WG. CDR. ARIFUR RAHMAN KHAN AND ALEYA SULTANA AND ORS. versus DLF SOUTHERN HOMES PVT LTD. (NOW KNOWN AS BEGUR OMR HOMES PVT. LTD.) AND ORS. on 24 August 2020

1. The fulcrum of the case of the developer rests on clause14 of the ABA. Clause 11(a) of the ABA indicates that subject to“all just exceptions” the developer endeavoured to completeconstruction within a period of thirty-six months from the date ofthe execution of the agreement unless hindered byforce majeureconditions. Undoubtedly, the expression ‘endeavour’ indicatesthat the developer did not bind itself to an inflexible timeline ofthirty-six months. But then again, the timeline of thirty-six mothswas subject to just exceptions and could be excused in the eventof force majeure conditions coming into operation. By theprovisions of clause 14, the developer agreed to compensate theflat buyers at the rate of Rs. 5 per square feet of the super area ofthe apartment per month for the period of delay. The existenceand extent of the delay constitute an admitted factual position.The failure of the developer was neither relatable to a “justexception” or the prevalence of force majeure conditionsreferable to clause 11. [Paras 18-21][157-C, E-G; 158-E; 159-A]

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A1.2 The ABA is clearly one-sided. Where a flat purchaserpays the instalments that are due in terms of the agreement witha delay, clause 39(a) stipulates that the developer would “at itssole option and discretion” waive a breach by the allottee of failingto make payments in accordance with the schedule, subject tothe condition that the allottee would be charged interest at theBrate of 15 per cent per month for the first ninety days andthereafter at an additional penal interest of 3 per cent per annum.In other words, a delay on the part of the flat buyer attracts interestat the rate of 18 per cent per annum beyond ninety days. On theother hand, where a developer delays in handing over possessionCthe flat buyer is restricted to receiving interest at Rs 5 per squarefoot per month under clause 14. Evidently, the terms of theagreement have been drafted by the developer. They do notmaintain a level platform as between the developer and purchaser.The stringency of the terms which bind the purchaser are notmirrored by the obligations for meeting times lines by theDdeveloper. The agreement does not reflect an even bargain. [Para22][159-C-F]

1.3 The agreement did not stipulate that the developerwould pay any interest on the amount which had already beenreceived. A large chunk of the purchase price was thus availableEto the developer to complete construction. The court must takea robust and common-sense based approach by taking judicialnotice of the fact that flat purchasers obtain loans and are requiredto pay EMIs to financial institutions for servicing their debt.Delays on the part of the developer in handing over possession Fpostpone the date on which purchasers will obtain a home.Besides servicing their loans, purchasers have to finance theexpenses of living elsewhere. A failure of the developer to complywith the contractual obligation to provide the flat to a flat purchaserwithin a contractually stipulated period amounts to a deficiency.

There is a fault, shortcoming or inadequacy in the nature andGmanner of performance which has been undertaken to beperformed in pursuance of the contract in relation to the service.The expression ‘service’ in Section 2 (1) (o) means a service ofany description which is made available to potential usersincluding the provision of facilities in connection with (amongHother things) housing construction. Under Section 14(1)(e), the

jurisdiction of the consumer forum extends to directing theopposite party inter alia to remove the deficiency in the servicein question. Intrinsic to the jurisdiction which has been conferredto direct the removal of a deficiency in service is the provision ofcompensation as a measure of restitution to a flat buyer for thedelay which has been occasioned by the developer beyond theperiod within which possession was to be handed over to thepurchaser. Flat purchasers suffer agony and harassment, as a resultof the default of the developer. Flat purchasers make legitimateassessments in regard to the future course of their lives basedon the flat which has been purchased being available for use andoccupation. These legitimate expectations are belied when thedeveloper as in the present case is guilty of a delay of years inthe fulfilment of a contractual obligation. To uphold the contentionof the developer that the flat buyer is constrained by the terms ofthe agreed rate irrespective of the nature or extent of delay wouldresult in a miscarriage of justice. Undoubtedly, as this court heldin Dhanda, courts ordinarily would hold parties down to acontractual bargain. Equally the court cannot be oblivious to theone-sided nature of ABAs which a red rafted by and to protectthe interest of the developer. Parliament consciously designedremedies in the CP Act 1986 to protect consumers. Where, as inthe present case, there has been a gross delay in the handingover of possession beyond the contractually stipulated debt, thejurisdiction of the consumer forum to award just and reasonablecompensation as an incident of its power to direct the removal ofa deficiency in service is not constrained by the terms of a ratewhich is prescribed in an unfair bargain. [Paras 23, 24][159-H;160-A-B; E-H; 161-A-D]

1.4 The judgment in Dhanda’s case does not prescribe anabsolute embargo on the award of compensation beyond the ratestipulated in the flat buyers’ agreement where handing over ofthe possession of a flat has been delayed. Dhanda’s case waspreceded by consent terms which were presented before thisCourt in two earlier civil appeals under which interest at the rateof 9 per cent had been granted. The decision lays down that theaward of interest cannot be arbitrary and without nexus to thedefault which has been committed. Hence, the award of interestat the maximum rate of interest charged by a nationalised bank ABC

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Afor advancing home loans was construed to be arbitrary. It was inthis context that the court observed that the parties having agreedto a consequence for delay, exceptional and strong reasons mustexist for the consumer fora to depart from the agreed rate. Thedecision does not lay down that there is an absence of jurisdictionin the adjudicatory fora constituted under the CP Act 1986 toBaward remedial compensation to a flat buyer for the delay of thedeveloper in handing over possession on the agreed date. In thepresent case, there exist, clear and valid reasons for not holdingdown the flat buying consumers merely to the entitlement toreceive compensation at the rate of 5 per square foot per monthCin terms of clause 14 of theABA: (i) There has been a breach onthe part of the developer in complying with the contractualobligation to hand over possession of the flats within a period ofthirty-six months of the date of the agreement as stipulated inclause 11(a); (ii) The failure of the developer to hand overpossession within the contractually stipulated period amounts toDa deficiency of service within the meaning of Section 2 (1) (g),warranting the invocation of the jurisdiction vested in the NCDRCto issue a direction for the removal of the deficiency inservice;(iii) The triggering of an obligation to pay compensation on theexistence of delay in handing over possession is admitted by theEdeveloper for, even according to it, it has adjusted compensationat the agreed rate of Rs 5 per square foot per month to 145 out ofthe 171 appellants; (iv) The agreement is manifestly one-sided:the rights provided to the developer for a default on the part ofthe home buyer are not placed on an equal platform with thecontractual right provided to the home buyer in the case of aFdefault by thedeveloper; (v) There has been a gross delay on thepart of the developer in completing construction ranging betweentwo and four years. Despite successive extensions of time todeliver possession sought by the developer, possession was notdelivered ontime; (vi) The nature and quantum of the delay onGthe part of the developer are of such a nature that the measure ofcompensation which is provided in clause 14 of the ABA wouldnot provide sufficient recompense to the purchasers;and (vii)Judicial notice ought to be taken of the fact that a flat purchaserwho is left in the lurc has a result of the failure of the developerto provide possession within the contractually stipulated dateH

suffers consequences in terms of agony and hardship, not theleast of which is financial in nature. Having paid a substantialamount of the purchase price to the developer and being requiredto service the debt towards loan installments the purchaser isunable to obtain timely possession of the flat which is the subjectmatter of the ABA. [Paras 31, 32][167-C-H; 168-A-F]

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 inorder to pursue a claim for compensation for delayed handingover of possession, the purchaser must indefinitely defer obtaininga conveyance of the premises purchased or, if they seek to obtaina Deed of Conveyance to forsake the right to claim compensation.This basically is a position which the NCDRC espoused. ThisCourtcannot countenance that view. The developer in the presentcase undertook to provide a service in the nature of developingresidential flats with certain amenities and remains amenable tothe jurisdiction of the Consumer Fora. [Paras 34, 36][170-D; 171-E]

2.2 However, the cases of the eleven purchasers whoentered into specific settlement deeds with the developers haveto be segregated. These eleven flat purchasers having enteredinto specific deeds of settlement, it would be only appropriateand proper if they are held down to the terms of the bargain.Similarly, the three appellants who transferred their title, rightand interest in the apartments would not be entitled to the benefitof the present order since they have sold their interest in theapartments to third parties.Even if the three appellants who hadtransferred their interest in the apartments had continued toagitate on the issue of delay of possession, the Court is notinclined to accept the submission that the subsequent transfereescan step into the shoes of the original buyer for the purpose ofbenefiting from this order. The subsequent transferees in spiteof being aware of the delay in delivery of possession the flats,had purchased the interest in the apartments from the originalbuyers. Further, it cannot be said that the subsequent transfereessuffered any agony and harassment comparable to that of the first A

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Abuyers, as a result of the delay in the delivery of possession inorder to be entitled to compensation. [Paras 37, 38][171-G-H;172-B, F-G]

HUDA v. Raje Ram (2008) 17 SCC 407 : [2008] 16SCR 601 – relied on.

