Fortune Infrastructure vs Trevor D’lima

M/S. FORTUNE INFRASTRUCTURE …APPELLANT(S) (NOW KNOWN AS M/S. HICON INFRASTRUCTURE) & ANR.

VERSUS TREVOR D’LIMA & ORS. …RESPONDENT(S) JUDGMENT

N.V. RAMANA, J.

1. These appeals are filed against the impugned

orders, dated 08.09.2016 and 03.11.2016, passed

by the National Consumer Disputes Redressal

Commission [hereinafter ‘NCDRC’ for brevity], in

Consumer Complaint No. 636 of 2015 and Review

Application No. 273 of 2016 in the Consumer

Complaint No. 636 of 2015.

2. A few facts which are necessary for the disposal of Signature Not Verified Digitally signed by SUKHBIR PAUL KAUR Date: 2018.03.12 17:25:42 PKT this matter are that the appellants, in the year Reason:

2011, launched a residential housing project by

1 name ‘Hicons Onyx’, renamed as Fortune

Residency, which was a re-development of

Mohammadi House. The respondents booked a flat

bearing no. 202, 2nd Floor in ‘A’ wing, admeasuring

828.40 Sq. Ft. with one unit of parking-space. The

total consideration for the flat was Rs.

1,93,00,000/-. It is alleged by the appellants, that

due to increase in the cost beyond what was

expected, they transferred the project to another

company being M/s. Zoy Shelcon Pvt. Ltd. It is to be

noted that the respondents have paid a sale

consideration of Rs. 1,87,00,000/-.

3. In 2015, aggrieved by the fact that appellants were

not willing to deliver the flat to them, the

respondents approached NCDRC through a

consumer complaint, being CC No. 636 of 2015,

with following prayers-

a. To hold and declare the Opposite Parties to be guilty of deficiency in service and unfair trade practices as per the provisions of the Consumer Protection Act, 1986 2 b. To direct the Opposite Parties 1 to 4 to comply with their statutory obligations and to execute and register the Agreement for Sale with the complainants in respect of flat No. 202 on the 2 nd floor admeasuring 828.40 Sq. Ft. with one car parking in the building known as Hicon Onyx and since re-named as Fortune residency situated at plot no. F/1116-A, Village Bandra, St. Martins Road Bandra (West), Mumbai 400 050 (Maharashtra).

c. To direct the Opposite Parties no. 1 to 4 to complete the construction of the building known as ‘Hicons Onyx’ since renamed as ‘Fortune residency’ and to hand over to the complainants vacant and peaceful possession of the Flat No. 202 on the 2nd floor admeasuring 828.40 Sq. Ft. with one car parking in the building known as Hicons Onyx and since renamed as Fortune residency situated at plot no. F/1116-A, Village Bandra, St. Martins road Bandra (West), Mumbai 400 050 (Maharashtra) on receiving the balance consideration amount of Rs. 6,00,000/-from the complainants Alternatively In the event of the Opposite Parties no. 1 to 4 having created third party interests in favour of the Opposite Party no. 5, to direct the Opposite parties no. 1 to 4 to hand over to the complainants any other flat of the same size quality and specifications with one car parking in the same building ‘Hicons Onyx’ since re-named as ‘Fortune Residency’ or any flat of the same size, quality and specifications with one car parking in the

3 same locality of the present building Hicons Onyx or Fortune Residency.

x x x x x

x x x x x f. To direct the Opposite Parties No. 1 to 4 jointly and severally pay to the complainants Rs.5,00,000/- (Rupees Five lakhs only) towards compensation for the inconvenience and mental agony suffered by the complainants due to the enormous delay in construction of the building, negligence and deficiency in service of the Opposite Parties No. 1 to 4.

g. To direct the opposite Parties No. 1 to 4 jointly and severally to pay to the complainants the sum of Rs. 1,00,000/- (Rupees One Lakh only) being the Legal and other incidental expenses incurred by the complainants.

h. For such other and further relief as this Hon’ble Commission may deem fit and proper in the nature and circumstances of the above numbered complaint.

4. The NCDRC has allowed the complaint and directed

the appellants: 1. To refund the amount of Rs.

1,87,00,000/- which they have received from the

complainants, within six weeks from the day of the

impugned judgment; 2. The appellants were further

directed to pay a sum of Rs. 3,65,46,000/- as 4 compensation and Rs. 10,000/- as cost of litigation

to the complainants within six weeks from the day

of the impugned judgment; 3. The aforesaid amount

was ordered to be paid at 10% per annum from the

date of the order till the actual date of payment. It

may be noted that even the review against the

aforesaid order was dismissed by the NCDRC vide

order dated 03.11.2016.

