Shri Subash Sharma                                              ………….. Applicant / Appellant

                                                      Versus

Divisional Manager,

Oriental Insurance Co. Ltd

Shillong                                                   ……………. Opposite Party  / Respondent

Date of Judgment                      :                       20.6.2014

To be Reported                           :                       Yes                

Judgment & Order

1.         Per: Ramesh Bawri, Senior Member: This Application arises from the original order dated 3.6.2013 passed by the District Forum in C.P. Case No. 31 of 2010 and the judgment and order dated 7.12.2013 passed by this Commission in Consumer Appeal No. 7 of 2013 arising from the said original order dated 3.6.2013. The Applicant in the Misc Case was the Complainant before the District Forum and the Respondent in the Appeal earlier decided by us.

2.         The brief facts leading to the filing of the present application is that the Applicant filed Complaint No. 31 of 2010 before the District Forum upon repudiation of his Insurance claim by the O.P. Insurance Co. The said complaint was disposed of vide order dated 3.6.2013 and relief granted in the following words: “OP is hereby directed to pay the entire sum insured amount of Rs. 13,55,980/- along with interest @ 6% per annum from the date when Complainant had preferred a claim.” Costs of Rs. 10,000/- were also imposed.

3.         The Insurance Company preferred an Appeal against the said order dated 3.6.2013 which was dismissed vide our Judgment dated 7.12.2013 in the following words: “The Appellant has failed to make out a case for interference with impugned order passed by the learned District Forum. The impugned order dated 03.06.2013 therefore stands upheld.” Costs of Rs. 5000/- was further imposed upon the Appellants.

4.         With the assistance of this Commission, a lot of persuasion on the part of the Applicant and several months delay, the Insurance Company ultimately paid a sum of Rs. 15,81,163/- to him on 8.4.2014 which the Applicant received ‘under protest’. No break up as to how the sum of Rs. 15,81,163/- was arrived at was given to the Applicant.

5.         Heard Shri S. Rana, learned counsel for the Applicant and Shri Sandeep Jindal, learned counsel for the OP / Insurance Company. Perused the case records. According to the Applicant he is entitled to a total sum of Rs. 19,21,487/- in accordance with the orders passed by the District Forum and this Commission whereas according to the Insurance Company the full sum due is only Rs. 15,81,163/- in terms of the orders and that has been paid.

6.         Let us first see below how and why this difference of Rs. 3,40,324/- (Rs. 19,21,487 (-) Rs. 15,81,163) has arisen, based on the application and show cause filed by the O.P.’s:

7.         Barring the negligible difference of Re. 1/- between the amount admitted by the Insurance Co. and the amount paid by it, the records and submissions reveal that the dispute / difference regarding the quantum of payment that the Applicant / Complaint is entitled to arises from following reasons:

a) Costs of 5000/- awarded by us in Appeal have not been paid by the Insurance Company.

b) The Insurance Company has resorted to Deduction of Tax at Source (TDS) @ 21% on the amount of interest.

c) As regards the date from which the Applicant is eligible to receive interest @ 6% on the principal award sum of Rs. 13,55,980/- the Applicant reads the term ‘from the date when Complainant had preferred a claim’, as was directed by the District Forum in its award dated 3.6.2013 and subsequently upheld by us, as the date when the Complainant filed his claim before the Insurance Company, which was on 4.7.2007. On the other hand, the learned counsel for the Insurance Company resolutely argues that the term “date when complainant had preferred a claim’ used in the award means the date when the complaint was filed before the learned District Forum which was on 26.7.2010. Hence, the difference in the calculations.

8.         Inasmuch as the order dated 3.6.2013 passed by the learned District Forum has merged in our Appellate order dated 7.12.2013, it is for us to now examine the three issues that have arisen giving rise to the difference in the amount payable as stated above and decide whose stand is legally correct.