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3. Amenities

Club house

There has been no breach by the developer of the obligationto provide a constructed facility of a club for the RWA. [ParaC40][174-C]

Other amenities

A deficiency under Section 2(1)(g) means a fault,imperfection, shortcoming or inadequacy in the quality, natureand manner of performance. This may be required to be maintainedDunder law or may be undertaken to be performed in pursuance ofa contract or otherwise in relation to any service. The builderinvited prospective flat purchasers to invest in the project ofWestend Heights on the basis of a clear representation that thesurrounding area of New Town situated on 80 acres was beingdeveloped to provide a wide range of amenities including aEshopping centre, health care facilities and an early learning school.The developer has failed to provide these amenities. This is acase involving an experienced developer who knew the natureof the representation which was being held out to the flatpurchasers. Developers sell dreams to home buyers. Implicit inFtheir representations is that the facilities which will be developedby the developer will provide convenience of living and a certainlifestyle based on the existence of those amenities. Having soldthe flats, the developer may find it economically unviable to providethe amenities. The flat purchasers cannot be left in the lurch or,as in the present case, be told that the absence of facilities whichGwere to be provided by the developer is compensated by otheramenities which are available in the area. The developer mustbe held accountable to its representation. True, in a situationsuch as the present it may be difficult for the court to quantify theexact nature of the compensation that should be provided to theHflat buyers. The general 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 cannothowever dilute the liability to pay. A developer who has breacheda clear representation which has been made to the buyers of theamenities which will be provided to them should be heldaccountable to the process of law. [Paras 41-43][175-E-G; 176-E-H; 177-A-B]

4. Tax

There is no deficiency of service in regard to the demandof interest payable on the tax which was required to be depositedwith the revenue. [Para 47][180-B]

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 chargestowards electricity based on the terms of the ABA. There is noinfirmity in the finding of the NCDRC, which is based on theprovisions contained in clause 23(b) of the ABA. The chargesrecovered are not contrary to what was specified in the contractbetween the parties. [Para 51][182-E]

6. Parking

The demand of parking charges is in terms of the ABA andhence it is not possible to accede to the submission that therewas a deficiency of service under this head. [Para 54][183-C]

7. The dismissal of the complaint by the NCDRC waserroneous. The flat buyers are entitled to compensation fordelayed handing over of possession and for the failure of thedeveloper to fulfil the representations made to flat buyers inregard to the provision of amenities. The impugned judgmentand order of the NCDRC dismissing the consumer complaint isset aside. Directions issued. [Para 55][183-D-E]

Nahalchand Laloochand Private Limited v. PanchaliCooperative Housing Society Limited (2010) 9 SCC536 : [2010] 10 SCR 804 – distinguished.

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144SUPREME COURT REPORTSAGhaziabad Development Authority v. Balbir Singh(2004) 5 SCC 65 : [2004] 3 SCR 68; R. V.Prasannakumaar v. Mantri Castles Pvt Ltd. (2020) 14SCC 769 : [2019] 5 SCR 821; Pioneer Urban Landand Infrastructure Limited v. Govindan Raghavan(2019) 5 SCC 725 : [2019] 5 SCR 1169 – relied on.BLarsen 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 SCR979; Lucknow Development Authority v. M K Gupta(1994) 1 SCC 243 : [1993]3 Suppl. SCR 615; NarneCConstruction (P) Ltd. v. Union of India (2012) 5 SCC359 : [2012] 4 SCR 574 – referred to.

From the Judgment and Order dated 02.07.2019 of the NationalGConsumer Disputes Redressal Commission in Complaint Case bearingNo. CC/1055/2015.

With

Civil Appeal No. 6303 of 2019

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Bishwajit Bhattacharyya, Col. R. Balasubramaniam, Pinaki Misra,Sr. Advs., Prashant Bhushan, Chandrachur Bhattacharyya, Sahil Tagotra,Shankar Divate, Ms. Ruby Singh Ahuja, Ms. Seema Sundd, PravinBahadur, Sanjeet Ranjan, Ms. Kritika Sachdeva, Priyash Sharma, PrabhatRanjan, Ritu Raj Srivastava, Aditya Singh, Alabhya Dhamija, Ms. TanushiPatel, M/s. Karanjawala & Co., Advs. for the appearing parties.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

1. The National Consumer Disputes Redressal Commission[1]dismissed a consumer complaint filed by 339 flat buyers, accepting thedefence of DLF Southern Homes Pvt. Ltd. and Annabel Builders andDevelopers Pvt. Ltd. that there was no deficiency of service on theirpart in complying with their contractual obligations and, that despite adelay in handing over the possession of the residential flats, the purchaserswere not entitled to compensation in excess of what was stipulated inthe Apartment Buyers Agreement[2].

2. The complaint before the NCDRC was initially instituted bynine flat buyers. These nine complainants had booked residential flats ina project called Westend Heights at New Town, DLF, BTM Extensionat Begu, Bengaluru. The project was being developed in an areaadmeasuring 27.5 acres and was to consist of 1980 units, spread acrossnineteen towers each consisting of a stilt and eighteen floors.

3. The Brochure of the first respondent advertised the nature ofthe project and the amenities which would be provided to buyers. It heldout the following representations on the basis of which buyers wereinduced to invest:

“New Town - the premier choice for Bangalore living. A premiumresidential 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 tomaximize your comfort and convenience. In New Townpremium high rise apartments are set against the backdrop of avibrant living environment where fun, comfort, security, andserenity blend in perfect unison. Life at New Town satisfies all 1 “NCDRC”

2 “ABA”

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Ayour needs and fulfils your heart’s desire. Imagine a place whereleisurely pursuits are always within reach. Imagine livingwhere convenience is never more than around the corner.

Westend Heights at New Tower DLF, BTM Extn.

Designs, keeping in mind the modern day requirements andBmeeting them with apt amenities, Westend Heights is the firstphase of New Town, with premium high-rise apartments ataffordable prices. The complex brings you comfort living embodiedin individual towers overlooking sprawling parks and vistas. Thisproject is being developed in a land area of 27. 5 acres. The projectCconsists of 1980 units spread across 19 towers that are Stilt+ 18floors high.

Amenities

Fun, Fitness, Leisure, Right Next Door

DThe most exclusive Club in Bangalore at New town, DLFBTM, EXTN, The Club set amidst a very comfortable setting is an impressivefeature of New Town. It is specially designed to take care of allstresses brought on by the modern world. Altogether a beautifulcomposition, that blends seamlessly with your lifestyle.

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Swimming Pool:

Gymnasium/Aerobics Centre

Restaurant & Bar

FBilliards Room

Banquet Hall

Tennis Courts

Cards Room

GSquash Courts

Spa, Massage & Beauty Parlour

Ease, Enjoyment, Convenience. Right Next Door Convenient shopping facilities at New Town, DLF BTMEXTNH

Shop with ease at our convenience shopping centre, wellequipped to handle your everyday needs. The shopping centrewill offer an array of outlets to make your life a trouble freeaffair.

Experience convenience at your doorstep

Hope, Dreams, Future. Right Next Door

Renowned Early Learning School at New Town DLF BTMEXTN.

Our play school airs to care for your child in a stimulating safe,fun-filled environment. It symbolizes our conviction that nurturedroots lay the foundation of a fully grown blossomed tree.

Health, Wellbeing. Assurance, Right Next Door State-of-the-art healthcare facilities at New Town DLF BTMEXTN.

In these years of fast paced lives, your family’s wellbeing isforemost in our minds. Our healthcare centre will better thelatest in screening, diagnosis, and medical care withcompetent medical professionals by your side, we will makesure that you would always remain in the best of health.

Comfort, Confidence, Peace of Mind Right Next Door.

Keeping your loves ones safe and secure at New Town, DLFBTM 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 monitoredgates, CCTV for parking and entrance lobby, video surveillancesystem and a rigorously screened 24-hour security guardworkforce, New Town offers you a secure and a well-protectedabode.” (emphasis supplied)

4. Responding to the representation held out by the developer, thecomplainants booked flats in the residential project. The flat buyersentered into agreements with the developer. Clause 11(a) of the ABAindicated that the developer would endeavour to complete constructionwithin a period of thirty-six months from the date of the execution of theagreement save and except for force majeure conditions. Clause 11(a)provided:

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A“11. (a) Schedule for Possession of the Said Apartment

The Company/LOC based on the present plans and estimatesand subject to all just exceptions, endeavors to completeconstruction of the Said Building /Said Apartment within a periodof thirty six (36) months from the date of execution of thisBAgreement unless there shall be delay or failure due to ForceMajeure conditions including but not limited to reasons mentionedin Clauses 11(b) and 11(c) or due to failure of Allottee to pay intime the Total Price and other charges taxes, securities etc. anddues/payments or any failure on the part of the Allottee to abideby all or any of the terms and conditions of this Agreement.”

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5. Force majeure stipulations were illustrated in sub-clauses (b)and (c) of clause 11, which included delay due to the reasons beyond thecontrol of the developer and failure to deliver possession due toGovernment rules, orders or notifications, respectively. Construction wasbehind schedule. The flat purchasers were informed on 12 January 2011Dthat possession of the apartments was expected to be completed by themiddle of 2012. This assurance was not fulfilled. By a communicationdated 18 June 2013, the developers issued a revised timeline intimatingall flat buyers that the delivery of possession would commence fromOctober 2013. However, on 8 August 2013 another communication wasEissued stating that the real estate industry was affected by an economicslow-down which had hampered the pace of construction. The date forhanding over possession was extended to June 2014. A tentative schedulefor delivery was indicated under which Towers D1 and D2 would behanded over by January 2014, and Towers A3 to A6, A7, B3 and B4would be handed over by May 2014. On 8 August 2014, the timelines forFhanding over possession were again extended by the developers : underthe revised schedule the flats in Towers D1 and D2 were to be handedover in August 2014, those in A1 to A-7 in February 2015, B1 to B6 inApril 2015 and C1 to C4 in June 2015. On 4 May 2015, the developersissued another communication indicating the progress of the work andGinformed the purchasers that site visits had been initiated for the project“till we receive the occupancy certificate for clusters A, B and C”. Thisis an admission of the fact that until then the occupation certificate hadnot been received. The obligation to handover possession within a periodof thirty-six months was not fulfilled.

6. The first batch of nine flat purchasers moved a consumercomplaint before the NCDRC complaining of a breach by the developerof the obligation, contractually assumed, under the terms of the ABA.Since the nine complainants purported to represent the entire group offlat purchasers, a notice of the complaint under Section 12(1)(c) of theConsumer Protection Act 1986[3] was published in the newspapers.

