BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION
AT HYDERABAD.
CC 79 of 2009
Between:
1. Mrs Pathai Ramakrishnan Vidyalakshmi
W/o Mr.Balasubramanian Raju
aged about 30 yrs, Occ: Service
2. Balasubramanian Raju S/o Balasubramanian
aged about 32 years, Occ: Service
Both are R/o Flat No.302, Manju Enclave,
Near Sarada High School, Kondapur
Hyderabad-032
Complainants
A N D
1. M/s Maytas Properties Limited
Reg.Office 6-3-1186/5/A, III Floor
Amogh Plaza, Begumpet,
Hyderabad, rep. by its Managing Director
2. Industrial Development Bank of India Ltd.,
Basheerbagh Branch, Loan Centre, 106
1st Floor, Mahavir House, Basheerbagh Square
Hyderabad-029, rep. by its Branch Manager
Opposite parties
Counsel for the complainants M/s V.Gourisankara Rao
Counsel for the opposite parties M/s K.Visweshwar Reddy (Op1)
M/s K.P.Saradhi (Op2)
QUORUM:
HON’BLE SRI JUSTICE D.APPA RAO, PRESIDENT
&
SRI S. BHUJANGA RAO, MEMBER
TUESDAY TWENTY FIFTH DAY OF SEPTEMBER
TWO THOUSAND TWELVE
ORAL ORDER: (Per Hon’ble Sri Justice D. Appa Rao, President)
***
1) This complaint is filed against MAYTAS (herein after called the ‘developer’) praying to direct the developer to hand over the finished flat or in the alternative refund the sale consideration with interest together compensation and costs and also against IDBI bank (herein after called the ‘bank’) not to insist for the payment of EMIS or for refund of the amount disbursed by the bank to the developer u/s 17 of the Consumer Protection Act.
2) The case of the complainants in brief is that the developer floated a venture and agreed to sell apartments situated in Sy192/P to 198/P, 201/P and 282/P at Bachupally of Qutubullapur Mandal, in Ranga Reddy district in an extent of Ac. 98.16 Guntas of land. The developer represented that it had obtained layout permission from HUDA for constructing the independent houses and flats etc. Under various agreements of sale consideration was agreed to be paid in instalments viz., 10% of the amount on the date of booking, and another 10% within 15 days from the date of booking and the remaining in phased manner and 5% at the time of handing over the flat as shown below:
| S.No. | CC 79/2009 |
| 1 | Flat Details | Instalment | Due Date | Rs. |
| | | |
| | Munnar | Booking advance | On Booking 10% | 625944 |
| | Type-5 | Allotment advance | 15 days from booking(10%) | 625944 |
| | Floor No. 3 | 1 | 15.03.2008 (20%) | 1251888 |
| | Flat No. 3D | 2 | 15.05.2008 (10%) | 625944 |
| | Built up area | 3 | 15.07.2008 (10%) | 625944 |
| | in sft - 1263 | 4 | 15.09.2008 (10%) | 625944 |
| | | 5 | 15.11.2008 (10%) | 625944 |
| | | 6 | 15.01.2009 (15%) | 938916 |
| | | 7 | During hand over (5%) | 312974 |
| | | Total sale consideration | | 6259442 |
| | Sale Deed Executed |
3) The bank agreed to grant loan and pay the amount to the developer as per the tripartite agreement executed in this regard between them. Accordingly the complainants had paid initial amount booking and allotment advance etc. and the bank in turn had sanctioned and disbursed the loan amount to the developer. The developer executed registered sale deed in favour of the complainants in respect of undivided share of land together with unfinished structure.
4) It was agreed that the construction was to be completed within 15 months with a grace period of three months. While so, on 7.1.2009, founder of M/s. Satyam Computer Services Ltd. Sri Ramalinga Raju confessed that he had diverted the founds from developer to computer services and therefore there could be delay in completion of the project. In fact, it cannot collect more than 20% towards advance as per Section 5 of the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987. It did not even file the declaration u/s 4 of the said Act. The bank even did not insist on the developer for adhering to the agreement under the provisions of above Act. The bank had disbursed the entire amount without any physical verification or valuation by a valuer contrary to the agreement and tripartite agreement. The developer was guilty in not completing the construction within the time stipulated, and diverting the funds. It had abruptly abandoned the construction. By virtue of directions of the Hon’ble High Court in Company Petition No. 172/2011 it had submitted its net worth as ‘zero’ and it has accumulated loss of Rs. 538 crores. In addition to that there is an award against the developer for Rs. 600 crores together with interest at Rs. 221 crores. In fact it had advanced loans of Rs. 247 crores to its subsidiary companies, recovery of which was doubtful. All this has created in mental agony to them. They were forced to pay EMIs on the loans borrowed. Therefore the complaints filed for the above mentioned reliefs.
