STATE CONSUMER DISPUTES REDRESSAL COMMISSION
OF TELANGANA : AT HYDERABAD
CC NO. 14 OF 2014
Between :
1) N.Lakshmi (Kantham) Varma W/o N.Ravi Varma,
Aged about 33 years,
2) N.Ravi Varma S/o N.Gandhi Raju,
Aged about 40 years,
Both are R/o 395, ANO NEUVO AVENUE Apt=1008,
Sunnyvale CA – 94085-1623, Rep. by their
GPA Mr.N.Gandhi Raju, R/o 3-14-19/1,
Srinivasapuram Colony,
Ramanthapur, Hyderabad – 500 013.
Complainants
And
1) M/s Hill County Properties Limited,
Formerly known as M/s Maytas Properties (P) Ltd,
Rep. by its Managing Director Muralidhar Khattar,
S/o Jugalram Khattar, aged about 75 years,
O/o Customer Support Department,
Hill County, Bachupally, Miyapur,
Hyderabad – 500 072.
2) Muralidhar Khattar S/o Jugalram Khattar,
Aged about 75 years, Managing Director,
M/s Hill County Properties Ltd.,
O/o Customer Support Department,
Hill County, Bachupally, Miyapur,
Hyderabad – 500 072.
3) Mr.Arun Kumar Saha
S/o Brindavan Chandra Saha,
Aged about 60 years, Chairman/Director,
M/s Hill County Properties Ltd.,
O/o Customer Support Department,
Hill County, Bachupally, Miyapur,
Hyderabad – 500 072.
4) M/s IDBI Bank Ltd.,
Rep. by its Branch Manager,
Hyderabad Branch: RAC, 3rd Floor,
D.No.5-9-89/1 & 2, PB No.370,
Chapel Road, Opp: Khan Latif Khan
Complex, Abids, Hyderabad – 500 001.
Opposite parties
Counsel for the Complainants : M/s V.Appa Rao & B.Srinivas
Counsel for the Opposite parties : M/s K.Visweswara Reddy-Ops 1 to 3.
Sri K.P.Sardhi-OP No.4.
Coram :
Hon’ble Sri Justice B.N.Rao Nalla, President
&
Sri Patil Vithal Rao, Member
Tuesday, the Eighteenth day of October
Two thousand Sixteen
Oral Order : (per Hon’ble Sri Justice B.N.Rao Nalla, President)
***
The complaint is filed under section 17(1)(a)(i) of the Consumer Protection Act, 1986 by the Complainants complaining deficiency of service and unfair practice of trade on the part of the Opposite parties 1 to 3 claiming refund of sale consideration including the home loan amount amounting to Rs.46,69,320/- with interest @ 15% per annum for the period from 24.09.2008 to 31.01.2014 and further interest from 01.02.2014 @ 15% p.a.; to pay compensation of Rs.10,00,000/- for mental agony, suffering and escalation of cost; to grant consequential relief by directing the Ops 1 to 3 to repay the amounts received from OP No.4 with interest and other charges as levied in the home loan account of Complainants out of the amount that may be awarded OR in case the Ops made ready the flat, have to pay the home loan interest from the date of disbursement to handing over of the flat, besides payment of compensation of Rs.10,00,000/- and Rs.5/- per square feet per month from due date to handing over of the flat; to pay legal charges of Rs.50,000/- of the complaint and pass such other order or orders as deemed fit and proper.
2. It is alleged that Ops 2 to 3 as Directors of OP No.1 informed that they under took development of land admeasuring Ac.16-95 in Sy.No.194/P, 196/P & 197/P situated in the lay-out known as Hill County, Bachupally village, Qutbullapur mandal, Ranga Reddy district under Development Agreement-cum-GPA bearing No.102/2006, dated 30.12.2005. They further made believe the Complainants that they obtained permissions for the lay-out as well as buildings for construction of residential apartment flats over the said land vide Lr.No.5876/MO2/Plg/H/2005, dt.21.03.2006 and vide Lr.No.5871/P4/Plg/HUDA/2007, dt.29.08.2007 from HUDA and had absolute rights over the Flat No.1D, 1st floor, type-5 of Munnar Apartment complex comprising of super built-up area of 1579 sq.ft. with one covered car parking and having rights over the undivided share of the land admeasuring 73 sq.yards.
