Suman Jindal vs M/S. Adarsh Developers

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No 4284 of 2019 (@ Special Leave Petition (c) No. 16227 of 2013)

Suman Jindal & Anr. Appellant(s)

Versus

M/s. Adarsh Developers Respondent(s)

JUDGMENT

Dr Dhananjaya Y Chandrachud, J

Leave granted.

This appeal arises from a decision of the National Consumer Disputes

Redressal Commission1 dated 18 January 2013.

The dispute in the present case relates to a residential apartment which

the appellants booked with the respondent who is the developer. The

respondent had launched a construction project called “Adarsh Palm Retreat”

situated at Bhoganhalli Village, Varthur Hobli, Bangalore East Taluk, Bangalore.

The appellants booked an apartment which was split into two, bearing no. X 903

(a) and (b). Though the dispute between the parties relates to the above flat, it

is necessary to advert to the fact that on 2 November 2004 the appellants had

also booked flat F 703 for which the respondent had issued a letter of allotment.

The price of that flat was Rs 32.28 lakhs. An agreement to sell was entered into

on 1 February 2005.

Signature Not Verified Digitally signed by RAJNI MUKHI

The dispute in the present case arises out of two letters of allotment Date: 2019.04.30 17:15:21 IST Reason:

1“NCDRC”

1 issued by the respondent to the appellants in respect of flat X 903 (a) and (b).

The agreed sale consideration was Rs 40,95,801. The letter of allotment

stipulated that the allotment would be confirmed on the payment of 25% of the

value of the flat as the booking amount. The appellants initially paid an amount of

Rs 1 lakh to the developer on or about 12 February 2005 which was followed by

a second payment of Rs 3 lakhs on 24 March 2005. On 21 February 2008 a

personal meeting took place between the appellants and the representatives of

the developer, the gist of which was recorded in an email dated 21 February

2008. The e-mail, in so far as is material records, what was discussed upon and

agreed at the meeting:

“1. I have paid Rs. 4 lakhs towards the booking of my flat X-903 in Tower-I I, with a commitment to Mr. Dheemanth that my financial institution would be making the subsequent payments on my behalf (since I am eligible for a loan upto 92% of the property value).

2. My financial institution needs the required documents (Agreement of Sale/Agreement of Construction) for releasing payment on my behalf. The same is pending from Adarsh, for want of necessary approvals.

3. Going by my discussions with Mr. Hari today, I need to make the payment of 15% of the agreement value, including Rs 4 lakhs that I have already paid.

4. Subsequent payment, in full, shall be made by my financial Sale/Agreement of Construction) from Adarsh Developers.

5. Agreement value for my apartment X-903 in TI, comes to Rs 42.2 lakhs 15% of this value amounts to Rs 6.33 lakhs. Reducing Rs 4 lakhs that I have already paid, I need to pay a balance of Rs 2.33 lakhs.

6. As informed to your goodself, Mr. Hari/Ms. Vijaya, I shall making this payment of Rs 2.33 lakhs on or before 29 February 2008.

Request you to confirm if my understanding is correct.”

2 To this email the Vice-President of the developer responded with the

following communication on 22 February 2008:

“Dear Parikshit, Noted the contents of your msg. U may do so, as per your msg. Further Ms. Vijaya will be in touch with you in this regard.

Thanks & Regards

P.B.Hari Vice President BD, Adarsh Group Contact No. 91 80 4134 3400.”

The case of the appellants is that by this exchange, the booking amount

which was initially 25% of the agreed sale consideration was reduced to 15%.

On 28 February 2008, the appellants paid an amount of Rs 2,50,000 to the

developer towards flat X 903 making up a total payment of Rs 6,50,000 which

was marginally in excess of an amount representing 15% of the agreed sale

consideration. Following this payment, the developer by an email dated 12

March 2008 stated that the agreement for flat X 903 would be ready by the first

week of March. On 20 March 2008, the developer demanded the balance of the

sale consideration failing which, it was stated, that the delay will attract penal

interest.

By an email dated 31 March 2008, the appellants recorded that further

payments would be arranged through a financial institution which had agreed to

grant a loan. However, it was stated that necessary documentation would be

required in terms of a sale/construction agreement, among other documents.

On 2 April 2008 the appellants confirmed receipt of the email and sought

the tentative dates by which the agreement and other documents required for the

3 loan disbursal would be ready. In the meantime, the Assistant Manager-

Marketing of the developer stated in an email that they were in the process of

executing the agreement and required the appellants to fill up a data sheet. This

was done by the appellants. On 26 May 2008 the developer’s representative

addressed an email to the appellants which is extracted below:

“Sir,

Kindly be informed your file has been reviewed by our Financial Department and noted that 15% of the booking amount of the flat is not paid and hence we cannot proceed with the agreements. You can come and meet our VP BD Mr. P.B.Hari for further clarifications.

