Supreme Court of India
WG. CDR. ARIFUR RAHMAN KHAN AND ALEYA SULTANA AND ORS.versusDLF SOUTHERN HOMES PVT LTD. (NOW KNOWN AS BEGUR OMR HOMES PVT. LTD.) AND ORS.
- Citation
- 2020 INSC 503
- Decided
- 24 August 2020
- Disposal
- Case Partly allowed
- Bench
- D Y CHANDRACHUD
Holding
Failure to hand over possession within the contractually stipulated period constitutes a deficiency of service, allowing the consumer forum to award just compensation beyond the contractual rate, and execution of conveyance does not preclude such a claim.
Summary
The case involved 339 flat buyers who purchased apartments in DLF's Westend Heights project. The developer failed to hand over possession within the contractually stipulated 36 months, causing a delay of two to four years. The buyers sought compensation beyond the Rs 5 per square foot per month stipulated in the Apartment Buyers Agreement (ABA), arguing that the agreement was one‑sided and the compensation insufficient. The National Consumer Disputes Redressal Commission dismissed the complaint, holding the parties to the contractual rate, but the Supreme Court held that the delay constituted a deficiency of service under the Consumer Protection Act, 1986 and that the consumer forum could award just compensation beyond the agreed rate. The Court also ruled that execution of a conveyance deed does not bar a claim for compensation, that subsequent transferees are not eligible for relief, and that the developer is liable for unfulfilled amenity representations. Accordingly, the Supreme Court set aside the NCDRC order and directed the developer to pay interest at 6% per annum on the purchase price from the expiry of the 36‑month period until possession, in addition to the amount already paid under clause 14 of the ABA.
Issues considered
- Whether delay in handing over possession of residential flats amounts to a deficiency of service under s.2(1)(g) of the Consumer Protection Act, 1986.
- Whether the consumer forum's jurisdiction to award compensation is limited by the contractual compensation rate stipulated in the Apartment Buyers Agreement.
- Whether execution of a deed of conveyance bars a flat buyer from claiming compensation for delayed possession.
- Whether subsequent transferees of the flat can claim compensation for the developer's delay.
- Whether the one‑sided terms of the ABA constitute an unfair trade practice under s.2(1)(r) of the Consumer Protection Act.
- Whether the developer is liable for failure to provide amenities as represented in the brochure.
- Liability of the developer for tax, electricity and parking charges under the ABA.
Legislation cited
- Consumer Protection Act, 1986s. 14(1)(e), s. 2(1)(g), s. 2(1)(o), s. 2(1)(r)
Subjects
Consumer Protection ActDeficiency of serviceDelayed possessionFlat Buyers AgreementCompensationUnfair contract termsConveyanceSubsequent transfereeAmenities representationTax liabilityElectricity chargesParking charges
Judgment
136 [2020]REPORTS
SUPREME COURT 9 S.C.R. 136 [2020] 9 S.C.R.
A WG. CDR. ARIFUR RAHMAN KHAN AND
ALEYA SULTANA AND ORS.
v.
DLF SOUTHERN HOMES PVT LTD. (NOW KNOWN AS
BEGUR OMR HOMES PVT. LTD.) AND ORS.
B (Civil Appeal No. 6239 of 2019)
AUGUST 24, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
K. M. JOSEPH, JJ.]
Consumer Protection Act, 1986 – s.2(1)(g) – Deficiency of
C service – Complaint by flat buyers seeking compensation inter alia
alleged delay in handing over possession of the flats – Dismissed
by NCDRC – On appeal, held: Failure of the developer to hand
over possession within the contractually stipulated period amounts
to a deficiency of service u/s.2(1)(g) – In the present case, under
D the Apartment Buyers Agreement (ABA), the developer was obligated
to hand over possession of the flats within thirty-six months of the
date of the agreement which condition was breached – Existence
and extent of the delay constitute an admitted factual position –
There has been a gross delay on the part of the developer in
completing construction ranging between two and four years –
E Further, the agreement is manifestly one-sided – Nature and quantum
of delay are such that the compensation provided in Clause 14,
ABA would not provide sufficient recompense to the purchasers –
Jurisdiction of consumer forum to award just compensation as an
incident of its power to direct removal of a deficiency in service is
F not constrained by the terms of a rate prescribed in an unfair bargain
– Impugned judgment set aside – Flat buyers entitled to
compensation.
Consumer Protection Act, 1986 – s.14(1)(e) – Jurisdiction of
consumer forum – Nature and extent of – Discussed.
G Consumer Protection – Flat buyers’ agreements – Delayed
possession – Award of compensation in addition to agreement –
Duty of Courts – Held: Ordinarily, courts would hold parties down
to a contractual bargain – However, cannot be oblivious to the
one-sided nature of agreements drafted by and to protect interest
of the developer.
H
136
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 137
HOMES PVT. LTD.
Consumer Protection Act, 1986 – s.2(1)(o) – “service” – A
Meaning of – Held: ‘service’ in s.2(1)(o) means a service of any
description made available to potential users including the provision
of facilities in connection with (among other things) housing
construction.
Consumer Protection – Claim against delayed possession of B
flats – Right of flat buyer to obtain deed of conveyance – Held:
Unreasonable to expect that in order to pursue a compensation
claim for delayed handing over of possession, the purchaser must
indefinitely defer obtaining a conveyance of the premises or, if they
seek to obtain a Deed of Conveyance to forsake the right to claim
compensation. C
Consumer Protection – Delay in handing over possession of
residential flats – Interest in flats transferred – Compensation for
delayed possession – Entitlement of subsequent transferees –
Discussed.
Consumer Protection Act, 1986 – s.2(1)(g) – Held: Deficiency D
u/s.2(1)(g) means a fault, imperfection, shortcoming or inadequacy
in the quality, nature and manner of performance.
Partly allowing the appeals, the Court
HELD: 1.1 Compensation for delayed possession
E
1. The fulcrum of the case of the developer rests on clause
14 of the ABA. Clause 11(a) of the ABA indicates that subject to
“all just exceptions” the developer endeavoured to complete
construction within a period of thirty-six months from the date of
the execution of the agreement unless hindered byforce majeure
conditions. Undoubtedly, the expression ‘endeavour’ indicates F
that the developer did not bind itself to an inflexible timeline of
thirty-six months. But then again, the timeline of thirty-six moths
was subject to just exceptions and could be excused in the event
of force majeure conditions coming into operation. By the
provisions of clause 14, the developer agreed to compensate the G
flat buyers at the rate of Rs. 5 per square feet of the super area of
the apartment per month for the period of delay. The existence
and extent of the delay constitute an admitted factual position.
The failure of the developer was neither relatable to a “just
exception” or the prevalence of force majeure conditions
referable to clause 11. [Paras 18-21][157-C, E-G; 158-E; 159-A] H
138 SUPREME COURT REPORTS [2020] 9 S.C.R.
A 1.2 The ABA is clearly one-sided. Where a flat purchaser
pays the instalments that are due in terms of the agreement with
a delay, clause 39(a) stipulates that the developer would “at its
sole option and discretion” waive a breach by the allottee of failing
to make payments in accordance with the schedule, subject to
the condition that the allottee would be charged interest at the
B
rate of 15 per cent per month for the first ninety days and
thereafter at an additional penal interest of 3 per cent per annum.
In other words, a delay on the part of the flat buyer attracts interest
at the rate of 18 per cent per annum beyond ninety days. On the
other hand, where a developer delays in handing over possession
C the flat buyer is restricted to receiving interest at Rs 5 per square
foot per month under clause 14. Evidently, the terms of the
agreement have been drafted by the developer. They do not
maintain a level platform as between the developer and purchaser.
The stringency of the terms which bind the purchaser are not
mirrored by the obligations for meeting times lines by the
D
developer. The agreement does not reflect an even bargain. [Para
22][159-C-F]
1.3 The agreement did not stipulate that the developer
would pay any interest on the amount which had already been
received. A large chunk of the purchase price was thus available
E to the developer to complete construction. The court must take
a robust and common-sense based approach by taking judicial
notice of the fact that flat purchasers obtain loans and are required
to pay EMIs to financial institutions for servicing their debt.
Delays on the part of the developer in handing over possession
F postpone the date on which purchasers will obtain a home.
Besides servicing their loans, purchasers have to finance the
expenses of living elsewhere. A failure of the developer to comply
with the contractual obligation to provide the flat to a flat purchaser
within a contractually stipulated period amounts to a deficiency.
There is a fault, shortcoming or inadequacy in the nature and
G manner of performance which has been undertaken to be
performed in pursuance of the contract in relation to the service.
The expression ‘service’ in Section 2 (1) (o) means a service of
any description which is made available to potential users
including the provision of facilities in connection with (among
H other things) housing construction. Under Section 14(1)(e), the
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 139
HOMES PVT. LTD.
jurisdiction of the consumer forum extends to directing the A
opposite party inter alia to remove the deficiency in the service
in question. Intrinsic to the jurisdiction which has been conferred
to direct the removal of a deficiency in service is the provision of
compensation as a measure of restitution to a flat buyer for the
delay which has been occasioned by the developer beyond the
B
period within which possession was to be handed over to the
purchaser. Flat purchasers suffer agony and harassment, as a result
of the default of the developer. Flat purchasers make legitimate
assessments in regard to the future course of their lives based
on the flat which has been purchased being available for use and
occupation. These legitimate expectations are belied when the C
developer as in the present case is guilty of a delay of years in
the fulfilment of a contractual obligation. To uphold the contention
of the developer that the flat buyer is constrained by the terms of
the agreed rate irrespective of the nature or extent of delay would
result in a miscarriage of justice. Undoubtedly, as this court held
D
in Dhanda, courts ordinarily would hold parties down to a
contractual bargain. Equally the court cannot be oblivious to the
one-sided nature of ABAs which a red rafted by and to protect
the interest of the developer. Parliament consciously designed
remedies in the CP Act 1986 to protect consumers. Where, as in
the present case, there has been a gross delay in the handing E
over of possession beyond the contractually stipulated debt, the
jurisdiction of the consumer forum to award just and reasonable
compensation as an incident of its power to direct the removal of
a deficiency in service is not constrained by the terms of a rate
which is prescribed in an unfair bargain. [Paras 23, 24][159-H;
F
160-A-B; E-H; 161-A-D]
1.4 The judgment in Dhanda’s case does not prescribe an
absolute embargo on the award of compensation beyond the rate
stipulated in the flat buyers’ agreement where handing over of
the possession of a flat has been delayed. Dhanda’s case was
preceded by consent terms which were presented before this G
Court in two earlier civil appeals under which interest at the rate
of 9 per cent had been granted. The decision lays down that the
award of interest cannot be arbitrary and without nexus to the
default which has been committed. Hence, the award of interest
at the maximum rate of interest charged by a nationalised bank H
140 SUPREME COURT REPORTS [2020] 9 S.C.R.
A for advancing home loans was construed to be arbitrary. It was in
this context that the court observed that the parties having agreed
to a consequence for delay, exceptional and strong reasons must
exist for the consumer fora to depart from the agreed rate. The
decision does not lay down that there is an absence of jurisdiction
in the adjudicatory fora constituted under the CP Act 1986 to
B
award remedial compensation to a flat buyer for the delay of the
developer in handing over possession on the agreed date. In the
present case, there exist, clear and valid reasons for not holding
down the flat buying consumers merely to the entitlement to
receive compensation at the rate of 5 per square foot per month
C in terms of clause 14 of theABA: (i) There has been a breach on
the part of the developer in complying with the contractual
obligation to hand over possession of the flats within a period of
thirty-six months of the date of the agreement as stipulated in
clause 11(a); (ii) The failure of the developer to hand over
possession within the contractually stipulated period amounts to
D
a deficiency of service within the meaning of Section 2 (1) (g),
warranting the invocation of the jurisdiction vested in the NCDRC
to issue a direction for the removal of the deficiency inservice;
(iii) The triggering of an obligation to pay compensation on the
existence of delay in handing over possession is admitted by the
E developer for, even according to it, it has adjusted compensation
at the agreed rate of Rs 5 per square foot per month to 145 out of
the 171 appellants; (iv) The agreement is manifestly one-sided:
the rights provided to the developer for a default on the part of
the home buyer are not placed on an equal platform with the
contractual right provided to the home buyer in the case of a
F
default by thedeveloper; (v) There has been a gross delay on the
part of the developer in completing construction ranging between
two and four years. Despite successive extensions of time to
deliver possession sought by the developer, possession was not
delivered ontime; (vi) The nature and quantum of the delay on
G the part of the developer are of such a nature that the measure of
compensation which is provided in clause 14 of the ABA would
not provide sufficient recompense to the purchasers;and (vii)
Judicial notice ought to be taken of the fact that a flat purchaser
who is left in the lurc has a result of the failure of the developer
to provide possession within the contractually stipulated date
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 141
HOMES PVT. LTD.