3. Believing the version of Ops, Complainants intended to purchase residential flat bearing No.1D on 1st floor, type-5 of Munnar Apartment complex comprising of super built-up area of 1579 sft. with one covered parking with rights over undivided share of land admeasuring 73 square yards, out of total extent of Ac.16-95 in Sy.No.194/P, 196/P & 197/P, situated at the project by name Hill County, Bachupally village, Qutbullapur mandal, Ranga Reddy district for a sale consideration of Rs.48,79,100/, accordingly, Ops executed an agreement of sale dated 24.09.2008 and agreed to finish the flat with certain terms and conditions. The Ops also executed tripartite agreement on 24.09.2008, whereby the OP No.1 received 95% of the sale consideration of Rs.48,79,100/- by 15.03.2008 through OP No.4 by way of home loan.
4. The balance sale consideration is payable by the Complainants at the time of handing over the flat i.e., on or before 30.09.2010. Though OP No.1 agreed to complete the flat and deliver by 30.09.2010 with a grace period of three months, it failed. In case of delay, it agreed to pay compensation of Rs.5/- per month per sq.ft. for a period of 8 months, which also expired on 31.05.2011. As there has been no compliance of the agreements by the developer, the Complainants got issued notice on 22.12.2013 for cancellation of the agreement of sale dt.24.09.2008 informing OP No.4 to initiate necessary steps for recovery of home loan amount released in favour of OP No.1.
5. Complainants obtained loan of Rs.25,00,000/- from OP No.4. OP No.4 released the entire loan amount without there being any constructions deviating the terms and conditions of tripartite agreement dated 24.09.2008, without registration of the flat, thereby committing unfair trade practice besides deficiency of service. OP No.4 failed to verify the pre-requisites of the flat such as valid building plans and permits before release of loan amount, violating the contractual obligations and guidelines issued by RBI and National Housing Bank from time to time and in violation of the statutory provisions enshrined under the Andhra Pradesh (Promotion of Constructions and Ownership of Apartments) Act, 1987 and its rules thereof.
6. The OP No.4 charged interest and other charges amounting to Rs.17,46,060/- towards the home loan account of Complainants, from 04.11.2008 to 09.10.2013. In view of non-completion of the flat, Complainants stopped paying the EMI’s and interest from October 2009 onwards. As such, the loan account of the Complainants was declared as NPA and OP No.4 is demanding for payment of loan at one go. Complainants are not in a position to meet the payment of loan amount. Hence the complaint with the reliefs, stated, supra.
7. The Ops 1 to 3 resisted the claim contending that the above consumer case is not maintainable on the grounds raised therein and is liable to be dismissed in limine. There is no deficiency of service on their part. The OP No.1 is a limited company incorporated under the provisions of Companies Act, 1956, inter-alia engaged in the business of construction and has changed the name from M/s Maytas Properties Limited to M/s Hill County Properties Limited. They admitted the approaching of Complainants for purchase of subject flat. The project commenced as per schedule and was proceeding as per the projected rate but on a wholly incorrect understanding of its association with Satyam Group of Companies, various investigations and proceedings were incorrect instituted against it. The resulting adverse media reports and other reports led to doubts and wrongful perceptions about its independent and unrelated status. Resulting which, the investors and lenders which had committed to funding the Hill County project of OP No.1, sought to resile and withdraw from the project causing serious and acute shortage of funds.
8. Various attachments and court orders had also delayed the project. The various steps taken by it brought back the project on track. In compliance of the Company Law Board orders dated 13.01.2011 IL&FS, the new management of OP No.1 commenced the construction at Hill County project. The present management is acting in accordance with the directions by the Company Law Board. At the time of induction into the OP No.1 by the new promoters in January 2011, the Hill County comprised of skeletal structures and half-built houses. The new promoter had to start from the basics, including revalidation of the earlier plans and sanctions, assessing and strengthening the existing superstructures and dealing with various issues with respect to income-tax attachments and funding.
9. As of date, the IL&FS group has invested more than Rs.550 crores into the Company. The Hill Country Project is completed and all approvals including Occupancy Certificates have also been obtained by them and the apartments are totally habitable. The status of the project has been repeatedly informed, by regular correspondence to all customers including the Complainants. The customers were also invited to visit for completing the final inspection of their respective units, for completion of formalities, yet the Complainants choose to keep silent on all such correspondence. On account of various factors relating to uncertainty over the Telangana formation, the real estate market in Hyderabad has suffered an erosion and some customers including Complainants sensed an opportunity to making a wrongful gain seeking refund of amount with interest, which, in real terms, would be more than the value of the apartment.
