22 Jul 2121

A buyer of a flat or residential area should be treated equally to an allottee, and it would be unfair to presume that the buyer was aware of the delay - Supreme Court of India

Case : M/S Laureate Buildwell Pvt. Ltd v. Charanjeet Singh Civil Appeal No. 7042 of 2019

Court : Supreme Court of India

Bench : Justice Uday Umesh Lalit, Justice Hemant Gupta and Justice S. Ravindra Bhat

Decided on : 22 Jul 2121

The Relevant Statutes

Section 2 (d), 2(1)(d)(i) of the Consumer Protection Act, 1986

Brief Facts & Procedural History

1. Ms Madhabi Venkatraman (hereinafter referred to as "the original allottee") filed for allocation of a residential flat of 4545 sq. ft. in the Nectarine Tower "PARX LAUREATE" in Sector-108, Expressway, Noida. The builder was supposed to finish the flat (Laureate). She made a ₹7,00,000/- registration payment. The original allottee received an allocation letter for the apartment after depositing 32,33,657/- out of the total sale price of 2,47,29,405/-. The flat was supposed to be turned over in 36 months, according to the allocation document (from the date of the allotment letter). The original allottee paid Laureate ₹1,55,89,329/- for the first seven instalments as required. The original allottee opted to sell the flat after observing the sluggish pace of development. She was approached by a buyer who was looking for a residential property through a broker. He was promised that ownership of the flat would be given on time, so he decided to buy it and paid an advance of ₹ 100,000 towards the final sale cost of ₹1,55,89,329/-. The buyer and the original allottee agreed that the rest of the selling consideration would be paid on or before October 15, 2015, and that the buyer would pay the remaining instalments over 1,55,89,329/- immediately after receiving the unit. Laureate sent demand letters for two payments, and the original allottee paid a total of ₹21,68,694/-.

2. The buyer claimed that ownership was not given as promised in October of 2015. (In the allotment letter). He decided to wait for possession before making any payments toward the sale; however, the original allottee insisted on the execution of a sale agreement and demanded payment of instalments that she had paid to the builder, claiming that she could not wait any longer and that she would forfeit the earnest money and cancel the deal. The buyer said that he enquired with the builder's authorities, who promised him that possession would be provided by June 2016. As a result, the purchaser entered into a selling agreement with the original allottee and paid ₹1,85,00,000/-.

3. The builder was asked by the original allottee to transfer the unit to the respondent. The buyer gave the builder, Laureate, an assurance that he had signed and completed. Later, Laureate sent the purchaser a letter verifying the payment of ₹1,93,70,883/- toward the flat's purchase. Following that, the buyer went to the construction site to get a sense of the scope of the work, but was denied entry by the builder's employees for security reasons, and was told that the work was still in progress and possession would be delivered soon. The buyer claims that he made telephone enquiries about possession from the builder's office, but that these were unsuccessful. He claims to have gone to the builder's office in the final week of January 2017 and been told that he would not be able to take ownership of the unit until the end of the year.

4. Following this, the buyer demanded that the builder reimburse the money he had paid. The purchaser submitted a legal notice to the builder, requesting a return of the amount of 1,93,70,883/- plus interest at the rate of 24 per cent per year from the different dates of deposit, but it was unsuccessful. He alleges that receiving the demand letter for the 11th instalment of ₹10,92,628/- startled him. The builder's representatives threatened the purchaser with cancellation and forfeiture of the money paid if the instalment was not paid. In these circumstances, the appellant petitioned the National Consumer Dispute Redressal Commission for a directive to the builder to restore the whole sum of 1,93,70,883/-, with interest at the rate of 24% from the dates when the instalments were paid to Laureate. In addition, compensation of ₹5,00,000/- and litigation fees of ₹2,00,000/- were sought, as well as additional charges.

5. The builder, Laureate, denied the claim, claiming that from March 28, 2013, to January 16, 2016, (a total of 26 months), there was a complete halt in the construction of all projects in NOIDA, including the buildings in question, due to an order issued by the National Green Tribunal (NGT) in OA/158/2013, and a notification issued by the Ministry of Environment, Forests, and Climate Change. The builder had given many reminders for payment towards the payments and ultimately issued a notice for cancellation of the Provisional Allotment of Flat No. 7013. The original allottee was aware of the NGT's instructions, and the builder had sent several reminders for payment towards the instalments. It was claimed that, under the terms of Clause 13(7) of the agreement, neither Ms Madhabi Venkatraman, the original allottee, nor the purchaser-respondent who is endorsed by the original allottee was entitled to any compensation for construction delays. The original allottee was also said to have asked that the builder transfer flat No. 7013 to the buyer. The purchaser signed an undertaking in front of the relevant authorities, stating that both the original allottee and the purchaser were aware of the NGT's order and that the construction delay was beyond the purchaser's control. As a result, their entitlement to compensation is regarded as relinquished under Clause 13.

