amount to the com-
plainant from the public fund immediately but to recover the. same from
those who are found responsible for such unpardonable behaviour by
dividing it proportionately where there are more than one functionaries.

For these reasons all the appeals are dismissed. In Appeal No. 6'1:37 D
of 1990 it is further directed that the Lucknow Development Authority
shall fix the responsibility of the officers who were responsible for causing
harassment and agony to the respondent within a period of six months from
the a copy of this order is produced or served on it. The amount of
compensation of Rs. 10,000 awarded by the Commission for mental harass- E
ment shall be recovered from such officers proportionately from their
salary. Compliance of this order shall be reported to this Court within one
month after expiry of the period granted for determining the responsibilty.
The Registrar General is directed to send a copy of this order to the
Secretary, Lucknow Development Authority immediately.
F
In Appeal Nos. 6'1:37 of 1990, 5257 of 1990, 3963 of 1989 and 2954-
59 of 1992 the appellant shall pay costs to the contesting respondents which
is assessed at Rs. 5,000 in each case. Since the respondents have not put
in appearance in other appeals there shall be no order as to costs.

A.G. Appeals dismissed. G

"·