10. The present complaint seeking refund of amount is barred in law apart from being barred by limitation as the Complainants have entered into an Agreement for Sale on 24.09.2008 and the same is agreed to be delivered on 24.09.2010, therefore, the complaint is barred by limitation. OP No.1 has completed the construction of apartments and common areas in the towers including lifts and lobbies and the apartments are fitted with power, water supply and gas pipelines, etc., As on date, 581 apartments have been sold, of which, 159 apartments have been handed over to the customers and the process of handing over the balance units is continuing. The OP No.1 is offering free power supply and maintenance to the residents. Since the apartment unit is ready, question of paying home loan amount does not arise. The legal notice dated 22.12.2013 is issued for the purpose of filing the complaint since the apartment is completed by 12.11.2013 and intimation was also issued to the Complainants prior to the notice. It denied that the present complaint falls in the footing of CC No.67 of 2009 and batch. Ban on registrations by income-tax department is lifted by the A.P. High Court orders dated 05.12.2012 in WP No.11412/2012 and thereby registrations have been commenced and till date 62 units are registered.
11. The delay in completing the project is only because of above force majeure events, which are beyond the control of OP No.1. As such, there is no wilful default or deficiency of service on its part. Ops are committed to compensate all the apartment owners including the Complainants @ 5% per sft for the entire period of delay in delivering the flats. As the amounts to be incurred by the Company towards payment of compensation to all customers of the Project is very substantial, will cause a huge drain on the company’s limited resources and the fair rental value rates of Gram Panchayat where the Project is located, were much lesser i.e., only Rs.2.40/- per sqft from 2008 till end of 2011. Even now, the fair rental value is only Rs.4.28/- per sft. from April 2012. The complainants are not entitled for any amount, much less an amount claimed in the complaint. Therefore, it prayed for dismissal of the complaint with exemplary costs.
12. The OP No.4 bank though served with notice failed to file its written version as also the evidence affidavit.
13. On behalf of the Complainants, Gandhi Raju, the GPA holder of Complainants filed his evidence affidavit and the documents, Exs.A1 to A10. On behalf of the OP No.1, its authorized person Neerav Kapasi has filed the affidavit and the documents, Ex.B1 to B12.
14. The counsel for the complainants and Opposite parties have advanced their arguments reiterating the contents of the complaint and the written version. In addition to the same, the counsel for Complainants and Ops 1 to 3 filed written arguments. Heard both sides.
15. The points that arise for consideration are :
i) Whether the complainant is entitled for refund of the amount, if so, to what amount?
ii) Whether the bank was justified in releasing the entire amount, contrary to the terms of agreements?
iii) Whether the complainant is entitled to compensation?
iv) To what relief?
16. It is an undisputed fact that the complainants have booked the subject flat and paid sale consideration to OP No.1 by borrowing loan from OP No.4 bank basing on the agreement entered into between the complainants and the developer. The developer had agreed to complete the construction and hand over possession within stipulated period from the date of execution of agreement. It also agreed to pay Rs.5/- per sft. for the delayed construction up to a maximum of 8 months. Pursuant to the above agreement of sale, tripartite agreement is also entered into between the developer, complainants and bank whereby the bank undertook to disburse the loan amount to the builder as agreed upon.
17. Unfortunately, the developer stopped the construction and it has come to a standstill, when Satyam group of companies in which developer is one of the constituent company went into liquidation. The complainants, therefore, seeks refund of the amount paid together with interest, compensation and costs.
18. The developer resisted the complaint on the ground that on account of ‘force majeure’ problems, the project could not be completed on time and thereafter they took every care to complete the project and as of now the project is completed and in spite of intimation given to the Complainants, they failed to take delivery of the same and therefore, the complaint is not maintainable before this Commission.
19. Though the OP No.1 contended that various steps were taken to complete the project on time, no evidence is placed to show the exact stage of the project. Affidavit of none of the Directors of the company was filed to show the stage of construction, nor the fact that any of the projects were completed. However, the learned counsel for the OP No.1 while advancing arguments stated that there is change in circumstance as the subject apartment is completed now. In this regard, we may state that as on the date of filing of issuing the notice, the subject flat was incomplete which necessitated the Complainants to seek cancellation of the agreement and seek refund of the amount. The developer except contending that the construction has been taken up and is in progress could not deny the statement of the complainants when they contended that no work was taken up. It could have sought for appointment of Commissioner or filed documents evidencing the construction activity.
