2020 (8) TMI 852 - SC - Indian Laws

Entitlement to compensation in excess of what was stipulated in the Apartment Buyers Agreement - delay in handing over the possession of the residential flats - Reimbursement of taxes and interest charged to the flat purchasers - Deficiency in providing amenities - Levy of electricity charges by the developer - Failure to construct the club house - whether the flat buyers are constrained by the stipulation contained in Clause 14 of ABA providing compensation for delay at the rate of ₹ 5 per square feet per month? HELD THAT - The flat purchasers invested hard earned money. It is only reasonable to presume that the next logical step is for the purchaser to perfect the title to the premises which have been allotted under the terms of the ABA. But the submission of the developer is that the purchaser forsakes the remedy before the consumer forum by seeking a Deed of Conveyance. To accept such a construction would lead to an absurd consequence of requiring the purchaser either to abandon a just claim as a condition for obtaining the conveyance or to indefinitely delay the execution of the Deed of Conveyance pending protracted consumer litigation. The developer in the present case has undertaken to provide a service in the nature of developing residential flats with certain amenities and remains amenable to the jurisdiction of the Consumer Fora. Consequently, we are unable to subscribe to the view of the NCDRC that flat purchasers who obtained possession or executed Deeds of Conveyance have lost their right to make a claim for compensation for the delayed handing over of the flats. Club House - HELD THAT - Since permission of BDA has still not been received legal action is contemplated again. The developer has produced photographs depicting the amenities which have been provided within the precincts of the club house. Membership fees for the club are stated to have been received in the account of the RWA and not in the account of the developer. The position which has been stated before the court has not been disputed by counsel for the Appellants. Hence, it is found that there has been no breach by the developer of the obligation to provide a constructed facility of a club for the RWA. Other Amenities - HELD THAT - A flat purchaser who invests in a flat does so on an assessment of its potential. The amenities which the builder has committed to provide impinge on the quality of life for the families of purchasers and the potential for appreciation in the value of the flat. The representation held out by the developer cannot be dismissed as chaff. 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. To allow the developer to escape their obligation would put a premium on false assurances and representations made to the flat purchasers. Hence, in factoring in the compensation which should be provided to the flat buyers who are concerned in the present batch of appeals, we would necessarily have to bear this issue in mind. Tax - HELD THAT - The developer has offered an explanation of why as a result of pending litigation, the dues towards works contract tax were not paid earlier. Indeed, if they were paid earlier, the purchasers would have been required to reimburse their proportionate share of taxes earlier as well. No part of the penalty imposed on the developer has been passed on to the purchasers. In view of the terms of the ABA and the explanation which has been submitted by the developer, 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. Electricity - HELD THAT - The NCDRC has upheld 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. Parking - HELD THAT - The ABA contained a break-up of the total price of the apartment. Parking charges for exclusive use of earmarked parking spaces were separately included in the break-up. The parking charges were revealed to the flat buyers in the brochure. The charges recovered are in terms of the agreement - 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. 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 - Appeal allowed.

Summary

Issues Involved:
1. Delay in handing over possession of flats.
2. Reimbursement of taxes and interest charged to flat purchasers.
3. Deficiency in providing amenities.
4. Levy of electricity charges by the developer.
5. Failure to construct the club house.
6. Execution of deeds of conveyance and settlement deeds.
7. Entitlement to compensation beyond the agreed rate.

Detailed Analysis:

1. Delay in Handing Over Possession:
The developer admitted to a significant delay in handing over possession of the flats, ranging from two to four years. Despite the stipulation in Clause 14 of the Apartment Buyers Agreement (ABA) that compensation for delay would be ?5 per square foot per month, the court found this rate inadequate given the extent of the delay. The agreement was deemed one-sided, heavily favoring the developer, and the court held that the consumer forum's jurisdiction to award just and reasonable compensation is not constrained by the terms of the ABA. The court emphasized that flat purchasers suffer financial and emotional distress due to such delays and are entitled to compensation beyond the stipulated rate.

2. Reimbursement of Taxes and Interest:
The ABA explicitly required flat purchasers to bear their proportionate share of taxes, including works contract tax. The developer explained that the delay in tax payments was due to pending litigation, and no penalty was passed on to the purchasers. The court found no deficiency of service in this regard, as the terms of the ABA were clear and the developer's explanation was reasonable.

3. Deficiency in Providing Amenities:
The developer failed to provide several promised amenities, including a shopping center, health care facilities, and an early learning school. The court held that the developer must be held accountable for these representations, as they significantly impact the quality of life and potential appreciation of the flats. The failure to provide these amenities constitutes a deficiency in service, warranting compensation to the flat purchasers.

4. Levy of Electricity Charges:
The developer collected additional charges for setting up a dedicated electric sub-station, as required by BESCOM. The court upheld the NCDRC's finding that these charges were in accordance with Clause 23(b) of the ABA, which allowed for the recovery of costs incurred for creating necessary infrastructure. There was no deficiency of service in this regard.

5. Failure to Construct the Club House:
The developer constructed a club house with various facilities and obtained an occupation certificate on 13 May 2019. The court found no breach of obligation regarding the club house, as the developer had fulfilled this aspect of the agreement.

6. Execution of Deeds of Conveyance and Settlement Deeds:
The court rejected the developer's argument that executing a deed of conveyance precludes a consumer claim for delayed possession. It was unreasonable to expect flat buyers to forsake their right to claim compensation in order to obtain a conveyance. However, the court excluded eleven purchasers who had entered into specific settlement deeds and three who had sold their interest in the apartments from the benefit of this order.

7. Entitlement to Compensation Beyond the Agreed Rate:
The court held that the flat buyers are entitled to compensation beyond the agreed rate of ?5 per square foot per month due to the significant delay and the one-sided nature of the ABA. The court directed the developer to pay compensation at the rate of 6% simple interest per annum on the total amounts paid towards the purchase of the flats, from the date of expiry of thirty-six months from the execution of the respective ABAs until the date of the offer of possession after the receipt of the occupation certificate. This amount is in addition to the compensation already credited by the developer.

Final Directions:
The court allowed the appeals in part, setting aside the NCDRC's dismissal of the complaint. The developer was directed to pay the additional compensation within one month, failing which it would carry interest at the rate of 9% per annum until payment.