7. Numerous applications for impleadment were allowed by theNCDRC and an amended complaint was ordered to be filed. On thecomplainants moving an application under Section 12(1)(c), the NCDRCby its order dated 21 November 2017 permitted them to file the complainton behalf or for the benefit of all the flat buyers who were interested inthe reliefs. However, flat buyers who had (i) executed deeds ofconveyance; or (ii) executed affidavits while accepting the agreedcompensation in full and final satisfaction; or (iii) received possessionwithin the stipulated time period; or (iv) had sold their flats after theexecution of the conveyance; or (v) who were subsequent purchasershaving purchased the flat after the execution of the conveyance deedwere to remain outside the purview of the proceedings. Further, thebuyers from whom Preferential Location Charges, charges for thepreferential location of the apartment, were not charged and were notchargeable were to remain out of the class on whose behalf or benefitthe complaint was instituted. On a challenge to the order, this Court byan order dated 10 April 2018 directed:

“Since the complaint filed by the appellants was only by nine personsjointly for their benefit, the same could not be treated to be inrepresentative capacity. Accordingly, the impugned order is setaside.

Aggrieved parties are at liberty to file an appropriate freshapplication under Section 12(1)(c) of the Consumer ProtectionAct, 1986 before the National Consumer Disputes RedressalCommission within two weeks from today. The same may bedisposed of by the National Commission in accordance with lawwithin three months from the date of filing of such an application.”

8. Pursuant to the liberty which was granted by this Court, anI.A.[4] was filed before the NCDRC under Section 12(1)(c). The 3 ‘‘CP Act 1986’’

4 IA No. 8083 of 2013

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Aapplication was disposed of on 13 July 2018 which led to an appealbefore this Court.

9. On 28 September 2018, this Court set aside the order of theNCDRC with the following directions:

“Having heard learned counsel for the appellants, we are of theview that the impugned judgment dated 13.07.2018 needs to beset aside. We set it aside and direct the National ConsumerDisputes Redressal Commission to treat the complaint, as amended,that has been filed, as a complaint filed on behalf of all 339 personsand to proceed on merits.

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It will be open for the respondents to give their say on the meritsof each of the 339 complainants.

The Commission will decide the matter within a period of sixmonths from today.

DThe Civil Appeals are disposed of accordingly.”

10. Procedural directions issued upon several impleadmentapplications resulted in a further order of this Court of 8 May 2019reiterating that the complaint would be treated as having been filed onbehalf of 339 persons. By its order dated 28 September 2018, whichwas reiterated again on 8 May 2019, this Court had laid down aEperemptory 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, thereare before this Court a total of 171 flat purchasers in the appeals. TheFcomplaint before the NCDRC, which was confined by the order of thisCourt dated 28 September 2018 to 339 complainants, now covers a morerestricted field of 171 flat purchasers. Annexure-1 to Civil Appeal No6239 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 ABAsGwere signed; (iv) dates by which possession was to be handed overunder the ABAs; and (v) dates on which the letter for possession wasissued by the developers.

12. The NCDRC divided the group of 339 flat buyers into sixgroups based on whether or not they had taken possession, executed H

deeds of conveyance, settled the dispute or sold the flats before or duringthe pendency of the complaint or their applications for impleadment:

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•Group A: Complainants who took possession of their flatsbefore the filing of the complaint/impleadment applications.

•Group B: Complainants who took possession and executedBdeeds of conveyance during the pendency of the complaint/impleadment applications.

•Group C: Complainants who took possession during thependency of the complaint/impleadment applications but havenot executed deeds of conveyance.

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•Group D: Complainants who settled their dispute during thependency of the complaint/ impleadment applications.

•Group E: Complainants who sold their flats during thependency of the complaint/impleadment applications.

•Group F: Complainants who have not taken possession of theDflats and have not executed a deed of conveyance.

13. The NCDRC held that flat buyers in Groups A and B who hadtaken possession before the filing of the complaint / impleadmentapplications and those who took possession and executed deeds ofconveyance before or during the pendency of the proceedings wouldnot be entitled to pursue their claims. The execution of the deed ofconveyance, according to the NCDRC, is a transfer of a right in propertyand it is not within the jurisdiction of the Commission to entertain agrievance that the conveyances have been entered into under coercion.Additionally, according to NCDRC, under the conveyance deed, suchflat buyers had accorded their satisfaction to the services provided bythe developer and voluntarily discharged the developer of all its liabilitiesunder the ABA. As regards flat purchasers in Group C, the NCDRCnoted that even those who have taken possession but have not executeda deed of conveyance have voluntarily discharged the developer. TheNCDRC observed that flat buyers in Group C had taken possessionwithout protest, without its permission and without lodging any complaintwith it after taking the possession. Those in Group D who had settledtheir dispute during the pendency of the complaint were held to be estoppedfrom pursuing their grievances. The NCDRC did not accept the contentionof the flat buyers in Group D that that they had settled the matter under E

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Acoercion and undue influence since, according to the NCDRC, no specificfacts and circumstances were pleaded by such flat buyers which madethem surrender their free will. The buyers in Group E who have soldtheir flats during the pendency of the complaint were held to have nosubsisting right. The NCDRC noted that as regards Group F(complainants who had neither taken possession nor executed aBconveyance), as many as 337 out of 339 flat purchasers had in facttaken possession. The NCDRC had to deal with the claims of tworemaining complainants, who had accepted the delayed compensationbut did not accept possession. Their complaints were dismissed.

14. The primary grounds on which compensation have been soughtCbefore the NCDRC were:

(i) Delay in handing over possession of the flats;

(ii) Reimbursement of taxes and interest charged to the flatpurchasers 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 thatEdelay 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 thepart of the developer, the NCDRC held that the agreements providedcompensation at the rate of Rs 5 per square foot of the super area forevery month of delay. The NCDRC held that the flat purchasers whoagreed to this stipulation in the agreements were not entitled to seek anyFamount in addition. Paragraph 470 of the judgment of the NCDRCcontains its finding:

“470. There is no dispute to the fact that the completion of theproject had been delayed. Delay had been acknowledged by theopposite parties. They had also offered to these complainants theGdelayed compensation calculated @ Rs 5/-per sq. ft. of the superarea.”

The NCDRC observed that the developer had while computingthe final demand made an adjustment on account of delayed compensationat the rate stipulated in the ABA. The flat purchasers having beenH

provided credit at the rate agreed by the developers, it was held that nofurther entitlement existed under the law. In the view of the NCDRC,the flat purchasers had failed to prove that the stipulation contained inthe agreement for the payment of compensation at Rs 5 per square footwas unreasonable. In taking this view, the Commission has lent supportto its decision by relying upon the decisions of this Court in DLF HomesPanchkula Pvt. Ltd. v. D S Dhanda, Etc.[5](“Dhanda”) and GhaziabadDevelopment Authority v. Balbir Singh[6 ](“Balbir Singh”). On themerits of the other grievances, the NCDRC has held that

(i) The charges recovered towards tax and interest are in termsof clause 1.10 of the ABA;

(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,counsel appearing on behalf of the appellants formulated the nature ofthe grievances of the flat buyers in the written submissions tenderedduring the hearing. Mr Prashant Bhushan, learned Counsel appearingfor the appellants has formulated his submissions under the followingheads:

(i) There is a gross delay ranging between two and four yearsin handing over possession and the flat buyers ought not tobe constrained by the terms of the agreement which areone-sided and unreasonable;

(ii) The execution of conveyances or settlement deeds wouldnot operate to preclude the flat buyers from claimingcompensation. The emails of the developer clearly indicatethat the flat buyers were not permitted to executeconveyances or to receive possession under protest;

(iii) The amenities which have been contracted for have notbeen provided by the developers; and

(iv) The flat buyers are not liable to indemnify the developer forthe demand of interest and penalty raised by the tax 5 2019 SCC OnLine SC 689

6 (2004) 5 SCC 65

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Aauthorities as a result of the failure to deposit the tax ontime. During the oral arguments, it was clarified that onlyinterest has been recovered from the flat buyers.

The above submissions of Mr Prashant Bhushan have beenreiterated in the submissions urged before the Court by Mr BishwajitBBhattacharya, learned Senior Counsel appearing on behalf of anothergroup of purchasers. Mr R Balasubramanian, learned Senior Counselhas, while adopting the submissions which were urged by Mr PrashantBhushan, advanced submissions on the levy of electricity charges andcharges for parking spaces.

C17. Opposing the submissions which have been urged on behalfof 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 dischargethe onus placed upon them to establish coercion or duressDwhile executing conveyances or settlements;

(ii) Possession of the complex, which is situated on landadmeasuring about 27 acres and comprising of 813apartments in nineteen towers has been handed over betweenfour to six years ago and the developer has transferred hisEright, title and interest to the Residents Welfare Association(“RWA”);

(iii) The allottees have benefited by the appreciation in the valueof their flats;

(iv) Out of 171 applicants, 145 have received compensation atFthe agreed rate while handing over possession. Theallotments were escalation free and the burden of increasedcosts has been borne by the developer;

(v) Under clause 14 of the ABA, the flat buyers have beencompensated at the rate of Rs 5 per square foot per monthGwhich would work out to about Rs 7500 per month for a flatadmeasuring 1500 square feet. No proof or measure ofactual loss suffered has been adduced;

(vi) The facts pertaining to the appellants would indicate that:

(a) Eighteen appellants executed conveyances before filingHthe complaints; (b) Fifty-four appellants executed conveyances during theAcourse of the proceedings;

(c) Fifty appellants executed conveyances after theimpugned judgment; (d) The above individuals include 11 who have enteredBinto written settlement deeds; (e) There is no delay in offering possession to sevenappellants; and (f)Three appellants are continuing to agitate theirgrievances despite having transferred their rights inthe flats. Out of 171 appellants, 122 executedconveyances before the complaint; during the pendencyof the proceedings or thereafter. Eleven appellants whohave entered into settlements did not raise a ground ofcoercion prior to a reply which was filed in December2018 shortly before the final hearing; C

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(vii) As regards the construction of facilities and amenities,a club house containing a swimming pool, gymnasium,tennis court, indoor badminton court and squash courtshas been constructed and an occupation certificate hasbeen received on 13 May 2019. The RWA is consciousEof the fact that difficulties in the allotment arose as aresult of the action of the Bangalore DevelopmentAuthority[7] which led to the filing of writ proceedingsbefore the High Court of Karnataka both by thedeveloper and the RWA. Even after the receipt of theFoccupation certificate, the developers have beencorresponding with BDA for permission to hand overpossession to the RWA. Other amenities including aschool and health care facilities were going to bedeveloped in the entire township comprising of 80 acresof which the complex of 27 acres was a part. The flatGbuyers were aware of the fact that under the terms ofthe ABA, the allottees have no right, title or interest inthe amenities outsidetheir residential complex andforming a part of the wider complex of 80 acres.