20. Since the developer could not prove the stages of construction or that it would hand over possession within a reasonable period, and the period that was originally stipulated was already expired, and all through the complainants too stopped paying EMIs to the bank from October 2009 onwards, we are of the opinion that it would be unjust that the complainants be directed to go on paying the amounts to the bank without there being any hope of getting the project completed. Admittedly, the OP No.1 failed to respond to the said notice.
21. The complainants by issuing the notice dated 22.12.2013 sought cancellation the above said agreement and demanded the developer to pay the consideration received so far, as no construction was taken up nor completed within the stipulated time, and sought for refund of the amount paid by the bank to it. On failure to comply with the request made in the notice, the present complaint is filed. Equally the complainants have also included the bank as a party to the proceeding alleging that the entire loan amount was released contrary to the tripartite agreement; wherein it had agreed to disburse stage wise. It was contrary to the agreement besides the guidelines under home loans scheme. It was also mentioned that since the developer had failed to complete the construction as per the terms of agreement of sale as well as tripartite agreement, the bank has to initiate the proceedings and recover the amount and return the loan amount recovered from them with ‘no due certificate’. However, the bank declared the account of the Complainants as Non-Performing Asset and initiated proceedings under law. The said proceedings will not come in the way of Complainants right to file the present complaint as the proceedings initiated before the Consumer Fora are in addition to and not in derogation of the provisions of any other law for the time being in force. Admittedly, by the time the OP No.1 sent letters to the Complainants to take possession, the Complainants have already invoked cancellation of agreement of sale and subsequently the proceedings are initiated.
22. We may also state that recovery of money by the complainants against the developer depends on the principle of unjust enrichment. This principle requires first that the developer has been enriched by receipt of a benefit, secondly, that this enrichment is at the expense of the complainant, and thirdly, that the retention of the enrichment be unjust. This justifies restitution.
23. We may also quote herein the words of Lord Mansfiled C.J.
This kind of equitable action to recover back money which ought not in justice to be kept….. lies only for money which ex acquo et bono the defendant ought to refund ….. It lies for money paid by mistake, or upon a consideration which happens to fail, or for money got through imposition (express or implied) or extortion, or oppression, or undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.
(emphasis supplied)
Section 72 of the Indian Contract Act runs as follows :
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. There must be some undue pecuniary inequality existing in the one party relative to the other which the law recognizes as requiring compensation upon equitable principles.
24. We may also state herein that the orders of this Commission against the very same developer (vide C.C.30/2009) directing to refund the amount with interest @ 12% p.a., has been upheld by the National Commission in F.A. No.189/2010 while reducing the compensation from Rs.5 lakhs to Rs.1 lakh. The SLP moved by the developer before the Hon’ble Supreme Court in Appeal (Civil) No.26256/2010 was dismissed on 27.09.2010. Therefore, these matters are covered by the above decisions and there is no need for any distinction to be made between these cases. However, in this regard, the counsel for Ops submitted that the said matters were before completing the construction of the Hill County Project and hence, the same cannot be relied on as the project is now completed. As discussed supra, we do not accept the contention of the learned counsel for Ops in view of notice got issued by the Complainants dated 22.12.2013.
25. It is an undisputed fact that agreement for purchase of apartment is between the complainants and the developer. It is also not in dispute as per the above said agreement, the amount is to be paid and accordingly the Complainants paid the amount by contributing their own funds as well as obtaining loan from the OP No.4 bank, which is not in dispute. Recoursing the above agreement, a tripartite agreement was executed in between the complainants, developer and the bank. The complainants allege that contrary to the terms of the above-said agreement, the amount was disbursed. In fact, it was duty bound to review the progress of construction before disbursing the amount as mentioned in the tripartite agreement. The OP No.4 bank cannot resile from the tripartite agreement and terms thereof.
26. We may refer herein some of the important terms of the tripartite agreement:
2) SBI shall make disbursement of the sanctioned loan by making payment to the developer directly on behalf of the borrower and payments made to the developer shall be deemed to be payments made to the borrower and borrower shall in each case be liable for the amount of the loan disbursed or his/her behalf to the developer, as though the same had been disbursed directly to him/her. It is further agreed by the borrower that SBI shall not be responsible or liable to ensure or ascertain the progress of the construction and mere demands by the borrower for disbursement would be sufficient for SBI to effect disbursement as aforesaid provided that all other sanction stipulations are complied by the borrower.