5. Having dissatisfied with the impugned orders

passed by the NCDRC, appellants approached

this Court through these civil appeals.

6. At the threshold it was brought to our notice that

on 08.09.2016, when the matter was argued, on

most of the other dates the appellants remained

unrepresented before NCDRC. Further the counsels

representing the appellants stated that their

counsel appointed for the forum below did not file

necessary pleadings except for a proforma reply.

Keeping in view of the above, they argued that this 5 case should be remanded back to the NCDRC for

fresh consideration. However, on careful

consideration of facts of this case, we are of the

opinion that a remand may not be required at this

stage. To put a quietus to the litigation, the

controversy can be adjudicated by this Court.

7. Learned counsel for the appellants, primarily

submitted that the present appellants have

transferred the project to a different company

thereby they should be discharged from any liability

for not handing over the disputed property to the

answering respondents (Complainants). He further

argued that, the present circle rate of the disputed

property is pegged at approximately half the price

awarded by the NCDRC. Lastly, he urged before this

Court to consider the downward trends shown in

the real estate market which mandates a lesser

compensation, compared to the one awarded by the

NCDRC.

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8. Per Contra, the learned counsel appearing on behalf

of the answering respondents (Complainants) fully

supported the reasoning of the NCDRC in coming to

a conclusion that, the appellants herein provided

deficient service by delaying the handing over of the

flat to the complainants. In all fairness, learned

counsel for answering respondents have admitted

that prices as contemplated under the impugned

order of NCDRC are not reflective of the true market

rates for similar flats available in the near vicinity of

the disputed flats.

9. It would not be out of context to mention that

during the hearing of this case, many attempts were

made by both parties to amicably settle the issue

concerning the quantum of compensation which

could not fructify. Further we requested Shri. Raju

Ramachandran, learned senior advocate, to use his

good office to persuade parties to settle the matter.

7 Such an endeavour also could not impress upon the

parties and therefore this court was called upon to

adjudicate the matter.

10. Having heard learned counsels on either side

and perusing the materials available on record, the

issue that fall for consideration is whether there is

deficiency of service on the part of the appellants? If

so, what is just and reasonable compensation?

11. It is now well established that the contractual

damages are usually awarded to compensate an

injured party to a breach of contract for the loss of

his bargain. In the case of Johnson and Anr. V.

Agnew, [1979] 1 All ER 883, the aforesaid case has

clearly held as under-

The general principle for the assessment of damages is

compensatory, i.e. that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed.

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12. The aforesaid proposition remains to hold the

field and has been applied consistently. This rule is

more qualified when it comes to the real estate

sector. If the seller wants to limit their liability for

breach of contract under the aforesaid rule, they

have to portray that they have performed their

obligation in a prudent manner. It may be noted

that the onus is on the seller to show his best

efforts and bona fides in discharging the obligation.

It may be noted that even in the absence of fraud,

mere unwillingness to carry out the duty could

constitute bad faith sufficient for the purchaser to

claim damages.

13. To decide whether the respondent ought to be

awarded compensation because of deficiency of

service, it is important to consider the meaning of

deficiency as provided under Section 2(1)(g) of the

Consumer Protection Act, 1986.

(g) “deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of 9 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;

In light of the above definition, we have to examine

whether there is any deficiency in service, which

entitles the complainant to damages/compensation.

14. In the present case, the appellants did not give

any valid reasons as to why they transferred the

property to a third party, despite their contractual

obligation to the respondents (complainants). The

obligation was on the appellants to show that he

was unable to transfer the property to the

respondent.

15. Moreover, a person cannot be made to wait

indefinitely for the possession of the flats allotted to

them and they are entitled to seek the refund of the

amount paid by them, along with compensation.

Although we are aware of the fact that when there

10 was no delivery period stipulated in the agreement,

a reasonable time has to be taken into

consideration. In the facts and circumstances of

this case, a time period of 3 years would have been

reasonable for completion of the contract i.e., the

possession was required to be given by last quarter

of 2014. Further there is no dispute as to the fact

that until now there is no redevelopment of the

property. Hence, in view of the above discussion,

which draw us to an irresistible conclusion that

there is deficiency of service on the part of the

appellants and accordingly the issue is answered.

When once this Court comes to the conclusion that,

there is deficiency of services, then the question is

what compensation the respondents/complainants

is entitled to ?