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Moreover, this issue is rendered academic since thearea around DLF township has become urbanizedwhere adequate facilities are available;

(viii) Clauses 1.3, 1.10, 2 and 3 require the allottees to beartax liabilities including towards works contract tax.When the project commenced in 2009, there was anabsence of clarity in regard to the liability on accountof works contract tax which was settled eventually bythe judgment of this Court in Larsen and ToubroLimited v. State of Karnataka[8]. It was as a result ofthis judgment that the issue was settled following which,the developer while computing the amount payable inthe final statements of accounts passed on the liabilityon account of the interest (but not towards penalty) ona proportionate basis in terms of clause 1.10 of theABA; B

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(ix) Clause 23(b) entitles the developer to raise a demandon a proportionate basis from the flat buyers forelectricity charges. Initially, BESCOM provided aconnection for electricity but subsequently as asubstantial load was required, the developer wasEpermitted to build its own electricity sub-station. Thiswas built at a cost of Rs. 18.01 crores for which thepro rata cost could be allocated to flat buyers in termsof clause 23(b); and

(x) The price of the apartment, as agreed in the ABA,Fincluded in the breakup, parking charges for exclusiveuse of earmarked parking spaces. Parking chargeswere also revealed upfront in the brochure. Theappellants had erroneously relied on the decision ofthis Court in Nahalchand Laloochand PrivateGLimited v. Panchali Cooperative Housing SocietyLimited[9], which turned on the construction of theprovisions of the Maharashtra Apartment OwnershipAct 1971 and Development Control Regulations forGreater Bombay 1991. This has subsequently been 8 (2014) 1 SCC 708H9 (2010) 9 SCC 536

explained in the decision in DLF Limited v.Manmohan Lowe[10]. There is no prohibition in theKarnataka Apartment Ownership Act upon thedeveloper providing earmarked parking charges in thebreakup of the total price of the apartment.

The rival submissions will now be analysed.

Compensation for delayed possession

18. The fulcrum of the case of the developer rests on clause 14 ofthe ABA which is in the following terms:

“14. The Allottee agrees and understands that if the company isunable to give possession within the period as mentioned above orsuch extended period as permitted under this Agreement, due toreasons other than those mentioned in this Agreement, then theCompany agrees to pay only to the Allottee and not to anyoneelse, subject to the Allottee, not being in default under any termsof this Agreement compensation @ Rs. 5/- per sq. feet of theSuper Area of the said apartment per month for the period ofsuch Delay. The adjustment of such compensation shall be doneonly at the time of execution of the Conveyance Deed of the SaidApartment to the Allottee first named under this Agreement andnot, earlier.”

19. Clause 11(a) of the ABA indicates that subject to “all justexceptions” the developer endeavoured to complete construction withina period of thirty-six months from the date of the execution of theagreement unless hindered by force majeure conditions. Undoubtedly,the expression ‘endeavour’ indicates that the developer did not bind itselfto an inflexible timeline of thirty-six months. But then again, the timelineof thirty-six moths was subject to just exceptions and could be excusedin the event of force majeure conditions coming into operation. By theprovisions of clause 14, the developer agreed to compensate the flatbuyers at the rate of Rs. 5 per square feet of the super area of theapartment per month for the period of delay. According to the developer(i) the flat purchasers are bound by the above stipulations under whichtheir entitlement was to receive compensation at the agreed rate (andhence not beyond); and (ii) no evidence has been adduced to indicatethat the rate which has been prescribed in the agreement is unreasonable.The developer relies on the observation in the decision of this Court in A

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ADhanda[11] that when parties have agreed to a consequence of delay inhanding over possession, there must be exceptional and strong reasonsfor the consumer fora to award compensation at more than the agreedrate. In assessing these submissions, we must at the outset note thesubmission 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 blockD, 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,Cvide communications dated 18.06.2013[12], 8.8.2013[13], 8.8.2014[14],4.5.2015[15] etc.”

20. The extent of the delay as set out in the above submissionshas not been controverted in the submissions which were urged beforethis Court by the developer. On the contrary, the finding of the NCDRCDin paragraph 470 of its judgment is that:

“…there is no dispute to the fact that the completion of the projecthas been delayed. Delay has been acknowledged by the oppositeparties….”

21. The existence and extent of the delay constitute an admittedEfactual position. In fact, in the written submissions which have beenfiled by the developer, it has been admitted that out of 171 appellants,145 were given compensation in terms of the rate prescribed in clause14 of the ABA. Once the developer has accepted that there was a delayon his part which triggered of the liability to pay compensation (albeit,according to the developer, in terms of clause 14) there can be no mannerFof doubt that:

(i) the developer assumed an obligation in terms of the ABA toendeavour to hand over possession in thirty-six months ofthe date of the execution of the agreement; G(ii)there was a failure on the part of the developer to complywith 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

H15 Annexure A12 @ page 938

(iii) the failure of the developer was neither relatable to a “justexception” or the prevalence of force majeure conditionsreferable to clause 11; and

(iv) the payment of compensation to the flat buyers or at least145 of the group of 171 represents an admission by thedeveloper of its breach, thereby triggering a liability to paycompensation.

22. The only issue which then falls for determination is whetherthe flat buyers in these circumstances are constrained by the stipulationcontained in clause 14 of ABA providing compensation for delay at therate of Rs 5 per square feet per month. In assessing the legal position, itis necessary to record that the ABA is clearly one-sided. Where a flatpurchaser pays the instalments that are due in terms of the agreementwith a delay, clause 39(a) stipulates that the developer would “at its soleoption and discretion” waive a breach by the allottee of failing to makepayments in accordance with the schedule, subject to the condition thatthe allottee would be charged interest at the rate of 15 per cent permonth for the first ninety days and thereafter at an additional penal interestof 3 per cent per annum. In other words, a delay on the part of the flatbuyer attracts interest at the rate of 18 per cent per annum beyondninety days. On the other hand, where a developer delays in handingover possession the flat buyer is restricted to receiving interest at Rs 5per square foot per month under clause 14 (which in the submission ofMr Prashant Bhushan works out to 1-1.5 per cent interest per annum).Would the condition which has been prescribed in clause 14 continue tobind the flat purchaser indefinitely irrespective of the length of the delay?The agreement stipulates thirty-six months as the date for the handingover of possession. Evidently, the terms of the agreement have beendrafted by the developer. They do not maintain a level platform as betweenthe developer and purchaser. The stringency of the terms which bindthe purchaser are not mirrored by the obligations for meeting times linesby the developer. The agreement does not reflect an even bargain.

23. On behalf of the flat purchasers it has been urged by Mr.R Balasubramanian (a submission which has not been controverted inrejoinder) that 95 per cent of the purchase price was paid during thecourse of the first two and a half to three years. The agreement did notstipulate that the developer would pay any interest on the amount whichhad already been received. A large chunk of the purchase price was A

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Athus available to the developer to complete construction. The court musttake a robust and common-sense based approach by taking judicial noticeof the fact that flat purchasers obtain loans and are required to payEMIs to financial institutions for servicing their debt. Delays on the partof the developer in handing over possession postpone the date on whichpurchasers will obtain a home. Besides servicing their loans, purchasersBhave to finance the expenses of living elsewhere. To postulate that aclause in the agreement confining the right of the purchaser to receivecompensation at the rate of Rs 5 per square foot per month (Rs 7,500per month for a flat of 1500 square feet) precludes any other claimwould be a manifestly unreasonable construction of the rights andCobligations of the parties. Where there is a delay of the nature that hastaken place in the present case ranging between periods of two yearsand four years, the jurisdiction of the consumer forum to award reasonablecompensation cannot be foreclosed by a term of the agreement. Theexpression deficiency of services is defined in Section 2 (1) (g) of theCP Act 1986 as:D

“(g) “deficiency” means any fault, imperfection, shortcoming orinadequacy in the quality, nature and manner of performance whichis required to be maintained by or under any law for the timebeing in force or has been undertaken to be performed by a personin pursuance of a contract or otherwise in relation to any service”E

24. A failure of the developer to comply with the contractualobligation to provide the flat to a flat purchaser within a contractuallystipulated period amounts to a deficiency. There is a fault, shortcomingor inadequacy in the nature and manner of performance which has beenundertaken to be performed in pursuance of the contract in relation toFthe service. The expression „service in Section 2 (1) (o) means a serviceof any description which is made available to potential users includingthe provision of facilities in connection with (among other things) housingconstruction. Under Section 14(1)(e), the jurisdiction of the consumerforum extends to directing the opposite party inter alia to remove theGdeficiency in the service in question. Intrinsic to the jurisdiction whichhas been conferred to direct the removal of a deficiency in service is theprovision of compensation as a measure of restitution to a flat buyer forthe delay which has been occasioned by the developer beyond the periodwithin which possession was to be handed over to the purchaser. Flatpurchasers suffer agony and harassment, as a result of the default ofH

the developer. Flat purchasers make legitimate assessments in regard tothe future course of their lives based on the flat which has been purchasedbeing available for use and occupation. These legitimate expectationsare belied when the developer as in the present case is guilty of a delayof years in the fulfilment of a contractual obligation. To uphold thecontention of the developer that the flat buyer is constrained by theterms of the agreed rate irrespective of the nature or extent of delaywould result in a miscarriage of justice. Undoubtedly, as this court heldin Dhanda, courts ordinarily would hold parties down to a contractualbargain. Equally the court cannot be oblivious to the one-sided nature ofABAs which are drafted by and to protect the interest of the developer.Parliament consciously designed remedies in the CP Act 1986 to protectconsumers. Where, as in the present case, there has been a gross delayin the handing over of possession beyond the contractually stipulateddebt, we are clearly of the view that the jurisdiction of the consumerforum to award just and reasonable compensation as an incident of itspower to direct the removal of a deficiency in service is not constrainedby the terms of a rate which is prescribed in an unfair bargain.

