NBCC (INDIA) LIMITED versus SHRI RAM TRIVEDI on 8 March 2021

[2021] 2 S.C.R. 280

SUPREME COURT REPORTS

[2021] 2 S.C.R.

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NBCC (INDIA) LIMITED

v.

SHRI RAM TRIVEDI

(Civil Appeal No 274 of 2020)

MARCH 08, 2021

B[DR. DHANANJAYA Y CHANDRACHUD AND

M. R. SHAH, JJ.]

Consumer Protection:

Allotment of residential unit by builder – Clause 20 of theCallotment letter stipulated for handing-over of the unit in two andhalf years and for compensation at the rate of Rs. 2 per sq. feet ofthe unit per month for the period of delay beyond one year form thestipulated date – Failure to hand-over the possession within thetime agreed upon – Consumer complaint – Consumer Commissiondirected the builder to pay compensation with 10% interest pa. onDthe amount deposited by the complainant from June 2015 till actualdate of possession i.e. on July 26, 2018 – Consumer Court alsoawarded an amount of Rs. 2 lakhs towards loss of rent andRs.25,000/- as costs – Appeal to Supreme Court – Held: Thecompensation @ Rs. 2/- per sq.ft. was one sided and constitutes anEunfair trade practice – As per clause 20 of allotment letter, the builderwas required to hand-over the possession within three and half years(including extention due to force majeure) which came to an end bythe end of December 2015 – Therefore, the interest would becomepayable from January 1, 2016 – In the light of prevailing marketconditions, rate of interest @ 10% pa. is excessive and therefore,Fthe rate is fixed at 7% pa. – Also, there was no justification toaward an amount of Rs. 2 lakhs, once interest for delayed handing-over of possession was granted – Order of Consumer Commissionmodified.

Words and Phrases:G“endeavour” – Meaning of.

Partly allowing the appeal, the Court

HELD: 1. Clause 20 of the letter of allotment provides thatthe appellant shall “endeavour” to complete the construction of H

the dwelling unit within two and a half years from the date of theletter of allotment. The expression ‘endeavour’ meant that theappellant would make an earnest effort to hand over possessionby that date. Even if the expression does not mean an absolutecommitment to hand over possession on or before a specifieddate, this expression has to be read in the context of the entiretyof the clause. To construe the expression as leaving the date forhanding over possession indefinite and at the absolute discretionof the developer would leave the purchaser at the mercy of thebuilder. Clause 20 must be construed to require the builder tomake all reasonable efforts to comply with the duty to hand overpossession by the stipulated date. The burden would lie on thedeveloper to explain the steps taken to comply with thecontractual stipulation. Clause 20 envisages that, save and exceptfor delay on account of force majeure, the appellant would paycompensation at the rate of Rs 2 per sq ft of the super area of thedwelling unit per month for the period of delay beyond one yearfrom the stipulated date. It stipulates that compensation wouldbe payable after four years (plus a valid extension due to forcemajeure) from the date of allotment. The above condition wouldindicate that beyond a period of one year, from the expiry of twoand a half years, which was envisaged under Clause 20, theappellant agreed to pay compensation to the flat buyer. The latterstipulation of four years is incongruous, because previously, aperiod of one year beyond the stipulated period of 2.5 years isfixed, beyond which compensation becomes payable. Thisindicates that three and a half years was by all accounts the periodfor handing over possession beyond which the purchaser wasentitled to compensation. [Para 7][287-A-F]

2. The NCDRC was justified in taking the view that thecondition in the allotment of payment of compensation at the rateof Rs 2 per sq ft is one-sided and constitutes an unfair tradepractice. The letter of allotment is in a standard form. Thepurchaser has no option but to sign on the dotted line. On theother hand, under Clause 16, if the buyer were to delay in thepayment of any instalment, a liability to pay simple interest at therate of 12% per annum is attracted. Clause 20, in other words, is AB

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Anot even-handed. While, on the one hand, it contemplates onlycompensation at the rate of Rs 2 per sq ft in the event that thereis a delay on the part of the appellant, the buyer is required topay a substantially higher rate of interest (12%) for any delayedpayment on his part. [Para 8][290-B-D]

BPioneer Urban Land and Infrastructure Limited v.Govindan Raghavan (2019) 5 SCC 725 : [2019] 5SCR 1169; Wg. Cdr. Arifur Rahman Khan and AleyaSultana & Ors. v. DLF Southern Homes Pvt Ltd. 2020(16) SCC 512 – relied on.

