Full Judgment Text
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No 4284 of 2019
(@ Special Leave Petition (c) No. 16227 of 2013)
Suman Jindal & Anr. Appellant(s)
Versus
M/s. Adarsh Developers Respondent(s)
J U D G M E N T
Dr Dhananjaya Y Chandrachud, J
Leave granted.
This appeal arises from a decision of the National Consumer Disputes
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Redressal Commission dated 18 January 2013.
The dispute in the present case relates to a residential apartment which
the appellants booked with the respondent who is the developer. The
respondent had launched a construction project called “Adarsh Palm Retreat”
situated at Bhoganhalli Village, Varthur Hobli, Bangalore East Taluk, Bangalore.
The appellants booked an apartment which was split into two, bearing no. X 903
(a) and (b). Though the dispute between the parties relates to the above flat, it
is necessary to advert to the fact that on 2 November 2004 the appellants had
also booked flat F 703 for which the respondent had issued a letter of allotment.
The price of that flat was Rs 32.28 lakhs. An agreement to sell was entered into
on 1 February 2005.
Signature Not Verified
The dispute in the present case arises out of two letters of allotment
Digitally signed by
RAJNI MUKHI
Date: 2019.04.30
17:15:21 IST
Reason:
1“NCDRC”
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issued by the respondent to the appellants in respect of flat X 903 (a) and (b).
The agreed sale consideration was Rs 40,95,801. The letter of allotment
stipulated that the allotment would be confirmed on the payment of 25% of the
value of the flat as the booking amount. The appellants initially paid an amount of
Rs 1 lakh to the developer on or about 12 February 2005 which was followed by
a second payment of Rs 3 lakhs on 24 March 2005. On 21 February 2008 a
personal meeting took place between the appellants and the representatives of
the developer, the gist of which was recorded in an email dated 21 February
2008. The e-mail, in so far as is material records, what was discussed upon and
agreed at the meeting:
“1. I have paid Rs. 4 lakhs towards the booking of my flat
X-903 in Tower-I I, with a commitment to Mr. Dheemanth that
my financial institution would be making the subsequent
payments on my behalf (since I am eligible for a loan upto
92% of the property value).
2. My financial institution needs the required documents
(Agreement of Sale/Agreement of Construction) for releasing
payment on my behalf. The same is pending from Adarsh, for
want of necessary approvals.
3. Going by my discussions with Mr. Hari today, I need to
make the payment of 15% of the agreement value, including
Rs 4 lakhs that I have already paid.
4. Subsequent payment, in full, shall be made by my
financial Sale/Agreement of Construction) from Adarsh
Developers.
5. Agreement value for my apartment X-903 in TI, comes
to Rs 42.2 lakhs 15% of this value amounts to Rs 6.33 lakhs.
Reducing Rs 4 lakhs that I have already paid, I need to pay a
balance of Rs 2.33 lakhs.
6. As informed to your goodself, Mr. Hari/Ms. Vijaya, I
shall making this payment of Rs 2.33 lakhs on or before 29
February 2008.
Request you to confirm if my understanding is
correct.”
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To this email the Vice-President of the developer responded with the
following communication on 22 February 2008:
“Dear Parikshit,
Noted the contents of your msg. U may do so, as per your
msg. Further Ms. Vijaya will be in touch with you in this
regard.
Thanks & Regards
P.B.Hari
Vice President BD,
Adarsh Group
Contact No. 91 80 4134 3400.”
The case of the appellants is that by this exchange, the booking amount
which was initially 25% of the agreed sale consideration was reduced to 15%.
On 28 February 2008, the appellants paid an amount of Rs 2,50,000 to the
developer towards flat X 903 making up a total payment of Rs 6,50,000 which
was marginally in excess of an amount representing 15% of the agreed sale
consideration. Following this payment, the developer by an email dated 12
March 2008 stated that the agreement for flat X 903 would be ready by the first
week of March. On 20 March 2008, the developer demanded the balance of the
sale consideration failing which, it was stated, that the delay will attract penal
interest.
By an email dated 31 March 2008, the appellants recorded that further
payments would be arranged through a financial institution which had agreed to
grant a loan. However, it was stated that necessary documentation would be
required in terms of a sale/construction agreement, among other documents.
On 2 April 2008 the appellants confirmed receipt of the email and sought
the tentative dates by which the agreement and other documents required for the
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loan disbursal would be ready. In the meantime, the Assistant Manager-
Marketing of the developer stated in an email that they were in the process of
executing the agreement and required the appellants to fill up a data sheet. This
was done by the appellants. On 26 May 2008 the developer’s representative
addressed an email to the appellants which is extracted below:
“Sir,
Kindly be informed your file has been reviewed by our
Financial Department and noted that 15% of the booking
amount of the flat is not paid and hence we cannot proceed
with the agreements. You can come and meet our VP BD Mr.
