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Inflated claims a no-no

Rosy Kumar | June 19, 2004

A person who files a civil suit claiming damages for some wrong done to him has to bear a hefty court fee.

But this is not the case with consumer complaints, where the law does not levy any court fee for instituting litigation. Consumer courts are otherwise substitutes to the civil courts, providing speedy justice at no cost and therefore consumers now choose these forums for redressal of their grievances.

However, the absence of court fees has given rise to another objectionable situation. Complainants now claim huge amounts of compensation that have no causal relationship to the loss suffered.

A car stops working, an air conditioner is noisy, or a doctor fails to attend to a patient properly -- and the aggrieved consumer demands lakhs of rupees as compensation for faulty goods/services, mental agony and harassment. But can such hefty amounts be awarded as compensation?

Compensation means recompense for the loss suffered. The term certainly has to be construed widely and in that sense the amount of recompense has to cover not only the actual loss but may also extend to physical, mental or emotional suffering.

Be that as it may, it is to be clearly understood that every item of loss has to not only be substantiated by cogent evidence but must also be quantified on established criteria. As early as 1997, the National Consumer Disputes Redressal Commission had in the case of Greater Calcutta Gas Supply Corporation vs Pranab Kumar Chatterjee warned consumers not to claim unsubstantiated and disproportionate compensation.

It observed that "the quantum of compensation has to be established on sound principles of quantifying damages and/or compensation. It could not be on the basis of ipsi dixit."

In the area of housing construction, thousands of cases have been filed before consumer courts against government-backed development authorities who floated schemes for allotment of flats or plots and then didn't honour their promised commitments.

The allottees, having parted with their money, wait for years to get possession of the allotted flats.

Often, it is not given at all as the schemes do not fructify and in other cases the construction is well below the mark or amenities like water or electricity supply are not provided.

The consumers of their services suffer both monetarily and emotionally. They rush to the consumer courts claiming lakhs of rupees as compensation without the supporting evidence of measurement of actual or probable loss.

In the light of the above situation, the National Commission in its judgement in HUDA/Darsh Kumar (2002) laid down that in all cases of deficient services of the development authorities, 18 per cent interest per annum on the amounts deposited by the allottees be allowed by way of compensation; this would cover not only the actual loss suffered by them but also the element of escalation in prices.

In hundreds of cases, this formula has been adopted from 2002 onwards.

Recently, the Supreme Court was confronted with the question as to whether the above generalised approach adopted by the National Commission of awarding compensation on a uniform basis in all cases was a correct one.

In its judgement dated March 17, 2004 in Ghaziabad Development Authority vs. Balbir Singh the Supreme Court deprecated the approach of awarding a lump sum compensation of 18 per cent interest in all such cases.

Setting aside the orders of the National Commission, the Supreme Court observed in its order that "compensation has to be worked out after looking into the facts of each case and after determining what is the amount of harassment/loss which has been caused to the consumers."

As no court fee is to be paid, consumers filing complaints in the consumer courts claim lakhs and lakhs of rupees as damages.

The Supreme Court's latest ruling on the subject -- holding authoritatively that compensation cannot be awarded arbitrarily and disproportionately -- should put an end to the practice of claiming exaggerated amounts.

Consumers would be well advised to measure the loss for each item on a cogent basis and be prepared to prove the same. Also, consumer litigation must be adjudicated judicially and high-sounding claims should not be entertained.

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