C3. As the facts of the present case indicate, the period oftwo and a half years, which was stipulated under Clause 20 of theletter of allotment, came to an end at the end of December 2014.Allowing thereafter for an additional period of one year, theextended period would come to an end by the end of December2015. The NCDRC granted interest at the rate of 10% with effectDfrom July 2015. While the NCDRC is justified in directing thepayment of interest, the direction should be modified in tworespects, firstly, as regards the date from which interest wouldbecome payable and, secondly, as regards the rate of interest. Asregards, the date on which interest would become payable, havingEregard to the one year period which is stipulated, beyond twoand a half years from the original period under Clause 20, interestwould become payable from 1 January 2016. Secondly, insofar asthe rate of interest is concerned, the interest should be fixed at7% per annum instead and in place of 10% which has beenawarded by the NCDRC. Interest at the rate of 10% is excessive,Fin light of prevailing market conditions. The appellant shall paysimple interest to the respondent at the rate of 7% per annumfrom 1 January 2016 until 26 July 2018 which is the date on whichpossession was handed over to the respondent. [Paras 9 and13(i)][290-D-G; 292-C-D]GCentral Bank of India v Ravindra (2002) 1 SCC 367 :[2001] 4 Suppl. SCR 323 – relied on.

4. Once the NCDRC awarded interest for the delayedhanding over of possession, there would be no justification to H

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award an additional amount of Rs 2,00,000. The direction in regardto the payment of an amount of Rs 2,00,000 towards loss of rentshall stand set aside. [Paras 10 and 13 (ii)][290-G-H; 292-D-E]

5. The plea of the appellant that there was a delay on thepart of the respondent in paying the fifth instalment does notmerit acceptance. In the present case, it is evident that theappellant itself was not in a position to hand over possession ofthe dwelling unit by the end of December 2014. Hence, therequirement of paying the penultimate instalment in September2014 must be looked at from that perspective. [Para 11][291-A-C]

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6. Similarly, there is absolutely no substance in the forcemajeure defense. The appellant has alleged that a dispute withthe contractor over termination and a boundary wall dispute withneighbouring landowners constituted a force majeure conditionunder Clause 20 of the allotment letter. The appellant, being anexperienced developer, must be conscious of routine delayscaused by business exigencies. This would not frustrate thecontract or absolve the appellant of the obligations assumed underthe terms of the agreement. [Para 12][291-C-E]

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DLF Home Developers Ltd v. Capital Greens Flat BuyersAssociation [2021] 5 SCC 537– relied on.

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From the Judgment and Order dated 20.09.2019 passed by NationalConsumer Disputes Redressal Commission in CC No. 84/2017

Kiran Kumar Patra, Adv. for Appellant.

Nitish Banka, Ammet Singh, Ms. Pareena Swarup, Ms. NidaKhana, K. P. Singh and Praveen Swarup Advs. for Respondent.

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284SUPREME COURT REPORTS

[2021] 2 S.C.R.

AThe Judgment of the Court was delivered byDR. DHANANJAYA Y CHANDRACHUD, J.

1. Admit.

2. This appeal arises from a judgment of the National ConsumerDisputes Redressal Commission[1] dated 20 September 2019.B3. In 2012, the appellant floated a group housing project at Sector89, Gurgaon. An advertisement was issued, inviting prospective flatbuyers. The respondent submitted an application on 14 March 2012 forthe allotment of a dwelling unit in the project described as “NBCCHeights”. The terms and conditions for allotment were set out in a standardCform. Instalments towards the purchase price were payable under atime-linked plan. An allotment letter was issued to the respondent on 30June 2012 for dwelling unit F-402 in the project. The terms of allotmentenvisaged that the appellant would “endeavour” to hand over possessionwithin two and a half years from the date of allotment. Clause 20 providesas follows:D“20. Subject to the terms of this Application and the Agreementincluding but not limited to timely payment of the Total Price, stampduty and other charges due and payable according to the paymentplan applicable to the Applicant or as per demand raised by NBCCand the Applicant complying with all the terms and conditions ofEthe Application, NBCC shall endeavor to complete theconstruction of the Dwelling Unit within 2 ½ (two years andsix months) from the date of allotment letter. NBCC onobtaining certificate of occupation and / or use from the competentauthorizes shall offer the Dwelling Unit to the Applicant for his /her occupation & use and subject to the applicant having compliedFwith all the terms and conditions of the agreements.