suffers consequences in terms of agony and hardship, not the A
least of which is financial in nature. Having paid a substantial
amount of the purchase price to the developer and being required
to service the debt towards loan installments the purchaser is
unable to obtain timely possession of the flat which is the subject
matter of the ABA. [Paras 31, 32][167-C-H; 168-A-F]
B
DLF Homes Panchkula Pvt. Ltd. v. D S Dhanda, Etc.
(2020) 16 SCC 318 : [2019] 7 SCR 1061 –
distinguished.
2.1 It would be manifestly unreasonable to expect that in
order to pursue a claim for compensation for delayed handing C
over of possession, the purchaser must indefinitely defer obtaining
a conveyance of the premises purchased or, if they seek to obtain
a Deed of Conveyance to forsake the right to claim compensation.
This basically is a position which the NCDRC espoused. This
Courtcannot countenance that view. The developer in the present
case undertook to provide a service in the nature of developing D
residential flats with certain amenities and remains amenable to
the jurisdiction of the Consumer Fora. [Paras 34, 36][170-D; 171-
E]
2.2 However, the cases of the eleven purchasers who
entered into specific settlement deeds with the developers have E
to be segregated. These eleven flat purchasers having entered
into specific deeds of settlement, it would be only appropriate
and proper if they are held down to the terms of the bargain.
Similarly, the three appellants who transferred their title, right
and interest in the apartments would not be entitled to the benefit F
of the present order since they have sold their interest in the
apartments to third parties.Even if the three appellants who had
transferred their interest in the apartments had continued to
agitate on the issue of delay of possession, the Court is not
inclined to accept the submission that the subsequent transferees
can step into the shoes of the original buyer for the purpose of G
benefiting from this order. The subsequent transferees in spite
of being aware of the delay in delivery of possession the flats,
had purchased the interest in the apartments from the original
buyers. Further, it cannot be said that the subsequent transferees
suffered any agony and harassment comparable to that of the first H
142 SUPREME COURT REPORTS [2020] 9 S.C.R.
A buyers, as a result of the delay in the delivery of possession in
order to be entitled to compensation. [Paras 37, 38][171-G-H;
172-B, F-G]
HUDA v. Raje Ram (2008) 17 SCC 407 : [2008] 16
SCR 601 – relied on.
B 3. Amenities
Club house
There has been no breach by the developer of the obligation
to provide a constructed facility of a club for the RWA. [Para
C 40][174-C]
Other amenities
A deficiency under Section 2(1)(g) means a fault,
imperfection, shortcoming or inadequacy in the quality, nature
and manner of performance. This may be required to be maintained
D under law or may be undertaken to be performed in pursuance of
a contract or otherwise in relation to any service. The builder
invited prospective flat purchasers to invest in the project of
Westend Heights on the basis of a clear representation that the
surrounding area of New Town situated on 80 acres was being
developed to provide a wide range of amenities including a
E
shopping centre, health care facilities and an early learning school.
The developer has failed to provide these amenities. This is a
case involving an experienced developer who knew the nature
of the representation which was being held out to the flat
purchasers. Developers sell dreams to home buyers. Implicit in
F their representations is that the facilities which will be developed
by the developer will provide convenience of living and a certain
lifestyle based on the existence of those amenities. Having sold
the flats, the developer may find it economically unviable to provide
the amenities. The flat purchasers cannot be left in the lurch or,
as in the present case, be told that the absence of facilities which
G
were to be provided by the developer is compensated by other
amenities which are available in the area. The developer must
be held accountable to its representation. 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
H flat buyers. The general appreciation in land values results in an
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 143
HOMES PVT. LTD.
increase in the value of the investment made by the buyers. A
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. [Paras 41-43][175-E-G; 176-
B
E-H; 177-A-B]
4. Tax
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. [Para 47][180-B] C
Larsen and Toubro Limited v. State of Karnataka (2014)
1 SCC 708 : [2013] 17 SCR 678- – referred to.
5. Electricity
The NCDR Chas up held the collection of the charges D
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. [Para 51][182-E]
E
6. Parking
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. [Para 54][183-C]
7. The dismissal of the complaint by the NCDRC was F
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. The impugned judgment
and order of the NCDRC dismissing the consumer complaint is
set aside. Directions issued. [Para 55][183-D-E] G
Nahalchand Laloochand Private Limited v. Panchali
Cooperative Housing Society Limited (2010) 9 SCC
536 : [2010] 10 SCR 804 – distinguished.
H
144 SUPREME COURT REPORTS [2020] 9 S.C.R.
A Ghaziabad Development Authority v. Balbir Singh
(2004) 5 SCC 65 : [2004] 3 SCR 68; R. V.
Prasannakumaar v. Mantri Castles Pvt Ltd. (2020) 14
SCC 769 : [2019] 5 SCR 821; Pioneer Urban Land
and Infrastructure Limited v. Govindan Raghavan
(2019) 5 SCC 725 : [2019] 5 SCR 1169 – relied on.
B
Larsen and Toubro Limited v. State of Karnataka (2014)
1 SCC 708 : [2013] 17 SCR 678; DLF Limited v.
Manmohan Lowe (2014) 12 SCC 231 : [2013] 16 SCR
979; Lucknow Development Authority v. M K Gupta
(1994) 1 SCC 243 : [1993]3 Suppl. SCR 615; Narne
C Construction (P) Ltd. v. Union of India (2012) 5 SCC
359 : [2012] 4 SCR 574 – referred to.
Case Law Reference
[2004] 3 SCR 68 relied on Para 15
D [2019] 7 SCR 1061 distinguished Para 15
[2013] 17 SCR 678 referred to Para 17(viii)
[2010] 10 SCR 804 distinguished Para 17(x)
[2013] 16 SCR 979 referred to Para 17(x)
E [1993] 3 Suppl. SCR 615 referred to Para 25
[2019] 5 SCR 821 relied on Para 27
[2019] 5 SCR 1169 relied on Para 28
[2012] 4 SCR 574 referred to Para 36
F
[2008] 16 SCR 601 relied on Para 38
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6239
of 2019.
From the Judgment and Order dated 02.07.2019 of the National
G Consumer Disputes Redressal Commission in Complaint Case bearing
No. CC/1055/2015.
With
Civil Appeal No. 6303 of 2019
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 145
HOMES PVT. LTD.
Bishwajit Bhattacharyya, Col. R. Balasubramaniam, Pinaki Misra, A
Sr. Advs., Prashant Bhushan, Chandrachur Bhattacharyya, Sahil Tagotra,
Shankar Divate, Ms. Ruby Singh Ahuja, Ms. Seema Sundd, Pravin
Bahadur, Sanjeet Ranjan, Ms. Kritika Sachdeva, Priyash Sharma, Prabhat
Ranjan, Ritu Raj Srivastava, Aditya Singh, Alabhya Dhamija, Ms. Tanushi
Patel, M/s. Karanjawala & Co., Advs. for the appearing parties.
B
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
1. The National Consumer Disputes Redressal Commission1
dismissed a consumer complaint filed by 339 flat buyers, accepting the
defence of DLF Southern Homes Pvt. Ltd. and Annabel Builders and C
Developers Pvt. Ltd. that there was no deficiency of service on their
part in complying with their contractual obligations and, that despite a
delay in handing over the possession of the residential flats, the purchasers
were not entitled to compensation in excess of what was stipulated in
the Apartment Buyers Agreement2. D
2. The complaint before the NCDRC was initially instituted by
nine flat buyers. These nine complainants had booked residential flats in
a project called Westend Heights at New Town, DLF, BTM Extension
at Begu, Bengaluru. The project was being developed in an area
admeasuring 27.5 acres and was to consist of 1980 units, spread across E
nineteen towers each consisting of a stilt and eighteen floors.
3. The Brochure of the first respondent advertised the nature of
the project and the amenities which would be provided to buyers. It held
out the following representations on the basis of which buyers were
induced to invest: F
“New Town - the premier choice for Bangalore living. A premium
residential enclave that celebrates life in all its resident splendor.
Featuring spacious apartments and a rich selection of amenities,
you will find in New Town, a residence specially appointed to
maximize your comfort and convenience. In New Town
G
premium high rise apartments are set against the backdrop of a
vibrant living environment where fun, comfort, security, and
serenity blend in perfect unison. Life at New Town satisfies all
1
“NCDRC”
2
“ABA” H
146 SUPREME COURT REPORTS [2020] 9 S.C.R.
A your needs and fulfils your heart’s desire. Imagine a place where
leisurely pursuits are always within reach. Imagine living
where convenience is never more than around the corner.
Westend Heights at New Tower DLF, BTM Extn.
Designs, keeping in mind the modern day requirements and
B meeting them with apt amenities, Westend Heights is the first
phase of New Town, with premium high-rise apartments at
affordable prices. The complex brings you comfort living embodied
in individual towers overlooking sprawling parks and vistas. This
project is being developed in a land area of 27. 5 acres. The project
C consists of 1980 units spread across 19 towers that are Stilt+ 18
floors high.
Amenities
Fun, Fitness, Leisure, Right Next Door
D The most exclusive Club in Bangalore at New town, DLF
BTM, EXTN,
The Club set amidst a very comfortable setting is an impressive
feature of New Town. It is specially designed to take care of all
stresses brought on by the modern world. Altogether a beautiful
composition, that blends seamlessly with your lifestyle.
E
Swimming Pool:
Gymnasium/Aerobics Centre
Restaurant & Bar
F Billiards Room
Banquet Hall
Tennis Courts
Cards Room
G Squash Courts
Spa, Massage & Beauty Parlour
Ease, Enjoyment, Convenience. Right Next Door
Convenient shopping facilities at New Town, DLF BTM
H EXTN
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 147
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
Shop with ease at our convenience shopping centre, well A
equipped to handle your everyday needs. The shopping centre
will offer an array of outlets to make your life a trouble free
affair.