9.         Regarding Issue No.1 i.e. non payment of the sum of Rs.5000/- awarded by us as costs, it is very unfortunate that the Insurance Co. has violated our order and chosen not to pay the same. Even when this violation / lapse was pointed out by the Applicant in his Application, the Insurance Company made no apology and resolutely stated in its show cause: “That the OP Insurance Co. has made the required payment after due calculation in a bonafide manner. It is once again humbly submitted that there is no basis for issuance of any direction by this Hon’ble Commission, requiring the OP Insurance Co. to pay the claimed amount of Rs.3,40,324/- or any other amount”.

We take a very dim view of such willful disobedience of our orders and had it not been for the apology hastily tendered by the Learned Counsel on behalf of the Insurance Co. during the hearing when this was pointed out to him and his assurance to pay the said amount forthwith, we would have taken a very serious view of the matter.

10.       In respect of the issue whether the Insurance Company is required / entitled to deduct Tax at Source (hereinafter ‘TDS’) @ 21% on the amount of interest paid by them to a consumer upon the direction of Consumer Fora, Ld. Counsel for the Applicant submits that no such TDS is deductable under the provisions of the Income Tax Act, 1961 or otherwise. On the other hand the Insurance Company’s stand is that TDS is indeed required to be deducted ‘as per the Rules” since ‘the PAN Card of the Applicant was not available’. In support of its contentions they have filed what appears to be an internal communication of the Insurance Co. titled ‘TDS rate Chart for Financial Year 2013-2014’ showing that vide Section 194A (presumably of the Income Tax Act, 1961) TDS is to be deducted on ‘Interest other than Interest on Securities (By others)’ at the rate of 10%. A note appended thereto further states that “TDS at higher rate i.e. 20% has to be deducted if the Deductee  does not provide PAN to the Deductor (read detail u/s 206 AA).”

First of all, even if this internal note is to be taken at face value, we fail to understand how TDS was deducted @ 21% instead of 20% as specified therein. Secondly, TDS was required to be deducted only @10% if copy of the PAN Card/PAN Number was furnished by the Applicant. However, there is nothing on record to show that the Insurance Co. had called upon the Applicant to furnish the same and they straight away resorted to a TDS deduction @ 21%. The least they were required to do was to ask for the PAN details and, only if the Applicant failed to furnish the same, should they have deducted TDS at the rate of 20%.

However, this is not the end of the matter, The larger issue, whether TDS is, in fact, deductible from any interest paid pursuant to a direction of the Consumer Fora notwithstanding any such note circulated internally by the Insurance Co. still remains to be decided.

11.       The very question of Deduction of Tax at Source arises from the provisions of section 194A of the Income Tax Act, 1961 which reads as follows:-

“194A. Interest other than “Interest on securities”.-(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:”

12.       This takes us to the question of ‘What is Interest?’ for the purposes of the I.T. Act? ‘Interest’ has been defined in Clause 28A of Section 2 of the Income Tax Act, 1961 as under:

"2(28A). "interest" means interest payable in any manner in respect of moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised."

13.       Bare reading of this definition of ‘Interest’ would show that, for the purposes of the I.T. Act, ‘Interest’ has a restricted meaning and only covers interest in respect of moneys borrowed or debts incurred. A payment having no nexus with a deposit, loan or borrowings is out of the ambit of the definition of interest contained in section 2(28A) of the Income-tax Act.

14.       In the present case, interest awarded to the Complainant has not been awarded either on the basis of  any money borrowed by the  Insurance Company from the Complainant nor on any debt incurred by them. The interest awarded by the learned District Forum was by way of compensation/damages for the delay in paying the insurance claim. Interest has been used merely as a convenient method to quantify the amount of compensation. Merely terming the compensation as ‘interest’ does not make it interest as envisaged under the Income Tax Act, 1961. The learned District Forum could easily have used the term ‘compensation’ instead of ‘interest’ in which case no question of tax deduction could have ever arisen. It would be unfair and illogical to hold that by the mere use of the word ‘interest’ instead of the word ‘compensation’, the entire character of the award should change. It must also be most importantly remembered that nowhere does the Consumer Protection Act, 1986 empower the Consumer Fora to award any interest simpliciter to a Complainant. Section 14(1)(d) of the C.P. Act only empowers it ‘to pay such amount as may be awarded by it as compensation to the Consumer for any loss or injury suffered by the Consumer due to the negligence of the Opposite party.’

