Consumer Protection Act, 1986 – s.2(1)(g) – Deficiency of service – Complaint by flat buyers seeking compensation inter alia alleged delay in handing over possession of the flats – Dismissed by NCDRC – On appeal, held: Failure of the developer to hand over possession within the contractually stipulated period amounts to a deficiency of service u/s.2(1)(g) – In the present case, under the Apartment Buyers Agreement (ABA), the developer was obligated to hand over possession of the flats within thirty-six months of the date of the agreement which condition was breached – Existence and extent of the delay constitute an admitted factual position – There has been a gross delay on the part of the developer in completing construction ranging between two and four years – Further, the agreement is manifestly one-sided – Nature and quantum of delay are such that the compensation provided in Clause 14, ABA would not provide sufficient recompense to the purchasers – Jurisdiction of consumer forum to award just compensation as an incident of its power to direct removal of a deficiency in service is not constrained by the terms of a rate prescribed in an unfair bargain – Impugned judgment set aside – Flat buyers entitled to compensation.
Consumer Protection Act, 1986 – s.14(1)(e) – Jurisdiction of consumer forum – Nature and extent of – Discussed. Consumer Protection – Flat buyers’ agreements – Delayed possession – Award of compensation in addition to agreement – Duty of Courts – Held: Ordinarily, courts would hold parties down to a contractual bargain – However, cannot be oblivious to the one-sided nature of agreements drafted by and to protect interest of the developer.
Consumer Protection Act, 1986 – s.2(1)(o) – “service” – Meaning of – Held: ‘service’ in s.2(1)(o) means a service of any description made available to potential users including the provision of facilities in connection with (among other things) housing construction.
Consumer Protection – Claim against delayed possession of flats – Right of flat buyer to obtain deed of conveyance – Held: Unreasonable to expect that in order to pursue a compensation claim for delayed handing over of possession, the purchaser must indefinitely defer obtaining a conveyance of the premises or, if they seek to obtain a Deed of Conveyance to forsake the right to claim compensation.
Consumer Protection – Delay in handing over possession of residential flats – Interest in flats transferred – Compensation for delayed possession – Entitlement of subsequent transferees – Discussed.
Consumer Protection Act, 1986 – s.2(1)(g) – Held: Deficiency u/s.2(1)(g) means a fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance.
Partly allowing the appeals, the Court
HELD: 1.1 Compensation for delayed possession
1. The fulcrum of the case of the developer rests on clause
14 of the ABA. Clause 11(a) of the ABA indicates that subject to “all just exceptions” the developer endeavoured to complete construction within a period of thirty-six months from the date of the execution of the agreement unless hindered byforce majeure conditions. Undoubtedly, the expression ‘endeavour’ indicates that the developer did not bind itself to an inflexible timeline of thirty-six months. But then again, the timeline of thirty-six moths was subject to just exceptions and could be excused in the event of force majeure conditions coming into operation. By the provisions of clause 14, the developer agreed to compensate the flat buyers at the rate of Rs. 5 per square feet of the super area of the apartment per month for the period of delay. The existence and extent of the delay constitute an admitted factual position. The failure of the developer was neither relatable to a “just exception” or the prevalence of force majeure conditions referable to clause 11. [Paras 18-21][157-C, E-G; 158-E; 159-A]
1.2 The ABA is clearly one-sided. Where a flat purchaser pays the instalments that are due in terms of the agreement with a delay, clause 39(a) stipulates that the developer would “at its sole option and discretion” waive a breach by the allottee of failing to make payments in accordance with the schedule, subject to the condition that the allottee would be charged interest at the rate of 15 per cent per month for the first ninety days and thereafter at an additional penal interest of 3 per cent per annum. In other words, a delay on the part of the flat buyer attracts interest at the rate of 18 per cent per annum beyond ninety days. On the other hand, where a developer delays in handing over possession the flat buyer is restricted to receiving interest at Rs 5 per square foot per month under clause 14. Evidently, the terms of the agreement have been drafted by the developer. They do not maintain a level platform as between the developer and purchaser. The stringency of the terms which bind the purchaser are not mirrored by the obligations for meeting times lines by the developer. The agreement does not reflect an even bargain. [Para 22][159-C-F]
