Supreme Court of India
SUMAN JINDAL & ANR.versusM/S ADARSH DEVELOPERS
- Citation
- 2019 INSC 572
- Decided
- 25 April 2019
- Disposal
- Appeal(s) allowed
- Bench
- D Y CHANDRACHUD
Holding
The reduction of the booking amount to 15% was a valid novation, the appellants had paid the requisite booking amount, and the developer was required to execute the agreement for sale, rendering the cancellation of allotment unlawful.
Summary
The appellants booked a residential flat with the developer who required a booking amount of 25% of the sale price. Through email correspondence in February 2008, the parties agreed to reduce the booking amount to 15%, which the appellants paid in excess of that amount. The developer later cancelled the allotment, claiming the appellants had not paid the original 25% booking amount. The consumer forums held that the appellants were not consumers and had not paid the required amount, dismissing the complaint. On appeal, the Supreme Court held that the reduction to 15% was a valid novation, the payment made satisfied the booking amount, and the developer was obligated under Section 4 of the Karnataka Ownership Flats Act to execute a written agreement for sale. Consequently, the cancellation was misconceived and the appellate court directed the developer to execute the sale agreement and the appellants to pay the balance with interest. The appeal was allowed.
Issues considered
- Whether the reduction of the booking amount from 25% to 15% constituted a valid novation modifying the original contract.
- Whether the appellants had satisfied the booking amount requirement under the modified terms.
- Whether the developer was obligated under Section 4 of the Karnataka Ownership Flats Act to execute a written agreement for sale upon receipt of advance payment.
- Whether the consumer forums were correct in holding that the appellants were not consumers and that there was no deficiency of service.
Legislation cited
Subjects
Consumer lawBooking amountHousing allotmentKarnataka Ownership Flats ActAgreement to sellAdvance paymentCancellation of allotmentNovationSection 4
Judgment
154 [2019]REPORTS
SUPREME COURT 7 S.C.R. 154 [2019] 7 S.C.R.
A SUMAN JINDAL & ANR.
v.
M/S ADARSH DEVELOPERS
(Civil Appeal No. 4284 of 2019)
B APRIL 25, 2019
[DR. DHANANJAYA Y CHANDRACHUD AND
HEMANT GUPTA, JJ.]
Consumer Disputes:
C
Cancellation of allotment of housing apartment – By
developer of the property – On the ground that the allottee had
failed to pay 25% of the total cost of the flat – Complaint before
State Consumer Commission – Dismissed – Order affirmed by
National Consumer Commission – On appeal, held: It is evident
D from the records that the booking amount was reduced to 15% from
25% of the agreed sale consideration – The allottee had paid the
amount which was in excess of 15% of the booking amount – Hence
the termination of allotment was misconceived – Section 4 of
Karnataka Ownership Flats Act also casts an obligation on the
developer, while receiving advance payment, to enter into a written
E agreement for sale – Karnataka Ownership Flats (Regulation of
the Promotion of Construction, Sale, Management and Transfer)
Act, 1972 – s. 4.
Allowing the appeal, the Court
F HELD : 1. Though initially 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
G developer on 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
H
154
SUMAN JINDAL & ANR. v. M/S ADARSH DEVELOPERS 155
appellant (Rs 6,50,000) was in fact in excess of the booking A
amount. Hence the entire basis on which the termination of the
allotment took place was misconceived. [Para 15] [160-B-C]
2. That apart, 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. B
Section 4 of the Karnataka Ownership Flats (Regulation of the
Promotion of Construction, Sale, Management and Transfer) Act,
1972 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 C
respondent. This cannot be regarded as unreasonable or as a
breach of the contractual obligations. In this background, 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. [Paras 16 and 17] [160-D-E; H; 161-A-B] D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4284
of 2019.
From the Judgment and Order dated 18.01.2013 of the National
Consumer Disputes Redressal Commission in Appeal No. 86 of 2010.
E
Rajesh Mahale, Adv. for the Appellants.
Balaji Srinivasan, Ms. Garima Jain, Ms. Pallavi Sengupta, Siddhant
Kohli, Mrs. Lakshmi Rao, Advs. for the Respondent.
The Judgment of the Court was delivered by
F
DR. DHANANJAYA Y. CHANDRACHUD, J.
1. Leave granted.
2. This appeal arises from a decision of the National Consumer
Disputes Redressal Commission1 dated 18 January 2013.
3. The dispute in the present case relates to a residential apartment G
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
1
“NCDRC” H
156 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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.
B
4. The dispute in the present case arises out of two letters of
allotment 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
C 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
D 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
E 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
F 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
G 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.
H
SUMAN JINDAL & ANR. v. M/S ADARSH DEVELOPERS 157
[DR. DHANANJAYA Y. CHANDRACHUD, J.]
6. As informed to your goodself, Mr. Hari/Ms. Vijaya, I shall A
making this payment of Rs 2.33 lakhs on or before 29 February
2008.
Request you to confirm if my understanding is correct.”
5. To this email the Vice-President of the developer responded
with the following communication on 22 February 2008: B
“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 C
P.B.Hari
Vice President BD,
Adarsh Group
Contact No. 91 80 4134 3400.”
6. The case of the appellants is that by this exchange, the booking D
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
E
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.
7. By an email dated 31 March 2008, the appellants recorded that
F
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.
8. On 2 April 2008 the appellants confirmed receipt of the email
and sought the tentative dates by which the agreement and other G
documents required for the 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
H
158 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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
B 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.
C
Asst. Manager-Marketing
Adarsh Developers
#10, VittalMallya Road,
Bangalore-560 001
Ph: 41343304.”
D 9. 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
E 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
F which had been paid by the appellants on 28 February 2008 was adjusted
to the cost of flat F 703.
10. Upon protesting against the cancellation, the appellants filed a
consumer complaint before the Karnataka State Consumer Disputes
Redressal Commission2.
G
11. 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
2
H “SCDRC”
SUMAN JINDAL & ANR. v. M/S ADARSH DEVELOPERS 159
[DR. DHANANJAYA Y. CHANDRACHUD, J.]
consideration and to seek an allotment from the builder failing which a A
refund could be sought.
12. 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.
13. The submission which has been canvassed on behalf of the B
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 C
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 D
consideration. Learned counsel submitted that under Section 4 of the
Karnataka Ownership Flats (Regulation of the Promotion of Construction,
Sale, Management and 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 E
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.
F
14. 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 G
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. H
160 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 15. 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
B
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 22 February 2008. That apart, the subsequent email of the developer
dated 26 May 2008 clearly indicates that 15% represented the booking
C 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.
D 16. 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:
E
“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
F 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,
G 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.”
17. Section 4 casts an obligation on the developer, while receiving
H advance payment, to enter into a written agreement for sale. The
SUMAN JINDAL & ANR. v. M/S ADARSH DEVELOPERS 161
[DR. DHANANJAYA Y. CHANDRACHUD, J.]
insistence of the appellants on the developer doing so was, therefore, A
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 obligations. In this
background, we are of the view that both the SCDRC and the NCDRC
B
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 C
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.
18. In the circumstances, we are of the view that the appeal would
have to be allowed. We accordingly allow the appeal and issue the D
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 E
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 F
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 G
execute all required 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;
H
162 SUPREME COURT REPORTS [2019] 7 S.C.R.
A (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.
B
Kalpana K. Tripathy Appeal allowed.
C
D
E
F
G
H
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