P.B.Hari for further clarifications.
Thanks & Regards
Vijaya G.
Asst. Manager-Marketing
Adarsh Developers
#10, VittalMallya Road,
Bangalore-560 001
Ph: 41343304.”
On 27 May 2008 the developer refused to execute the agreement on the
ground that payments were delayed. The appellants addressed a
communication to the Managing Director of the developer stating that the loan
had already been sanctioned and the bank was willing to release the payment
upon the execution of necessary documentation. Thereafter, by communications
dated 4 June 2008, 12 July 2008, 27 July 2008, 1 September 2008 and 3
October 2008 the appellants called upon the developer to execute the
agreement to sell. The respondent, however, cancelled the allotment on 30
November 2008 on the ground that the appellants had failed to pay 25% of the
total cost of the flat required as the booking amount. The amount of Rs 2,50,000
which had been paid by the appellants on 28 February 2008 was adjusted to the
cost of flat F 703.
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Upon protesting against the cancellation, the appellants filed a consumer
complaint before the Karnataka State Consumer Disputes Redressal
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Commission .
The SCDRC dismissed the complaint holding that : (i) the appellants are
not ‘consumers’ within the meaning of Consumer Protection Act 1986; (ii) the
appellants had not paid the booking amount; and (iii) it was open to the
appellants to yet pay the entire sale consideration and to seek an allotment from
the builder failing which a refund could be sought.
In appeal, this order has been substantially affirmed by the NCDRC. The
view taken by the NCDRC is that the appellants failed to make payment for the
flat and hence, there was no deficiency of service.
The submission which has been canvassed on behalf of the appellants by
Mr. Rajesh Mahale, learned counsel is that as the sequence of events would
indicate, there was a novatio under which the booking amount which was
originally fixed at 25% was reduced to 15%. Learned counsel submitted that the
email addressed by the appellants to the developer regarding this on 21
February 2008, following a personal meeting was agreed upon in the response
dated 22 February 2008. It was submitted that in pursuance of this agreement
the appellants paid a total sum of Rs 6,50,000 to the respondent by 28 February
2008 as evidenced by the receipt executed by the developer. Moreover, it was
urged that the respondent in its email 26 May 2008 had specifically accepted the
position that the booking amount was 15% of the total sale consideration.
Learned counsel submitted that under Section 4 of the Karnataka Ownership
Flats (Regulation of the Promotion of Construction, Sale, Management and
2 “SCDRC”
5
Transfer) Act, 1972, the promoter is obliged to enter into an agreement to sell
before accepting any advance payment. Hence it was urged that consistent with
the obligation cast on the developer, the appellants had repeatedly called upon
the developer to enter into necessary documentation so that the balance
payment could be made by utilising the loan amount which was sanctioned by a
bank in favour of the appellants. In this context it has been submitted that the
cancellation of the agreement was clearly a deficiency of service.
On the other hand, Mr. Balaji Srinivasan, learned counsel appearing on
behalf of the respondent submitted that the original agreement between the
parties contemplated that the booking amount should be 25% of the total cost of
the flat. It was urged that though the allotment was made in February 2005, until
February 2008 the initial booking amount of 25% had not been paid. Hence it is
urged that the builder was justified in cancelling the agreement. Moreover, after
the dismissal of the appeal by the NCDRC, the developer entered into an
agreement to sell with a third party on 16 March 2013. Hence it was urged that
at the highest the appellants would be entitled to a refund of the consideration
with reasonable interest.
The clear picture which emerges from the documentary material on the
record is that by the letter of allotment dated 28 February 2005, the respondent
agreed to allot flat X 903 (a) and (b) to the appellant for an agreed consideration
of Rs.40.95 lakhs. Though the booking amount was to be 25% of the agreed
sale consideration, the correspondence between the parties indicates that there
was an agreement to reduce this to 15%. This is reflected in the email
addressed by the appellant following a personal meeting on 21 February 2008
and the categoric acceptance of this position in response, by the developer on
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22 February 2008. That apart, the subsequent email of the developer dated 26
May 2008 clearly indicates that 15% represented the booking amount payable
for the flat. It is not in dispute that if the booking amount is computed at the rate
of 15% of the agreed sale consideration, what was paid by the appellant (Rs
6,50,000) was in fact in excess of the booking amount. Hence the entire basis
on which the termination of the allotment took place was misconceived.