However, SBI as its sole discretion, shall disburse the loan in suitable instalments, at the request of borrower, or in suitable instalments to be decided by SBI , with reference to need or progress of construction, which decision shall be final and binding on the borrower/developer. The borrower shall be responsible for follow with the SBI to make disbursement on his/her behalf as per any agreement, payment schedule he/she may have with the developer. Not withstanding anything to the contrary contained herein, SBI may in its sole discretion refused to disburse the loan until:
(a) Borrowers has paid his/her own contribution in full to the developer (the cost of the dwelling unit less the loan) and the progress and need of the construction justifies the disbursement requested.
3) …… The developer further agrees to total subrogation of borrower’s right to receive refund of all the monies, received by the developer from SBI on behalf of the borrower in favour SBI. In any event in which such refund becomes due and payable to the borrower under any agreement/arrangement executed/made between the developer and the borrower, the developer in particular agrees and undertakes not to pay any amount on any account or under any circumstances to the borrower by way of refund or otherwise without first receiving a written consent of SBI.
The borrower and the developer also agrees that as soon as the first disbursement is made by SBI, the mortgage/charge in favour of SBI shall, without the necessity of any deed, document or writing, fasten on the said dwelling unit and the same shall continue (notwithstanding its allotment, completion and occupation) until the loan of SBI is fully repaid with interest and all other dues.
(5) If for any reason there is an increase in the cost of the dwelling unit such increase in the cost of the dwelling unit shall be paid/borne by the borrower without any reference to SBI and until such payment is made UTI bank shall have the right to suspend further disbursement of the sanctioned loan.
7(a) Upon cancellation of the allotment of schedule property, made to the borrower for any reason, the developer shall immediately intimate about the same in writing to SBI. Upon receipt of such intimation, SBI shall notify the developer all amounts due to it from the borrower. In such an event, the developer shall forthwith pay UTI Bank all amounts received by it from SBI on behalf of the borrower within 60 days of receipt of such statement during which period, the developer shall pay interest to SBI, at the rate of interest on such amount shall be the same as agreed between the SBI and borrower in the loan agreement.”
7 (b) Further the developer hereby agrees that it shall also pay all the remaining amounts due and payable to SBI from the borrower such as defaulted payments, additional interest, etc. after deducting reasonable expenses (as agreed by the developer, and SBI ) incurred by the developer from the sale proceeds of the property. Further any such sale by the developer can be effected only after obtaining a consent from SBI.
9) That in the event of default in payment of any dues to SBI by the borrower SBI may at its sole discretion enforce the security by sale of the land and dwelling unit for which the loan has been availed by the borrower and the developer shall not raise any objection/obstruction for the same and shall accept another purchaser for the house or flat in place of the borrower, however subject to the substitute purchaser complying with the necessary requirements of the developer in this respect. If there are any dues/outstandings payable by the borrower to the developer the same shall be subordinate/secondary to that of the liability of the borrower to SBI.
27. The OP No.1 would contend that the complaint is barred by limitation in view of the fact that as per agreement of sale dated 24.09.2008, the unit was agreed to be delivered on 24.12.2010, therefore, the complaint is barred by limitation. In that regard, they relied on the Judgment rendered by Hon’ble Supreme Court of India, reported in (2009) 5 SCC 121 in the matter of State Bank of India Vs. B.S. Agricultural Industries. We have perused the said Judgment. The facts in the said case and on the facts in the case on hand are different and distinct. In the present case, the Complainants are seeking refund of amount on account of non-compliance of the terms of the agreement. The monies paid by the Complainants are lying with the OP No.1, which is nothing but a debt repayable to the Complainants. In this regard, we may state that limitation does not extinguish the debt or preclude its enforcement, unless the debtor chooses to avail himself of the defence and specially pleads it. An indebtedness does not lose its character as such, merely because, it is barred; it still affords sufficient consideration to support a promise to pay, and gives a creditor an insurable interest." The general rule, at least with respect to debts or money demands, is that a statute of limitation bars, or runs "against, the remedy and does not discharge the debt or extinguish or impair the right, obligation, or cause of action." The position then is that under the law a debt subsists notwithstanding that its recovery is barred by limitation. The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act, 36 of 1963, only bars the remedy, but does not destroy the right to which the remedy relates. The right to the debt continues to exist notwithstanding that the remedy is barred by limitation. The only exception in which the remedy also becomes barred by limitation is when the right is destroyed. Except in such cases which are specially provided under the right to which the remedy relates, in other cases the right subsists. Though the right to enforce the debt by judicial process is barred under Section 3 read with the relevant article in the Schedule, the right to the debt remains. The time barred debt does not cease to exist by reason of Section 3. That right can be exercised in any other manner than by means. The debt is not extinguished, but the remedy to enforce the liability is destroyed. What Section 3 refers to is only the remedy but not the right of the creditors. Such debt continues to subsist so long as it is not paid. Under these circumstances, we do not accept the contention of the learned counsel for OP No.1.
