Ireo Grace Realtech Pvt. Ltd. vs Abhishek Khanna & Others

HELD: 1.1 The first issue which has been raised by the Appellant-Developer as also the Apartment Buyers, is the relevant date from which the 42 months’ period is to be calculated for handing over possession. Clause 13.3 of the Agreement states that the Developer proposed to offer possession of the apartment to the allottee within a period of 42 months from the date of approval of the Building Plans and/or fulfilment of the preconditions imposed thereunder, referred to as the “Commitment Period”. The Company would be entitled to a further “Grace Period” of 180 days’ after the expiry of the Commitment Period for unforeseen delays beyond the reasonable control of the Company. This would work out to 42+6 months i.e. 48 months. [Para 18][29-C-E]

1.2 The point of controversy is whether the 42 months’ period is to be calculated from the date when the Fire NOC was granted by the concerned authority, as contended by the Developer; or, the date on which the Building Plans were approved, as contended by the Apartment Buyers. Section 15 of the Haryana Fire Safety Act, 2009 makes it mandatory for a Builder/Developer to obtain the approval of the Fire Fighting Scheme conforming to the National Building Code of India, and obtain a No Objection Certificate before the commencement of construction. Clause 13.3 of the Apartment Buyer’s Agreement provides that the 42 months’ period has to be calculated from the date of approval of the Building Plans and/or fulfilment of the pre-conditions imposed thereunder. The Building Plans sanctioned by the Directorate of Town and Country Planning, Haryana contained the Terms & Conditions of Approval, which included a provision for Fire Safety contained in Clause (3). The Developer was directed to submit Fire Safety Plans indicating the complete Fire Protection Arrangements, and means of escape/access for the proposed building with suitable legend and standard signs. On receipt of the Fire Plans, the Commissioner, Municipal Corporation, Gurgaon, after satisfying himself with the entire fire protection measures as in conformity with the National Building Code, 2005 and the Fire Safety Bye-Laws, would issue an NOC for Fire Safety. This NOC/Clearance was required to be submitted before the Municipal Corporation, within a period of 90 days’from the issuance of the sanctioned Building Plans. Clause 17(iv) of the sanctioned Plan stipulated that the Developer shall obtain an NOC from the Ministry of Environment & Forests, before starting the construction/execution of development works at site. The Environmental Clearance granted by the Ministry of Environment & Forest Government of Haryana on 12.12.2013 required the Developer to submit a copy of the Fire Safety Plan approved by the Fire Department, before commencing construction of the project. General Condition (vi) under Part B of the Environmental Clearance stipulated that the Developer shall obtain all other statutory clearances, including the approval from the Fire Department, prior to construction of the project. Thus, it was a mandatory requirement under the Haryana Fire Safety Act, 2009 to obtain the Fire NOC before commencement of construction activity. This requirement is stipulated in the sanctioned Building Plans, as also in the Environment Clearance. The 42 months’ period in Clause 13.3 of the Agreement for handing over possession of the apartments would be required to be computed from the date on which Fire NOC was issued, and not from the date of the Building Plans being sanctioned. In the present case, the Developer obtained approval of the Building Plans from the Directorate, Town and Country Planning, Haryana, on 23.07.2013. The Developer applied for issuance of Fire NOC for the Fire Fighting Scheme of the Group Housing Colony within the 90 days period before the Director, Fire Service, Panchkula. [Paras 18.118.10][29-E-G; 30-G-H; 31-A-H; 32-A-H]

1.3 The Commissioner vide letter dated 30.12.2013 raised

16 objections with respect to the proposed Fire Fighting Plan. The Developer vide letter dated 22.01.2014 responded to the objections, submitting that the objections had been cured, and requested that the approval of the Fire Fighting Scheme be granted on a priority basis. The Fire Department informed the Developer vide letter dated 28.03.2014 that the deficiencies in the application for Fire NOC had not been cured. The Developer was granted a further period of 15 days’ to cure the defects, failing which, its application would be deemed to be rejected. The Developer submitted revised drawings as per the NBC Fire Scheme alongwith its letter dated 18.08.2014. This letter was received in the office of the Municipal Corporation on 13.10.2014, as per endorsement on the said letter. [Para 18.10][33-A-D]

1.4 On 27.11.2014, the Director, Haryana Fire Service granted approval to the Fire Fighting Scheme subject to the conditions mentioned therein. The computation of the period for handing over possession would be computed from this date. The Commitment Period of 42 months plus the Grace Period of 6 months from 27.11.2014, would be 27.11.2018, as being the relevant date for offer of possession. The aforesaid chronology for obtaining Fire NOC would indicate a delay of approximately 7 months in obtaining the Fire NOC by the Developer. [Para 18.11][33-D-F]