That apart, we find from the record that the appellants had all along been
insisting on the execution of the agreement to sell so as to facilitate the
disbursement of the loan which had been sanctioned by the bank. Section 4 of
the Karnataka Ownership Flats (Regulation of the Promotion of Construction,
Sale, Management and Transfer) Act, 1972 provides as follows:
“Section 4. Promoter before accepting advance payment or
deposit to enter into agreement and agreement to be
registered – Notwithstanding anything contained in any other
law a promoter who intends to construct or constructs a block
or building of flats, all or some of which are to be taken or are
taken on ownership basis, shall, before he accepts any sum
of money as advance payment or deposit, which shall not be
more than twenty per cent of the sale price, enter into a
written agreement for sale with each of such persons who are
to take or have taken such flats, and the agreement shall be
registered under the Registration Act, 1908 and such
agreement shall contain the prescribed particulars; and to
such agreement there shall be attached, such documents or
copies thereof, in respect of such matters, as may be
prescribed.”
Section 4 casts an obligation on the developer, while receiving advance
payment, to enter into a written agreement for sale. The insistence of the
appellants on the developer doing so was, therefore, consistent with the statutory
obligation cast on the respondent. Evidently, the appellants were seeking the
execution of necessary documentation so as to facilitate the disbursal of the
loan. This cannot be regarded as unreasonable or as a breach of the contractual
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obligations. In this background, we are of the view that both the SCDRC and the
NCDRC were not justified in rejecting the primary relief which was sought by the
appellants in terms of the fulfillment of the agreement. A copy of the subsequent
agreement which was entered into between the respondent and the third party
has been placed on record. The agreement to sell was entered into on 16 March
2013, after the NCDRC had dismissed the appeal. An agreement to sell with
the third party cannot defeat the rights of the appellants under a prior contract in
respect of the residential flat in question. The subsequent agreement must
necessarily be subordinate to the rights of the appellant.
In the circumstances, we are of the view that the appeal would have to be
allowed. We accordingly allow the appeal and issue the following directions:
(i) The appellants shall, within a period of four weeks’ from today, pay to the
developer the balance of the sale consideration computed on the basis of the
sale price of Rs 40,95,801 after deduction of the amount of Rs 6,50,000 paid
towards the booking amount. The appellants shall pay interest computed at
the rate of 9% per annum on the aforesaid sale consideration with effect from 20
April 2008 until the date of payment;
(ii) The appellants shall, apart from the balance of the sale price, also pay (i)
BWSSB & BESCOM charges;(ii) Maintenance Deposit; and (iii) Registration and
Stamp Duty charges and service tax as applicable under the governing
provisions of law;
(iii) The respondent is directed to execute all necessary agreements to
complete the title of the appellants and to have the agreements duly registered,
simultaneously with the handing over of the payment. In the event the
respondent fails to do so, the Registrar of the SCDRC shall execute all required
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agreements in compliance with the above directions on behalf of the respondent
to effectuate the right, title and interest of the appellants. Possession shall be
handed over to the appellants in pursuance of the aforesaid directions
simultaneously with the completion of registration formalities;
(iv) Until the aforesaid exercise is carried out the interim order directing status
quo passed by this Court during the pendency of these proceedings on 15 July
2013 shall continue to operate.
The appeal is accordingly allowed. There shall be no order as to costs.
………………………….............................J.
(DR. DHANANJAYA Y. CHANDRACHUD)
…………………………............................J.
(HEMANT GUPTA)
NEW DELHI
APRIL 25, 2019
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ITEM NO.9 COURT NO.11 SECTION XIV
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Special Leave Petition (c) No. 16227 of 2013
SUMAN JINDAL & ANR. Appellant(s)
VERSUS
M/S. ADARSH DEVELOPERS Respondent(s)
FOR [PERMISSION TO FILE ANNEXURES] ON IA 1/2013
FOR [PERMISSION TO FILE ANNEXURES] ON IA 2/2013
FOR [PERMISSION TO FILE ANNEXURES] ON IA 3/2014
Date : 25-04-2019 These matters were called on for hearing today.
CORAM : HON'BLE DR. JUSTICE D.Y. CHANDRACHUD
HON'BLE MR. JUSTICE HEMANT GUPTA
For Appellant(s) Mr. Rajesh Mahale, AOR
For Respondent(s) Mr. Balaji Srinivasan, AOR
Ms. Garima Jain, Adv.
Ms. Pallavi Sengupta, Adv.
Mr. Siddhant Kohli, Adv.
Mrs. Lakshmi Rao, Adv.
UPON hearing the counsel the Court made the following
O R D E R
Leave granted.
The appeal is allowed in terms of the signed order.
Pending application(s), if any, shall stand disposed of.
(POOJA CHOPRA) (SAROJ KUMARI GAUR)
COURT MASTER BRANCH OFFICER
(Signed Reportable Judgment is placed on the file)
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