Three Judges Bench comprising Honble Mr. Justice V. Ramana, Honble Mr. Justice
Mohan M. Shantanagoudar & Honble Mr. Justice Ajay Rastogi while deciding SLP (C)
No. 5237 of 2015 titled Punjab Urban Development Authority & Anr. Vs Ram
Singh, over-ruled the Judgment in HUDA Vs Sunita, (2005) 2 SCC 479
holding that the Consumer Fora have the jurisdiction to deal with the legality
of the Statutory Fees imposed by the Statutory Authorities.
A Two Judge Bench of Supreme Court while expressing doubt as to the correctness
of the Judgment rendered in the case of HUDA Vs. Sunita, (2005) 2 SCC 479
Vide Order dated 13.09.2018 referred the same to Three Judge Bench. Supreme
Court therein held that the National Consumer Disputes Redressal Commission had
no jurisdiction to adjudicate the legality behind the demand of composition fee
and extension fee made by HUDA, as the same being statutory obligation, does not
qualify as deficiency in service.
The opinion expressed by the Two Judge Bench comprising Honble Mr. Justice D. M.
Dharmadhikari & Honble Mr. Justice B. N. Srikrishna regarding the decision in
the case HUDA Vs. Sunita, (2005) 2 SCC 479 while passing the referral order held
We are, prima facie, of the view that this sixparagraph order, which does
not, prima facie, contain any reason for the conclusion reached, requires a
relook in view of the fact that the Consumer Protection Act, 1986 is a
Petitioners submitted that the order in HUDA Vs. Sunita, (2005) 2 SCC 479 is
well reasoned, as it validly holds that the NCDRC lacks jurisdiction to decide
the legitimacy behind the demand of composition fee and extension fee.
Relying on the aforesaid holding, the counsel further stated that statutory dues
cannot be claimed as deficiency in services. Lastly, the learned counsel
submitted that although the Consumer Protection Act, 1986 (hereinafter referred
to as the Act) is beneficial in nature, demanding a liberal construction, the
same cannot be used to extend the ambit of the Act by bringing in remedies or
benefits which were not intended by the legislature.
However, Senior Counsel appointed as amicus curiae to assist and appear on
behalf of the respondent claimed that the order passed in HUDA Vs. Sunita,
(2005) 2 SCC 479, is an aberration in a series of longstanding Judgments by
Supreme Court. Amicus Curiae thereafter placed strong reliance upon the
Judgments of Supreme Court in Lucknow Development Authority Vs M. K. Gupta,
(1994) 1 SCC 243, and Ghaziabad Development Authority Vs Balbir Singh,
(2004) 5 SCC 65, wherein, it was held that the NCDRC has the jurisdiction to
protect Consumers against defective services rendered even by a statutory body.
Further, the Amicus Curiae, while supporting the view that the Sunita case
(supra) was per incuriam, citing various judgments of Supreme Court submitted
that the statutory authorities come under the ambit of the Act.
Coming back to the Sunita case (supra), Supreme Court held that the NCDRC had no
jurisdiction to adjudicate the legality behind the demand of composition or
extension fee by a developmental authority. It further observed that the
statutory obligations of a developmental authority and the plot holder under the
authority’s statutory framework cannot be construed as acts or omissions
resulting in a deficiency in service.
The Hon’ble Supreme Court while overruling the decision in Sunita Case (Supra)
and upholding the law laid down earlier in Lucknow Development Authority and
Ghaziabad Development Authority (Supra) held that the service provided by the
petitioner herein squarely comes under the ambit of ‘service’.
Relevant Paras are reproduced as under:
17. Moreover, we also need to note that the distinction between statutory
liability which arise generally such as a tax, and those that may arise out of a
specific relationship such as that between a service provider and a consumer,
was not considered by this Court in the case of Sunita (supra). For instance, a
tax is a mandatory imposition by a public authority for public purpose
enforceable by law; and is not imposed with respect to any special benefit
conferred, as consideration, on the tax payer. There is no element of quid pro
quo between the tax payer and the public authority.
However, the above is not the only form of due charged by a statutory authority.