16. Before we come to the aspect of quantum of

compensation, it would be appropriate to look at the

settled legal position concerning the same. At the 11 outset, we may note that even under the Consumer

Protection Act, 1986, the damages for commercial

contracts need to be determined as per the Indian

Contract Act.

17. It would be pertinent to note that in common

law, claim for damages is the rule and specific

performance is an exception, while in civil law front,

specific performance has traditionally been a prime

remedy for the breach of contract.1

18. This Court in Ghaziabad Development

Authority v. Balbir Singh, (2004) 5 SCC 65, has

observed that there is no fixed formula for fixing

damages in the following manner-

8. However, the power and duty to award compensation does not mean that irrespective of facts of the case compensation can be awarded in all matters at a uniform rate of 18% per annum. As seen above, what is being awarded is compensation i.e. a recompense for the loss or injury. It therefore necessarily has to be based on a

1 Apparent from the study of French Civil Code (FCC) and German Civil Code (BGB).

12 finding of loss or injury and has to correlate with the amount of loss or injury. Thus, the Forum or the Commission must determine that there has been deficiency in service and/or misfeasance in public office which has resulted in loss or injury. 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 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. Similarly, compensation can be given if after allotment is made there has been cancellation of scheme without any justifiable cause.

9. That compensation cannot be uniform and can best be illustrated by considering cases where possession is being directed to be delivered and cases where only monies are directed to be returned. In cases where possession is being directed to be delivered the compensation for harassment will necessarily have to be less because in a way that party is being compensated by increase in the value of the property he is getting. But in cases where monies are being simply returned then the party is suffering a loss 13 inasmuch as he had deposited the money in the hope of getting a flat/plot. He is being deprived of that flat/plot. He has been deprived of the benefit of escalation of the price of that flat/plot. Therefore, the compensation in such cases would necessarily have to be higher. … We clarify that the above are mere examples. They are not exhaustive. The above shows that compensation cannot be the same in all cases irrespective of the type of loss or injury suffered by the consumer.

(emphasis supplied)

19. It must be noted that the law is well settled in

this regard. Whenever the builder has refused to

perform the contract without valid justification, the

buyer is entitled for compensation as he has been

deprived of price escalation of the flat. Every breach

of contract gives rise to an action for damages. Such

amount of damages must be proved with reasonable

certainty.

20. Before we assess the damages, another

important issue to be delved upon is the reckoning

date for the purpose of the assessing the damages.

Whether should it be from the date on which the

14 breach took place or should it be from the date of

judgment?

21. Learned counsel for the appellants, with some

vehemence, argued that the rates of the property

have considerably slumped due to downfall in the

real-estate market. Such submissions are to be

tested as per the established principles of law. As

per the settled law, the damages become due on the

date when the breach of contract takes place, and

are normally assessed by the reference to the time

of breach. The aforesaid rule is based on the

principle that the injured party is presumed to be in

knowledge of the breach as soon as it is committed

and at that time he can take appropriate measures

of mitigation to control the loss flowing from the

breach. The courts may deviate from the aforesaid

rule and fix appropriate date in facts and

circumstance of a case if aforesaid presumptions

15 could not be established or it would not be

reasonable to follow the rule. It may be noted that

where there is non-delivery of the flat/house, and

the developer has refused to provide alternative and

equivalent accommodation, and the buyer lacks

means to purchase a substitute from the market,

then in such circumstances, damages would not be

reasonable to be assessed on the breach date.

22. We have already noted that the appellants were

to perform the contract within a reasonable period

of three years from the date of the agreement i.e., by

the last quarter of 2014. Aggrieved by the delay in

handing over the possession, the respondents

(complainants) approached the NCDRC for

conveyance and in alternative prayed for damages.

It is now settled that where a party sustains loss by

reason of a breach of contract, the damages are to

be granted so as to place the suffering party in the

same position as if the contract had been 16 performed. In light of the above, the damages other

than consequential loss have to be measured at the

time of the breach. However, the aforesaid rule is

flexible which needs to be assessed in facts and

circumstances of individual case. In this case at

hand the respondents tried to execute the

agreement and sought for conveyance of the

property through the NCDRC. In these

circumstances we may note that, even in the first

appeal, offers were being made on behalf of

appellants to convey alternative properties, which

were refused as being insufficient. Therefore, in

facts and circumstances of this case, the damage

need not be determined from the date of breach of

contract.

23. Even though the appellants raised a factual

issue concerning the non-payment of

part-consideration, we do not think it is necessary

to go into this aspect, as the NCDRC has given a 17 categorical finding that Rs. 1,87,00,000/- has been

paid by the respondents (complainants).