6. The builder further claimed that as the 18th and 20th storey roof slabs were being installed, the 11th and 12th payments were sought from the Complainant, but that they were not paid. As a result, the builder was within his rights to cancel the allotment. The builder was unable to complete the project due to a restriction order issued by the NGT prohibiting any building within a 10-kilometre radius of the Okhla Bird Sanctuary. The builder was entitled to an extension of time for offering possession of such premises under paragraph 13(5) due to force majeure conditions. As a result, it is not obligated to pay any damages.

7. After reviewing the parties' depositions, affidavits, documentary evidence, and submissions, the National Consumer Dispute Redressal Commission discovered that the demand letter for the 11th instalment was dated 24.03.2017, whereas the claimed delivery date was 15.10.2015. The building stage 'on the beginning of 18th storey roof slab' of the skyscraper had been reached, according to the letter, and the 11th payment was requested to be paid. This indicated that the mentioned tower's construction was still unfinished as of March 24, 2017. The original allottee had paid a sum of ₹5,29,000/- towards punitive interest levied by the Developer at a rate of 24 per cent per annum, according to Receipt No. 306 dated 01.03.2016, according to the commission. The National Consumer Dispute Redressal Commission held that the developer reimburses the money placed with the developer in respect of subject flat No. 7013 with interest @ 10% p.a. from the respective dates of deposit to the day of realisation, coupled with the cost of ₹25,000/.

8. The appellant appeals in the Honourable Supreme Court of India challenging the order of the National Consumer Dispute Redressal Commission.

The Issue(s) of the Case

Whether the order passed by National Consumer Dispute Redressal Commission valid?

The Observations of the Court

1. Honourable Supreme Court of India observes that the builder admits that when the endorsement letter was issued, the buyer not only stepped into the shoes of the original allottee but also gained entitled to ownership of the apartment. There is no dispute that the purchaser fits the bill as a complainant/consumer and is allowed to file a complaint in any venue under the Consumer Protection Act of 1986 for any service fault.

2. Honourable Supreme Court of India also observes that if the facts are taken into account, extending the project would have significant financial consequences for the original allottees, who are on the one hand obligated to pay instalments and, on the other hand, are frequently required to pay monthly rentals if they need a home. Such duties are nearly unbearable. At this point, an extended wait is unthinkable, therefore allottees prefer to locate buyers who could fill their shoes. The fact that such purchasers assume the original allottee's responsibilities – either to pay the remaining instalments or to wait a period – does not exclude them from being classified as consumers. All that remains is for the consumer forum or commission – or perhaps the courts – to assess the respective equities in each instance in light of the time frame.

3. Honourable Supreme Court of India also observes that it is clear that the Consumer Protection Act of 1986 was enacted to address consumer complaints (a term that is defined and interpreted broadly) and provide a forum for their prompt resolution, and that, where third parties have sought relief, technicalities have consistently been ignored by this court. As a result, even after a customer is compensated for a fire, the insurer might file a complaint against the carrier/service provider and seek damages (of course along with the insured party). Similarly, the lack of privity of contract is not a bar to a third party filing a complaint against a service provider for an occurrence that is otherwise covered by an agreement.

4. Referring to the case of Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783, the Honourable Supreme Court of India ruled that The Real Estate Regulatory Authority Act of 2019 completely protects complainant-initiated procedures and subsequent actions, including those taken by the National Consumer Dispute Redressal Commission.

5. Honourable Supreme Court of India also observes that the type and degree of remedy that a later purchaser may be entitled to depend on the facts. However, a later purchaser who steps into the shoes of an initial allottee of a housing project in which the builder has failed to honour its pledge to provide the flat within a specified period cannot expect any – even reasonable – time for the builder to execute its responsibility. Given that there may be a significant number—possibly thousands—of flat purchasers waiting for their promised flats or houses, such a judgement would be arbitrary; they would undoubtedly be entitled to all reliefs under the Act. In such a situation, a later purchaser will very certainly fall into the same category. Furthermore, the purchaser undertakes to acquire the apartment with the reasonable expectation that ownership will be delivered within the boundaries of the delayed timetable that he is aware of at the time of purchase. As a result, if the purchaser requests a refund based on a judgement that he, too, can no longer wait and suffer unbearable difficulties (like the original allottee), the equities would have to be reshaped.

The Decision Held by the Court

Honourable Supreme Court of India held that it can be appropriately shaped by ordering a refund of the principal amounts, plus interest at 9% per year, from the day the builder learned of or accepted the transfer. In the instant instance, there is evidence on the record that the occupancy certificate had not been issued as of the day the appeal was filed. Given that the purchaser/respondent had stepped into the shoes of the original allottee and informed Laureate of this fact in April 2016, the principles of fairness necessitate that interest is awarded in favour of the respondent at least from that date. In the aforementioned words, the National Consumer Dispute Redressal Commission's directives are amended appropriately. The National Consumer Dispute Redressal Commission's contested order is amended in the aforementioned terms, and the appeal is partially accepted. There will be no expenses order.

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