25. Numerous judgments of this Court have elaborated on thenature and extent of the jurisdiction of the consumer forum to award justand reasonable compensation. Since the decision of this Court inLucknow Development Authority v. M K Gupta[16], it has been asettled principle of law that the jurisdiction of the consumer forum extendsto the award of compensation to alleviate the harassment and agony toa consumer. In Balbir Singh[17], a two judge Bench of this Court, whileexplaining the ambit of the jurisdiction of the adjudicatory fora under theCP Act 1986 observed:

“6…The word compensation is of a very wide connotation. Itmay constitute actual loss or expected loss and may extend tocompensation for physical, mental or even emotional suffering,insult or injury or loss. The provisions of the Consumer ProtectionAct enable a consumer to claim and empower the Commission toredress any injustice done. “

26. The court observed that the award of compensation has to bebased on a finding of loss or injury and must correlate to it. The courtobserved that no “hard and fast rule” could be prescribed:

16 (1994) 1 SCC 24317 (2004) 5 SCC 65

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A“8…No hard-and-fast rule can be laid down, however, a fewexamples would be where an allotment is made, price is received/paid but possession is not given within the period set out in thebrochure. The Commission/Forum would then need to determinethe loss. Loss could be determined on basis of loss of rent whichcould have been earned if possession was given and the premisesBlet out or if the consumer has had to stay in rented premises thenon basis of rent actually paid by him. Along with recompensingthe loss the Commission/Forum may also compensate forharassment/injury, both mental and physical.’’

Where possession has been given, one of the circumstances whichCmust be factored in is that the purchaser has been compensated by theincrease in the value of the property.

27. In R V Prasannakumaar v. Mantri Castles Pvt Ltd[18] underthe terms of the ABA, possession of the flats was to be handed over tothe buyers on 31 January 2014. However, the developer received anDoccupation certificate only on 10 February 2016 and it was thereafterfrom May 2016 that the developer started issuing letters offeringpossession. Based on this, the NCDRC awarded compensation in theform of interest at the rate of 6 per cent per annum. The developer hadpleaded that since the agreement provided compensation at the rate ofERs. 3 per square foot per month for delayed possession, the purchaserswere 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 therate which has been stipulated by the developer, of compensationFat the rate of 3 per sq. ft. per month does not provide just orreasonable recompense to a flat buyer who has invested moneyand has not been handed over possession as on the stipulateddate of 31 January 2014. To take a simple illustration, a flat buyerwith an agreement of a flat admeasuring a 1000 sq. ft. wouldreceive, under the agreement, not more than Rs. 3000/- per month.GThis in a city such as Bangalore does not provide just or adequatecompensation. The jurisdiction of the NCDRC to award justcompensation under the provisions of the Consumer ProtectionAct, 1986 cannot in the circumstances be constrained by the terms of the agreement. The agreement in its view is one sided anddoes not provide sufficient recompense to the flat purchasers.”

The Court observed that there was a delay of two years andhence the award of interest at the rate of 6 per cent was reasonable andjustified.

28. In Pioneer Urban Land and Infrastructure Limited v.Govindan Raghavan[19], there was a delay of almost two years inobtaining an occupancy certificate after the date stipulated in the ABA.As a consequence, there was a failure to provide possession of the flatto the purchaser within a reasonable period. This Court dwelt on theterms of the ABA under which the builder was entitled to charge interestat 18 per cent per annum for the delay in payment of instalments by thepurchaser. On the other hand, the failure to provide possession on thepart of the developer was subject to a grace period of twelve monthsfollowed by a termination notice of ninety days and a further period ofninety days to the developer to effect a refund. Adverting to these clauses,the court noted:

“6.4. A perusal of the apartment buyer’s agreement dated 8-5-2012 reveals stark incongruities between the remedies availableto both the parties. For instance, Clause 6.4(ii) of the agreemententitles the appellant builder to charge interest @18% p.a. onaccount of any delay in payment of instalments from the respondentflat purchaser. Clause 6.4(iii) of the agreement entitles theappellant builder to cancel the allotment and terminate theagreement, if any instalment remains in arrears for more than 30days. On the other hand, as per Clause 11.5 of the agreement, ifthe appellant builder fails to deliver possession of the apartmentwithin the stipulated period, the respondent flat purchaser has towait for a period of 12 months after the end of the grace period,before serving a termination notice of 90 days on the appellantbuilder, and even thereafter, the appellant builder gets 90 days torefund only the actual instalment paid by the respondent flatpurchaser, after adjusting the taxes paid, interest and penalty ondelayed payments. In case of any delay thereafter, the appellantbuilder is liable to pay interest @9% p.a. only.

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A6.5. Another instance is Clause 23.4 of the agreement which entitlesthe appellant builder to serve a termination notice upon therespondent flat purchaser for breach of any contractual obligation.If the respondent flat purchaser fails to rectify the default within30 days of the termination notice, then the agreement automaticallystands cancelled, and the appellant builder has the right to forfeitBthe entire amount of earnest money towards liquidated damages.On the other hand, as per Clause 11.5(v) of the agreement, if therespondent flat purchaser fails to exercise his right of terminationwithin the time limit provided in Clause 11.5, then he shall not beentitled to terminate the agreement thereafter, and shall be boundCby 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 isshown that the flat purchasers had no option but to sign on thedotted line, on a contract framed by the builder. The contractualDterms of the agreement dated 8-5-2012 are ex facie one-sided,unfair and unreasonable. The incorporation of such one-sidedclauses in an agreement constitutes an unfair trade practice asper Section 2(1)(r) of the Consumer Protection Act, 1986 since itadopts unfair methods or practices for the purpose of selling theEflats by the builder.”

The Court observed that in these circumstances, the flat purchaserscould not be compelled to obtain possession which was offered almosttwo years after the grace period under the agreement had expired. Hence,the NCDRC was held to have correctly awarded interest at the rate ofF10 percent per annum.

29. The decision of this Court in Dhanda[20] has been relied uponby learned Senior Counsel appearing on behalf of the developer aselucidating the principle that where a flat buyers agreement stipulates aconsequence for delayed possession, exceptional and strong reasonsmust be established before the forum constituted under the Act of 1986Gawards compensation in addition to what has been contractually agreed.In Dhanda’s case, the SCDRC issued a direction for handing overphysical possession of the residential unit to the complainant and forexecution of a sale deed. In addition, compensation was awarded by

way of interest at the rate of 12 per cent per annum with effect fromtwelve months after the stipulated date under the agreement. In an appealby the developer, the NCDRC directed that the rate of interest for ahouse building loan for the corresponding period in a scheduled nationalisedbank 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 ofRs. 1 lac per annum from the date for handing over possession to theactual date of possession was regarded as appropriate in the facts of thecase. In that case under the terms of the buyers agreements, possessionwas to be delivered within twenty-four months of the execution of theagreement i.e. 10 February 2013 – failing which the developer was liableto pay compensation at the rate of Rs. 10 per square foot per month forthe delay. The developer contended that construction activities weredelayed as a result of an injunction granted by this Court over a period ofeight months and consequently sought an extension of the period forhanding over possession by one year. Alternatively, the developer offeredto refund the money deposited with interest at 9 per cent per annum.Construction of 258 independent floors was completed while about 1,500units were nearing completion. In two sets of Civil Appeals which cameup before this Court earlier, agreed terms were arrived at providing forthe award of interest at 9 per cent per annum from the date of deposit tillrefund. While considering the order of the NCDRC, this Court observed:

“16. The District Forum under the Consumer Protection Act, 1986is empowered inter-alia to order the opposite party to pay suchamount as may be awarded as compensation to the consumer forany loss or injury suffered by the consumer due to the negligenceof the opposite party including to grant punitive damages. But theforums under the Act cannot award interest and/or compensationby applying rule of thumb. The order to grant interest at themaximum of rate of interest charged by nationalised bank foradvancing home loan is arbitrary and no nexus with the defaultcommitted. The appellant has agreed to deliver constructed flats.For delay in handing over possession, the consumer is entitled tothe consequences agreed at the time of executing buyer’sagreement. There cannot be multiple heads to grant of damagesand interest when the parties have agreed for payment of damagesat the rate of Rs. 10/- per sq. ft. per month. Once the partiesagreed for a particular consequence of delay in handing over ofpossession then, there has to be exceptional and strong reasons AB

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Afor the SCDRC/NCDRC to award compensation at more thanthe agreed rate.”

30. The orders of the SCDRC and NCDRC were held to bewithout any foundation being led by the complainant and based purelyon a “rule of thumb”. The court noted that the amount of interestBrepresents compensation to the beneficiaries who are deprived of theuse of the investment which has been made and will take into its ambit the consequence of a delay in not handing over possession. The courtheld that both the SCDRC and NCDRC awarded compensation underdifferent heads on account of a singular default of not handing overpossession. This was held not to be sustainable. The court held that:C

“19. Thus, we find that the complainant is entitled to interest fromthe Appellant for not handing over possession as projected as isoffered by it but it is not a case to award special punitive damagesas one of the causes for late delivery of possession was beyondthe control of the Appellant. Therefore, in view of the settlementDproposal submitted by the Appellant in earlier two set of appealsin 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 theComplainants along with offer of possession. The AppellantEshall also direct the Jones Lang LaSalle - the real estatemaintenance agency, engaged by the Appellant to undertakesuch maintenance works as is necessary on account of damagedue to non-occupation of the flats after construction etc.

ii) It shall be open to the Complainants to seek the assistance ofFthe maintenance agency to attend to the maintenance workwhich may arise on account of non-occupation or on accountof natural vagaries.

iii) Such maintenance work shall be completed by the Appellantwithin two months of the offer of possession but the paymentGof interest at the rate of 9 per cent per annum will be for aperiod of two months from the date of offer of possession in allsituations.

v) Since the Complainants have been forced to invoke jurisdictionof the consumer forums, they shall be entitled to consolidatedHamount of Rs. 50,000/- in each complaint on all accounts such

as mental agony and litigation expenses etc. The complainantshall not be entitled to any other amount over and above theamount mentioned above.

vi)In case, the original allottee has transferred the flat, thetransferee shall be entitled to interest at the rate of 9 per centper annum from the date of expiry of three years from theagreement or from the date of transfer, whichever is later.”