28. The complainants contend that contrary to the terms of agreement and also various guidelines for releasing loan amounts, the bank has released the entire amount in one go without considering the stages of construction to the detriment of his interest. The bank can directly pay the amount to the developer as agreed upon but not whole of the amount without even verifying the stages of construction and existence of property. It could not have released the amount without verifying the progress of construction jeopardising their claims. By referring to project programme guide lines where there was specific reference that the developer should be in business for not less than 5 years and the builder/developer has history of due completion of 3 projects and it should have completed at least 1,00,000 sft. of built up area, and that without satisfying the eligibility criterion, the bank could not have sanctioned Advance Disbursement Facility (ADF for short). They contend that the developer was incorporated on 20.01.2005 and the amount was released without completion of 5 years to avail ADF contrary to stipulations.
29. The learned counsel for OP No.4 bank contends that by virtue of tripartite agreement, the developer has to refund all monies paid by IDBI bank, where under, it was specifically mentioned that :
“7(f) If the Builder does not execute the sale deed in favour of the Borrower within 60 days from the date of final disbursement for whatever reason or in an event of litigation affecting the property, the builder shall promptly and immediately refund all monies paid by IDBI bank.”
The developer and complainants are jointly liable for any of the claims for the loan amount disbursed. In the light of above clause they are estopped from making any claim that the project is completed as now. In order to get over the payment of the amount towards EMI they were impleaded as parties. It is only a financial institution facilitating funding of the project and purchase thereof. It has nothing to do with the completion of construction.
30. Admittedly, the bank initiated proceedings declared the account of the Complainants as NPA (non-performing asset). In contravention of the guidelines issued by Reserve Bank of India from time to time and tripartite agreement, the bank disbursed the loan amount. It is not known why the bank had taken such a stance when the guidelines as well as its own agreement stipulate to release the amount stage wise. The fact remains that the bank released the amounts to the developer contrary to guidelines as well as tripartite agreement to non-existent apartment.
31. There would be no meaning in releasing the entire amount in one go, the bank having agreed to release the amount in a phased manner. Even it is not the case of the bank that on the letter taken from the complainants, the bank had released the entire loan amount. This would cause unjust enrichment to the developer, and loss to the complainants. The terms of the agreement in between three parties were made in order to see that no party suffers from non-implementation of terms of the agreement. The bank cannot act at its own whims and fancies, and release the amount.
32. If the bank acts contrary to the agreement and guidelines, the complainants are not liable to refund the amount paid to the developer. The bank can as well recover from the developer by recoursing the above clauses. The courts will not come to the rescue of the party which violates the terms and conveys benefits to one party in preference to another. It intends to cause loss to a genuine borrower by unduly favouring a defaulting and unfair customer. All this amounts to unfair trade practice.
33. However, the very property which the complainant sought to purchase was a non-existent property kept as primary security. It also extended the loan on deposit of equitable mortgage though there was a mention that if equitable mortgage is not possible it would be by registered mortgage deed. The learned counsel for bank would contend that loan was sanctioned taking the property as security which the complainants intend to purchase from the developer besides on the instruction of the complainants. When the bank knew full well that the property was non-existent, disbursing the loan amount to the developer cannot be said to be valid. Considering the nature of transaction between the parties, we are of the opinion that the bank could not have disbursed the amount without taking proper care and caution to find out the non-existence of the flat for which loan was sanctioned.
34. The banks and financial institutions promising to lend monies or sanctioning loans and the borrower investing in the project will be clothed by the principles of Promissory Estoppel. The doctrine of promissory estoppel is an evolving doctrine, contours of which are not yet fully and finally demarcated. Being an equitable doctrine, it should be kept elastic enough in the hands of the court to do complete justice between the parties. If the equity demands that the promissor is allowed to resile and the promisee is compensated appropriately that ought to be done. If, however, equity demands that the promissor should be precluded in the light of things done by the promisee on the faith of representation from resiling and that he should be held fast to his representation, that should be done. It is a matter holding scales even between the parties to do justice between them. This is the equity implicit in the doctrine vide State of H.P. Vs. Ganesh Wood Products reported in 1995 (6) SCC 363.