Experience convenience at your doorstep
Hope, Dreams, Future. Right Next Door B
Renowned Early Learning School at New Town DLF BTM
EXTN.
Our play school airs to care for your child in a stimulating safe,
fun-filled environment. It symbolizes our conviction that nurtured
roots lay the foundation of a fully grown blossomed tree. C
Health, Wellbeing. Assurance, Right Next Door
State-of-the-art healthcare facilities at New Town DLF BTM
EXTN.
In these years of fast paced lives, your family’s wellbeing is D
foremost in our minds. Our healthcare centre will better the
latest in screening, diagnosis, and medical care with
competent medical professionals by your side, we will make
sure that you would always remain in the best of health.
Comfort, Confidence, Peace of Mind Right Next Door.
E
Keeping your loves ones safe and secure at New Town, DLF
BTM EXTN.
Let New Town set your mind at rest when it comes to security.
Our advanced, state-of-the-art security system ensures comfort
& peace of mind for you and your loved ones, with monitored
F
gates, CCTV for parking and entrance lobby, video surveillance
system and a rigorously screened 24-hour security guard
workforce, New Town offers you a secure and a well-protected
abode.” (emphasis supplied)
4. Responding to the representation held out by the developer, the
complainants booked flats in the residential project. The flat buyers G
entered into agreements with the developer. Clause 11(a) of the ABA
indicated that the developer would endeavour to complete construction
within a period of thirty-six months from the date of the execution of the
agreement save and except for force majeure conditions. Clause 11(a)
provided: H
148 SUPREME COURT REPORTS [2020] 9 S.C.R.
A “11. (a) Schedule for Possession of the Said Apartment
The Company/LOC based on the present plans and estimates
and subject to all just exceptions, endeavors to complete
construction of the Said Building /Said Apartment within a period
of thirty six (36) months from the date of execution of this
B Agreement unless there shall be delay or failure due to Force
Majeure conditions including but not limited to reasons mentioned
in Clauses 11(b) and 11(c) or due to failure of Allottee to pay in
time the Total Price and other charges taxes, securities etc. and
dues/payments or any failure on the part of the Allottee to abide
by all or any of the terms and conditions of this Agreement.”
C
5. Force majeure stipulations were illustrated in sub-clauses (b)
and (c) of clause 11, which included delay due to the reasons beyond the
control of the developer and failure to deliver possession due to
Government rules, orders or notifications, respectively. Construction was
behind schedule. The flat purchasers were informed on 12 January 2011
D that possession of the apartments was expected to be completed by the
middle of 2012. This assurance was not fulfilled. By a communication
dated 18 June 2013, the developers issued a revised timeline intimating
all flat buyers that the delivery of possession would commence from
October 2013. However, on 8 August 2013 another communication was
E issued stating that the real estate industry was affected by an economic
slow-down which had hampered the pace of construction. The date for
handing over possession was extended to June 2014. A tentative schedule
for delivery was indicated under which Towers D1 and D2 would be
handed over by January 2014, and Towers A3 to A6, A7, B3 and B4
would be handed over by May 2014. On 8 August 2014, the timelines for
F handing over possession were again extended by the developers : under
the revised schedule the flats in Towers D1 and D2 were to be handed
over in August 2014, those in A1 to A-7 in February 2015, B1 to B6 in
April 2015 and C1 to C4 in June 2015. On 4 May 2015, the developers
issued another communication indicating the progress of the work and
G informed the purchasers that site visits had been initiated for the project
“till we receive the occupancy certificate for clusters A, B and C”. This
is an admission of the fact that until then the occupation certificate had
not been received. The obligation to handover possession within a period
of thirty-six months was not fulfilled.
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 149
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
6. The first batch of nine flat purchasers moved a consumer A
complaint before the NCDRC complaining of a breach by the developer
of the obligation, contractually assumed, under the terms of the ABA.
Since the nine complainants purported to represent the entire group of
flat purchasers, a notice of the complaint under Section 12(1)(c) of the
Consumer Protection Act 19863 was published in the newspapers.
B
7. Numerous applications for impleadment were allowed by the
NCDRC and an amended complaint was ordered to be filed. On the
complainants moving an application under Section 12(1)(c), the NCDRC
by its order dated 21 November 2017 permitted them to file the complaint
on behalf or for the benefit of all the flat buyers who were interested in
the reliefs. However, flat buyers who had (i) executed deeds of C
conveyance; or (ii) executed affidavits while accepting the agreed
compensation in full and final satisfaction; or (iii) received possession
within the stipulated time period; or (iv) had sold their flats after the
execution of the conveyance; or (v) who were subsequent purchasers
having purchased the flat after the execution of the conveyance deed D
were to remain outside the purview of the proceedings. Further, the
buyers from whom Preferential Location Charges, charges for the
preferential location of the apartment, were not charged and were not
chargeable were to remain out of the class on whose behalf or benefit
the complaint was instituted. On a challenge to the order, this Court by
an order dated 10 April 2018 directed: E
“Since the complaint filed by the appellants was only by nine persons
jointly for their benefit, the same could not be treated to be in
representative capacity. Accordingly, the impugned order is set
aside.
F
Aggrieved parties are at liberty to file an appropriate fresh
application under Section 12(1)(c) of the Consumer Protection
Act, 1986 before the National Consumer Disputes Redressal
Commission within two weeks from today. The same may be
disposed of by the National Commission in accordance with law
within three months from the date of filing of such an application.” G
8. Pursuant to the liberty which was granted by this Court, an
4
I.A. was filed before the NCDRC under Section 12(1)(c). The
3
‘‘CP Act 1986’’
4
IA No. 8083 of 2013
H
150 SUPREME COURT REPORTS [2020] 9 S.C.R.
A application was disposed of on 13 July 2018 which led to an appeal
before this Court.
9. On 28 September 2018, this Court set aside the order of the
NCDRC with the following directions:
“Having heard learned counsel for the appellants, we are of the
B view that the impugned judgment dated 13.07.2018 needs to be
set aside. We set it aside and direct the National Consumer
Disputes Redressal Commission to treat the complaint, as amended,
that has been filed, as a complaint filed on behalf of all 339 persons
and to proceed on merits.
C It will be open for the respondents to give their say on the merits
of each of the 339 complainants.
The Commission will decide the matter within a period of six
months from today.
D The Civil Appeals are disposed of accordingly.”
10. Procedural directions issued upon several impleadment
applications resulted in a further order of this Court of 8 May 2019
reiterating that the complaint would be treated as having been filed on
behalf of 339 persons. By its order dated 28 September 2018, which
was reiterated again on 8 May 2019, this Court had laid down a
E
peremptory time schedule of six months for the disposal of the complaint.
Eventually, on 2 July 2019, the complaint was dismissed by the NCDRC.
11. Civil Appeal No 6239 of 2019 comprises of 83 appellants.
Civil Appeal No 6303 of 2019 comprises of 88 appellants. Thus, there
are before this Court a total of 171 flat purchasers in the appeals. The
F
complaint before the NCDRC, which was confined by the order of this
Court dated 28 September 2018 to 339 complainants, now covers a more
restricted field of 171 flat purchasers. Annexure-1 to Civil Appeal No
6239 of 2019 contains a tabulation of (i) names of the flat purchasers;
(ii) dates on which the flats were booked; (iii) dates on which the ABAs
G were signed; (iv) dates by which possession was to be handed over
under the ABAs; and (v) dates on which the letter for possession was
issued by the developers.
12. The NCDRC divided the group of 339 flat buyers into six
groups based on whether or not they had taken possession, executed
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 151
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
deeds of conveyance, settled the dispute or sold the flats before or during A
the pendency of the complaint or their applications for impleadment:
• Group A: Complainants who took possession of their flats
before the filing of the complaint/impleadment applications.
• Group B: Complainants who took possession and executed
deeds of conveyance during the pendency of the complaint/ B
impleadment applications.
• Group C: Complainants who took possession during the
pendency of the complaint/impleadment applications but have
not executed deeds of conveyance.
C
• Group D: Complainants who settled their dispute during the
pendency of the complaint/ impleadment applications.
• Group E: Complainants who sold their flats during the
pendency of the complaint/impleadment applications.
• Group F: Complainants who have not taken possession of the D
flats and have not executed a deed of conveyance.
13. The NCDRC held that flat buyers in Groups A and B who had
taken possession before the filing of the complaint / impleadment
applications and those who took possession and executed deeds of
conveyance before or during the pendency of the proceedings would E
not be entitled to pursue their claims. The execution of the deed of
conveyance, according to the NCDRC, is a transfer of a right in property
and it is not within the jurisdiction of the Commission to entertain a
grievance that the conveyances have been entered into under coercion.
Additionally, according to NCDRC, under the conveyance deed, such
F
flat buyers had accorded their satisfaction to the services provided by
the developer and voluntarily discharged the developer of all its liabilities
under the ABA. As regards flat purchasers in Group C, the NCDRC
noted that even those who have taken possession but have not executed
a deed of conveyance have voluntarily discharged the developer. The
NCDRC observed that flat buyers in Group C had taken possession G
without protest, without its permission and without lodging any complaint
with it after taking the possession. Those in Group D who had settled
their dispute during the pendency of the complaint were held to be estopped
from pursuing their grievances. The NCDRC did not accept the contention
of the flat buyers in Group D that that they had settled the matter under
H
152 SUPREME COURT REPORTS [2020] 9 S.C.R.
A coercion and undue influence since, according to the NCDRC, no specific
facts and circumstances were pleaded by such flat buyers which made
them surrender their free will. The buyers in Group E who have sold
their flats during the pendency of the complaint were held to have no
subsisting right. The NCDRC noted that as regards Group F
(complainants who had neither taken possession nor executed a
B
conveyance), as many as 337 out of 339 flat purchasers had in fact
taken possession. The NCDRC had to deal with the claims of two
remaining complainants, who had accepted the delayed compensation
but did not accept possession. Their complaints were dismissed.
14. The primary grounds on which compensation have been sought
C before the NCDRC were:
(i) Delay in handing over possession of the flats;
(ii) Reimbursement of taxes and interest charged to the flat
purchasers under clause 1.10 of the ABA;
D (iii) Deficiency in providing amenities;
(iv) Levy of electricity charges by the developer; and
(v) Failure to construct the club house.
15. The NCDRC, in the course of its judgment, observed that
E delay in the handing over of flats to the flat purchasers was admitted.
While recording a finding of fact that there was an admitted delay on the
part of the developer, the NCDRC held that the agreements provided
compensation at the rate of Rs 5 per square foot of the super area for
every month of delay. The NCDRC held that the flat purchasers who
agreed to this stipulation in the agreements were not entitled to seek any
F
amount in addition. Paragraph 470 of the judgment of the NCDRC
contains its finding:
“470. There is no dispute to the fact that the completion of the
project had been delayed. Delay had been acknowledged by the
opposite parties. They had also offered to these complainants the
G delayed compensation calculated @ Rs 5/-per sq. ft. of the super
area.”