31. The judgment in Dhanda’s case does not prescribe an absoluteembargo on the award of compensation beyond the rate stipulated in theflat buyers agreement where handing over of the possession of a flathas been delayed. Dhanda’s case was preceded by consent terms whichwere presented before this Court in two earlier civil appeals under whichinterest at the rate of 9 per cent had been granted. The decision laysdown that the award of interest cannot be arbitrary and without nexus tothe default which has been committed. Hence, the award of interest atthe maximum rate of interest charged by a nationalised bank for advancinghome loans was construed to be arbitrary. It was in this context that thecourt observed that the parties having agreed to a consequence for delay,exceptional and strong reasons must exist for the consumer fora to departfrom the agreed rate. The decision, in other words, does not lay downthat there is an absence of jurisdiction in the adjudicatory fora constitutedunder the CP Act 1986 to award remedial compensation to a flat buyerfor the delay of the developer in handing over possession on the agreeddate.

32. In the present case, there exist, clear and valid reasons for notholding down the flat buying consumers merely to the entitlement toreceive compensation at the rate of 5 per square foot per month in termsof clause 14 of the ABA:

(i) There has been a breach on the part of the developer incomplying with the contractual obligation to hand overpossession of the flats within a period of thirty-six months ofthe date of the agreement as stipulated in clause 11(a);

(ii) The failure of the developer to hand over possession withinthe contractually stipulated period amounts to a deficiency ofservice within the meaning of Section 2 (1) (g), warrantingthe invocation of the jurisdiction vested in the NCDRC toissue a direction for the removal of the deficiency in service; A

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A(iii) The triggering of an obligation to pay compensation on theexistence of delay in handing over possession is admitted bythe developer for, even according to it, it has adjustedcompensation at the agreed rate of Rs 5 per square foot permonth to 145 out of the 171 appellants; B(iv) The agreement is manifestly one-sided: the rights provided tothe developer for a default on the part of the home buyer arenot placed on an equal platform with the contractual rightprovided to the home buyer in the case of a default by thedeveloper; C(v) There has been a gross delay on the part of the developer incompleting construction ranging between two and four years.Despite successive extensions of time to deliver possessionsought by the developer, possession was not delivered on time;

(vi) The nature and quantum of the delay on the part of theDdeveloper are of such a nature that the measure ofcompensation which is provided in clause 14 of the ABA wouldnot provide sufficient recompense to the purchasers; and

(vii) Judicial notice ought to be taken of the fact that a flat purchaserwho is left in the lurch as a result of the failure of the developerEto provide possession within the contractually stipulated datesuffers consequences in terms of agony and hardship, not theleast of which is financial in nature. Having paid a substantialamount of the purchase price to the developer and beingrequired to service the debt towards loan installments thepurchaser is unable to obtain timely possession of the flatFwhich is the subject matter of the ABA.

But, it has been submitted by the developer – a submission whichfound acceptance by the NCDRC – that the execution of the Deed ofConveyance by a flat purchaser precludes a consumer claim being raisedfor delayed possession. During the course of the proceedings before theGNCDRC, the flat purchasers relied upon the communications which wereissued by the developer to demonstrate that the purchasers were notpermitted by the developer to execute a Deed of Conveyance or to takepossession under protest. The material which was produced before theNCDRC supports this submission, which was urged before the Court byMr Prashant Bhushan, learned Counsel. By a communication dated 16H

February 2016, the developer informed a flat buyer that in terms of theABA, the allottee is required to take possession of the apartment bymaking payments and executing documentation after the developer hasobtained a certificate for occupation from the competent authority andhas offered possession of the apartment to the allottee. The developerstated:

“We may also like to bring to your notice, that if the acceptanceof offer of possession terms is being conveyed by the allotteeunder protest the Company will not be in a position to hand overthe possession and execute the Conveyance Deed and as suchyour request to take over the possession and execute thedocuments under protest is untenable.”

33. By an email dated 24 December 2016, another flat buyer wasinformed that:

“It would be a pleasure to progress with possession once yousubmit the affidavit. However we can’t accept any documentsto this effect under protest or claim of coercion. This affidavithas to be unconditionally submitted and possession taken.”

By another communication dated 21 December 2016, a flatpurchaser was informed that:

“It was explained to you in our FDN itself and our earlier reply/clarifications, that any kind of protest ‘is not tenable if youwish to take possession and register the property as well. Kindlyexecute the affidavit as advised and proceed for further processon registering the property.”

By a communication dated 1 December 2016, the developerinformed a flat purchaser that

“Your letter that you took possession and executed thedocuments under protest is untenable and unacceptable andthe company will not be in a position to execute the conveyancedeed under protest.”

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. Thoughthese are four communications issued by the developer, the appellants A

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Asubmitted that they are not isolated aberrations but fit into a pattern. Thedeveloper does not state that it was willing to offer the flat purchaserspossession of their flats and the right to execute conveyance of the flatswhile reserving their claim for compensation for delay. On the contrary,the tenor of the communications indicates that while executing the Deedsof Conveyance, the flat buyers were informed that no form of protest orBreservation would be acceptable. The flat buyers were essentiallypresented with an unfair choice of either retaining their right to pursuetheir claims (in which event they would not get possession or title in themeantime) or to forsake the claims in order to perfect their title to theflats for which they had paid valuable consideration. In this backdrop,Cthe simple question which we need to address is whether a flat buyerwho seeks to espouse a claim against the developer for delayedpossession can as a consequence of doing so be compelled to defer theright 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 forcompensation for delayed handing over of possession, the purchaserDmust indefinitely defer obtaining a conveyance of the premises purchasedor, if they seek to obtain a Deed of Conveyance to forsake the right toclaim compensation. This basically is a position which the NCDRC hasespoused. We cannot countenance that view.

35. The flat purchasers invested hard earned money. It is onlyEreasonable to presume that the next logical step is for the purchaser toperfect the title to the premises which have been allotted under the termsof the ABA. But the submission of the developer is that the purchaserforsakes the remedy before the consumer forum by seeking a Deed ofConveyance. To accept such a construction would lead to an absurdFconsequence of requiring the purchaser either to abandon a just claim asa condition for obtaining the conveyance or to indefinitely delay theexecution of the Deed of Conveyance pending protracted consumerlitigation.

36. It has been urged by the learned counsel of the developer thatGa consequence of the execution of the Deed of Conveyance in the presentcase is that the same ceases to be a transaction in the nature of “supplyof services” covered under the CP Act 1986 and becomes a mere saleof immovable property which is not amenable to the jurisdiction ofConsumer Fora. In Narne Construction (P) Ltd. v. Union of India[21],H21 (2012) 5 SCC 359

this Court distinguished between a simple transfer of a piece of immovableproperty and housing construction or building activity carried out by aprivate or statutory body falling in the category of „service within themeaning of Section 2 (1) (o) of the CP Act 1986. This Court held that:

“8. Having regard to the nature of transaction between the appellantCompany and its customers involved much more than a simpletransfer of a piece of immovable property it is clear the sameconstitutes “service” within the meaning of the Act. It was notthe case that the appellant Company was selling the given propertywith all its advantages and/or disadvantages on “as is where is”basis, as was the position in UT Chandigarh Admn v. AmarjeetSingh. It is a case where a clear-cut assurance was made to thepurchasers as to the nature and extent of development that wouldbe carried out by the appellant Company as a part of packageunder which a sale of fully developed plots with assured facilitieswas made in favour of the purchasers for valuable consideration.To the extent the transfer of site with developments in the mannerand 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 itaccountable before the competent Consumer Forum at theinstance of consumers like the respondents.”

The developer in the present case has undertaken to provide aservice in the nature of developing residential flats with certain amenitiesand remains amenable to the jurisdiction of the Consumer Fora.Consequently, we are unable to subscribe to the view of the NCDRCthat flat purchasers who obtained possession or executed Deeds ofConveyance have lost their right to make a claim for compensation forthe delayed handing over of the flats.

37. However, the cases of the eleven purchasers who enteredinto 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 beappropriate if their cases are excluded from the purview of the presentorder. These eleven flat purchasers having entered into specific deedsof settlement, it would be only appropriate and proper if they are helddown to the terms of the bargain. We are not inclined to accept thecontention of the learned counsel of the appellants, Mr. Prashant Bhushan,that the settlement deeds were executed under coercion or undue A

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38. Similarly, the three appellants who have transferred their title,right and interest in the apartments would not be entitled to the benefit ofthe present order since they have sold their interest in the apartments toBthird parties. The written submissions which have been filed before thisCourt indicate that “the two buyers stepped into the shoes of the firstbuyers” as a result of the assignment of rights and liabilities by the firstbuyer in favour of the second buyer. In HUDA v. Raje Ram[22], thisCourt while holding that a claim of compensation for delayed possessionby 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 theappellant in the years 1994, 1997 and 1996 respectively. Theywere aware, when the plots were re-allotted to them, that therewas delay (either in forming the layout itself or delay in deliveringDthe allotted plot on account of encroachment etc). In spite of it,they took re-allotment. Their cases cannot be compared to casesof original allottees who were made to wait for a decade or morefor delivery and thus put to mental agony and harassment. Theywere aware that time for performance was not stipulated as theEessence of the contract and the original allottees had acceptedthe delay.”