Thanks & Regards

Vijaya G. Asst. Manager-Marketing Adarsh Developers #10, VittalMallya Road, Bangalore-560 001 Ph: 41343304.”

On 27 May 2008 the developer refused to execute the agreement on the

ground that payments were delayed. The appellants addressed a

communication to the Managing Director of the developer stating that the loan

had already been sanctioned and the bank was willing to release the payment

upon the execution of necessary documentation. Thereafter, by communications

dated 4 June 2008, 12 July 2008, 27 July 2008, 1 September 2008 and 3

October 2008 the appellants called upon the developer to execute the

agreement to sell. The respondent, however, cancelled the allotment on 30

November 2008 on the ground that the appellants had failed to pay 25% of the

total cost of the flat required as the booking amount. The amount of Rs 2,50,000

which had been paid by the appellants on 28 February 2008 was adjusted to the

cost of flat F 703.

4 Upon protesting against the cancellation, the appellants filed a consumer

complaint before the Karnataka State Consumer Disputes Redressal

Commission2.

The SCDRC dismissed the complaint holding that : (i) the appellants are

not ‘consumers’ within the meaning of Consumer Protection Act 1986; (ii) the

appellants had not paid the booking amount; and (iii) it was open to the

appellants to yet pay the entire sale consideration and to seek an allotment from

the builder failing which a refund could be sought.

In appeal, this order has been substantially affirmed by the NCDRC. The

view taken by the NCDRC is that the appellants failed to make payment for the

flat and hence, there was no deficiency of service.

The submission which has been canvassed on behalf of the appellants by

Mr. Rajesh Mahale, learned counsel is that as the sequence of events would

indicate, there was a novatio under which the booking amount which was

originally fixed at 25% was reduced to 15%. Learned counsel submitted that the

email addressed by the appellants to the developer regarding this on 21

February 2008, following a personal meeting was agreed upon in the response

dated 22 February 2008. It was submitted that in pursuance of this agreement

the appellants paid a total sum of Rs 6,50,000 to the respondent by 28 February

2008 as evidenced by the receipt executed by the developer. Moreover, it was

urged that the respondent in its email 26 May 2008 had specifically accepted the

position that the booking amount was 15% of the total sale consideration.

Learned counsel submitted that under Section 4 of the Karnataka Ownership

Flats (Regulation of the Promotion of Construction, Sale, Management and

2 “SCDRC”

5 Transfer) Act, 1972, the promoter is obliged to enter into an agreement to sell

before accepting any advance payment. Hence it was urged that consistent with

the obligation cast on the developer, the appellants had repeatedly called upon

the developer to enter into necessary documentation so that the balance

payment could be made by utilising the loan amount which was sanctioned by a

bank in favour of the appellants. In this context it has been submitted that the

cancellation of the agreement was clearly a deficiency of service.

On the other hand, Mr. Balaji Srinivasan, learned counsel appearing on

behalf of the respondent submitted that the original agreement between the

parties contemplated that the booking amount should be 25% of the total cost of

the flat. It was urged that though the allotment was made in February 2005, until

February 2008 the initial booking amount of 25% had not been paid. Hence it is

urged that the builder was justified in cancelling the agreement. Moreover, after

the dismissal of the appeal by the NCDRC, the developer entered into an

agreement to sell with a third party on 16 March 2013. Hence it was urged that

at the highest the appellants would be entitled to a refund of the consideration

with reasonable interest.

The clear picture which emerges from the documentary material on the

record is that by the letter of allotment dated 28 February 2005, the respondent

agreed to allot flat X 903 (a) and (b) to the appellant for an agreed consideration

of Rs.40.95 lakhs. Though the booking amount was to be 25% of the agreed

sale consideration, the correspondence between the parties indicates that there

was an agreement to reduce this to 15%. This is reflected in the email

addressed by the appellant following a personal meeting on 21 February 2008

and the categoric acceptance of this position in response, by the developer on

6 22 February 2008. That apart, the subsequent email of the developer dated 26

May 2008 clearly indicates that 15% represented the booking amount payable

for the flat. It is not in dispute that if the booking amount is computed at the rate

of 15% of the agreed sale consideration, what was paid by the appellant (Rs

6,50,000) was in fact in excess of the booking amount. Hence the entire basis

on which the termination of the allotment took place was misconceived.