The NCDRC observed that the developer had while computing
the final demand made an adjustment on account of delayed compensation
at the rate stipulated in the ABA. The flat purchasers having been
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 153
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
provided credit at the rate agreed by the developers, it was held that no A
further entitlement existed under the law. In the view of the NCDRC,
the flat purchasers had failed to prove that the stipulation contained in
the agreement for the payment of compensation at Rs 5 per square foot
was unreasonable. In taking this view, the Commission has lent support
to its decision by relying upon the decisions of this Court in DLF Homes
B
Panchkula Pvt. Ltd. v. D S Dhanda, Etc.5 (“Dhanda”) and Ghaziabad
Development Authority v. Balbir Singh6 (“Balbir Singh”). On the
merits of the other grievances, the NCDRC has held that
(i) The charges recovered towards tax and interest are in terms
of clause 1.10 of the ABA;
C
(ii) Charges recovered for electricity are in terms of the ABA;
(iii) The levy of parking charges is valid; and
(iv) The club house has been constructed.
16. In order to facilitate the final disposal of the Civil Appeals, D
counsel appearing on behalf of the appellants formulated the nature of
the grievances of the flat buyers in the written submissions tendered
during the hearing. Mr Prashant Bhushan, learned Counsel appearing
for the appellants has formulated his submissions under the following
heads:
E
(i) There is a gross delay ranging between two and four years
in handing over possession and the flat buyers ought not to
be constrained by the terms of the agreement which are
one-sided and unreasonable;
(ii) The execution of conveyances or settlement deeds would
F
not operate to preclude the flat buyers from claiming
compensation. The emails of the developer clearly indicate
that the flat buyers were not permitted to execute
conveyances or to receive possession under protest;
(iii) The amenities which have been contracted for have not
been provided by the developers; and G
(iv) The flat buyers are not liable to indemnify the developer for
the demand of interest and penalty raised by the tax
5
2019 SCC OnLine SC 689
6
(2004) 5 SCC 65 H
154 SUPREME COURT REPORTS [2020] 9 S.C.R.
A authorities as a result of the failure to deposit the tax on
time. During the oral arguments, it was clarified that only
interest has been recovered from the flat buyers.
The above submissions of Mr Prashant Bhushan have been
reiterated in the submissions urged before the Court by Mr Bishwajit
B Bhattacharya, learned Senior Counsel appearing on behalf of another
group of purchasers. Mr R Balasubramanian, learned Senior Counsel
has, while adopting the submissions which were urged by Mr Prashant
Bhushan, advanced submissions on the levy of electricity charges and
charges for parking spaces.
C 17. Opposing the submissions which have been urged on behalf
of the appellants, Mr Pinaki Misra, learned Senior Counsel urged that:
(i) Despite the order of this Court dated 28 September 2018,
no evidence has been led by the complainants to discharge
the onus placed upon them to establish coercion or duress
D while executing conveyances or settlements;
(ii) Possession of the complex, which is situated on land
admeasuring about 27 acres and comprising of 813
apartments in nineteen towers has been handed over between
four to six years ago and the developer has transferred his
E right, title and interest to the Residents Welfare Association
(“RWA”);
(iii) The allottees have benefited by the appreciation in the value
of their flats;
(iv) Out of 171 applicants, 145 have received compensation at
F the agreed rate while handing over possession. The
allotments were escalation free and the burden of increased
costs has been borne by the developer;
(v) Under clause 14 of the ABA, the flat buyers have been
compensated at the rate of Rs 5 per square foot per month
G which would work out to about Rs 7500 per month for a flat
admeasuring 1500 square feet. No proof or measure of
actual loss suffered has been adduced;
(vi) The facts pertaining to the appellants would indicate that:
(a) Eighteen appellants executed conveyances before filing
H the complaints;
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 155
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
(b) Fifty-four appellants executed conveyances during the A
course of the proceedings;
(c) Fifty appellants executed conveyances after the
impugned judgment;
(d) The above individuals include 11 who have entered
into written settlement deeds; B
(e) There is no delay in offering possession to seven
appellants; and
(f) Three appellants are continuing to agitate their
grievances despite having transferred their rights in C
the flats. Out of 171 appellants, 122 executed
conveyances before the complaint; during the pendency
of the proceedings or thereafter. Eleven appellants who
have entered into settlements did not raise a ground of
coercion prior to a reply which was filed in December
2018 shortly before the final hearing; D
(vii) As regards the construction of facilities and amenities,
a club house containing a swimming pool, gymnasium,
tennis court, indoor badminton court and squash courts
has been constructed and an occupation certificate has
been received on 13 May 2019. The RWA is conscious E
of the fact that difficulties in the allotment arose as a
result of the action of the Bangalore Development
Authority7 which led to the filing of writ proceedings
before the High Court of Karnataka both by the
developer and the RWA. Even after the receipt of the F
occupation certificate, the developers have been
corresponding with BDA for permission to hand over
possession to the RWA. Other amenities including a
school and health care facilities were going to be
developed in the entire township comprising of 80 acres
of which the complex of 27 acres was a part. The flat G
buyers were aware of the fact that under the terms of
the ABA, the allottees have no right, title or interest in
the amenities outside their residential complex and
forming a part of the wider complex of 80 acres.
7
“BDA” H
156 SUPREME COURT REPORTS [2020] 9 S.C.R.
A Moreover, this issue is rendered academic since the
area around DLF township has become urbanized
where adequate facilities are available;
(viii) Clauses 1.3, 1.10, 2 and 3 require the allottees to bear
tax liabilities including towards works contract tax.
B When the project commenced in 2009, there was an
absence of clarity in regard to the liability on account
of works contract tax which was settled eventually by
the judgment of this Court in Larsen and Toubro
Limited v. State of Karnataka8. It was as a result of
C this judgment that the issue was settled following which,
the developer while computing the amount payable in
the final statements of accounts passed on the liability
on account of the interest (but not towards penalty) on
a proportionate basis in terms of clause 1.10 of the
ABA;
D
(ix) Clause 23(b) entitles the developer to raise a demand
on a proportionate basis from the flat buyers for
electricity charges. Initially, BESCOM provided a
connection for electricity but subsequently as a
substantial load was required, the developer was
E permitted to build its own electricity sub-station. This
was built at a cost of Rs. 18.01 crores for which the
pro rata cost could be allocated to flat buyers in terms
of clause 23(b); and
(x) The price of the apartment, as agreed in the ABA,
F included in the breakup, parking charges for exclusive
use of earmarked parking spaces. Parking charges
were also revealed upfront in the brochure. The
appellants had erroneously relied on the decision of
this Court in Nahalchand Laloochand Private
G Limited v. Panchali Cooperative Housing Society
Limited9, which turned on the construction of the
provisions of the Maharashtra Apartment Ownership
Act 1971 and Development Control Regulations for
Greater Bombay 1991. This has subsequently been
8
(2014) 1 SCC 708
H 9
(2010) 9 SCC 536
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 157
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
explained in the decision in DLF Limited v. A
Manmohan Lowe10. There is no prohibition in the
Karnataka Apartment Ownership Act upon the
developer providing earmarked parking charges in the
breakup of the total price of the apartment.
The rival submissions will now be analysed. B
Compensation for delayed possession
18. The fulcrum of the case of the developer rests on clause 14 of
the ABA which is in the following terms:
“14. The Allottee agrees and understands that if the company is
unable to give possession within the period as mentioned above or C
such extended period as permitted under this Agreement, due to
reasons other than those mentioned in this Agreement, then the
Company agrees to pay only to the Allottee and not to anyone
else, subject to the Allottee, not being in default under any terms
of this Agreement compensation @ Rs. 5/- per sq. feet of the
D
Super Area of the said apartment per month for the period of
such Delay. The adjustment of such compensation shall be done
only at the time of execution of the Conveyance Deed of the Said
Apartment to the Allottee first named under this Agreement and
not, earlier.”
19. Clause 11(a) of the ABA indicates that subject to “all just E
exceptions” the developer endeavoured to complete construction within
a period of thirty-six months from the date of the execution of the
agreement unless hindered by force majeure conditions. Undoubtedly,
the expression ‘endeavour’ indicates that the developer did not bind itself
to an inflexible timeline of thirty-six months. But then again, the timeline F
of thirty-six moths was subject to just exceptions and could be excused
in the event of force majeure conditions coming into operation. By the
provisions of clause 14, the developer agreed to compensate the flat
buyers at the rate of Rs. 5 per square feet of the super area of the
apartment per month for the period of delay. According to the developer
(i) the flat purchasers are bound by the above stipulations under which G
their entitlement was to receive compensation at the agreed rate (and
hence not beyond); and (ii) no evidence has been adduced to indicate
that the rate which has been prescribed in the agreement is unreasonable.
The developer relies on the observation in the decision of this Court in
10
(2014) 12 SCC 231 H
158 SUPREME COURT REPORTS [2020] 9 S.C.R.
A Dhanda11 that when parties have agreed to a consequence of delay in
handing over possession, there must be exceptional and strong reasons
for the consumer fora to award compensation at more than the agreed
rate. In assessing these submissions, we must at the outset note the
submission of Mr Prashant Bhushan, learned Counsel that:
B “There are a total of 4 blocks in „WESTEND HEIGHTS project.
In Blocks A, B and C, the delay is huge, over 4 years. For block
D, the average delay is 2 years. Out of 339 complainants, for 268,
the delay is huge, over 4 years.
The Builder sought repeated extension of time to deliver possession,
C vide communications dated 18.06.201312, 8.8.201313, 8.8.201414,
4.5.201515 etc.”
20. The extent of the delay as set out in the above submissions
has not been controverted in the submissions which were urged before
this Court by the developer. On the contrary, the finding of the NCDRC
D in paragraph 470 of its judgment is that:
“…there is no dispute to the fact that the completion of the project
has been delayed. Delay has been acknowledged by the opposite
parties….”
21. The existence and extent of the delay constitute an admitted
E factual position. In fact, in the written submissions which have been
filed by the developer, it has been admitted that out of 171 appellants,
145 were given compensation in terms of the rate prescribed in clause
14 of the ABA. Once the developer has accepted that there was a delay
on his part which triggered of the liability to pay compensation (albeit,
according to the developer, in terms of clause 14) there can be no manner
F
of doubt that:
(i) the developer assumed an obligation in terms of the ABA to
endeavour to hand over possession in thirty-six months of
the date of the execution of the agreement;
G (ii) there was a failure on the part of the developer to comply
with the contractual obligation;
11
2019 SCC OnLine SC 689
12
Annexure A9 @ page 929
13
Annexure A10 @ page 932, 933
14
Annexure A11 @ page 936
15
H Annexure A12 @ page 938
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 159
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
(iii) the failure of the developer was neither relatable to a “just A
exception” or the prevalence of force majeure conditions
referable to clause 11; and
(iv) the payment of compensation to the flat buyers or at least
145 of the group of 171 represents an admission by the
developer of its breach, thereby triggering a liability to pay B
compensation.
22. The only issue which then falls for determination is whether
the flat buyers in these circumstances are constrained by the stipulation
contained in clause 14 of ABA providing compensation for delay at the
rate of Rs 5 per square feet per month. In assessing the legal position, it C
is necessary to record that the ABA is clearly one-sided. Where a flat
purchaser pays the instalments that are due in terms of the agreement
with a delay, clause 39(a) stipulates that the developer would “at its sole
option and discretion” waive a breach by the allottee of failing to make
payments in accordance with the schedule, subject to the condition that
the allottee would be charged interest at the rate of 15 per cent per D
month for the first ninety days and thereafter at an additional penal interest
of 3 per cent per annum. In other words, a delay on the part of the flat
buyer attracts interest at the rate of 18 per cent per annum beyond
ninety days. On the other hand, where a developer delays in handing
over possession the flat buyer is restricted to receiving interest at Rs 5 E
per square foot per month under clause 14 (which in the submission of
Mr Prashant Bhushan works out to 1-1.5 per cent interest per annum).