In a catena of judgments, this Court has recognized that certain statutory dues
may arise from services rendered by a statutory authority. In the case of
Commissioner, Hindu Religious Endowments, Madras Vs Sri Lakshmindra Thirtha
Swamiar of Sri Shirur Mutt, 1954 SCR 1005, a seven Judge Bench of Supreme
Court held that;
46. Coming now to fees, a fee is generally defined to be a charge for a
special service rendered to individuals by some governmental agency. The amount
of fee levied is supposed to be based on the expenses incurred by the Government
in rendering the service, though in many cases the costs are arbitrarily
Ordinarily, the fees are uniform and no account is taken of the varying
abilities of different recipients to pay [ Vide Lutz on Public Finance, p. 215].
These are undoubtedly some of the general characteristics, but as there may be
various kinds of fees, it is not possible to formulate a definition that would
be applicable to all cases.
47. …The distinction between a tax and a fee lies primarily in the fact that a
tax is levied as a part of a common burden, while a fee is a payment for a
special benefit or privilege. Fees confer a special capacity, although the
special advantage, as for example in the case of registration fees for documents
or marriage licences, is secondary to the primary motive of regulation in the
public interest [Vide Findlay Shirras on Science of Public Finance, Vol. I, p.
202]. Public interest seems to be at the basis of all impositions, but in a fee,
it is some special benefit which the individual receives.
18. A Five Judge Bench of Supreme Court, in the case of Kewal Krishan Puri &
Anr. Vs State of Punjab & Anr., (1980) 1 SCC 416, also took note of the fact
that certain statutory dues can arise from a quid pro quo relationship between
the authority and an individual upon whom the liability falls.
23. …(6) That the element of quid pro quo may not be possible, or even
necessary, to be established with arithmetical exactitude but even broadly and
reasonably it must be established by the authorities who charge the fees that
the amount is being spent for rendering services to those on whom falls the
burden of the fee.
19. Therefore, it is a clearly established principle that certain statutory
dues, such as fees, can arise out of a specific relation. Such statutory dues
might be charged as a quid pro quo for a privilege conferred or for a service
rendered by the authority. As noted above, there are exactions which are for the
common burden, like taxes, there are dues for a specific purpose, like cess, and
there are dues in lieu of a specific service rendered.
Therefore, it is clear from the above discussion that not all statutory
dues/exactions are amenable to the jurisdiction of the Consumer Forum, rather
only those exactions which are exacted for a service rendered, would be amenable
to the jurisdiction of the Consumer Forum.
20. At the cost of repetition, we may note that those exactions, like tax, and
cess, levied as a part of common burden or for a specific purpose, generally may
not be amenable to the jurisdiction of the Consumer Forum. However, those
statutory fees, levied in lieu of service provided, may in the usual course be
subject matter of Consumer Forum’s jurisdiction provided that there is a
‘deficiency in service’ etc.
21. We may also refer to the case of Ghaziabad Development Authority (supra)
wherein this Court, relying upon Lucknow Development Authority case (supra),
held that the power of the Consumer forum extends to redressing any injustice
rendered upon a consumer as well as over any mala fide, capricious or any
oppressive act done by a statutory body.
The relevant para of the judgment reads as under:
6. ….Thus, the law is that the Consumer Protection Act has a wide reach and the
Commission has jurisdiction even in cases of service rendered by statutory and
public authorities. Such authorities become liable to compensate for misfeasance
in public office i.e. an act which is oppressive or capricious or arbitrary or
negligent provided loss or injury is suffered by a citizen. … Where there has
been capricious or arbitrary or negligent exercise or non-exercise of power by
an officer of the authority, the Commission/Forum has a statutory obligation to
If the Commission/Forum is satisfied that a complainant is entitled to
compensation for loss or injury or for harassment or mental agony or oppression,
then after recording a finding it must direct the authority to pay compensation
and then also direct recovery from those found responsible for such unpardonable
22. Therefore, in line with the law laid down by us, we hold that the
determination of the dispute concerning the validity of the imposition of a
statutory due arising out of a deficiency in service, can be undertaken by the
consumer fora as per the provisions of the Act. The decision of this Court in
the case of Sunita (supra), wherein, it was held that NCDRC has no jurisdiction
to adjudicate the legitimacy of the aforementioned statutory dues, was rendered
without considering any of the previous judgments of this Court and the objects
of the Act. Consequently, the law laid down in the aforesaid case does not hold
good before the eyes of law, and is thereby overruled.