In the event of the Applicant failure to clear all theoutstanding dues including interest, if any and / or takeover/ occupy the Dwelling Unit within 30 days from the date ofintimation in writing by NBCC, then the same shall lie atGthe Applicant’s risk and cost and the Applicant shall be liableto pay a compensation to NBCC (for maintaining thecomplex) @ Rs. 2/-per sq. ft. of the super area per monthfor the entire period of such delay. This compensation shall be in addition to the other dues / claims of interest etc. as per termsof sale / allotment.

The applicant agrees that if however the completion of the saidComplex is delayed due to force majeure (such as acts ofgod or the public enemy, expropriation, compliance withany order or request of government authorizes, act of war,rebellions, sabotage, fire, floods illegal strikes, or riots etc.)then NBCC shall be entitled to extension of time fordelivery of possession of the Dwelling Unit. NBCC agreesto pay to the allottee and subject to the applicant not being indefault under any terms of this Application/ agreementCompensation @ Rs. 2/- per sq ft of the use super area of theDwelling Unit per month for the period of such delay beyond Oneyear (plus valid extend period due to force majeure reasons) fromthe stipulated date of completion of the complex. Thus thecompensation, if any shall be payable only after four years plusvalid extension due to force majeure reasons from date ofalIotment. The adjustment of such compensation shall be doneonly at the time of execution of conveyance deed of the DwellingUnit.”

(emphasis supplied)

(emphasis supplied)

4. In January 2017, the respondent instituted a consumer complaintbefore the NCDRC[2] since possession of the unit had not been handedover. The appellant obtained an occupation certificate from the Townand Country Planning Department of Haryana on 19 July 2017. Uponreceiving the occupation certificate, the appellant issued a notice toallottees on the same day, informing them of the receipt of the occupationcertificate and requesting them to clear all their dues before takingpossession. A letter of possession was issued to the respondent on 9February 2018. The respondent made part payment towards the fifthand sixth instalments on 28 February 2018 and the balance payment on6 March 2018. Possession was eventually handed over to the respondenton 26 July 2018 against an indemnity, as directed by the NCDRC in itsorder dated 6 June 2018. The NCDRC, in its impugned order dated 20September 2018, directed the appellant to pay compensation computedat 10% per annum on the amount deposited by the respondent fromJune 2015 till the actual date of possession. In addition to this, the 2 Consumer Case No 84 of 2017

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Arespondent was awarded an amount of Rs 2,00,000 towards loss of rentand costs of Rs 25,000. Time for payment was fixed at four weeks fromthe date of receipt of a copy of the order, failing which interest was to bepayable at 12%.

5. The submissions which have been urged on behalf of theBappellant are that:

(i) The respondent had been allotted a residential unit under atime-linked plan which envisaged the making of paymentsin accordance with a prescribed schedule. While the firstfour instalments were paid on time, there was a delay inCpaying the fifth instalment which was due on September 302014, while the final instalment was payable on the issuanceof the letter of possession;

(ii) Since the respondent had delayed in the payment of thefifth instalment, there was no reason or justification to awardDinterest;

(iii) The appellant committed that it would “endeavour” tocomplete the project within two and a half years of thedate of allotment and there was no unconditionalcommitment for delivery by a specific date; E(iv)Clause 20 stipulated compensation at the rate of Rs 2 persq ft of the super area; and

(v) The appellant was entitled to the benefit of superveningforce majeure conditions.