Would the condition which has been prescribed in clause 14 continue to
bind the flat purchaser indefinitely irrespective of the length of the delay?
The agreement stipulates thirty-six months as the date for the handing
over of possession. Evidently, the terms of the agreement have been F
drafted by the developer. They do not maintain a level platform as between
the developer and purchaser. The stringency of the terms which bind
the purchaser are not mirrored by the obligations for meeting times lines
by the developer. The agreement does not reflect an even bargain.
23. On behalf of the flat purchasers it has been urged by Mr. G
R Balasubramanian (a submission which has not been controverted in
rejoinder) that 95 per cent of the purchase price was paid during the
course of the first two and a half to three years. The agreement did not
stipulate that the developer would pay any interest on the amount which
had already been received. A large chunk of the purchase price was H
160 SUPREME COURT REPORTS [2020] 9 S.C.R.
A thus available to the developer to complete construction. The court must
take a robust and common-sense based approach by taking judicial notice
of the fact that flat purchasers obtain loans and are required to pay
EMIs to financial institutions for servicing their debt. Delays on the part
of the developer in handing over possession postpone the date on which
purchasers will obtain a home. Besides servicing their loans, purchasers
B
have to finance the expenses of living elsewhere. To postulate that a
clause in the agreement confining the right of the purchaser to receive
compensation at the rate of Rs 5 per square foot per month (Rs 7,500
per month for a flat of 1500 square feet) precludes any other claim
would be a manifestly unreasonable construction of the rights and
C obligations of the parties. Where there is a delay of the nature that has
taken place in the present case ranging between periods of two years
and four years, the jurisdiction of the consumer forum to award reasonable
compensation cannot be foreclosed by a term of the agreement. The
expression deficiency of services is defined in Section 2 (1) (g) of the
CP Act 1986 as:
D
“(g) “deficiency” means any fault, imperfection, shortcoming or
inadequacy in the quality, nature and manner of performance which
is required to be maintained by or under any law for the time
being in force or has been undertaken to be performed by a person
in pursuance of a contract or otherwise in relation to any service”
E
24. A failure of the developer to comply with the contractual
obligation to provide the flat to a flat purchaser within a contractually
stipulated period amounts to a deficiency. There is a fault, shortcoming
or inadequacy in the nature and manner of performance which has been
undertaken to be performed in pursuance of the contract in relation to
F the service. The expression „service in Section 2 (1) (o) means a service
of any description which is made available to potential users including
the provision of facilities in connection with (among other things) housing
construction. Under Section 14(1)(e), the jurisdiction of the consumer
forum extends to directing the opposite party inter alia to remove the
G deficiency in the service in question. Intrinsic to the jurisdiction which
has been conferred to direct the removal of a deficiency in service is the
provision of compensation as a measure of restitution to a flat buyer for
the delay which has been occasioned by the developer beyond the period
within which possession was to be handed over to the purchaser. Flat
purchasers suffer agony and harassment, as a result of the default of
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 161
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
the developer. Flat purchasers make legitimate assessments in regard to A
the future course of their lives based on the flat which has been purchased
being available for use and occupation. These legitimate expectations
are belied when the developer as in the present case is guilty of a delay
of years in the fulfilment of a contractual obligation. To uphold the
contention of the developer that the flat buyer is constrained by the
B
terms of the agreed rate irrespective of the nature or extent of delay
would result in a miscarriage of justice. Undoubtedly, as this court held
in Dhanda, courts ordinarily would hold parties down to a contractual
bargain. Equally the court cannot be oblivious to the one-sided nature of
ABAs which are drafted by and to protect the interest of the developer.
Parliament consciously designed remedies in the CP Act 1986 to protect C
consumers. Where, as in the present case, there has been a gross delay
in the handing over of possession beyond the contractually stipulated
debt, we are clearly of the view that the jurisdiction of the consumer
forum to award just and reasonable compensation as an incident of its
power to direct the removal of a deficiency in service is not constrained
D
by the terms of a rate which is prescribed in an unfair bargain.
25. Numerous judgments of this Court have elaborated on the
nature and extent of the jurisdiction of the consumer forum to award just
and reasonable compensation. Since the decision of this Court in
Lucknow Development Authority v. M K Gupta16, it has been a
settled principle of law that the jurisdiction of the consumer forum extends E
to the award of compensation to alleviate the harassment and agony to
a consumer. In Balbir Singh17, a two judge Bench of this Court, while
explaining the ambit of the jurisdiction of the adjudicatory fora under the
CP Act 1986 observed:
“6…The word compensation is of a very wide connotation. It F
may constitute actual loss or expected loss and may extend to
compensation for physical, mental or even emotional suffering,
insult or injury or loss. The provisions of the Consumer Protection
Act enable a consumer to claim and empower the Commission to
redress any injustice done. “ G
26. The court observed that the award of compensation has to be
based on a finding of loss or injury and must correlate to it. The court
observed that no “hard and fast rule” could be prescribed:
16
(1994) 1 SCC 243
17
(2004) 5 SCC 65 H
162 SUPREME COURT REPORTS [2020] 9 S.C.R.
A “8…No hard-and-fast rule can be laid down, however, a few
examples would be where an allotment is made, price is received/
paid but possession is not given within the period set out in the
brochure. The Commission/Forum would then need to determine
the loss. Loss could be determined on basis of loss of rent which
could have been earned if possession was given and the premises
B
let out or if the consumer has had to stay in rented premises then
on basis of rent actually paid by him. Along with recompensing
the loss the Commission/Forum may also compensate for
harassment/injury, both mental and physical.’’
Where possession has been given, one of the circumstances which
C must be factored in is that the purchaser has been compensated by the
increase in the value of the property.
27. In R V Prasannakumaar v. Mantri Castles Pvt Ltd18 under
the terms of the ABA, possession of the flats was to be handed over to
the buyers on 31 January 2014. However, the developer received an
D occupation certificate only on 10 February 2016 and it was thereafter
from May 2016 that the developer started issuing letters offering
possession. Based on this, the NCDRC awarded compensation in the
form of interest at the rate of 6 per cent per annum. The developer had
pleaded that since the agreement provided compensation at the rate of
E Rs. 3 per square foot per month for delayed possession, the purchasers
were not entitled to anything in addition. Dealing with the submission,
this Court observed:
“9. We are in agreement with the view of the NCDRC that the
rate which has been stipulated by the developer, of compensation
F at the rate of 3 per sq. ft. per month does not provide just or
reasonable recompense to a flat buyer who has invested money
and has not been handed over possession as on the stipulated
date of 31 January 2014. To take a simple illustration, a flat buyer
with an agreement of a flat admeasuring a 1000 sq. ft. would
receive, under the agreement, not more than Rs. 3000/- per month.
G This in a city such as Bangalore does not provide just or adequate
compensation. The jurisdiction of the NCDRC to award just
compensation under the provisions of the Consumer Protection
Act, 1986 cannot in the circumstances be constrained by the terms
18
H 2019 SCC OnLine SC 224
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 163
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
of the agreement. The agreement in its view is one sided and A
does not provide sufficient recompense to the flat purchasers.”
The Court observed that there was a delay of two years and
hence the award of interest at the rate of 6 per cent was reasonable and
justified.
28. In Pioneer Urban Land and Infrastructure Limited v. B
Govindan Raghavan19, there was a delay of almost two years in
obtaining an occupancy certificate after the date stipulated in the ABA.
As a consequence, there was a failure to provide possession of the flat
to the purchaser within a reasonable period. This Court dwelt on the
terms of the ABA under which the builder was entitled to charge interest C
at 18 per cent per annum for the delay in payment of instalments by the
purchaser. On the other hand, the failure to provide possession on the
part of the developer was subject to a grace period of twelve months
followed by a termination notice of ninety days and a further period of
ninety days to the developer to effect a refund. Adverting to these clauses,
the court noted: D
“6.4. A perusal of the apartment buyer’s agreement dated 8-5-
2012 reveals stark incongruities between the remedies available
to both the parties. For instance, Clause 6.4(ii) of the agreement
entitles the appellant builder to charge interest @18% p.a. on
account of any delay in payment of instalments from the respondent E
flat purchaser. Clause 6.4(iii) of the agreement entitles the
appellant builder to cancel the allotment and terminate the
agreement, if any instalment remains in arrears for more than 30
days. On the other hand, as per Clause 11.5 of the agreement, if
the appellant builder fails to deliver possession of the apartment F
within the stipulated period, the respondent flat purchaser has to
wait for a period of 12 months after the end of the grace period,
before serving a termination notice of 90 days on the appellant
builder, and even thereafter, the appellant builder gets 90 days to
refund only the actual instalment paid by the respondent flat
purchaser, after adjusting the taxes paid, interest and penalty on G
delayed payments. In case of any delay thereafter, the appellant
builder is liable to pay interest @9% p.a. only.
19
(2019) 5 SCC 725 H
164 SUPREME COURT REPORTS [2020] 9 S.C.R.
A 6.5. Another instance is Clause 23.4 of the agreement which entitles
the appellant builder to serve a termination notice upon the
respondent flat purchaser for breach of any contractual obligation.
If the respondent flat purchaser fails to rectify the default within
30 days of the termination notice, then the agreement automatically
stands cancelled, and the appellant builder has the right to forfeit
B
the entire amount of earnest money towards liquidated damages.
On the other hand, as per Clause 11.5(v) of the agreement, if the
respondent flat purchaser fails to exercise his right of termination
within the time limit provided in Clause 11.5, then he shall not be
entitled to terminate the agreement thereafter, and shall be bound
C by the provisions of the agreement.”
Justice Indu Malhotra speaking for the Court noted:
“6.8. A term of a contract will not be final and binding if it is
shown that the flat purchasers had no option but to sign on the
dotted line, on a contract framed by the builder. The contractual
D terms of the agreement dated 8-5-2012 are ex facie one-sided,
unfair and unreasonable. The incorporation of such one-sided
clauses in an agreement constitutes an unfair trade practice as
per Section 2(1)(r) of the Consumer Protection Act, 1986 since it
adopts unfair methods or practices for the purpose of selling the
E flats by the builder.”
The Court observed that in these circumstances, the flat purchasers
could not be compelled to obtain possession which was offered almost
two years after the grace period under the agreement had expired. Hence,
the NCDRC was held to have correctly awarded interest at the rate of
F 10 percent per annum.
29. The decision of this Court in Dhanda20 has been relied upon
by learned Senior Counsel appearing on behalf of the developer as
elucidating the principle that where a flat buyers agreement stipulates a
consequence for delayed possession, exceptional and strong reasons
G must be established before the forum constituted under the Act of 1986
awards compensation in addition to what has been contractually agreed.
