SUMAN JINDAL & ANR. versus M/S ADARSH DEVELOPERS on 25 April 2019

1. Leave granted.

2. This appeal arises from a decision of the National ConsumerDisputes Redressal Commission[1] dated 18 January 2013.

3. The dispute in the present case relates to a residential apartmentwhich the appellants booked with the respondent who is the developer.The respondent had launched a construction project called “Adarsh PalmRetreat” situated at Bhoganhalli Village, Varthur Hobli, Bangalore EastTaluk, Bangalore. The appellants booked an apartment which was split 1 “NCDRC”

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Ainto two, bearing no. X 903 (a) and (b). Though the dispute betweenthe parties relates to the above flat, it is necessary to advert to the factthat on 2 November 2004 the appellants had also booked flat F 703 forwhich the respondent had issued a letter of allotment. The price of thatflat was Rs 32.28 lakhs. An agreement to sell was entered into on 1February 2005.B

4. The dispute in the present case arises out of two letters ofallotment issued by the respondent to the appellants in respect of flat X903 (a) and (b). The agreed sale consideration was Rs 40,95,801. Theletter of allotment stipulated that the allotment would be confirmed onthe payment of 25% of the value of the flat as the booking amount. TheCappellants initially paid an amount of Rs 1 lakh to the developer on orabout 12 February 2005 which was followed by a second payment of Rs3 lakhs on 24 March 2005. On 21 February 2008 a personal meetingtook place between the appellants and the representatives of thedeveloper, the gist of which was recorded in an email dated 21 FebruaryD2008. The e-mail, in so far as is material records, what was discussedupon and agreed at the meeting:

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

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

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

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

5. Agreement value for my apartment X-903 in TI, comes to Rs42.2 lakhs 15% of this value amounts to Rs 6.33 lakhs. ReducingRs 4 lakhs that I have already paid, I need to pay a balance of Rs2.33 lakhs.

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6. As informed to your goodself, Mr. Hari/Ms. Vijaya, I shallmaking this payment of Rs 2.33 lakhs on or before 29 February2008.

Request you to confirm if my understanding is correct.”

5. To this email the Vice-President of the developer respondedwith 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 GroupContact No. 91 80 4134 3400.”

6. The case of the appellants is that by this exchange, the bookingamount which was initially 25% of the agreed sale consideration wasreduced to 15%. On 28 February 2008, the appellants paid an amount ofRs 2,50,000 to the developer towards flat X 903 making up a total paymentof Rs 6,50,000 which was marginally in excess of an amount representing15% of the agreed sale consideration. Following this payment, thedeveloper by an email dated 12 March 2008 stated that the agreementfor flat X 903 would be ready by the first week of March. On 20 March2008, the developer demanded the balance of the sale considerationfailing which, it was stated, that the delay will attract penal interest.

7. By an email dated 31 March 2008, the appellants recorded thatfurther payments would be arranged through a financial institution whichhad agreed to grant a loan. However, it was stated that necessarydocumentation would be required in terms of a sale/constructionagreement, among other documents.

8. On 2 April 2008 the appellants confirmed receipt of the emailand sought the tentative dates by which the agreement and otherdocuments required for the loan disbursal would be ready. In themeantime, the Assistant Manager- Marketing of the developer stated inan email that they were in the process of executing the agreement andrequired the appellants to fill up a data sheet. This was done by the A

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Aappellants. On 26 May 2008 the developer’s representative addressedan email to the appellants which is extracted below:

“Sir,

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

Thanks & Regards

Vijaya G.CAsst. Manager-MarketingAdarsh Developers#10, VittalMallya Road,Bangalore-560 001Ph: 41343304.”

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9. On 27 May 2008 the developer refused to execute theagreement on the ground that payments were delayed. The appellantsaddressed a communication to the Managing Director of the developerstating that the loan had already been sanctioned and the bank waswilling to release the payment upon the execution of necessaryEdocumentation. Thereafter, by communications dated 4 June 2008, 12July 2008, 27 July 2008, 1 September 2008 and 3 October 2008 theappellants called upon the developer to execute the agreement to sell.The respondent, however, cancelled the allotment on 30 November 2008on the ground that the appellants had failed to pay 25% of the total costof the flat required as the booking amount. The amount of Rs 2,50,000Fwhich had been paid by the appellants on 28 February 2008 was adjustedto the cost of flat F 703.

10. Upon protesting against the cancellation, the appellants filed aconsumer complaint before the Karnataka State Consumer DisputesRedressal Commission[2].

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11. The SCDRC dismissed the complaint holding that : (i) theappellants are not ‘consumers’ within the meaning of ConsumerProtection 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 H2 “SCDRC”

consideration and to seek an allotment from the builder failing which arefund could be sought.

12. In appeal, this order has been substantially affirmed by theNCDRC. The view taken by the NCDRC is that the appellants failed tomake payment for the flat and hence, there was no deficiency of service.