Even if the three appellants who had transferred their interest inthe apartments had continued to agitate on the issue of delay of possession,we are not inclined to accept the submission that the subsequentFtransferees can step into the shoes of the original buyer for the purposeof benefiting from this order. The subsequent transferees in spite ofbeing aware of the delay in delivery of possession the flats, had purchasedthe interest in the apartments from the original buyers. Further, it cannotbe said that the subsequent transferees suffered any agony andharassment comparable to that of the first buyers, as a result of theGdelay 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 described as “DLF Westend Heights”, New Town. This was describedas “the premier choice for Bangalore living…a premium residentialenclave featuring spacious apartments with a rich selection of amenities.”Westend Heights at New Town was described as a project which wasbeing developed on a land area of 27.5 acres. The brochure specificallyreferred to the amenities being provided. Among them were (i) “Themost exclusive club in Bangalore”; (ii) a swimming pool; (iii) gymnasium/aerobics centre; and (iv) a restaurant and Bar together with other sportsfacilities. Besides this, the brochure contained a representation of thesetting up of a convenience shopping centre with an array of outlets, arenowned 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 onthe allottees states that this liability will be proportionate to the ratio ofthe super area of the apartment to the total super area of all the apartmentsand other “shops, clubs etc” in the said complex.

The grievance in regard to the alleged failure of the developer toprovide amenities may be divided into two segments:

(i) The club house; and

(ii) Other amenities

Club house

40. The developer has stated before the court that a club housecontaining appurtenant facilities including a swimming pool, gymnasium,billiards room, tennis court, indoor badminton court, squash court andcommunity hall has been fully constructed and an occupation certificatehas been received on 13 May 2019. The developer has stated that underthe building regulations, it has to handover 5 per cent of the area of thegroup housing complex to BDA as a civic amenities (“CA”) area. TheRWA 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 forconstruction of the club. The developer relinquished the CA area in favourof the BDA, constituted an RWA and applied to BDA on 22 June 2010for the allotment of the CA site in favour of the RWA. The writtensubmissions indicate that a dispute over the charges demanded by BDAtowards lease rent led to a writ petition before the Karnataka High Courtbeing instituted both by the developer and the RWA which was allowedon 29 June 2015. The developer submitted a building plan to the municipalbody. A second writ petition had to be filed in which the High Court on A

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A18 October 2016 directed the municipal body to proceed with the approvalof the building plans. Sanction for the building plan was received on 18May 2017 and after construction of the club building, an occupationcertificate was received on 13 May 2019. The developer has stated thatit has been following up with BDA to permit them to hand over possessionand management of the club to the RWA. Since permission of BDA hasBstill not been received legal action is contemplated again. The developerhas produced photographs depicting the amenities which have beenprovided within the precincts of the club house. Membership fees forthe club are stated to have been received in the account of the RWA andnot in the account of the developer. The position which has been statedCbefore the court as elucidated above has not been disputed by counselfor the appellants. Hence, we find that there has been no breach by thedeveloper of the obligation to provide a constructed facility of a club forthe RWA.

Other amenities

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41. As regards the other amenities, the defence of the developeris that these were to be developed as an integral element of the entiretownship of 80 acres of which the project admeasuring 27 acres(comprised in Westend Heights) was a part. The ABA stipulates thatallottees of the complex have no right, title and interest in respect of theEamenities or facilities outside the residential complex, which lie withinthe larger township. According to the developer, no part of theconsideration which was paid by allottees, including the appellants, wastowards the amenities and facilities falling outside the boundary of thecomplex. In this regard, the developer relies on the following stipulationaccepted by allottees under clause 5 of the Booking Application Form:F

“The applicant confirms and represents that he has not made anypayment to the Company in any manner whatsoever and that theCompany has not indicated / premised / represented / given anyimpression of any kind in an explicit or implicit manner whatsoever,that the Applicant shall have any right, title or interest of any inGwhatsoever in any lands, buildings, common areas, facilities andamenities 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 notentitled to or has not paid for the lands outside the said land/said H

complex whether the same is within said project or other. Thesaid project would comprise of many complexes similar on differentto said complex. Allottee has not paid any amount towards anyother lands, areas, facilities and amenities including but not limitedto those listed below, and as such, the allottee shall have no rightinterest of any nature whatsoever in the same and the same arespecifically excluded from the scope of this agreement. The allotteeacknowledges that the ownership of such land and facilities andamenities shall vest solely with the company/LDC and its associatecompanies subsidiaries and they alone shall have sole right andabsolute authority to deal with the same including their usage andmanner/method of use, disposal etc. creation of rights in favourof 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 flatpurchasers have no right, title or interest in respect of the amenitieswhich were to be constructed by the developer as a part of the largertownship of New Town. The entire area comprised 80 acres of whichWestend Heights was situated on 27 acres. The absence of a title orinterest in the flat purchasers in the amenities to be provided outside thearea of 27 acres begs the question as to whether there was a breach ofa clear representation which was held out to the flat purchasers by thedeveloper. A deficiency under Section 2(1)(g) means a fault, imperfection,shortcoming or inadequacy in the quality, nature and manner ofperformance. This may be required to be maintained under law or maybe undertaken to be performed in pursuance of a contract or otherwisein relation to any service. The builder invited prospective flat purchasersto invest in the project of Westend Heights on the basis of a clearrepresentation that the surrounding area of New Town situated on 80acres was being developed to provide a wide range of amenities includinga shopping centre, health care facilities and an early learning school.The developer has failed to provide these amenities. In the reply, thedeveloper has stated that:

“It is stated that School, Commercial Complex and Health clinicare part of the facility which will be provided upon the completionof the Whole New Town project as these facilities, with existingpopulation cannot sustain these facilities. Every matter has to beadjudicated in light of its own facts and circumstance…”

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AIn the written submissions of the developer, the failure to providethe amenities is sought to be glossed over by contending that:

“…the issue of these facilities has since become completelyacademic since the area around the DLF Township has alreadybecome totally urbanized and well developed thanks in largerBmeasure due to the DLFs activities in the area and there are nowmany proximate hospitals, schools, shopping areas that havemushroomed in the immediate vicinity and neighbourhood of theDLF Township which are in fact being regularly and convenientlyused by the residents of the DLF residential complex which includethe Appellants herein. As such, there is no loss or claim for anyCdamages that could be said to have accrued to the Appellantseither under the ABA or otherwise under this alleged head ofclaim.”

43. In other words, what the developer holds out as a defence isthat though there has been a failure on their part to provide the amenities,Dthe flat buyers have the benefit of facilities in the surrounding area whichhas become urbanised. We cannot agree with this line of submissions.The reply of the developer seeks to explain the failure to construct thefacilities on the ground that the “existing population cannot sustain thesefacilities” – a school, commercial complex and health care facilities.EThis is a case involving an experienced developer who knew the natureof the representation which was being held out to the flat purchasers.Developers sell dreams to home buyers. Implicit in their representationsis that the facilities which will be developed by the developer will provideconvenience of living and a certain lifestyle based on the existence ofthose amenities. Having sold the flats, the developer may find itFeconomically unviable to provide the amenities. The flat purchaserscannot be left in the lurch or, as in the present case, be told that theabsence of facilities which were to be provided by the developer iscompensated by other amenities which are available in the area. Thedeveloper must be held accountable to its representation. A flat purchaserGwho invests in a flat does so on an assessment of its potential. Theamenities which the builder has committed to provide impinge on thequality of life for the families of purchasers and the potential forappreciation in the value of the flat. The representation held out by thedeveloper cannot be dismissed as chaff. True, in a situation such as thepresent it may be difficult for the court to quantify the exact nature ofH

the compensation that should be provided to the flat buyers. The generalappreciation in land values results in an increase in the value of theinvestment made by the buyers. Difficulties in determining the measureof compensation cannot however dilute the liability to pay. A developerwho has breached a clear representation which has been made to thebuyers of the amenities which will be provided to them should be heldaccountable to the process of law. To allow the developer to escapetheir obligation would put a premium on false assurances andrepresentations made to the flat purchasers. Hence, in factoring in thecompensation which should be provided to the flat buyers who areconcerned in the present batch of appeals, we would necessarily haveto bear this issue in mind.

Tax

44. The ABA contained specific provisions in regard to the paymentof taxes.

Clause 1.3 of the ABA provided:

“1.3 The Allottee shall make the payment of the Total price as perthe payment plan set out in annexure -III of this Agreement. Othercharges, securities, payments etc. (as specified in this Agreement),Taxes and increase thereof (as provided in clause 1.10) shall bepayable by the Allottee, as and when demanded by the Company.”

Clause 1.10 contained a specific provision in regard to theobligation of the allottee to pay taxes in addition to the total price. Clause1.10 provided:

“1.10. The Allottee agrees and understands that in addition toTotal price, the Allottee shall be liable to pay the Taxes, whichshall be charged and paid as under:

a) A sum equivalent to the proportionate share of Taxes shall bepaid by the Allottee to the Company. The Proportionate shareshall be the ratio of the Super Area of the said Apartment to thetotal super area of all the apartments other buildings shop, clubetc. 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 aCharteredꞏ Accountant, the amount payable as stated above whichshall be final and binding on the Allottee and the Allottee shall A

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make payment of such amount within 30 (thirty days) of suchintimation.”

The ABA also contains the following provisions:

“2. Payment for taxes on land, wealth-tax, cesses etc. by Allottee: -

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The Allottee agrees and confirms to pay all Government rates,tax on land, municipal tax, property taxes, wealth tax, Buildingand Other Construction Workers Welfare Fund (Cess),taxes,one time building tax, luxury tax if any, fees or levies of all andany kind by whatever name called, whether levied or Leviablenow or in future by the Government or municipal authority orany other governmental authority on the Said Complex and Ior the Said Building or land appurtenant thereto as the casemay be as assessable or applicable from the date of theApplication if the Said Apartment is assessed separately and ifthe Said Apartment is not assessed separately then the Allotteeshall pay directly to the concerned authority and if the same islevied on or paid by the Company or the Allottee then the sameshall be borne and paid by the Allottee on pro-rata basis andsuch determination of proportionate share by the Company anddemand shall be final and binding on the Allottee. However, ifthe Said Apartment is assessed separately the Allottee shallpay directly to the Government Authority.