In Dhanda’s case, the SCDRC issued a direction for handing over
physical possession of the residential unit to the complainant and for
execution of a sale deed. In addition, compensation was awarded by
20
H 2019 SCC OnLine SC 689
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 165
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
way of interest at the rate of 12 per cent per annum with effect from A
twelve months after the stipulated date under the agreement. In an appeal
by the developer, the NCDRC directed that the rate of interest for a
house building loan for the corresponding period in a scheduled nationalised
bank would be appropriate and if a floating rate of interest was prescribed,
the higher rate of interest should be taken for the computation. A sum of
B
Rs. 1 lac per annum from the date for handing over possession to the
actual date of possession was regarded as appropriate in the facts of the
case. In that case under the terms of the buyers agreements, possession
was to be delivered within twenty-four months of the execution of the
agreement i.e. 10 February 2013 – failing which the developer was liable
to pay compensation at the rate of Rs. 10 per square foot per month for C
the delay. The developer contended that construction activities were
delayed as a result of an injunction granted by this Court over a period of
eight months and consequently sought an extension of the period for
handing over possession by one year. Alternatively, the developer offered
to refund the money deposited with interest at 9 per cent per annum.
D
Construction of 258 independent floors was completed while about 1,500
units were nearing completion. In two sets of Civil Appeals which came
up before this Court earlier, agreed terms were arrived at providing for
the award of interest at 9 per cent per annum from the date of deposit till
refund. While considering the order of the NCDRC, this Court observed:
“16. The District Forum under the Consumer Protection Act, 1986 E
is empowered inter-alia to order the opposite party to pay such
amount as may be awarded as compensation to the consumer for
any loss or injury suffered by the consumer due to the negligence
of the opposite party including to grant punitive damages. But the
forums under the Act cannot award interest and/or compensation F
by applying rule of thumb. The order to grant interest at the
maximum of rate of interest charged by nationalised bank for
advancing home loan is arbitrary and no nexus with the default
committed. The appellant has agreed to deliver constructed flats.
For delay in handing over possession, the consumer is entitled to
the consequences agreed at the time of executing buyer’s G
agreement. There cannot be multiple heads to grant of damages
and interest when the parties have agreed for payment of damages
at the rate of Rs. 10/- per sq. ft. per month. Once the parties
agreed for a particular consequence of delay in handing over of
possession then, there has to be exceptional and strong reasons H
166 SUPREME COURT REPORTS [2020] 9 S.C.R.
A for the SCDRC/NCDRC to award compensation at more than
the agreed rate.”
30. The orders of the SCDRC and NCDRC were held to be
without any foundation being led by the complainant and based purely
on a “rule of thumb”. The court noted that the amount of interest
B represents compensation to the beneficiaries who are deprived of the
use of the investment which has been made and will take into its ambit
the consequence of a delay in not handing over possession. The court
held that both the SCDRC and NCDRC awarded compensation under
different heads on account of a singular default of not handing over
possession. This was held not to be sustainable. The court held that:
C
“19. Thus, we find that the complainant is entitled to interest from
the Appellant for not handing over possession as projected as is
offered by it but it is not a case to award special punitive damages
as one of the causes for late delivery of possession was beyond
the control of the Appellant. Therefore, in view of the settlement
D proposal submitted by the Appellant in earlier two set of appeals
in respect of same project, and to settle any further controversy,
the Appellant is directed as follows:
i) To send a copy of the occupation certificate to the
Complainants along with offer of possession. The Appellant
E shall also direct the Jones Lang LaSalle - the real estate
maintenance agency, engaged by the Appellant to undertake
such maintenance works as is necessary on account of damage
due to non-occupation of the flats after construction etc.
ii) It shall be open to the Complainants to seek the assistance of
F the maintenance agency to attend to the maintenance work
which may arise on account of non-occupation or on account
of natural vagaries.
iii) Such maintenance work shall be completed by the Appellant
within two months of the offer of possession but the payment
G of interest at the rate of 9 per cent per annum will be for a
period of two months from the date of offer of possession in all
situations.
v) Since the Complainants have been forced to invoke jurisdiction
of the consumer forums, they shall be entitled to consolidated
H amount of Rs. 50,000/- in each complaint on all accounts such
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 167
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
as mental agony and litigation expenses etc. The complainant A
shall not be entitled to any other amount over and above the
amount mentioned above.
vi) In case, the original allottee has transferred the flat, the
transferee shall be entitled to interest at the rate of 9 per cent
per annum from the date of expiry of three years from the B
agreement or from the date of transfer, whichever is later.”
31. The judgment in Dhanda’s case does not prescribe an absolute
embargo on the award of compensation beyond the rate stipulated in the
flat buyers agreement where handing over of the possession of a flat
has been delayed. Dhanda’s case was preceded by consent terms which C
were presented before this Court in two earlier civil appeals under which
interest at the rate of 9 per cent had been granted. The decision lays
down that the award of interest cannot be arbitrary and without nexus to
the default which has been committed. Hence, the award of interest at
the maximum rate of interest charged by a nationalised bank for advancing
home loans was construed to be arbitrary. It was in this context that the D
court observed that the parties having agreed to a consequence for delay,
exceptional and strong reasons must exist for the consumer fora to depart
from the agreed rate. The decision, in other words, does not lay down
that there is an absence of jurisdiction in the adjudicatory fora constituted
under the CP Act 1986 to award remedial compensation to a flat buyer E
for the delay of the developer in handing over possession on the agreed
date.
32. In the present case, there exist, clear and valid reasons for not
holding down the flat buying consumers merely to the entitlement to
receive compensation at the rate of 5 per square foot per month in terms F
of clause 14 of the ABA:
(i) There has been a breach on the part of the developer in
complying with the contractual obligation to hand over
possession of the flats within a period of thirty-six months of
the date of the agreement as stipulated in clause 11(a); G
(ii) The failure of the developer to hand over possession within
the contractually stipulated period amounts to a deficiency of
service within the meaning of Section 2 (1) (g), warranting
the invocation of the jurisdiction vested in the NCDRC to
issue a direction for the removal of the deficiency in service;
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168 SUPREME COURT REPORTS [2020] 9 S.C.R.
A (iii) The triggering of an obligation to pay compensation on the
existence of delay in handing over possession is admitted by
the developer for, even according to it, it has adjusted
compensation at the agreed rate of Rs 5 per square foot per
month to 145 out of the 171 appellants;
B (iv) The agreement is manifestly one-sided: the rights provided to
the developer for a default on the part of the home buyer are
not placed on an equal platform with the contractual right
provided to the home buyer in the case of a default by the
developer;
C (v) There has been a gross delay on the part of the developer in
completing construction ranging between two and four years.
Despite successive extensions of time to deliver possession
sought by the developer, possession was not delivered on time;
(vi) The nature and quantum of the delay on the part of the
D developer are of such a nature that the measure of
compensation which is provided in clause 14 of the ABA would
not provide sufficient recompense to the purchasers; and
(vii) Judicial notice ought to be taken of the fact that a flat purchaser
who is left in the lurch as a result of the failure of the developer
E to provide possession within the contractually stipulated date
suffers consequences in terms of agony and hardship, not the
least of which is financial in nature. Having paid a substantial
amount of the purchase price to the developer and being
required to service the debt towards loan installments the
purchaser is unable to obtain timely possession of the flat
F which is the subject matter of the ABA.
But, it has been submitted by the developer – a submission which
found acceptance by the NCDRC – that the execution of the Deed of
Conveyance by a flat purchaser precludes a consumer claim being raised
for delayed possession. During the course of the proceedings before the
G NCDRC, the flat purchasers relied upon the communications which were
issued by the developer to demonstrate that the purchasers were not
permitted by the developer to execute a Deed of Conveyance or to take
possession under protest. The material which was produced before the
NCDRC supports this submission, which was urged before the Court by
Mr Prashant Bhushan, learned Counsel. By a communication dated 16
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 169
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
February 2016, the developer informed a flat buyer that in terms of the A
ABA, the allottee is required to take possession of the apartment by
making payments and executing documentation after the developer has
obtained a certificate for occupation from the competent authority and
has offered possession of the apartment to the allottee. The developer
stated:
B
“We may also like to bring to your notice, that if the acceptance
of offer of possession terms is being conveyed by the allottee
under protest the Company will not be in a position to hand over
the possession and execute the Conveyance Deed and as such
your request to take over the possession and execute the
documents under protest is untenable.” C
33. By an email dated 24 December 2016, another flat buyer was
informed that:
“It would be a pleasure to progress with possession once you
submit the affidavit. However we can’t accept any documents D
to this effect under protest or claim of coercion. This affidavit
has to be unconditionally submitted and possession taken.”
By another communication dated 21 December 2016, a flat
purchaser was informed that:
“It was explained to you in our FDN itself and our earlier reply/ E
clarifications, that any kind of protest ‘is not tenable if you
wish to take possession and register the property as well. Kindly
execute the affidavit as advised and proceed for further process
on registering the property.”
By a communication dated 1 December 2016, the developer F
informed a flat purchaser that
“Your letter that you took possession and executed the
documents under protest is untenable and unacceptable and
the company will not be in a position to execute the conveyance
deed under protest.” G
Copies of these communications are marked as Annexures P-28,
P-29, P-30 and P-31 to Civil Appeal 6239 of 2019.
34. The developer has not disputed these communications. Though
these are four communications issued by the developer, the appellants
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170 SUPREME COURT REPORTS [2020] 9 S.C.R.
A submitted that they are not isolated aberrations but fit into a pattern. The
developer does not state that it was willing to offer the flat purchasers
possession of their flats and the right to execute conveyance of the flats
while reserving their claim for compensation for delay. On the contrary,
the tenor of the communications indicates that while executing the Deeds
of Conveyance, the flat buyers were informed that no form of protest or
B
reservation would be acceptable. The flat buyers were essentially
presented with an unfair choice of either retaining their right to pursue
their claims (in which event they would not get possession or title in the
meantime) or to forsake the claims in order to perfect their title to the
flats for which they had paid valuable consideration. In this backdrop,
C the simple question which we need to address is whether a flat buyer
who seeks to espouse a claim against the developer for delayed
possession can as a consequence of doing so be compelled to defer the
right to obtain a conveyance to perfect their title. It would, in our view,
be manifestly unreasonable to expect that in order to pursue a claim for
compensation for delayed handing over of possession, the purchaser
D
must indefinitely defer obtaining a conveyance of the premises purchased
or, if they seek to obtain a Deed of Conveyance to forsake the right to
claim compensation. This basically is a position which the NCDRC has
espoused. We cannot countenance that view.
35. The flat purchasers invested hard earned money. It is only
E 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
F 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.
36. It has been urged by the learned counsel of the developer that
G a consequence of the execution of the Deed of Conveyance in the present
case is that the same ceases to be a transaction in the nature of “supply
of services” covered under the CP Act 1986 and becomes a mere sale
of immovable property which is not amenable to the jurisdiction of
Consumer Fora. In Narne Construction (P) Ltd. v. Union of India21,
21
H (2012) 5 SCC 359
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 171
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
this Court distinguished between a simple transfer of a piece of immovable A
property and housing construction or building activity carried out by a
private or statutory body falling in the category of „service within the
meaning of Section 2 (1) (o) of the CP Act 1986. This Court held that:
“8. Having regard to the nature of transaction between the appellant
Company and its customers involved much more than a simple B
transfer of a piece of immovable property it is clear the same
constitutes “service” within the meaning of the Act. It was not
the case that the appellant Company was selling the given property
with all its advantages and/or disadvantages on “as is where is”
basis, as was the position in UT Chandigarh Admn v. Amarjeet
Singh. It is a case where a clear-cut assurance was made to the C
purchasers as to the nature and extent of development that would
be carried out by the appellant Company as a part of package
under which a sale of fully developed plots with assured facilities
was made in favour of the purchasers for valuable consideration.