35. It is legally open to the bank to take a decision in good faith in the exercise of its bonafide discretion as to whether it was safe to make advances of public monies to any particular party and arrive at a decision after examining the relevant facts and circumstances.
36. However, in the present case, the complainants by issuing the legal notice on 22.12.2013, put an end to the contract as the developer disabled itself from performing its obligations. The bank did not act in good faith nor had it exercised bonafide discretion while releasing the funds.
37. Recourse can be had to a decision in Nannapaneni Venkata Rao Co-operative Sugars Ltd. Vs. State Bank of India reported in AIR 2003 AP 515 (DB) it was held :
“Refusal on the part of the respondent bank to pay interest on the ground that opening of such account and crediting of the interest is not in accordance with the guidelines of RBI is not tenable as the respondent is solely responsible for suppressing the fact while entering into the contract.”
38. This Commission can take judicial cognizance of the fact that the OP No.4 bank had financed the builder obviously in view of reputation the developer was having by then, and the bank contrary to the terms of the agreement as well as guidelines, disbursed the amounts keeping the interest of the complainants in jeopardy. The banks are picking and choosing certain clauses and contending that the very complainant have given authorization to them to release the amount and therefore they have released, forgetting the fact that the very financing of the project was contrary to the scheme issued in this regard. Evidently, the bank as well as the developer benefitted from these transactions. The developer has taken the amount without constructing the flat, and equally the bank has been collecting the amounts from the complainant towards EMI, however, stopped paying the instalments from October 2009 by the Complainants. Even then, the bank has been demanding the interest and other charges and had initiated proceedings in law. It is a case of double jeopardy. Necessarily all this amounts to unfair trade practise as well as deficiency in service on the part of developer as well as the bank. Necessarily the complainant is to be compensated. Since terms of the agreement enable the bank to collect from the developer, it can as well recover the same. The bank by violating its own rules cannot take advantage and recover the same from the complainant. This suppression of rules at the time when so called authorization taken from the complainant amounts to unfair trade practise. This cannot be allowed to happen.
39. The bank has undoubtedly violated the terms of the tripartite agreement, and released the amount even without bothering to verify as to the stage and nature of construction. In other words, the bank financed a non-existent project or incomplete project, duping its own customer. If the bank releases the amounts contrary to tripartite agreement it has to suffer for the consequential losses. Whatever loss caused thereby it could as well approach appropriate forum for recovery of the amount from the developer, to which it has released the amount in one go. The bank under the terms entitled to recover from the developer to which it had paid the amounts. It cannot turn round and claim against the complainants. It is not under original stipulation that the bank had to pay the entire amount to the developer. The developer also agreed to refund the amount if there are cancellations of the agreements or failure to fulfil its commitments. The agreement that was arrived at earlier was fair and no party would benefit from the lapses or mistakes of the other. Therefore, the complainants are not liable to pay the EMIs.
40. The bank has to collect the loan amount plus whatever interest and other legally permissible charges from the developer and credit it to the complainants loan account. It shall not collect further EMI’s nor entitled to any more amount except the amount, if any, remained unpaid by the complainants towards loan granted to them. The bank has no authority to complain to CIBIL. In fact, if there is a provision, the CIBIL has to enter the name of the bank, as one of the violators of guidelines of the banks. In the above facts and circumstances, the points (i) to (iv) are answered accordingly holding that the OP No.1 is liable to pay the amounts to the Complainants.
41. In the result, the complaint is allowed in part in following terms:
i) The developer OP No.1 is directed to refund the amount paid by the complainants with interest @ 9% p.a., from respective dates till the date of payment, together with compensation of Rs.1,00,000/- and costs of Rs.6,000/-.
ii) Further, the developer OP No.1 is directed to refund the amount disbursed by the bank i.e., Rs.25,00,000/- to it along with interest, penal charges etc., levied by the OP No.4 bank, if any, failing which the bank is liable to collect, and credit the same to the loan account of the complainants.
Time for compliance eight weeks.