The validity of interpretation furthered in the case of Sunita (supra) hinges on
the interpretation of Section 2(1)(d), 2(1)(e), 2(1)(f), 2(1)(g) and 2(1)(o) of
Section 2 (1) (g) deficiency means any fault, imperfection, shortcoming or
inadequacy in the quality, nature and manner of performance which is required to
be maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or otherwise
in relation to any service.
Thus, meaning of deficiency is explained as any fault, imperfection, shortcoming
or inadequacy in quality, nature and manner of performance of any service or
supply of goods, in terms of standards set by the parties themselves through
contract or otherwise, or imposed by the law in force. The basis for application
of the consumer laws hinges on the relationship between the service provider and
consumer. The usage of ‘otherwise’ within the provision subsumes other modes of
standard setting alternative instruments other than contracts such as laws,
byelaws, rules and customary practices etc.
Service is defined under Section 2(1)(o) of the Act, which reads as under: (o)
service means service of any description which is made available to
potential users and includes, but not limited to, the provision of facilities in
connection with banking, financing insurance, transport, processing, supply of
electrical or other energy, board or lodging 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 a contract of
This definition is not exhaustive rather the legislature has left the task to
expound the provision on a case to case basis to the judiciary. The purpose of
leaving this provision open ended, without providing an exhaustive list
indicates the requirement for a liberal interpretation.
Broadly speaking, it is inclusive of all those services performed for a
consideration, except gratuitous services and contract of personal services.
Moreover, aforesaid provision reflects the legislative intent of providing
impetus to ‘consumerism’. It may be noted that such a phenomenon has had
a benevolent effect on the Government undertakings, wherein a new dynamism of
innovation, accountability and transparency are imbibed.
On perusal of the impugned precedent, it may be noted that it does not provide
clear cut reasoning for the view held by the Court, except to the extent of
pointing out that statutory obligations are not encompassed under the Act. Such
broad proposition necessarily required further elaboration, as there is a
possibility of over inclusivity.
Further, there is no gainsaying that all statutory obligations are not sovereign
functions. Although all sovereign functions/services are regulated and performed
under constitutional/statutory instruments, yet there are other functions,
though might be statutory, but cannot be called as sovereign functions. These
sovereign functions do not contain the consumer service provider relationship in
them and are not done for a consideration.
Moreover, we need to be mindful of the fact that sovereign functions are
undergoing a radical change in the face of privatization and globalization.
India being a welfare State, the sovereign functions are also changing. We may
note that the government in order to improve the quality of life and welfare of
its citizens, has undertaken many commercial adventures.
Sovereign functions like judicial decision making, imposition of tax, policing
etc, strictly understood, qualify for exemption from the Act, but the welfare
activities through economic adventures undertaken by the Government or statutory
bodies are covered under the jurisdiction of the Consumer Forums.
Even in departments discharging sovereign functions, if there are sub-units /
wings which are providing services/supply goods for a consideration and they are
severable, then they can be considered to come within the ambit of the Act.
[refer to Standard Chartered Bank Ltd. v. Dr. B. N. Raman, (2006) 5 SCC
727], held the Supreme Court.
The Hon’ble Court also observed that if a Statutory Authority, other than the
core sovereign duties, is providing services then, unless the Statute exempts or
provides for alternative forum, the Consumer Forum would continue to have
jurisdiction to deal with the same.
The Hon’ble Court, while differentiating different types of statutory fees for
the purpose of bringing them within the jurisdiction of the Consumer Forums,
observed that tax and cess are a form of exactions which are common burden or
for specific purpose respectively and does not involve the element of quid pro
quo and therefore, are not amenable to the jurisdiction of Consumer Fora
however, the statutory fees which are exacted in lieu of a service rendered,
would be amenable to the jurisdiction of Consumer Forums.
Written By: Damini Singh Chauhan - Semester 9th, The Law School,
University of Jammu.
Email: [email protected]