M/s. Fortune Infrastructure (Now Known As M/s. Hicon Infrastructure) & Anr. vs Trevor D’lima & Ors.

HELD : 1. The contractual damages are usually awarded to compensate an injured party to a breach of contract for the loss of his bargain. This rule is more qualified when it comes to the real estate sector. If the seller wants to limit their liability for breach of contract under the aforesaid rule, they have to portray that they have performed their obligation in a prudent manner. The onus is on the seller to show his best efforts and bona fides in discharging the obligation. Even in the absence of fraud, mere unwillingness to carry out the duty could constitute bad faith sufficient for the purchaser to claim damages. [Paras 11 and 12][280-F-H; 281-A]

2. Whenever the builder has refused to perform the contract without valid justification, the buyer is entitled for compensation as he has been deprived of price escalation of the flat. Every breach of contract gives rise to an action for damages. Such amount of damages must be proved with reasonable certainty. [Para 19] [283-D]

3. Even under the Consumer Protection Act, 1986, the damages for commercial contracts need to be determined as per the Contract Act. [Para 16] [282-A]

4. In the facts and circumstances of the present case, there is deficiency of service on the part of the appellants, which entitles the complainant to damages/compensation. The appellants did not give any valid reasons as to why they transferred the property to a third party, despite their contractual obligation to the respondents (complainants). The obligation was on the appellants to show that he was unable to transfer the property to the respondent. Moreover, a person cannot be made to wait indefinitely for the possession of the flats allotted to them and they are entitled to seek the refund of the amount paid by them, along with compensation. Although there was no delivery period stipulated in the agreement, a reasonable time has to be taken into consideration. [Paras 14 and 15] [281D-F]

5. The damages become due on the date when the breach of contract takes place, and are normally assessed by reference to the time of breach. The aforesaid rule is based on the principle that the injured party is presumed to be in knowledge of the breach as soon as it is committed and at that time he can take appropriate measures of mitigation to control the loss flowing from the breach. The courts may deviate from the aforesaid rule and fix appropriate date in facts and circumstance of a case if aforesaid presumptions could not be established or it would not be reasonable to follow the rule. [Para 21] [283-F-H; 284-A]

6. Where a party sustains loss by reason of a breach of contract, the damages are to be granted so as to place the suffering party in the same position as if the contract had been performed. In light of the above, the damages other than consequential loss have to be measured at the time of the breach. However, the aforesaid rule is flexible which needs to be assessed in facts and circumstances of individual case. [Para 22] [284-CD]

7. Where there is non-delivery of the flat/house, and the developer has refused to provide alternative and equivalent accommodation, and the buyer lacks means to purchase a substitute from the market, then in such circumstances, damages would not be reasonable to be assessed on the breach date. [Para 21] [284-A]

8. In the present case, the complainants (respondents) tried to execute the agreement and sought for conveyance of the property through the NCDRC. In these circumstances, even in the first appeal, offers were being made on behalf of appellants to convey alternative properties, which were refused as being insufficient. Therefore, in the facts and circumstances of the present case, the damage need not be determined from the date of breach of contract. [Para 22] [284-E]

9. Appellants have produced circle rates of properties in the vicinity of the disputed flats, which vary from Rs. 18,655 per Sq. Ft. to Rs. 25,787/- per Sq. Ft. Whereas the respondents have produced executed sale deeds in the nearby vicinity, which was Rs. 65,000 per Sq. ft., Rs. 69,342/- per Sq. ft., Rs. 75,000/- per Sq. Ft. and Rs. 88,050/- per Sq. Ft.. NCDRC has taken the minimum available market price as the reference point for awarding compensation at the rate of Rs. 65,000/- per Sq. Ft. Excessive reliance on the aforesaid sale deed may not be appropriate as the present property is a redevelopment of an earlier property. Usually the real estate rates for re-developed properties are on the lower side instead of green-field projects. [Para 24] [284-G-H; 285-A]

10. Thus, the claim of the respondents (complainants) as granted by the NCDRC seems to surpass the actual-loss based damages and enter the domain of gain-based remedy. It would not be appropriate to grant such damages. There is no dispute about the fact that damages for the contractual breach is generally compensatory arising out of the breach. Therefore, the damages awarded should not be excessive and a court/tribunal needs to take a balanced approach so as to ensure right compensation. [Para 25] [285-B-C]

11. It would be appropriate, just and reasonable that the market rate be fixed at Rs. 50,000/- per Sq. Ft. (Rupees Fifty Thousand per square feet) as the reference rate for determination of market price prevailing in the vicinity of the disputed property. Hence, the estimated market price would be Rs.4,14,20,000/instead of Rs.5,38,46,000/- as granted by the NCDRC. However, there is no reason to interfere in respect of the compensation granted for the parking space. [Para 26] [285-D-E]

Ghaziabad Development Authority v. Balbir Singh (2004) 5 SCC 65 : [2004] 3 SCR 68 – relied on. Johnson and Anr. v. Agnew [1979] 1 All ER 883 – referred to.