1.3 The agreement did not stipulate that the developer would pay any interest on the amount which had already been received. A large chunk of the purchase price was thus available to the developer to complete construction. The court must take a robust and common-sense based approach by taking judicial notice of the fact that flat purchasers obtain loans and are required to pay EMIs to financial institutions for servicing their debt. Delays on the part of the developer in handing over possession postpone the date on which purchasers will obtain a home. Besides servicing their loans, purchasers have to finance the expenses of living elsewhere. A failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. There is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. The expression ‘service’ in Section 2 (1) (o) means a service of any description which is made available to potential users including the provision of facilities in connection with (among other things) housing construction. Under Section 14(1)(e), the jurisdiction of the consumer forum extends to directing the opposite party inter alia to remove the deficiency in the service in question. Intrinsic to the jurisdiction which has been conferred to direct the removal of a deficiency in service is the provision of compensation as a measure of restitution to a flat buyer for the delay which has been occasioned by the developer beyond the period within which possession was to be handed over to the purchaser. Flat purchasers suffer agony and harassment, as a result of the default of the developer. Flat purchasers make legitimate assessments in regard to the future course of their lives based on the flat which has been purchased being available for use and occupation. These legitimate expectations are belied when the developer as in the present case is guilty of a delay of years in the fulfilment of a contractual obligation. To uphold the contention of the developer that the flat buyer is constrained by the terms of the agreed rate irrespective of the nature or extent of delay would result in a miscarriage of justice. Undoubtedly, as this court held in Dhanda, courts ordinarily would hold parties down to a contractual bargain. Equally the court cannot be oblivious to the one-sided nature of ABAs which a red rafted by and to protect the interest of the developer. Parliament consciously designed remedies in the CP Act 1986 to protect consumers. Where, as in the present case, there has been a gross delay in the handing over of possession beyond the contractually stipulated debt, the jurisdiction of the consumer forum to award just and reasonable compensation as an incident of its power to direct the removal of a deficiency in service is not constrained by the terms of a rate which is prescribed in an unfair bargain. [Paras 23, 24][159-H; 160-A-B; E-H; 161-A-D]
1.4 The judgment in Dhanda’s case does not prescribe an absolute embargo on the award of compensation beyond the rate stipulated in the flat buyers’ agreement where handing over of the possession of a flat has been delayed. Dhanda’s case was preceded by consent terms which were presented before this Court in two earlier civil appeals under which interest at the rate of 9 per cent had been granted. The decision lays down that the award of interest cannot be arbitrary and without nexus to the default which has been committed. Hence, the award of interest at the maximum rate of interest charged by a nationalised bank for advancing home loans was construed to be arbitrary. It was in this context that the court observed that the parties having agreed to a consequence for delay, exceptional and strong reasons must exist for the consumer fora to depart from the agreed rate. The decision does not lay down that there is an absence of jurisdiction in the adjudicatory fora constituted under the CP Act 1986 to award remedial compensation to a flat buyer for the delay of the developer in handing over possession on the agreed date. In the present case, there exist, clear and valid reasons for not holding down the flat buying consumers merely to the entitlement to receive compensation at the rate of 5 per square foot per month in terms of clause 14 of theABA: (i) There has been a breach on the part of the developer in complying with the contractual obligation to hand over possession of the flats within a period of thirty-six months of the date of the agreement as stipulated in clause 11(a); (ii) The failure of the developer to hand over possession within the contractually stipulated period amounts to a deficiency of service within the meaning of Section 2 (1) (g), warranting the invocation of the jurisdiction vested in the NCDRC to issue a direction for the removal of the deficiency inservice;
(iii) The triggering of an obligation to pay compensation on the existence of delay in handing over possession is admitted by the developer for, even according to it, it has adjusted compensation at the agreed rate of Rs 5 per square foot per month to 145 out of the 171 appellants; (iv) The agreement is manifestly one-sided: the rights provided to the developer for a default on the part of the home buyer are not placed on an equal platform with the contractual right provided to the home buyer in the case of a default by thedeveloper; (v) There has been a gross delay on the part of the developer in completing construction ranging between two and four years. Despite successive extensions of time to deliver possession sought by the developer, possession was not delivered ontime; (vi) The nature and quantum of the delay on the part of the developer are of such a nature that the measure of compensation which is provided in clause 14 of the ABA would not provide sufficient recompense to the purchasers;and (vii) Judicial notice ought to be taken of the fact that a flat purchaser who is left in the lurc has a result of the failure of the developer to provide possession within the contractually stipulated date suffers consequences in terms of agony and hardship, not the least of which is financial in nature. Having paid a substantial amount of the purchase price to the developer and being required to service the debt towards loan installments the purchaser is unable to obtain timely possession of the flat which is the subject matter of the ABA. [Paras 31, 32][167-C-H; 168-A-F]
DLF Homes Panchkula Pvt. Ltd. v. D S Dhanda, Etc. (2020) 16 SCC 318 : [2019] 7 SCR 1061 –
distinguished.
