Delay in handing over possession is deficiency under the Consumer Protection Act

Isha Sawant | Government Law College | 28th August 2020

Wg. Cdr. Arifur Rahman Khan and Aleya Sultana v. DLF Southern Homes Pvt. Ltd.

Facts:

Nine flat-buyers had initially filed a complaint before the National Consumer Dispute Redressal Commission (NCDRC), they had booked residential flats in a project called Westland Heights at New Town, DLF in Bengaluru, this project was being developed in an area measuring 27.5 acres which was a part of a larger 80-acre township. A brochure advertising the nature of the project and amenities to be provided to the buyers, pursuant to which the complainants had booked flats and entered into an agreement with the developer – clause 11(a) of the Apartment Buyers Agreement (ABA) stipulated the completion of the project within 36 months from the date of execution of agreement except for force majeure conditions. The flat-buyers were informed on 12 January 2011 that possession of apartments was expected to be completed by mid-2012, the dates were further extended up to 2015 when they were informed of another delay by a notification dated 4^th May 2015 that they hadn’t received the Occupation Certificate (OC), thus the obligation of handing over possession within 36 months was not fulfilled.

The nine flat-buyers filed a consumer complaint of breach of contractual obligation under terms of ABA, so a complaint was filed under section-12 (1)(c) of the Consumer Protection Act (CPA), 1986. The NCDRC divided the 339 flat-buyers complainants into 6 groups- based on whether or not they had taken possession, executed deeds of conveyance, settled disputes or sold flats before or during pendency of the complaints or their application for impleadment, since 337 out of 339 flat-buyers had taken possession, their complaints were dismissed and the NCDRC dealt with the remaining two complainants accepted compensation but did not take possession and their appeals were dismissed, the NCDRC accepted the submission of DLF Southern Homes Pvt. Ltd. And Anabel Builders and Developers Pvt. Ltd. (the respondents) that there was no deficiency on their part in complying with the contractual obligations and that despite delay in handing over possession of the flats the complainants were not entitled to compensation in excess of what was set-out in the ABA which is Rs. 5 per sq. ft per month, it observed that the flat-buyers had failed to prove that the said compensation was unreasonable, the commission relied on the cases of DLF Homes Panchkula Pvt. Ltd. V. D. S. Dhanda and Ghaziabad Development Authority v. Balbir Singh for their decision. 

Issues:

1. Whether the flat-buyers are constrained by the stipulation in ABA of providing compensation at the rate of Rs. 5 per sq. ft per month.
2. Whether the flat-buyers who seek to take a claim against the developer for delayed possession can as a consequence of doing so be compelled to suspend their right to obtain a conveyance deed. 

Legal Provisions:

Consumer Protection Act, section 12 (1)(c)

Appellant’s Contention:

The counsel for the appellants contended that there was a delay ranging from two to four years in handing over possession and flat-buyers should not be constrained by one-sided and unreasonable agreements. The execution of conveyances or settlement deeds do not prevent flat-buyers from claiming compensation, also the emails of the developers to the flat-buyers clearly indicate that the flat-buyers under protest were not permitted to execute conveyance deeds. The amenities contracted by the developers were alleged to have not been provided by them. They also contended that the flat-buyers were not liable to secure the developers for the demand of interest and penalty imposed by the tax-authority for failure of the developer to deposit tax on time, it was clarified during oral arguments that only interest was recovered from flat-buyers. 

Respondents Contention:

The respondents contended that the complainants have given no evidence to establish coercion or duress inflicted by developers while executing conveyance or settlements. They stated that possession was handed over between four to six years ago and the developer had transferred his right, title and interest to the Residents Welfare Association, the flat-buyers have benefited by the increase in value of the property. They also mentioned that the allotments were made escalation free and the burden of increased costs was borne by the developer. As per clause 15 of ABA, the flat-buyers were compensated at a rate of Rs. 5 per sq, ft per month which amounts to Rs. 7500 per month for a 1500 sq. ft flat, no proof of actual loss suffered was provided by the complainants. Regarding facilities and amenities, they stated that a club house containing a swimming pool, gymnasium, tennis court, badminton court and squash court has been constructed and its OC was received on 13 May 2019.