6. The NCDRC rejected the submission that the appellant hadFonly agreed to “endeavour” to provide possession within two and a halfyears of the date of allotment. It held that even if time is not the essenceof the contract, substantial reasons have to be furnished by the developerfor not handing over possession in terms of the date agreed in the letterof allotment. The NCDRC computed the period of two and a half yearsGfrom the month of June 2012 when the letter of allotment was issuedand, thus, concluded that possession ought to have been delivered byDecember 2014. Giving the appellant a further grace period of six months,it directed the payment of interest at 10% per annum from July 2015 tillthe actual date on which possession was handed over. The correctnessof the decision falls for determination in the backdrop of the submissionsHrecorded earlier.

7. Clause 20 of the letter of allotment provides that the appellantshall “endeavour” to complete the construction of the dwelling unit withintwo and a half years from the date of the letter of allotment. Theexpression ‘endeavour’ meant that the appellant would make an earnesteffort to hand over possession by that date. Even if the expression doesnot mean an absolute commitment to hand over possession on or beforea specified date, this expression has to be read in the context of theentirety of the clause. To construe the expression as leaving the date forhanding over possession indefinite and at the absolute discretion of thedeveloper would leave the purchaser at the mercy of the builder. Clause20 must be construed to require the builder to make all reasonable effortsto comply with the duty to hand over possession by the stipulated date.The burden would lie on the developer to explain the steps taken tocomply with the contractual stipulation. Clause 20 envisages that, saveand except for delay on account of force majeure, the appellant wouldpay compensation at the rate of Rs 2 per sq ft of the super area of thedwelling unit per month for the period of delay beyond one year fromthe stipulated date. It stipulates that compensation would be payableafter four years (plus a valid extension due to force majeure) from thedate of allotment. The above condition would indicate that beyond aperiod of one year, from the expiry of two and a half years, which wasenvisaged under Clause 20, the appellant agreed to pay compensation tothe flat buyer. The latter stipulation of four years is incongruous, becausepreviously, a period of one year beyond the stipulated period of 2.5 yearsis fixed, beyond which compensation becomes payable. This indicatesthat three and a half years was by all accounts the period for handingover possession beyond which the purchaser was entitled tocompensation.

8. The NCDRC held that the condition in the allotment of paymentof compensation at the rate of Rs 2 per sq ft is one-sided and constitutesan unfair trade practice. In Pioneer Urban Land and InfrastructureLimited v. Govindan Raghavan[3], a two-judge bench of this Courtconsidered a similar agreement where there was a delay on the part ofthe Builder. This Court upheld the NCDRC’s award of compensation atthe rate of 10 per cent per annum, instead of the contractually stipulatedrate by holding the following:

3 (2019) 5 SCC 725

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A“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 contractualterms 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 asBper Section 2(1)(r) of the Consumer Protection Act, 1986 since itadopts unfair methods or practices for the purpose of selling theflats by the builder.”

A two judge bench of this Court in Wg. Cdr. Arifur RahmanKhan and Aleya Sultana & Ors. v. DLF Southern Homes Pvt LtdC(now known as Begur OMR Homes Pvt Ltd)[4] followed the decisionin Pioneer Urban in interpreting an Apartment Buyers’ Agreement thatwas, inter alia, breached by the Developer on the ground of a grossdelay. This Court noted:

“22 The only issue which then falls for determination is whetherDthe flat buyers in these circumstances are constrained by thestipulation contained in clause 14 of ABA providing compensationfor delay at the rate of Rs 5 per square feet per month. In assessingthe legal position, it is necessary to record that the ABA is clearlyone-sided. Where a flat purchaser pays the instalments that areEdue in terms of the agreement with a delay, clause 39(a) stipulatesthat the developer would “at its sole option and discretion” waivea breach by the allottee of failing to make payments in accordancewith the schedule, subject to the condition that the allottee wouldbe charged interest at the rate of 15 per cent per month for thefirst ninety days and thereafter at an additional penal interest of 3Fper 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 inhanding over possession the flat buyer is restricted to receivinginterest at Rs 5 per square foot per month under clause 14 (whichGin the submission of Mr Prashant Bhushan works out to 1-1.5 percent interest per annum). Would the condition which has beenprescribed in clause 14 continue to bind the flat purchaserindefinitely irrespective of the length of the delay? The agreementstipulates thirty-six months as the date for the handing over of H4 Civil Appeal No 6239 of 2019

possession. Evidently, the terms of the agreement have beendrafted by the developer. They do not maintain a level platform asbetween the developer and purchaser. The stringency of the termswhich bind the purchaser are not mirrored by the obligations formeeting times lines by the developer. The agreement does notreflect an even bargain….