2.1 It would be manifestly unreasonable to expect that in order to pursue a claim for compensation for delayed handing over of possession, the purchaser must indefinitely defer obtaining a conveyance of the premises purchased or, if they seek to obtain a Deed of Conveyance to forsake the right to claim compensation. This basically is a position which the NCDRC espoused. This Courtcannot countenance that view. The developer in the present case undertook to provide a service in the nature of developing residential flats with certain amenities and remains amenable to the jurisdiction of the Consumer Fora. [Paras 34, 36][170-D; 171E]
2.2 However, the cases of the eleven purchasers who entered into specific settlement deeds with the developers have to be segregated. These eleven flat purchasers having entered into specific deeds of settlement, it would be only appropriate and proper if they are held down to the terms of the bargain. Similarly, the three appellants who transferred their title, right and interest in the apartments would not be entitled to the benefit of the present order since they have sold their interest in the apartments to third parties.Even if the three appellants who had transferred their interest in the apartments had continued to agitate on the issue of delay of possession, the Court is not inclined to accept the submission that the subsequent transferees can step into the shoes of the original buyer for the purpose of benefiting from this order. The subsequent transferees in spite of being aware of the delay in delivery of possession the flats, had purchased the interest in the apartments from the original buyers. Further, it cannot be said that the subsequent transferees suffered any agony and harassment comparable to that of the first buyers, as a result of the delay in the delivery of possession in order to be entitled to compensation. [Paras 37, 38][171-G-H; 172-B, F-G]
HUDA v. Raje Ram (2008) 17 SCC 407 : [2008] 16 SCR 601 – relied on.
3. Amenities
Club house
There has been no breach by the developer of the obligation to provide a constructed facility of a club for the RWA. [Para 40][174-C]
Other amenities
A deficiency under Section 2(1)(g) means a fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance. This may be required to be maintained under law or may be undertaken to be performed in pursuance of a contract or otherwise in relation to any service. The builder invited prospective flat purchasers to invest in the project of Westend Heights on the basis of a clear representation that the surrounding area of New Town situated on 80 acres was being developed to provide a wide range of amenities including a shopping centre, health care facilities and an early learning school. The developer has failed to provide these amenities. This is a case involving an experienced developer who knew the nature of the representation which was being held out to the flat purchasers. Developers sell dreams to home buyers. Implicit in their representations is that the facilities which will be developed by the developer will provide convenience of living and a certain lifestyle based on the existence of those amenities. Having sold the flats, the developer may find it economically unviable to provide the amenities. The flat purchasers cannot be left in the lurch or, as in the present case, be told that the absence of facilities which were to be provided by the developer is compensated by other amenities which are available in the area. The developer must be held accountable to its representation. True, in a situation such as the present it may be difficult for the court to quantify the exact nature of the compensation that should be provided to the flat buyers. The general appreciation in land values results in an increase in the value of the investment made by the buyers. Difficulties in determining the measure of compensation cannot however dilute the liability to pay. A developer who has breached a clear representation which has been made to the buyers of the amenities which will be provided to them should be held accountable to the process of law. [Paras 41-43][175-E-G; 176E-H; 177-A-B]
4. Tax
There is no deficiency of service in regard to the demand of interest payable on the tax which was required to be deposited with the revenue. [Para 47][180-B]
Larsen and Toubro Limited v. State of Karnataka (2014)
1 SCC 708 : [2013] 17 SCR 678- – referred to.
5. Electricity
The NCDR Chas up held the collection of the charges towards electricity based on the terms of the ABA. There is no infirmity in the finding of the NCDRC, which is based on the provisions contained in clause 23(b) of the ABA. The charges recovered are not contrary to what was specified in the contract between the parties. [Para 51][182-E]
6. Parking
The demand of parking charges is in terms of the ABA and hence it is not possible to accede to the submission that there was a deficiency of service under this head. [Para 54][183-C]
7. The dismissal of the complaint by the NCDRC was erroneous. The flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities. The impugned judgment and order of the NCDRC dismissing the consumer complaint is set aside. Directions issued. [Para 55][183-D-E]
Nahalchand Laloochand Private Limited v. Panchali Cooperative Housing Society Limited (2010) 9 SCC
536 : [2010] 10 SCR 804 – distinguished.
Ghaziabad Development Authority v. Balbir Singh (2004) 5 SCC 65 : [2004] 3 SCR 68; R. V.
Prasannakumaar v. Mantri Castles Pvt Ltd. (2020) 14 SCC 769 : [2019] 5 SCR 821; Pioneer Urban Land and Infrastructure Limited v. Govindan Raghavan (2019) 5 SCC 725 : [2019] 5 SCR 1169 – relied on. Larsen and Toubro Limited v. State of Karnataka (2014)
1 SCC 708 : [2013] 17 SCR 678; DLF Limited v.
Manmohan Lowe (2014) 12 SCC 231 : [2013] 16 SCR 979; Lucknow Development Authority v. M K Gupta (1994) 1 SCC 243 : [1993]3 Suppl. SCR 615; Narne Construction (P) Ltd. v. Union of India (2012) 5 SCC
359 : [2012] 4 SCR 574 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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