In this connection the following decisions may be profitably referred to :

(i)    Haryana Urban Development Authority vs. Dev Dutt Gandhi  (AIR 2004 SC 4498)

(ii)   Ghaziabad Development Authority vs. Dr. N. K. Gupta [(2002) 258 ITR 337 (NCDRC)]

(iii) Income-tax Officer, Ward-2(2), Ahmedabad vs Parag Mahasukhlal Shah [(2011) 12 Taxmann.com 37 (ITAT Ahd.)]

15.       In the light of the two aforementioned sections of the Income Tax Act, 1961 and the discussion above we are therefore of the unequivocal view that whenever any amount is paid by the Opposite Party as compensation for mental harassment and agony and/or failure of public duty upon the direction of the Consumer Fora, there arises no question of deduction of any TDS, notwithstanding the fact that the compensation awarded is termed and/or quantified as interest and any such payment does not fall within the ambit of section 194A of the Income Tax Act, 1961 read with Section 2(28A) of the same Act. The interest awarded to the present Applicant in this case is no exception.

16.       Another aspect of the matter to be taken note of is that Section 194A of the Income Tax Act, 1961 does not apply to any 'payment of interest' per se but applies to 'payment of INCOME by way of interest'. There is a difference. Clearly, the interest paid must not only be a payment thereof but must also constitute 'Income' of the person to whom it is paid. As we have already held, the interest awarded to the Applicant was in fact compensation for the delayed payment of his claim. It could also be said to be payment of damages. Now, whether or not such compensation / damages constitute 'income' of the Applicant under the provisions of the Income Tax Act is a question which does arise but which we shall not delve into, inasmuch as such an argument has not been raised before us by the Applicant.

17.       The third and last dispute relates to the meaning of the term ‘from the date when Complainant had preferred a claim’ used by the Ld. District Forum when it awarded interest on the principal award amount. We need not dwell long on this matter as, in our view, it is a clear attempt by the Insurance Company to subvert the order by unnecessarily confusing the issue in order to reduce their legal liability.

18.       As stated above, this dispute relates to the date from which the Applicant is eligible to receive interest @ 6% on the principal award sum of Rs. 13,55,980/-. The Applicant interprets the term ‘from the date when Complainant had preferred a claim’, used by the District Forum in its award dated 3.6.2013 and subsequently upheld by us, as the date when the Complainant filed his claim before the Insurance Company, which was on 4.7.2007. On the other hand, the learned counsel for the Insurance Company resolutely argues that the term “date when complainant had preferred a claim’ used in the award means the date when the complaint was filed before the learned District Forum which was on 26.7.2010.

19.       In its show cause, the Insurance Company has tried to justify and defend its act of paying interest only from the date when the Applicant filed his complaint before the learned District Forum in the following words: “Further, interest was calculated @ 6% from the date of the claim petition, i.e. 26.07.2010 since, even in the judgment dated 03.06.2013 passed by the learned District Forum, Shillong, the interest was ordered to be calculated “from the date when the Complainant had preferred a claim”. As is the usual practice, the date when the Complainant had preferred the claim will have to mean the date on which the claim was preferred before the learned District Forum, i.e. 26.07.2010. This date cannot mean the date on which the Complainant had preferred the claim before the Insurance Company i.e. 04.07.2007.” Learned counsel for the Insurance Company has made every effort possible to justify this stand which has been resisted by Learned Counsel for the Applicant.