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3. Amount paid by Allottee with Application The Allottee has paid a sum of Rs. 3,00,000/- (Rupees 3 LakhsFonly) alongwith the Application, the receipt of which theCompany doth hereby acknowledge and the Allottee agrees topay the remaining price of the Said Apartment as prescribed inschedule of payments (Annexure-III) attached with thisAgreement along with all other charges, Taxes, securities etc.as mentioned in this Agreement and as per the de-mand raisedGby 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 wayof value added tax (VAT), state sales tax, central sales tax, H

works contract tax, service tax, cess, levies and educationalcess and any other taxes levies, charges by whatever namecalled levied and collected by Government Agency inconnection with Development / construction of the SaidApartment/Said Building/Said Complex.”

The expression total price is also defined in the ABA so as to beexclusive inter alia of taxes.

45. The two certificates of the Chartered Accountant issued on26 July 2013 and 9 August 2014 indicate that taxes inclusive of interesthave been recovered. According to the appellants, the builder admittedthat it had “not properly discharged” his liability towards taxes for aperiod of thirty-six months between 2011-2012 and 2013-2014 and thattax 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 onaccount of the default of the developer in discharging the tax liability ontime cannot be fastened upon the buyers.

46. On behalf of the developer it has been submitted that whenconstruction commenced in 2009, there was an absence of clarity onwhether works contract tax was liable to be paid in relation to agreementsbetween owners-developers and allottees of apartments where theapartments were to be delivered in future. In 2013, this Court deliveredits judgment in Larsen and Toubro Limited v State of Karnataka[23]as a result of which the liability towards works contract tax wasadjudicated upon. Consequently, while computing the amount payable inthe final statements of accounts, the developer passed on the interestburden but not the penalty on a proportionate basis in terms of clause1.10. The allottees were required to pay their proportionate share of theworks contract tax in terms of the ABA and the final demand was raisedat the time of the offer of possession.

47. The specific conditions contained in the ABA clearly imposedthe 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.The developer has offered an explanation of why as a result of pendinglitigation, the dues towards works contract tax were not paid earlier.Indeed, if they were paid earlier, the purchasers would have been requiredto reimburse their proportionate share of taxes earlier as well. No part A

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Aof the penalty imposed on the developer has been passed on to thepurchasers. In view of the terms of the ABA and the explanation whichhas been submitted by the developer, there is no deficiency of service inregard to the demand of interest payable on the tax which was requiredto be deposited with the revenue.

BElectricity

48. The submission by Mr. R. Balasubramanian, learned SeniorCounsel is that the initial collection of Rs. 1.50 lacs from each buyertowards BESCOM /BWSSB charges for electricity and water areadmitted. Subsequently, invoking clause 23(b) of the ABA, the developerCcollected two lacs from each buyer towards additional electricity charges.The appellants contest the entitlement of the developer to claim thesecharges.

Clause 23(b) of the ABA is in the following terms:

“23. (b) Payments and other charges for bulk supply of electricalDenergy If Company or the Maintenance Agency decides to apply for andthereafter receives permission from BESCOM or from any otherbody / commission/ regulator/ licensing authority constituted bythe Government of Karnataka for such purpose, to receive andEdistribute bulk supply of electrical energy in the Said Project/SaidComplex then the Allottee undertakes to pay on demand to theCompany proportionate share as may be determined by theCompany of all payments and charges paid/ payable by theCompany or the Maintenance Agency to BESCOM…TheFproportionate share of cost incurred by the Company for creatinginfrastructure like HT feeder, EHT sub stations etc shall also bepayable by the Allottee on demand.”

49. According to the developer, initially an electricity connectionwas provided by BESCOM without insisting on the requirement of anelectric sub-station. Subsequently as occupation certificates wereGreceived for additional towers, BESCOM required a dedicated electricsub-station which was constructed by the developer at a cost of Rs.18.01 crores. The pro rata cost for setting up this additional infrastructurewas, according to the developer, payable by the allottees. When offersfor possession were issued to the buyers, the following stipulation wasHcontained in the letter:

“Our initial effort was to obtain and energize the power supply tothe entire project of 1830 apartments through individual ll KVfeeders from Golahalli 66/llKV Substation. On this basis, thecosting for infrastructure towards provisioning of utilities as perclause 1.14, 1.15, 23(b) and JDC of ABA was estimated at rateRs. 127.96/sft., which was reflected in the Final Demand to DBlock customers. However, after a detailed evaluation of the loadrequirement for the project as per norms, BESCOM has nowstipulated that, in accordance with clause 3.2.4 of KERCRegulations, we establish a dedicated 66/11 kv Substation withinour project site to cater to the needs of the project, instead of theearlier proposed scheme of 11 Kv feeders from Golahalli. Theincrease 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 costrecovery towards provisioning of utilities to Rs. 188.00/sft. In viewof the above said amounts are being recovered on the basis ofprovisional estimates. On commissioning and energizing thesubstation, the company shall arrange a certificate fromindependent chartered accountant/ chartered engineer to arriveat the actual cost incurred. Your share of the said actual cost bythe Company shall be duly intimated to you accordingly. If it isfound that excess amount paid by you, over and above the actualcost incurred by the company, said excess amount so collectedshall be refunded to you without interest. If the actual expensesexceeds the estimated amount computed @Rs. 188/-sq. ft. thendemand for the shortfall amount shall be raised through furtherdemand on the owner of the property and shall be payable byyou. We would further like to bring to your kind attention that theprovision of 66/llKV substation will ensure better qualityuninterrupted power supply as compared with the previouslyplanned scheme of 11KV reeders.”

50. Mr. R. Balasubramanian, learned Senior Counsel contendsthat clause 23(b) relates to receiving and distributing the bulk supply ofelectrical 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 theentire New Town project and not for Westend Heights alone. In thiscontext it has also been submitted that distribution of electricity is AB

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Agoverned by the KERC Regulations 2006. While planning the project,the developer calculated the cost of the 66/11 KV sub-station and collectedcharges from each of the 1830 buyers. Hence, it has been submittedthat there was no requirement of additional bulk supply of electricity forthe nineteen hundred buyers. In this context, the formulation in the writtensubmissions is extracted below:B

“(under) regulation 3.02 (e) of KERC (Conditions of Supply ofElectricity by the Distribution Licensee) Regulations 2004, it ismandatory to set up 66 KV supply line/ KV substation if thedemands goes beyond 7500 KVA. Further under regulation 3.2.4KERC (Recovery of Expenditure for Supply of Electricity)CRegulations 2004 : “In case of layouts/buildings requiring powersupply and the requisitioned load is more than 7500 KVA, thedeveloper/ Applicant shall provide the space for erection of sub-station and also bear the entire charges of such a sub-station andassociated lines/equipments. The work shall be carried out eitherDby the Licensee duly recovering the charges as per estimate orby the Applicant himself through appropriate class of licensedcontractor by paying 10% of the estimate as supervision chargesto the Licensee.”

51. The NCDRC has upheld the collection of the charges towardsEelectricity based on the terms of the ABA. There is no infirmity in thefinding of the NCDRC, which is based on the provisions contained inclause 23(b) of the ABA. The charges recovered are not contrary towhat was specified in the contract between the parties.

ParkingF

52. The appellants seek a refund of an amount of Rs. 2.25 lacscollected from each buyer towards car parking. The submission is thatunder Section 3(f) of the Karnataka Apartment Ownership Act 1972[24] ,common areas and facilities include parking areas. According to theappellants, the flat buyers had already paid for the super area in terms ofGclause 1.6 of ABA including common areas and facilities which wouldbe deemed to include car parking under the KAO Act. The relevantportion of clause 1.6 is extracted below:

“1.6. The Allottee agrees that the Total price of the said Apartmentis calculated on the basis of its Super Area only (as indicated in H24 “KAO Act”

clause 1.1.) except the parking space, additional car parkingspace which are based on fixed valuation….”(emphasis supplied)

53. We are unable to accede to the above submission. The ABAcontained a break-up of the total price of the apartment. Parking chargesfor exclusive use of earmarked parking spaces were separately includedin the break-up. The parking charges were revealed to the flat buyers inthe brochure. The charges recovered are in terms of the agreement.

54. The decision of this Court in Nahalchand Laloochand PrivateLimited v. Panchali Cooperative Housing Society Limited[25] turnedon the provisions of the Maharashtra Ownership Flats Act 1971, asexplained in the subsequent decision of this Court in DLF Limited v.Manmohan Lowe[26]. The demand of parking charges is in terms of theABA and hence it is not possible to accede to the submission that therewas a deficiency of service under this head.

55. For the above reasons we have come to the conclusion thatthe dismissal of the complaint by the NCDRC was erroneous. The flatbuyers are entitled to compensation for delayed handing over ofpossession and for the failure of the developer to fulfil the representationsmade to flat buyers in regard to the provision of amenities. The reasoningof the NCDRC on these facets suffers from a clear perversity andpatent errors of law which have been noticed in the earlier part of thisjudgment. Allowing the appeals in part, we set aside the impugnedjudgment and order of the NCDRC dated 2 July 2019 dismissing theconsumer complaint. While doing so, we issue the following directions:

(i) Save and except for eleven appellants who entered into specificsettlements with the developer and three appellants who havesold their right, title and interest under the ABA, the first andsecond respondents shall, as a measure of compensation, pay anamount calculated at the rate of 6 per cent simple interest perannum to each of the appellants. The amount shall be computedon the total amounts paid towards the purchase of the respectiveflats with effect from the date of expiry of thirty-six months fromthe execution of the respective ABAs until the date of the offerof possession after the receipt of the occupation certificate; 25 (2010) 9 SCC 536

26 (2014) 12 SCC 231

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184SUPREME COURT REPORTS[2020] 9 S.C.R.

A(ii) The above amount shall be in addition to the amounts whichhave been paid over or credited by the developer at the rate of Rs5 per square foot per month at the time of the drawing of finalaccounts; and

(iii) The amounts due and payable in terms of directions (i) andB(ii) above shall be paid over within a period of one month from thedate of this judgment failing which they shall carry interest at therate 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.

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