24 A failure of the developer to comply with the contractualobligation to provide the flat to a flat purchaser within acontractually stipulated period amounts to a deficiency. There is afault, shortcoming or inadequacy in the nature and manner ofperformance which has been undertaken to be performed inpursuance of the contract in relation to the service. The expression“service in Section 2 (1) (o) means a service of any descriptionwhich is made available to potential users including the provisionof facilities in connection with (among other things) housingconstruction. Under Section 14(1)(e), the jurisdiction of theconsumer forum extends to directing the opposite party inter aliato remove the deficiency in the service in question. Intrinsic to thejurisdiction which has been conferred to direct the removal of adeficiency in service is the provision of compensation as a measureof restitution to a flat buyer for the delay which has beenoccasioned by the developer beyond the period within whichpossession was to be handed over to the purchaser. Flatpurchasers suffer agony and harassment, as a result of the defaultof the developer. Flat purchasers make legitimate assessments inregard to the future course of their lives based on the flat whichhas been purchased being available for use and occupation. Theselegitimate expectations are belied when the developer as in thepresent case is guilty of a delay of years in the fulfilment of acontractual obligation. To uphold the contention of the developerthat the flat buyer is constrained by the terms of the agreed rateirrespective of the nature or extent of delay would result in amiscarriage of justice. Undoubtedly, as this court held in Dhanda,courts ordinarily would hold parties down to a contractual bargain.Equally the court cannot be oblivious to the one-sided nature ofABAs which are drafted by and to protect the interest of thedeveloper. Parliament consciously designed remedies in the CPAct 1986 to protect consumers. Where, as in the present case,there has been a gross delay in the handing over of possession A

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SUPREME COURT REPORTS

Abeyond the contractually stipulated debt, we are clearly of theview that the jurisdiction of the consumer forum to award just andreasonable compensation as an incident of its power to direct theremoval of a deficiency in service is not constrained by the termsof a rate which is prescribed in an unfair bargain.”

BIn adverting to the facts of this case, the NCDRC was justified intaking the view that the condition in the allotment of payment ofcompensation at the rate of Rs 2 per sq ft is one-sided and constitutes anunfair trade practice. The letter of allotment is in a standard form. Thepurchaser has no option but to sign on the dotted line. On the other hand,under Clause 16, as noted by the NCDRC, if the buyer were to delay inCthe payment of any instalment, a liability to pay simple interest at therate of 12% per annum is attracted. Clause 20, in other words, is noteven-handed. While, on the one hand, it contemplates only compensationat the rate of Rs 2 per sq ft in the event that there is a delay on the partof the appellant, the buyer is required to pay a substantially higher rateDof interest (12%) for any delayed payment on his part.

9. As the facts of the present case indicate, the period of two anda half years, which was stipulated under Clause 20 of the letter ofallotment, came to an end at the end of December 2014. Allowingthereafter for an additional period of one year, the extended period wouldEcome to an end by the end of December 2015. The NCDRC grantedinterest at the rate of 10% with effect from July 2015. In our view, whilethe NCDRC is justified in directing the payment of interest, the directionshould be modified in two respects, firstly, as regards the date fromwhich interest would become payable and, secondly, as regards the rateof interest. As regards, the date on which interest would become payable,Fhaving regard to the one year period which is stipulated, beyond two anda half years from the original period under Clause 20, interest wouldbecome payable from 1 January 2016. Secondly, insofar as the rate ofinterest is concerned, the interest should be fixed at 7% per annum insteadand in place of 10% which has been awarded by the NCDRC. InterestGat the rate of 10% is excessive, in light of prevailing market conditions.[5]

10. The NCDRC has, in addition to the award of interest, grantedcompensation of Rs 2,00,000 for loss of rent. Once the NCDRC awardedinterest for the delayed handing over of possession, there would be nojustification to award an additional amount of Rs 2,00,000.H5 Central Bank of India v Ravindra, (2002) 1 SCC 367 para 39

NBCC (INDIA) LIMITED v. SHRI RAM TRIVEDI[DR. DHANANJAYA Y CHANDRACHUD, J.]