2.1 Under the construction-linked plan, Clause 6 provided that the apartment buyers would be required to deposit 20% of the sale consideration within 45 days of booking of the apartment. Clause 7.4 of the Agreement provides that if there is a delay in payment of an instalment, the apartment buyer would be required to pay Interest on every delayed payment of such instalment @ 20% S.I. p.a. Clause 13.2 of the Agreement provides that if the allottee fails, ignores or neglects to take possession of the said Apartment in accordance with the Notice of Possession, the allottee shall be liable to pay “Holding Charges” on the super area @ Rs.7.5 per sq. ft. per month. In contrast, Clause 13.3 of the Agreement provides that if the Company fails to offer possession by the end of the Grace Period i.e. 42+6 months, it would be liable to pay Delay Compensation@ Rs.7.5 per sq. ft. of the super area for every month of delay. [Para 19.1][33-G-H; 34-B-D]

2.2 Delay compensation at Rs. 7.5 per sq. ft. works out to approximately 0.9% to 1 % Interest per annum.The price per sq. ft of an apartment under the Apartment Buyer’s Agreement was Rs. 10,350/- per sq. ft. Clause 13.5 provides that the allottee may opt for termination, only after 42 months from the date of issuance of Fire NOC + 6 months’ Grace Period, plus a further period of 12 months. The Delay Compensation would be payable to the allottee only if the termination was “validly opted”. The compensation was limited to a fixed period of 12 months only, and that no other claim whatsoever, whether monetary or otherwise, was payable by the Developer. Clause 13.8 of the Agreement provides that the allottee shall be deemed to have waived all its claims in respect of the area, specifications, quality, construction, any other provision in the apartment against the Developer upon taking possession of the apartment. Clause 21 provides for termination of the Agreement and forfeiture of earnest money by the Developer, if the allottee neglects or fails to make timely payments as stipulated in the Agreement, or fails to exercise the options offered by the Developer. [Para 19.1] [34-D-H; 35-A-B]

2.3 Clause 21.3 provides that upon such termination, the Appellant Company shall be under no obligation, except to refund the amounts already paid by the allottee, without any interest, and after forfeiting and deducting the earnest money, interest on delayed payments, brokerage / commission / charges, service tax and other amounts due and payable to it. The principal amount after the aforesaid deductions are made, would be refunded at an uncertain future date i.e. after the Developer had sold the apartment allotted to the complainant. In contrast, the allottee is given a very limited right to cancel the Agreement solely in the event of the clear and unambiguous failure of the warranties of the Company, which leads to frustration of the Agreement on that account. In such case, the allottee will be entitled to a refund of the instalments actually paid, along with interest @ 8% p.a. within a period of 90 days from the date of determination to this effect. No other claim, whatsoever, monetary or otherwise shall lie against the Company. [Para 19.1][35-B-E]

2.4 The aforesaid clauses reflect the wholly one-sided terms of the Apartment Buyer’s Agreement, which are entirely loaded in favour of the Developer, and against the allottee at every step. The terms of the Apartment Buyer’s Agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Consumer Protection Act, 1986. Section 2(1)(g) of the Act defines the expression “deficiency” to include any fault, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained under law, or in pursuance of a contract, or in relation to a ‘service’. The term “service” has been defined by S. 2(1)(o) to include a service of any description which is made available to potential users. S. 2(1)(o) was amended by Act 50 of 1993 w.e.f. from 18.06.1993 to include “housing construction” within the purview of “service”. [Paras 19.2, 19.3][35-E-H; 36-A-D]

Lucknow Development Authority v. M.K. Gupta (1994)

1 SCC 243 : [1993] 3 Suppl. SCR 615; Pioneer Urban Land and Infrastructure Ltd v. Govindan Raghavan (2019) 5 SCC 725 : [2019] 5 SCR 1169; Wg. Cdr. Arifur Rahman Khan & Others v. DLF Southern Homes Pvt. Ltd., 2020 SCC Online SC 667 – relied on

2.5 Section 14 of the 1986 Act empowers the Consumer Fora to redress the deficiency of service by issuing directions to the Builder, and compensate the consumer for the loss or injury caused by the opposite party, or discontinue the unfair or restrictive trade practices. The incorporation of such one-sided and unreasonable clauses in the Apartment Buyer’s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act. Even under the 1986 Act, the powers of the consumer fora were in no manner constrained to declare a contractual term as unfair or one-sided as an incident of the power to discontinue unfair or restrictive trade practices. An “unfair contract” has been defined under the 2019 Act, and powers have been conferred on the State Consumer Fora and the National Commission to declare contractual terms which are unfair, as null and void. This is a statutory recognition of a power which was implicit under the 1986 Act. The Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer’s Agreement. [Paras 19.6, 19.7][40-B-F]

3.1 The Consumer Protection Act, 1986 was enacted to protect the interests of consumers, and provide a remedy for better protection of the interests of consumers, including the right to seek redressal against unfair trade practices or unscrupulous exploitation. Section 3 of the Consumer Act provides that the remedies under the Act are in addition to, and not in derogation of any other law applicable. [Paras 20.1, 20.2] [40-F-G; 41-G-H]

Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha (dead) through LRs and others (2004) 1 SCC 305 : [2003] 6 Suppl. SCR 659 – referred to

National Seeds Corporation Limited v. M.