20.       We cannot agree with the stand taken by the Insurance Company and we agree with the Applicant. The compensation that has been awarded by the District Forum and duly upheld by us, even though under the nomenclature of interest, represents the loss that the Applicant suffered because of deprivation of the use of the claimed and awarded amount for a numer of years. It is obvious that such deprivation was right from the date when he lodged his claim with the Insurance Company and not only from the date when he filed his Complaint before the learned Forum. He was forced to file his Complaint at a later stage when the Insurance repudiated his claim. In this view of the matter too, it is not logical and it cannot be accepted that the Applicant was eligible to payment of interest only from the date of filing his Complaint before the learned District Forum. We also do not agree with the strenuous argument of the Insurance Company’s Counsel that the usual practice of the Consumer Fora is to award interest from the date when a Complaint is filed before it.

21.       Moreover, the Insurance Company is clearly forgetting that while a ‘claim’ can be filed by a person before an Insurance Company it is inconceivable that the person can prefer a ‘claim’ before the Consumer Fora. He can only file a ‘complaint’ and pray for various reliefs. Consumer Fora are constituted to hear complaints and to impart justice, not to entertain ‘claims’. By any stretch of imagination, a Consumer who is before the Consumer Fora has no right to make any ‘claim’, which tantamounts to making a demand.

22.       In view of the discussion above it is therefore clear that the direction of the Ld. District Forum as confirmed by us in Appeal to pay interest @ 6% on the sum of Rs.13,55,980/- ‘from the date when Complainant had preferred a claim’ means and always meant ‘from the date when Complainant has preferred a claim with the Insurance Company’ which in the  present case was on 4.7.2007.

23.       In the light of the discussions made above we are also of the view that the actions of the O.P. Insurance Company utterly lack bonafides and they have not only attempted to subvert the orders passed by the District Forum and this Commission but to further harass the Applicant, deprive him of his rightful dues and drive him into unnecessary litigation, besides wasting our precious time. At a time when evolving societal pressures demand greater degree of accountability in the governance, it does no good to the judicial institutions to watch such situations as helpless spectators. The time has therefore come that a strong check is put to such harassment to consumers by de-incentivizing this kind of conduct. Perhaps a Goliath like the Appellant can afford such litigation expenses (the burden for which, of course, ultimately falls on the common man) but such expenses a David like the Applicant / Complainant can ill afford. Moreover, if state instrumentalities like the Appellant are allowed to continue to use their might to engage small Consumers in such protracted litigation,  Consumers’ confidence in the Consumer Fora will be utterly shaken and wrong will tend to prevail over right.  This we cannot allow. Here we are also reminded of the observations made by the Hon’ble Supreme Court in Lucknow Development Authority vs M.K. Gupta  (AIR 1994 SC 787) explaining the social evils that arise from arbitrary and capricious exercise of power in the following words, in para 10 :

“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. ….. 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 corruption thrive and prosper in the society due to lack of public resistance. Nothing is more damaging than the feeling of helplessness.”

We therefore consider it fit and proper to impose Rs. 10,000/- as costs to be paid by the O.P. Insurance Company to the Applicant, hoping that this would encourage them to mend their ways and also be more diligent in complying with the orders of this Commission in future.

24.       Summing up, we allow the application and direct the OP Insurance Company to comply with the directions dated 3.6.2013 passed by the Learned District Forum as confirmed by our order dated 7.12.2013 and pay interest on the sum of Rs.13,55,980/- @ 6% p.a. from 4.7.2007 upto 8.4.2014, when the principal amount was admittedly paid, after deducting the interest amount of Rs.2,72,384/- already paid on 8.4.2014. We further direct the OP Insurance Company not to deduct any TDS from the total interest paid or to be paid to the Applicant. Needless to say, the costs earlier imposed by us to the tune of Rs.5,000/- and Rs.10,000/- being the costs imposed vide this order as stated above shall also be paid. The total amount as directed above shall be paid within 30(thirty) days hereof, failing which the entire amount will bear interest @12% p.a. until the date of payment.

25.       With these directions this application is disposed of.

SENIOR MEMBER                                                  PRESIDENT