To the extent the transfer of site with developments in the manner D
and to the extent indicated earlier was a part of the transaction,
the appellant Company has indeed undertaken to provide a service.
Any deficiency or defect in such service would make it
accountable before the competent Consumer Forum at the
instance of consumers like the respondents.”
E
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 F
the delayed handing over of the flats.
37. However, the cases of the eleven purchasers who entered
into specific settlement deeds with the developers have to be segregated.
In the case of these eleven persons, we are of the view that it would be
appropriate if their cases are excluded from the purview of the present G
order. These eleven flat purchasers having entered into specific deeds
of settlement, it would be only appropriate and proper if they are held
down to the terms of the bargain. We are not inclined to accept the
contention of the learned counsel of the appellants, Mr. Prashant Bhushan,
that the settlement deeds were executed under coercion or undue H
172 SUPREME COURT REPORTS [2020] 9 S.C.R.
A influence since no specific material has been produced on record to
demonstrate the same.
38. Similarly, the three appellants who have transferred their title,
right and interest in the apartments would not be entitled to the benefit of
the present order since they have sold their interest in the apartments to
B third parties. The written submissions which have been filed before this
Court indicate that “the two buyers stepped into the shoes of the first
buyers” as a result of the assignment of rights and liabilities by the first
buyer in favour of the second buyer. In HUDA v. Raje Ram22, this
Court while holding that a claim of compensation for delayed possession
by subsequent transferees is unsustainable, observed that:
C
“7. Respondents in the three appeals are not the original allottees.
They are re-allottees to whom re-allotment was made by the
appellant in the years 1994, 1997 and 1996 respectively. They
were aware, when the plots were re-allotted to them, that there
was delay (either in forming the layout itself or delay in delivering
D the allotted plot on account of encroachment etc). In spite of it,
they took re-allotment. Their cases cannot be compared to cases
of original allottees who were made to wait for a decade or more
for delivery and thus put to mental agony and harassment. They
were aware that time for performance was not stipulated as the
E essence of the contract and the original allottees had accepted
the delay.”
Even if the three appellants who had transferred their interest in
the apartments had continued to agitate on the issue of delay of possession,
we are not inclined to accept the submission that the subsequent
F transferees can step into the shoes of the original buyer for the purpose
of benefiting from this order. The subsequent transferees in spite of
being aware of the delay in delivery of possession the flats, had purchased
the interest in the apartments from the original buyers. Further, it cannot
be said that the subsequent transferees suffered any agony and
harassment comparable to that of the first buyers, as a result of the
G delay in the delivery of possession in order to be entitled to compensation.
Amenities
39. The brochure that was issued by the developers spoke of a
“Distinctive DLF Living” while advertising the project, which was
22
H (2008) 17 SCC 407
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 173
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
described as “DLF Westend Heights”, New Town. This was described A
as “the premier choice for Bangalore living…a premium residential
enclave featuring spacious apartments with a rich selection of amenities.”
Westend Heights at New Town was described as a project which was
being developed on a land area of 27.5 acres. The brochure specifically
referred to the amenities being provided. Among them were (i) “The
B
most exclusive club in Bangalore”; (ii) a swimming pool; (iii) gymnasium/
aerobics centre; and (iv) a restaurant and Bar together with other sports
facilities. Besides this, the brochure contained a representation of the
setting up of a convenience shopping centre with an array of outlets, a
renowned early - learning school and state of the art health care facilities.
Clause 1.10(a) of the ABA, which imposes the liability to bear taxes on C
the allottees states that this liability will be proportionate to the ratio of
the super area of the apartment to the total super area of all the apartments
and other “shops, clubs etc” in the said complex.
The grievance in regard to the alleged failure of the developer to
provide amenities may be divided into two segments: D
(i) The club house; and
(ii) Other amenities
Club house
40. The developer has stated before the court that a club house E
containing appurtenant facilities including a swimming pool, gymnasium,
billiards room, tennis court, indoor badminton court, squash court and
community hall has been fully constructed and an occupation certificate
has been received on 13 May 2019. The developer has stated that under
the building regulations, it has to handover 5 per cent of the area of the F
group housing complex to BDA as a civic amenities (“CA”) area. The
RWA has to apply to BDA for allotment of the CA area in its favour.
Upon allotment, the RWA hands over the area to the builder for
construction of the club. The developer relinquished the CA area in favour
of the BDA, constituted an RWA and applied to BDA on 22 June 2010
for the allotment of the CA site in favour of the RWA. The written G
submissions indicate that a dispute over the charges demanded by BDA
towards lease rent led to a writ petition before the Karnataka High Court
being instituted both by the developer and the RWA which was allowed
on 29 June 2015. The developer submitted a building plan to the municipal
body. A second writ petition had to be filed in which the High Court on
H
174 SUPREME COURT REPORTS [2020] 9 S.C.R.
A 18 October 2016 directed the municipal body to proceed with the approval
of the building plans. Sanction for the building plan was received on 18
May 2017 and after construction of the club building, an occupation
certificate was received on 13 May 2019. The developer has stated that
it has been following up with BDA to permit them to hand over possession
and management of the club to the RWA. Since permission of BDA has
B
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
C before the court as elucidated above has not been disputed by counsel
for the appellants. Hence, we find 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
D 41. As regards the other amenities, the defence of the developer
is that these were to be developed as an integral element of the entire
township of 80 acres of which the project admeasuring 27 acres
(comprised in Westend Heights) was a part. The ABA stipulates that
allottees of the complex have no right, title and interest in respect of the
E amenities or facilities outside the residential complex, which lie within
the larger township. According to the developer, no part of the
consideration which was paid by allottees, including the appellants, was
towards the amenities and facilities falling outside the boundary of the
complex. In this regard, the developer relies on the following stipulation
accepted by allottees under clause 5 of the Booking Application Form:
F
“The applicant confirms and represents that he has not made any
payment to the Company in any manner whatsoever and that the
Company has not indicated / premised / represented / given any
impression of any kind in an explicit or implicit manner whatsoever,
that the Applicant shall have any right, title or interest of any in
G whatsoever in any lands, buildings, common areas, facilities and
amenities failing outside the Said Complex…”
The above stipulation is reiterated under clause 1.21 of the ABA:
“The allottee acknowledges and confirms that the allottee is not
entitled to or has not paid for the lands outside the said land/said
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 175
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
complex whether the same is within said project or other. The A
said project would comprise of many complexes similar on different
to said complex. Allottee has not paid any amount towards any
other lands, areas, facilities and amenities including but not limited
to those listed below, and as such, the allottee shall have no right
interest of any nature whatsoever in the same and the same are
B
specifically excluded from the scope of this agreement. The allottee
acknowledges that the ownership of such land and facilities and
amenities shall vest solely with the company/LDC and its associate
companies subsidiaries and they alone shall have sole right and
absolute authority to deal with the same including their usage and
manner/method of use, disposal etc. creation of rights in favour C
of other person by way of sale, transfer, lease Joint venture,
collaboration or any other including transfer of government, semi-
government, any other person.’’
42. Now, it is correct as the developer contends that the flat
purchasers have no right, title or interest in respect of the amenities D
which were to be constructed by the developer as a part of the larger
township of New Town. The entire area comprised 80 acres of which
Westend Heights was situated on 27 acres. The absence of a title or
interest in the flat purchasers in the amenities to be provided outside the
area of 27 acres begs the question as to whether there was a breach of
a clear representation which was held out to the flat purchasers by the E
developer. A deficiency under Section 2(1)(g) means a fault, imperfection,
shortcoming or inadequacy in the quality, nature and manner of
performance. This may be required to be maintained under law or may
be undertaken to be performed in pursuance of a contract or otherwise
in relation to any service. The builder invited prospective flat purchasers F
to invest in the project of Westend Heights on the basis of a clear
representation that the surrounding area of New Town situated on 80
acres was being developed to provide a wide range of amenities including
a shopping centre, health care facilities and an early learning school.
The developer has failed to provide these amenities. In the reply, the
developer has stated that: G
“It is stated that School, Commercial Complex and Health clinic
are part of the facility which will be provided upon the completion
of the Whole New Town project as these facilities, with existing
population cannot sustain these facilities. Every matter has to be
adjudicated in light of its own facts and circumstance…” H
176 SUPREME COURT REPORTS [2020] 9 S.C.R.
A In the written submissions of the developer, the failure to provide
the amenities is sought to be glossed over by contending that:
“…the issue of these facilities has since become completely
academic since the area around the DLF Township has already
become totally urbanized and well developed thanks in larger
B measure due to the DLFs activities in the area and there are now
many proximate hospitals, schools, shopping areas that have
mushroomed in the immediate vicinity and neighbourhood of the
DLF Township which are in fact being regularly and conveniently
used by the residents of the DLF residential complex which include
the Appellants herein. As such, there is no loss or claim for any
C damages that could be said to have accrued to the Appellants
either under the ABA or otherwise under this alleged head of
claim.”
43. In other words, what the developer holds out as a defence is
that though there has been a failure on their part to provide the amenities,
D the flat buyers have the benefit of facilities in the surrounding area which
has become urbanised. We cannot agree with this line of submissions.
The reply of the developer seeks to explain the failure to construct the
facilities on the ground that the “existing population cannot sustain these
facilities” – a school, commercial complex and health care facilities.
E This is a case involving an experienced developer who knew the nature
of the representation which was being held out to the flat purchasers.
Developers sell dreams to home buyers. Implicit in their representations
is that the facilities which will be developed by the developer will provide
convenience of living and a certain lifestyle based on the existence of
those amenities. Having sold the flats, the developer may find it
F economically unviable to provide the amenities. The flat purchasers
cannot be left in the lurch or, as in the present case, be told that the
absence of facilities which were to be provided by the developer is
compensated by other amenities which are available in the area. The
developer must be held accountable to its representation. A flat purchaser
G 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
H
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 177
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
the compensation that should be provided to the flat buyers. The general A
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
B
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. C
Tax
44. The ABA contained specific provisions in regard to the payment
of taxes.
Clause 1.3 of the ABA provided: D
“1.3 The Allottee shall make the payment of the Total price as per
the payment plan set out in annexure -III of this Agreement. Other
charges, securities, payments etc. (as specified in this Agreement),
Taxes and increase thereof (as provided in clause 1.10) shall be
payable by the Allottee, as and when demanded by the Company.” E
Clause 1.10 contained a specific provision in regard to the
obligation of the allottee to pay taxes in addition to the total price. Clause
1.10 provided:
“1.10. The Allottee agrees and understands that in addition to
Total price, the Allottee shall be liable to pay the Taxes, which F
shall be charged and paid as under:
a) A sum equivalent to the proportionate share of Taxes shall be
paid by the Allottee to the Company. The Proportionate share
shall be the ratio of the Super Area of the said Apartment to the
total super area of all the apartments other buildings shop, club G
etc. in the said complex.
b) The Company shall periodically intimate to the Allottee herein,
on the basis of certificates from a Chartered Engineer and /or a
Charteredꞏ Accountant, the amount payable as stated above which
shall be final and binding on the Allottee and the Allottee shall H
178 SUPREME COURT REPORTS [2020] 9 S.C.R.
A make payment of such amount within 30 (thirty days) of such
intimation.”