24. Appellants have produced circle rates of

properties in the vicinity of the disputed flats. These

rates vary from Rs. 18,655 per Sq. Ft. to Rs.

25,787/- per Sq. Ft. Whereas the respondents have

produced executed sale deeds in the nearby vicinity,

which was Rs. 65,000 per Sq. ft., Rs. 69,342/- per

Sq. ft., Rs. 75,000/- per Sq. Ft. and Rs. 88,050/-

per Sq. Ft. NCDRC has taken the minimum

available market price as the reference point for

awarding compensation at the rate of Rs. 65,000/-

per Sq. Ft. We are of the opinion that excessive

reliance on the aforesaid sale deed may not be

appropriate as the present property is a

redevelopment of an earlier property. Our attention

has been drawn to the fact that usually the real

18 estate rates for re-developed properties are on the

lower side instead of green-field projects.

25. In light of the above, we consider that the claim

of the respondents (complainants) as granted by the

NCDRC seems to surpass the actual-loss based

damages and enter the domain of gain-based

remedy. Although we do not recognize any a priopri

limitations on such claim, but we do not think that

it would be appropriate to grant such damages in

the case at hand. There is no dispute about the fact

that damages for the contractual breach is generally

compensatory arising out of the breach. Therefore,

the damages awarded should not be excessive and a

court/tribunal needs to take a balanced approach

so as to ensure right compensation.

26. Taking into consideration of factual aspects

involved in the matter and on consideration of the

submissions of the counsels on either side, we deem

it appropriate, just and reasonable that the market 19 rate be fixed at Rs. 50,000/- per Sq. Ft. (Rupees

Fifty Thousand per square feet) as the reference rate

for determination of market price prevailing in the

vicinity of the disputed property. Hence, the

estimated market price would be Rs.4,14,20,000/-

instead of Rs.5,38,46,000/- as granted by the

NCDRC. However, we do not see any reason to

interfere in respect of the compensation granted for

the parking space.

27. Therefore, the appellants are directed as under- a. To refund the amount of Rs. 1,87,00,000/- which they have received from the complainants. b. To pay a sum of Rs. 2,27,20,000/- as compensation to the complainants. c. To pay a sum of Rs. 20,00,000/- as compensation for one unit of parking lot. d. The appellants shall also pay Rs. 10,000/- as the cost of litigation to the complainants. e. The aforesaid amount is required to be paid within six weeks from the day of this order. If the payment in terms of this order is not made within the time stipulated herein, it shall carry interest of 9 % per annum from the date of this order.

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28. It is to be noted that this Court vide order

dated 23.02.2017, while issuing notice, directed the

appellants to deposit Rs. 2,50,00,000/- before

NCDRC as a condition precedent for hearing this

case. Later it was represented to us that the

appellants as on 31.05.2017, had deposited the

aforesaid amount before NCDRC. In view of the

above, we allow the respondents (complainants) to

withdraw the aforesaid amount with accrued

interest, if any and the same be adjusted to the

appellants’ liability as indicated above.

29. In light of the above discussions, we allow the

appeals in part to the extent indicated above. There

shall be no order as to the costs.

………………………J. (N. V. Ramana)

………………………J. (S. Abdul Nazeer) New Delhi March 12, 2018 21 ITEM NO.1503 COURT NO.9 SECTION XVII

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Civil Appeal No(s). 3533-3534/2017

M/S. FORTUNE INFRASTRUCTURE (NOW KNOWN AS M/S HICON INFRSTRUCTURE) & ANR. Appellant(s)

VERSUS

TREVOR D'LIMA & ORS. Respondent(s)

([HEARD BY : HON. N.V. RAMANA AND HON. S. ABDUL NAZEER, JJ.])

Date : 12-03-2018 These appeals were called on for pronouncement of today.

For Appellant(s) Mr. E. C. Agrawala, AOR

For Respondent(s) Mr. Abhir Phukan, Adv.

For Mr. V. Shyamohan, AOR

Hon'ble Mr. Justice N.V. Ramana pronounced the judgment of the Bench comprising His Lordship and Hon'ble Mr. Justice S. Abdul Nazeer.

In light of the discussions, we allow the appeals in part to the extent indicated in the signed reportable judgment. There shall be no order as to the costs.

(SUKHBIR PAUL KAUR) (RENUKA SADANA) AR CUM PS ASST.REGISTRAR

(Signed reportable judgment is placed on the file)

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