11. The submission of the appellant that there was a delay on thepart of the respondent in paying the fifth instalment does not meritacceptance. The fifth instalment was payable in the month of September2014, while the final instalment, as learned counsel submitted, was payableat the time of the issuance of the letter of possession. This was to takeplace in December 2014. In the present case, it is evident that the appellantitself was not in a position to hand over possession of the dwelling unitby the end of December 2014. Hence, the requirement of paying thepenultimate instalment in September 2014 must be looked at from thatperspective. Admittedly, as the NCDRC has noticed, the appellant haspaid an amount of over Rs one crore, out of the total sale considerationof Rs 1,00,54,478.

12. Similarly, there is absolutely no substance in the force majeuredefense. The appellant has alleged that a dispute with the contractorover termination and a boundary wall dispute with neighbouringlandowners constituted a force majeure condition under Clause 20 ofthe allotment letter. We find no merit in this argument as the appellant,being an experienced developer, must be conscious of routine delayscaused by business exigencies. This would not frustrate the contract orabsolve the appellant of the obligations assumed under the terms of theagreement. Similar delays were rejected as force majeure grounds by athree-judge bench of this Court in DLF Home Developers Ltd v.Capital Greens Flat Buyers Association[6] where the Court noted:

“6. At the outset, we must deal with the force majeure defence.The NCDRC has carefully evaluated the basis on which thedefence was set up and has come to the conclusion that there isno cogent evidence in regard to the nature of the delay and thereasons for the delay in the approval of the building plans. Quiteapart from this finding of fact, it is evident that a delay in theapproval of building plans is a normal incident of a constructionproject. A developer in the position of the appellant would beconscious of these delays and cannot set this up as a defence to aclaim for compensation where a delay has been occasioned beyondthe contractually agreed period for handing over possession. Asregards the stop work orders, there is a finding of fact that thesewere occasioned by a succession of fatal accidents which tookplace at the site and as a result of the failure of the appellant to 6 Civil Appeal Nos 3864-3889 of 2020

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6 Civil Appeal Nos 3864-3889 of 2020

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Afollow safety instructions. This is a pure finding of fact. There isno error of law or fact. Hence, we find no substance inthe force majeure defence.”

13. We accordingly uphold the principal findings of the NCDRCin regard to the entitlement of the respondent to receive compensationBfor the delayed handing over of possession. The force majeure defenseraised by the appellant was justifiably rejected by the NCDRC. Therespondent was entitled to be compensated for the delay of the appellantfor which an appropriate direction for interest is necessary. However,as indicated above, the order of the NCDRC in regard to the rate ofinterest and the date from which it becomes payable has to be modified.CFor this purpose, we allow the appeal partially in the following terms:

(i) Instead and in substitution of the direction issued by theNCDRC, the appellant shall pay simple interest to therespondent at the rate of 7% per annum from 1 January2016 until 26 July 2018 which is the date on which possessionDwas handed over to the respondent;

(ii) The direction in regard to the payment of an amount of Rs2,00,000 towards loss of rent shall stand set aside havingregard to the compensation which has been granted to therespondent in terms of (i) above; andE

(iii) The appellant shall cooperate in completing all necessaryformalities for completing the documentation (includingformalities for registration) in respect of the dwelling unitwhich has been sold to the respondent, if not alreadycompleted, within a period of one month from the date ofFreceipt of a certified copy of this order. The payment ofinterest in terms of (i) above shall also be effected withinone month.

14. The appeal is disposed of in the above terms. No order as to costs.G15. Pending application, if any, stands disposed of.

Kalpana K. Tripathy

Appeal partly allowed.

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