Madhusudhan Reddy (2012) 2 SCC 506 : [2012]

2 SCR 1065; Virender Jain v. Alaknanda Cooperative Group Housing Society Limited and others (2013) 9 SCC

383 : [2013] 2 SCR 1058; Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751 : [2018] 14 SCR 791 – relied on.

3.2 Section 18 of the RERA Act, 2016 provides the remedy of refund with interest and compensation to allottees, when a Developer fails to complete the construction or give possession as per the Agreement of Sale. The remedies under Section 18 are “without prejudice to any other remedy available”. Section 71 of the RERA Act empowers the RERA Authority to determine compensation payable under Sections 12, 14, 18 and 19 of the Act. The proviso to Section 71 provides that a consumer has the right to withdraw its complaint before the consumer fora in respect of matters covered under Sections 12, 14, 18 and 19 of the Act, and file the same before the RERA. [Paras 20.5, 20.6][45-E-G]

3.2 Section 79 of the RERA Act bars the jurisdiction only of civil courts in respect of matters which an authority constituted under the RERA Act is empowered to adjudicate on. Section 88 of the RERA Actis akin to Section 3 of the Consumer Protection Act, and provides that the provisions of the RERA Act shall apply in addition to and not in derogation of other applicable laws. [Paras 20.7, 20.8][46-D-F]

3.3 An allottee may elect or opt for one out of the remedies provided by law for redressal of its injury or grievance. An election of remedies arises when two concurrent remedies are available, and the aggrieved party chooses to exercise one, in which event he loses the right to simultaneously exercise the other for the same cause of action. [Para 20.9][46-G-H]

A.P. State Financial Corporation v. M/s GAR Re-rolling Corporation (1994) 2 SCC 647 : [1994] 1 SCR 857; P.R. Deshpande v. Maruti Balaram Haibatti (1998) 6 SCC 507 : [1998] 3 SCR 1079; National Insurance Co. Ltd. v. Mastan & Ors. (2006) 2 SCC 641 : [2005]

5 Suppl. SCR 704 – referred to

Transcore v. Union of India (2008) 1 SCC 125 : [2006]

9 Suppl. SCR 785; Mathew Varghese v. M. Amritha Kumar (2014) 5 SCC 610 : [2014] 2 SCR 736; M/s Imperia Structures Ltd. v. Anil Patni and Anr (2020) 10 SCC 783 – relied on

3.4 The absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read with Section 88 of the RERA Act makes the position clear. Section 18 of the RERA Act specifies that the remedies are “without prejudice to any other remedy available”. [Para 20.11][51-D-E]

4.1 The Apartment Buyers in their Complaint filed before the National Commission made a prayer for refund of the amount deposited alongwith Interest @ 20% p.a. compounding quarterly till its realisation. The Apartment Buyers, in their submissions have stated that they have obtained home loans on which Interest @ 7.90% p.a. is being paid, even as on date. The Delay Compensation specified in the Apartment Buyer’s Agreement of Rs. 7.5 per sq. ft. which translates to 0.9% to 1% p.a. on the amount deposited by the Apartment Buyer cannot be accepted as adequate compensation for the delay in the construction of the project. At the same time, the claim of the Apartment Buyers for payment of compound interest @ 20% p.a., cannot be accepted as it has no nexus with the commercial realities of the prevailing market. [Para 21.2][57-E-G]

4.2 Covid–19 Pandemic has greatly impacted the construction industry. In these circumstances, it is necessary to balance the competing interest of both parties. In the interests of justice and fairplay, the amounts deposited by the Apartment Buyers is refunded with Interest @ 9% S.I. per annum from 27.11.2018 till the date of payment of the entire amount. The refund will be paid within a period of three months from the date of this judgment. If there is any further delay, the Developer will be liable to pay default interest @ 12% S.I. p.a. The Developer shall not deduct the Earnest Money of 20% from the principal amount, or any other amount as mentioned in Clause 21.3 of the Agreement, on account of the various defaults committed by the Developer, including the delay of over 7 months in obtaining the Fire NOC. [Para 21.2][58-A-D]