That apart, we find from the record that the appellants had all along been

insisting on the execution of the agreement to sell so as to facilitate the

disbursement of the loan which had been sanctioned by the bank. Section 4 of

the Karnataka Ownership Flats (Regulation of the Promotion of Construction,

Sale, Management and Transfer) Act, 1972 provides as follows:

“Section 4. Promoter before accepting advance payment or deposit to enter into agreement and agreement to be registered – Notwithstanding anything contained in any other law a promoter who intends to construct or constructs a block or building of flats, all or some of which are to be taken or are taken on ownership basis, shall, before he accepts any sum of money as advance payment or deposit, which shall not be more than twenty per cent of the sale price, enter into a written agreement for sale with each of such persons who are to take or have taken such flats, and the agreement shall be registered under the Registration Act, 1908 and such agreement shall contain the prescribed particulars; and to such agreement there shall be attached, such documents or copies thereof, in respect of such matters, as may be prescribed.”

Section 4 casts an obligation on the developer, while receiving advance

payment, to enter into a written agreement for sale. The insistence of the

appellants on the developer doing so was, therefore, consistent with the statutory

obligation cast on the respondent. Evidently, the appellants were seeking the

execution of necessary documentation so as to facilitate the disbursal of the

loan. This cannot be regarded as unreasonable or as a breach of the contractual

7 obligations. In this background, we are of the view that both the SCDRC and the

NCDRC were not justified in rejecting the primary relief which was sought by the

appellants in terms of the fulfillment of the agreement. A copy of the subsequent

agreement which was entered into between the respondent and the third party

has been placed on record. The agreement to sell was entered into on 16 March

2013, after the NCDRC had dismissed the appeal. An agreement to sell with

the third party cannot defeat the rights of the appellants under a prior contract in

respect of the residential flat in question. The subsequent agreement must

necessarily be subordinate to the rights of the appellant.

In the circumstances, we are of the view that the appeal would have to be

allowed. We accordingly allow the appeal and issue the following directions:

(i) The appellants shall, within a period of four weeks’ from today, pay to the

developer the balance of the sale consideration computed on the basis of the

sale price of Rs 40,95,801 after deduction of the amount of Rs 6,50,000 paid

towards the booking amount. The appellants shall pay interest computed at

the rate of 9% per annum on the aforesaid sale consideration with effect from 20

April 2008 until the date of payment;

(ii) The appellants shall, apart from the balance of the sale price, also pay (i)

BWSSB & BESCOM charges;(ii) Maintenance Deposit; and (iii) Registration and

Stamp Duty charges and service tax as applicable under the governing

provisions of law;

(iii) The respondent is directed to execute all necessary agreements to

complete the title of the appellants and to have the agreements duly registered,

simultaneously with the handing over of the payment. In the event the

respondent fails to do so, the Registrar of the SCDRC shall execute all required

8 agreements in compliance with the above directions on behalf of the respondent

to effectuate the right, title and interest of the appellants. Possession shall be

handed over to the appellants in pursuance of the aforesaid directions

simultaneously with the completion of registration formalities;

(iv) Until the aforesaid exercise is carried out the interim order directing status

quo passed by this Court during the pendency of these proceedings on 15 July

2013 shall continue to operate.

The appeal is accordingly allowed. There shall be no order as to costs.

………………………….............................J. (DR. DHANANJAYA Y. CHANDRACHUD)

…………………………............................J. (HEMANT GUPTA)

NEW DELHI APRIL 25, 2019

9 ITEM NO.9 COURT NO.11 SECTION XIV

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

Special Leave Petition (c) No. 16227 of 2013

SUMAN JINDAL & ANR. Appellant(s)

VERSUS

M/S. ADARSH DEVELOPERS Respondent(s)

FOR [PERMISSION TO FILE ANNEXURES] ON IA 1/2013 FOR [PERMISSION TO FILE ANNEXURES] ON IA 2/2013 FOR [PERMISSION TO FILE ANNEXURES] ON IA 3/2014

Date : 25-04-2019 These matters were called on for hearing today.

CORAM : HON'BLE DR. JUSTICE D.Y. CHANDRACHUD HON'BLE MR. JUSTICE HEMANT GUPTA

For Appellant(s) Mr. Rajesh Mahale, AOR

For Respondent(s) Mr. Balaji Srinivasan, AOR Ms. Garima Jain, Adv. Ms. Pallavi Sengupta, Adv. Mr. Siddhant Kohli, Adv. Mrs. Lakshmi Rao, Adv.

UPON hearing the counsel the Court made the following O R D E R

Leave granted.

The appeal is allowed in terms of the signed order.

Pending application(s), if any, shall stand disposed of.

(POOJA CHOPRA) (SAROJ KUMARI GAUR) COURT MASTER BRANCH OFFICER

(Signed Reportable Judgment is placed on the file)

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