It was also mentioned that the flat-buyers as per terms of the ABA were aware that they have no rights over the amenities outside the 27.5-acre residential complex and forming a part of the wider complex of 80 acres. As per clauses 1.3, 1.10, 2 and 3 the allottees were required to bear tax-liabilities including towards work contracts tax, clause 23(b) entitled the developer to raise demand on proportionate basis for electricity charges from flat-buyers; and as agreed in the ABA, the price of the apartment included in the price break-up parking charges separately for exclusive use of earmarked parking spaces, there was no prohibition regarding the same in the Karnataka Apartment Ownership Act.

Observation of the Court:

The case was heard by the Supreme Court Bench of Dr. D Y Chandrachud and K.M. Joseph, JJ. The court observing the findings of the NCRDC stated that there is no dispute that the completion of the project was delayed, the existence and extent of delay constitutes an admitted factual position. The court recorded that the ABA is one-sided, in it a delay of payment by a flat-buyer attracts interest rate of 18% per annum beyond 90 days whereas the developer delays in handing over possession the flat-buyer is restricted to receiving interest at only Rs. 5 per sq. ft per month. They stated that the terms of the agreement drafted by the developer does not maintain a level platform between the developer and purchaser. The court stated that where a delay of such nature takes place on part of the developer as in the present case.

Ranging from two to four years it qualifies as deficiency under sec-12(1)(g) of the CPA, 1986 and the consumer forum has jurisdiction to award reasonable compensation to alleviate the harassment and agony suffered by the flat-buyers and the same cannot be prevented by a term of agreement, the court relied on the decisions in the cases of Lucknow Development Authority v. M. K. Gupta (1994) and R V Prassannakumaar v. Mantri Castles (2019). The court held that in the present case there are clear and valid reasons for not holding down the flat-buyers to receive a compensation at the rate of Rs. 5 per sq. ft/p.a. in terms of clause 14 of the ABA, the delay on part of the developer caused agony and hardships beyond financial matters. The court held the developer’s submission accepted by the NCDRC that the flat-buyers forsake their remedy before the consumer forum by seeking a deed of conveyance to be incorrect.

The observed that since the developer was awaiting permission from the Bangalore Development Authority to handover possession and management of the constructed clubhouse to the RWA so there was no breach by the developer of the obligation to provide a constructed facility of a club for the RWA. Regarding the representation made by the developer to the buyers of the amenities like school, hospital, restaurant, supermarket, etc in the 80 acre township of New Town which was not provided, the court held that the developer breached a clear representation which was made to the buyers and he would be liable for it. On the contention regarding taxes paid by flat-buyers the court observed the terms of the ABA and the developer’s submission and held that there was no deficiency of service regarding demand of interest payable on the tax which was required to be deposited with the revenue.

The court observed no infirmity in the findings of NCDRC which upheld the collection of charged towards electricity based on the terms of ABA, the charges recovered were not contrary to what was specified in the contract between the parties. The court also stated that the ABA contained a break-up of total price of the apartment, the parking charges for exclusive use of earmarked parking spaces was separately included in it, so the charges recorded were in terms of the agreement. The court observed that the dismissal of the complaint by the NCDRC was erroneous, the reasoning of the NCRDC suffered from patent error of law. The flat-buyers were held to be entitled to compensation for the delayed handing over of possession of the apartment and for the failure of the developer to fulfil representations made to the flat-buyers in regard to provision of amenities. 

Judgement:

The court set aside the impugned judgement and order of the NCDRC dated 2^nd July 2019, the appeal was partially allowed. The court gave following directions to the developer regarding the amount of compensation to be paid to the appellants except for the 11 appellants who entered into specific settlements with the developer and three appellants who sold their right, title and interest under the ABA; the compensation amount was to be paid in addition to the amount paid by the developer at the rate of Rs. 5 per sq. ft/p.a., the same was to be paid within one-month from the date of judgement failing which it would attract an interest rate of 9% p.a. until the payment.