The ABA also contains the following provisions:
“2. Payment for taxes on land, wealth-tax, cesses etc. by
B Allottee: -
The Allottee agrees and confirms to pay all Government rates,
tax on land, municipal tax, property taxes, wealth tax, Building
and Other Construction Workers Welfare Fund (Cess),taxes,
one time building tax, luxury tax if any, fees or levies of all and
C any kind by whatever name called, whether levied or Leviable
now or in future by the Government or municipal authority or
any other governmental authority on the Said Complex and I
or the Said Building or land appurtenant thereto as the case
may be as assessable or applicable from the date of the
Application if the Said Apartment is assessed separately and if
D the Said Apartment is not assessed separately then the Allottee
shall pay directly to the concerned authority and if the same is
levied on or paid by the Company or the Allottee then the same
shall be borne and paid by the Allottee on pro-rata basis and
such determination of proportionate share by the Company and
E demand shall be final and binding on the Allottee. However, if
the Said Apartment is assessed separately the Allottee shall
pay directly to the Government Authority.
3. Amount paid by Allottee with Application
The Allottee has paid a sum of Rs. 3,00,000/- (Rupees 3 Lakhs
F only) alongwith the Application, the receipt of which the
Company doth hereby acknowledge and the Allottee agrees to
pay the remaining price of the Said Apartment as prescribed in
schedule of payments (Annexure-III) attached with this
Agreement along with all other charges, Taxes, securities etc.
as mentioned in this Agreement and as per the de-mand raised
G
by the Company in accordance with the Agreement.”
The ABA contains the definition of taxes in the following terms:
“Taxes” shall mean any and all taxes payable by the Company/
LOC and/or its contractors, suppliers, consultants, etc. by way
H of value added tax (VAT), state sales tax, central sales tax,
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 179
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
works contract tax, service tax, cess, levies and educational A
cess and any other taxes levies, charges by whatever name
called levied and collected by Government Agency in
connection with Development / construction of the Said
Apartment/Said Building/Said Complex.”
The expression total price is also defined in the ABA so as to be B
exclusive inter alia of taxes.
45. The two certificates of the Chartered Accountant issued on
26 July 2013 and 9 August 2014 indicate that taxes inclusive of interest
have been recovered. According to the appellants, the builder admitted
that it had “not properly discharged” his liability towards taxes for a C
period of thirty-six months between 2011-2012 and 2013-2014 and that
tax dues were paid on 25 March 2015 together with penalty and interest.
Hence, it has been urged that the liability to pay interest which arose on
account of the default of the developer in discharging the tax liability on
time cannot be fastened upon the buyers.
D
46. On behalf of the developer it has been submitted that when
construction commenced in 2009, there was an absence of clarity on
whether works contract tax was liable to be paid in relation to agreements
between owners-developers and allottees of apartments where the
apartments were to be delivered in future. In 2013, this Court delivered
its judgment in Larsen and Toubro Limited v State of Karnataka23 E
as a result of which the liability towards works contract tax was
adjudicated upon. Consequently, while computing the amount payable in
the final statements of accounts, the developer passed on the interest
burden but not the penalty on a proportionate basis in terms of clause
1.10. The allottees were required to pay their proportionate share of the F
works contract tax in terms of the ABA and the final demand was raised
at the time of the offer of possession.
47. The specific conditions contained in the ABA clearly imposed
the liability to bear the proportionate share of taxes on the purchasers.
Clauses 1.3 and 1.10 leave no manner of doubt in regard to the position. G
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
23
(2014) 1 SCC 708 H
180 SUPREME COURT REPORTS [2020] 9 S.C.R.
A 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.
B Electricity
48. The submission by Mr. R. Balasubramanian, learned Senior
Counsel is that the initial collection of Rs. 1.50 lacs from each buyer
towards BESCOM /BWSSB charges for electricity and water are
admitted. Subsequently, invoking clause 23(b) of the ABA, the developer
C collected two lacs from each buyer towards additional electricity charges.
The appellants contest the entitlement of the developer to claim these
charges.
Clause 23(b) of the ABA is in the following terms:
“23. (b) Payments and other charges for bulk supply of electrical
D energy
If Company or the Maintenance Agency decides to apply for and
thereafter receives permission from BESCOM or from any other
body / commission/ regulator/ licensing authority constituted by
the Government of Karnataka for such purpose, to receive and
E distribute bulk supply of electrical energy in the Said Project/Said
Complex then the Allottee undertakes to pay on demand to the
Company proportionate share as may be determined by the
Company of all payments and charges paid/ payable by the
Company or the Maintenance Agency to BESCOM…The
F proportionate share of cost incurred by the Company for creating
infrastructure like HT feeder, EHT sub stations etc shall also be
payable by the Allottee on demand.”
49. According to the developer, initially an electricity connection
was provided by BESCOM without insisting on the requirement of an
electric sub-station. Subsequently as occupation certificates were
G
received for additional towers, BESCOM required a dedicated electric
sub-station which was constructed by the developer at a cost of Rs.
18.01 crores. The pro rata cost for setting up this additional infrastructure
was, according to the developer, payable by the allottees. When offers
for possession were issued to the buyers, the following stipulation was
H contained in the letter:
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 181
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
“Our initial effort was to obtain and energize the power supply to A
the entire project of 1830 apartments through individual ll KV
feeders from Golahalli 66/llKV Substation. On this basis, the
costing for infrastructure towards provisioning of utilities as per
clause 1.14, 1.15, 23(b) and JDC of ABA was estimated at rate
Rs. 127.96/sft., which was reflected in the Final Demand to D
B
Block customers. However, after a detailed evaluation of the load
requirement for the project as per norms, BESCOM has now
stipulated that, in accordance with clause 3.2.4 of KERC
Regulations, we establish a dedicated 66/11 kv Substation within
our project site to cater to the needs of the project, instead of the
earlier proposed scheme of 11 Kv feeders from Golahalli. The C
increase in cost because of this new sub-station and allied works,
over and above the originally envisaged 11KV scheme is estimated
@Rs. 18.01 Cr., thereby increasing the total infrastructure cost
recovery towards provisioning of utilities to Rs. 188.00/sft. In view
of the above said amounts are being recovered on the basis of
D
provisional estimates. On commissioning and energizing the
substation, the company shall arrange a certificate from
independent chartered accountant/ chartered engineer to arrive
at the actual cost incurred. Your share of the said actual cost by
the Company shall be duly intimated to you accordingly. If it is
found that excess amount paid by you, over and above the actual E
cost incurred by the company, said excess amount so collected
shall be refunded to you without interest. If the actual expenses
exceeds the estimated amount computed @Rs. 188/-sq. ft. then
demand for the shortfall amount shall be raised through further
demand on the owner of the property and shall be payable by
F
you. We would further like to bring to your kind attention that the
provision of 66/llKV substation will ensure better quality
uninterrupted power supply as compared with the previously
planned scheme of 11KV reeders.”
50. Mr. R. Balasubramanian, learned Senior Counsel contends
that clause 23(b) relates to receiving and distributing the bulk supply of G
electrical energy to “the said project /said complex” which is defined as
“project under the name and style of “New Town DLF BTM Extension”.
According to the submission, the charges have been collected for the
entire New Town project and not for Westend Heights alone. In this
context it has also been submitted that distribution of electricity is H
182 SUPREME COURT REPORTS [2020] 9 S.C.R.
A governed by the KERC Regulations 2006. While planning the project,
the developer calculated the cost of the 66/11 KV sub-station and collected
charges from each of the 1830 buyers. Hence, it has been submitted
that there was no requirement of additional bulk supply of electricity for
the nineteen hundred buyers. In this context, the formulation in the written
submissions is extracted below:
B
“(under) regulation 3.02 (e) of KERC (Conditions of Supply of
Electricity by the Distribution Licensee) Regulations 2004, it is
mandatory to set up 66 KV supply line/ KV substation if the
demands goes beyond 7500 KVA. Further under regulation 3.2.4
KERC (Recovery of Expenditure for Supply of Electricity)
C Regulations 2004 : “In case of layouts/buildings requiring power
supply and the requisitioned load is more than 7500 KVA, the
developer/ Applicant shall provide the space for erection of sub-
station and also bear the entire charges of such a sub-station and
associated lines/equipments. The work shall be carried out either
D by the Licensee duly recovering the charges as per estimate or
by the Applicant himself through appropriate class of licensed
contractor by paying 10% of the estimate as supervision charges
to the Licensee.”
51. The NCDRC has upheld the collection of the charges towards
E 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
F 52. The appellants seek a refund of an amount of Rs. 2.25 lacs
collected from each buyer towards car parking. The submission is that
under Section 3(f) of the Karnataka Apartment Ownership Act 197224 ,
common areas and facilities include parking areas. According to the
appellants, the flat buyers had already paid for the super area in terms of
G clause 1.6 of ABA including common areas and facilities which would
be deemed to include car parking under the KAO Act. The relevant
portion of clause 1.6 is extracted below:
“1.6. The Allottee agrees that the Total price of the said Apartment
is calculated on the basis of its Super Area only (as indicated in
24
H “KAO Act”
ARIFUR RAHMAN KHAN AND ALEYA SULTANA v. DLF SOUTHERN 183
HOMES PVT. LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
clause 1.1.) except the parking space, additional car parking A
space which are based on fixed valuation….”(emphasis supplied)
53. We are unable to accede to the above submission. 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 B
the brochure. The charges recovered are in terms of the agreement.
54. The decision of this Court in Nahalchand Laloochand Private
Limited v. Panchali Cooperative Housing Society Limited25 turned
on the provisions of the Maharashtra Ownership Flats Act 1971, as
explained in the subsequent decision of this Court in DLF Limited v. C
Manmohan Lowe26. 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.
55. For the above reasons we have come to the conclusion that
the dismissal of the complaint by the NCDRC was erroneous. The flat D
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. The reasoning
of the NCDRC on these facets suffers from a clear perversity and
patent errors of law which have been noticed in the earlier part of this
judgment. Allowing the appeals in part, we set aside the impugned E
judgment and order of the NCDRC dated 2 July 2019 dismissing the
consumer complaint. While doing so, we issue the following directions:
(i) Save and except for eleven appellants who entered into specific
settlements with the developer and three appellants who have
sold their right, title and interest under the ABA, the first and F
second respondents shall, as a measure of compensation, pay an
amount calculated at the rate of 6 per cent simple interest per
annum to each of the appellants. The amount shall be computed
on the total amounts paid towards the purchase of the respective
flats with effect from the date of expiry of thirty-six months from G
the execution of the respective ABAs until the date of the offer
of possession after the receipt of the occupation certificate;
25
(2010) 9 SCC 536
26
(2014) 12 SCC 231 H
184 SUPREME COURT REPORTS [2020] 9 S.C.R.
A (ii) The above amount shall be in addition to the amounts which
have been paid over or credited by the developer at the rate of Rs
5 per square foot per month at the time of the drawing of final
accounts; and
(iii) The amounts due and payable in terms of directions (i) and
B (ii) above shall be paid over within a period of one month from the
date of this judgment failing which they shall carry interest at the
rate of 9 per cent per annum until payment.
56. The civil appeals are accordingly allowed in the above terms.
57. Pending application(s), if any, shall stand disposed of.
C
Divya Pandey Appeals partly allowed.
D
E
F
G
H
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