1. Supreme Court Gives Clarification on Transfer of Actional Claims

In October 2023, the Supreme Court (SC) in Infrastructure Leasing and Financial Services Ltd. v. HDFC Bank Ltd. & Anr.[1] clarified on the legal stance pertaining to transfer of actionable claims. This ruling emerged from a dispute between Infrastructure Leasing and Financial Services Ltd. (IL&FS) and HDFC Bank Ltd. (Bank), on the point of the documents executed by IL&FS by which rents were made over to the bank constituted an assignment and thus fell outside the scope of an asset and security freeze order made by the NCLAT.

Facts of the case

The HDFC bank (respondent) gave Rs. 400 crore credit facility to IL&FS (appellant), governed by “Master Facility Agreement” (MFA) that intended the opening of an escrow account with Housing Development Finance Corporation Bank Ltd.

Simultaneously, an “Assignment Agreement” (AA) was also executed between the parties, assigning the authorized indebtedness to the respondent from the gross income derived from the Business Centre Services/Lease/Leave and License Agreements (various agreements). A dispute between the parties occurred that led to the initiation of legal proceedings.

The National Company Law Appellate Tribunal (NCLAT) issued an asset freeze order against the appellant’s assets and securities. Being aggrieved by the order of the NCLAT an appeal was filed before the SC.

The issue before the SC was whether the rents payable by the appellants would be considered as an assignment.

Decision of the SC

On an analysis of the agreements entered between the parties, the SC concluded that the documents executed by the appellant was an assignment. It added that as per the MFA the rents receivable by the appellant were the security for advance extended to the respondent. That the AA specifically mentioned that the rents receivable by the appellant would be assigned to the respondent. The use of terms ‘security’ and ‘pledge’ in the agreement clearly established that there was an assignment.

The SC further examined the legal nature of Lease Rental Discounting (LRD). It observed that although the agreements were not termed “LRD”, the parties intended to assign the debt, including the rent payable.

The SC placed reliance on Section 3 of the Transfer of Property Act, 1882, (TPA) that defines the term ‘actionable claims’ as claims related to unsecured debts and beneficial interest in movable property and both are enforceable. Further, it stressed that Section 130 of the TPA provides the way actionable claims can be transferred.

1. Supreme Court Clarified No Compound Interest Be Awarded Casually As Compensation by Consumer Forums in Real Estate Disputes

In April 2023, the Supreme Court (SC) in M/s Suneja Towers Private Limited & Anr. v. Anita Merchant[2] clarified that “For an award of compound interest, relevant factors shall have to be taken into account which would include uncertainties of the market and several other imponderables.” The Court highlighted that as per the proviso to Section 14(1)(d) of the Consumer Protection Act of 1986, (Act) the Forum is empowered to grant punitive damages if it deems fit.

Facts in brief

In the instant case, Anita Merchant (respondent) filed three complaints before the Consumer Disputes Redressal Forum (District Forum) alleging deficiency in service by M/s Suneja Towers Pvt. Ltd. (appellants). It was contended that the appellants had failed to deliver the possession of three flats booked by the respondent even after the expiry of the agreed period. The respondent had already paid 60% of the total sale consideration. The District Forum dismissed the complaints on the grounds that the complainant did not fall within the category of “consumer”, as defined under Section 2(d) of the Act.

An appeal was filed before the State Commission by placing reliance on Manjeet Kaur Monga v. K.L. Suneja[3] (‘Monga’s Case’), it granted relief to the respondent by directing the appellants to refund the deposit along with ‘compound interest at the rate of 14% from the date of deposit’. On appeal, the National Commission upheld the decision of the State Commission based on Monga’s Case decision.  This led the appellants to approach the SC.

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Decision of the SC

The SC set aside the order passed by the State and National Commission. It added that in Monga’s Case compensation was sought under the Monopolies and Restrictive Trade Practices Act (MRTP Act), whereas in the instant case it was sought under the Consumer Protection Act, 1986. The Court directed the respondent to retain Rs. 2,48,52,000 along with the accrued interest already paid by the appellants. However, it added that no further payment be made to the respondent by the appellants in lieu of refund, compensation or interest.

Conclusion

The SC highlighted that a compound interest cannot be awarded without considering material factors, in-depth analysis of all facts, uncertainties of market, etc. in real estate disputes. In this case, the Court specifically stated that granting compound interest to the respondent would cause unjust enrichment, that the Consumer Forum has sufficient powers under the Act to grant punitive damages.

• CIVIL APPEAL NO(S). 4708 OF 2022.
• (2023) SCC OnLine SC 443.
• (2018) 14 SCC 679.