Analysis

13. The submission which has been canvassed on behalf of theappellants by Mr. Rajesh Mahale, learned counsel is that as the sequenceof events would indicate, there was a novatio under which the bookingamount which was originally fixed at 25% was reduced to 15%. Learnedcounsel submitted that the email addressed by the appellants to thedeveloper regarding this on 21 February 2008, following a personalmeeting was agreed upon in the response dated 22 February 2008. Itwas submitted that in pursuance of this agreement the appellants paid atotal sum of Rs 6,50,000 to the respondent by 28 February 2008 asevidenced by the receipt executed by the developer. Moreover, it wasurged that the respondent in its email 26 May 2008 had specificallyaccepted the position that the booking amount was 15% of the total saleconsideration. Learned counsel submitted that under Section 4 of theKarnataka Ownership Flats (Regulation of the Promotion of Construction,Sale, Management and Transfer) Act, 1972, the promoter is obliged toenter into an agreement to sell before accepting any advance payment.Hence it was urged that consistent with the obligation cast on thedeveloper, the appellants had repeatedly called upon the developer toenter into necessary documentation so that the balance payment couldbe made by utilising the loan amount which was sanctioned by a bank infavour of the appellants. In this context it has been submitted that thecancellation of the agreement was clearly a deficiency of service.

14. On the other hand, Mr. Balaji Srinivasan, learned counselappearing on behalf of the respondent submitted that the originalagreement between the parties contemplated that the booking amountshould be 25% of the total cost of the flat. It was urged that though theallotment was made in February 2005, until February 2008 the initialbooking amount of 25% had not been paid. Hence it is urged that thebuilder was justified in cancelling the agreement. Moreover, after thedismissal of the appeal by the NCDRC, the developer entered into anagreement to sell with a third party on 16 March 2013. Hence it wasurged that at the highest the appellants would be entitled to a refund ofthe consideration with reasonable interest.

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A15. The clear picture which emerges from the documentarymaterial on the record is that by the letter of allotment dated 28 February2005, the respondent agreed to allot flat X 903 (a) and (b) to the appellantfor an agreed consideration of Rs.40.95 lakhs. Though the bookingamount was to be 25% of the agreed sale consideration, thecorrespondence between the parties indicates that there was anBagreement to reduce this to 15%. This is reflected in the email addressedby the appellant following a personal meeting on 21 February 2008 andthe categoric acceptance of this position in response, by the developeron 22 February 2008. That apart, the subsequent email of the developerdated 26 May 2008 clearly indicates that 15% represented the bookingCamount payable for the flat. It is not in dispute that if the booking amountis computed at the rate of 15% of the agreed sale consideration, whatwas paid by the appellant (Rs 6,50,000) was in fact in excess of thebooking amount. Hence the entire basis on which the termination of theallotment took place was misconceived.D16. That apart, we find from the record that the appellants had allalong been insisting on the execution of the agreement to sell so as tofacilitate the disbursement of the loan which had been sanctioned by thebank. Section 4 of the Karnataka Ownership Flats (Regulation of thePromotion of Construction, Sale, Management and Transfer) Act, 1972provides as follows:E

“Section 4. Promoter before accepting advance payment or depositto enter into agreement and agreement to be registered –Notwithstanding anything contained in any other law a promoterwho intends to construct or constructs a block or building of flats,all or some of which are to be taken or are taken on ownershipFbasis, shall, before he accepts any sum of money as advancepayment or deposit, which shall not be more than twenty per centof the sale price, enter into a written agreement for sale witheach of such persons who are to take or have taken such flats,and the agreement shall be registered under the Registration Act,G1908 and such agreement shall contain the prescribed particulars;and to such agreement there shall be attached, such documentsor copies thereof, in respect of such matters, as may beprescribed.”

17. Section 4 casts an obligation on the developer, while receivingHadvance 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 documentationso as to facilitate the disbursal of the loan. This cannot be regarded asunreasonable or as a breach of the contractual obligations. In thisbackground, we are of the view that both the SCDRC and the NCDRCwere not justified in rejecting the primary relief which was sought by theappellants in terms of the fulfillment of the agreement. A copy of thesubsequent agreement which was entered into between the respondentand the third party has been placed on record. The agreement to sellwas entered into on 16 March 2013, after the NCDRC had dismissedthe appeal. An agreement to sell with the third party cannot defeat therights of the appellants under a prior contract in respect of the residentialflat in question. The subsequent agreement must necessarily besubordinate to the rights of the appellant.

18. In the circumstances, we are of the view that the appeal wouldhave to be allowed. We accordingly allow the appeal and issue thefollowing directions:

(i) The appellants shall, within a period of four weeks’ from today,pay to the developer the balance of the sale consideration computed onthe basis of the sale price of Rs 40,95,801 after deduction of the amountof Rs 6,50,000 paid towards the booking amount.The appellants shallpay interest computed at the rate of 9% per annum on the aforesaid saleconsideration 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 asapplicable under the governing provisions of law;

(iii) The respondent is directed to execute all necessary agreementsto complete the title of the appellants and to have the agreements dulyregistered, simultaneously with the handing over of the payment. In theevent the respondent fails to do so, the Registrar of the SCDRC shallexecute all required agreements in compliance with the above directionson behalf of the respondent to effectuate the right, title and interest ofthe appellants. Possession shall be handed over to the appellants inpursuance of the aforesaid directions simultaneously with the completionof registration formalities; AB

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162SUPREME COURT REPORTS

A(iv) Until the aforesaid exercise is carried out the interim orderdirecting status quo passed by this Court during the pendency of theseproceedings on 15 July 2013 shall continue to operate.

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

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Kalpana K. Tripathy

Appeal allowed.

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