PRESIDENT MEMBER
18.10.2016
APPENDIX OF EVIDENCE
WITNESSES EXAMINED
For Complainant : For Opposite parties :
Affidavit evidence of N.Gandhi Affidavit evidence of Neerav Kapasi
Raju, GPA holder.
EXHIBITS MARKED
For Complainants :
Ex.A1 Photostat copy of Agreement for sale, dated 24.09.2008 executed by the OP No.1 in favour of the Complainants.
Ex.A2 Photostat copy of the Tripartite Agreement, dated 24.09.2008 executed between the Complainants, the OP No.1 and 4.
Ex.A3 is the Photostat copy of sanction letter issued by OP No.4 bank in favour of the Complainants, for a sum of Rs.25,00,000/-.
Ex.A4 is the copy of Home Loan application form made by the Complainants to the OP No.4 bank seeking loan of Rs.25,00,000/-.
Ex.A5 is the copy of extract of loan ledger account of the Complainant, for the period from 01.01.2001 to 24.12.2013.
Ex.A6 is the copy of General Power of Attorney executed by the Complainants in favour of Gandhi Raju, dated 18.12.2007.
Ex.A7 is the office copy of notice, dated 22.12.2013 got issued by the Complainants to the Ops 1 to 3.
Ex.A8 are the original postal receipts, dated 22.12.2013 and the postal acknowledgement.
Ex.A9 is the Photostat copy of Fresh Certificate of Incorporation consequent upon change of name of the OP No.1 company from Maytas Properties Limited to Hill County Properties Limited, dated 16.08.2013.
Ex.A10 is the Photostat copy of Form-32, in respect of OP No.1 company.
For Opposite parties :
Ex.B1 are the Photostat copies of the letters addressed by the Ops to its customers, dated 01.04.2014 and 27.05.2014 respectively.
Ex.B2 is the Photostat copy of the letter addressed by the Ops, dated 31.05.2013 informing the progress of construction.
Ex.B3 is the Photostat copy of the letter addressed by the Executive Officer, Gram Panchayat, Bachupally, dated 20.07.2012 to the Ops, informing the fair rental value.
Ex.B4 is the Photostat copy of the Orders in W.P.No.9227 of 2010 and batch matters, dated 05.12.2012.
Ex.B5 is the Photostat copy of Occupancy Certificate furnished by the District Panchayat Officer, Ranga Reddy district in respect of Block-C4, Munnar.
Ex.B6 are the various photographs showing the completion of the project as on 25.07.2014.
Ex.B7 is the letter dated 12.11.2013 addressed by the Ops to Complainant informing to make final inspection of the Munnar block.
Ex.B8 is the Photostat copy of the extract of resolution passed by the Board of Directors of M/s Maytas Properties Ltd., held on 02.04.2011.
Ex.B9 is the Photostat copy of Certificate of Incorporation consequent upon change of name of Maytas Properties Limited to Hill County Properties Limited.
Ex.B10 is Photostat copy of orders in CP No.4/2009, dated 05.03.2009 passed by the Company Law Board, Principal Bench, New Delhi.
Ex.B11 is the Photostat copy of attendance-cum-order sheet of hearing before the Company Law Board on 13.01.2011.
Ex.B12 is the copy of letter dated 25.02.2011 addressed by the Ops to its customer.
Ex.B13 is the copy of letter dated 20.07.2012 addressed by the Executive Officer, Gram Panchayat, Bachupalli to the Ops informing the fair rental value.
Ex.B14 is the copy of orders in W.P.No.9227/2010 and batch, dated 05.12.2012.
Ex.B15 is the copy of letter dated 12.12.2012 addressed by Ops to its customer.
Ex.B16 is the copy of letter dated 23.08.2013 addressed by Ops to its customer.
Ex.B17 is the copy of letter dated 11.11.2013 addressed by Ops to its customer.
Ex.B18 is the copy of letter dated 12.11.2013 addressed by the Ops to the Complainant informing to cause final inspection of the Munnar block.
Ex.B19 are the copies of letters dated 17.01.2014 and 27.05.2014 addressed by the Ops to its customer.
Ex.B20 is the Photostat copy of Occupancy Certificate, dated 14.08.2013 furnished by the District Panchayat Officer, Ranga Reddy district, in respect of Block-C4, Munnar.
Ex.B21 are the photographs of the Tower and the apartment.
Ex.B22 is the Photostat copy of the extract of the minutes of the meeting of Board of Directors of Maytas Properties Limited, held on 24.08.2013.
PRESEIDENT MEMBER
18.10.2016