5) The developer filed counter resisting the claim. It admitted that it is a limited company incorporated under the provisions of Companies Act inter-alia engaged in the business of construction. It alleged that it started a venture, under the name and style ‘Maytas Hill County’. They entered into an agreements of sale on various dates agreeing to sell flat as alleged in the complaint for the consideration mentioned therein excluding stamp duty, registration fee, VAT, service tax etc. The project was commenced as per the schedule. However, on a wholly incorrect understanding of its association with Mr. B. Ramalinga Raju, various investigations and proceedings were instituted against it. The private financial institutions which had committed funding withdrew from the project causing serious shortage of funds, jeopardizing the further development of the project. The delay in completion of the project was due to ‘force majeure’ which is beyond its control. There was no deficiency in service on its part. Later on account of various steps taken by it 140 independent houses were constructed and delivered possession and 172 independent houses are in final stages. It had also undertaken to complete the construction of flats. It was fully committed to complete the project and deliver the same to the complainants. Its case was also referred to Company Law Board. It has appointed SBI Capital Markets Ltd. (SBI Cap) as transaction advisor. The entire process was entrusted to Justice A. R. Laxmanan former judge of Supreme Court of India. The Company Law Board on 13.1.2011 passed an order inducting M/s. Infrastructure Leasing & Financial Services Ltd., M/s. IL&FS Financial Services Ltd. and M/s. IL & FS Engineering and Construction Company Ltd., into the company as shareholders by allotting preferential shares. Pursuant to which the Board of Directors are re-constituted. They have initiated various measures. It is in the process of arranging further infusion of funds in order to complete the project. The agreement stipulates arbitration clause wherein the disputes would be referred to an arbitrator. It did neither commit any breach nor commit any offence as alleged in the complaint. In view of various judgements and court orders the project was delayed. In fact it had invoked the arbitration clause and referred the matter to an arbitrator Hon’ble Justice V. Bhaskar Rao for adjudication. The complainants were not entitled to any of the amounts. Therefore it prayed for dismissal of the complaint with costs.
6) The bank filed counter resisting the case. The complainant approached the bank for availing loan for purchase of a flat. and they entered into agreement of sale with the developer. Basing on the application and income profile of the complainant and the agreement of sale entered into between the complainant and the developer it (the bank) had agreed to sanction loan as per the norms. The complainant developer, and the bank entered into a tripartite agreement and as per the terms it had disbursed the loan amount against mortgage property directly to the developer on behalf of complainant as per the agreed terms basing on the disbursal request submitted by the complainant. The tripartite agreement enables the bank to review the progress of construction to protect its own interest and not a duty cast on it. The complainant cannot stop payment of EMIs on the ground that the developer failed to complete the construction/hand over possession of the flats. They are estopped from making any claims in the light of terms of tripartite agreement. There was no deficiency in service on its part nor adopted any unfair trade practise. The complainant filed these false cases in order to avoid repayment of loan amount and make wrongful gain. Therefore it prayed for dismissal of the complaints with costs.
7) Both parties filed their affidavit evidence and got the documents marked as shown in appendix of evidence.
8) The points that arise for consideration are :
i. Whether the complainants are entitled for possession and registration of flats or in the alternative 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 complainants are entitled to compensation?
iv. To what relief?
9) It is an undisputed fact that the complainants had booked the flat and paid sale consideration by borrowing loan from the bank basing on a construction 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 was also entered into between the developer, complainants and bank where the bank undertook to disburse the loan amount to the builder as agreed upon.
10) Unfortunately the developer stopped the construction and it has come to a stand-still, when Satyam group of companies in which developer is one of the constituent company went into liquidation. The complainant, therefore, seek possession of the completed apartments or in the alternative refund of amounts or to permit them to re-convey title to the developer together with interest, compensation and costs.
11) The developer resisted the complaints on the ground that the agreement provides for reference to an Arbitrator in case of dispute and therefore the complaint is not maintainable before this Commission.
12) We may state that the developer filed applications to dismiss the complaints on the ground that there is an arbitration clause contained in the agreement. The said applications were dismissed holding that the Commission has jurisdiction in the light of various decisions of the Apex Court. Aggrieved by the said order, the developer filed W.P.Nos.27689/10 and batch. Their lordships of the High Court dismissed the Writ Petitions upholding the order of this Commission. Therefore, we do not intend to once again consider the said question. The developer is estopped from contending that by virtue of arbitration clause, this Commission cannot proceed ahead for adjudicating the matters in the light of the above orders.
13) The developer raised another contention that by virtue of the orders of the Company Law Board (‘CLB’ for short) dt.05-3-2009 and 13-1-2011, the complainants cannot seek relief before this Commission and they have to approach the CLB for redressal. More over, it cannot be said to be guilty of rendering deficiency in service.
14) Despite the fact that developer company is the party, it did not bring it to the notice of the Company Law Board as to the various claims made by the complainants. Except stating that the Maytas Hill Owners Association was a party to such order, there is no proof that the complainants are parties to the said association or any notice was served on them individually in order to bind them. In all fairness, the developer company ought to have impleaded the complainants as parties to the above said proceedings.
15) The learned counsel for the complainants submitted that they learnt that the developer represented before the CLB that all measures would be taken up for completion of the project. Evidently no construction activity has been taken up. Even otherwise they did not even start construction as per the orders of CLB and arbitration. These facts are not disputed. The complainants submitted that they have no hopes that the project would be completed within a reasonable time so that they could wait for the project to be completed and then take possession of the apartment. They insist that their amounts be refunded with interest, besides penalty @ Rs. 5/- per sft as agreed upon together with compensation and costs.
16) The learned counsel for the developer contended that the order of the Company Law Board is binding on the complainants and these complaints have to be necessarily dismissed with a direction to approach the CLB. When the developer company originally run by Satyam Computer Services Ltd. founded by Mr. B. Ramalinga Raju went into serious financial troubles and the allegation that funds of Satyam were diverted to Maytas Properties to bail out from liquidation, the Central Government filed Company Application No.4/2009 U/s.388 B, 397, 398, 402 and 403 of the Companies Act before the Principal Bench of Company Law Board, New Delhi. In the said company petition, directions were issued on 13-1-2011, directing Central Government to nominate a nominee director on behalf of the CLB. The order discloses that Shri Ved Kumar Jain was nominated as director on behalf of the CLB. The nominee director undertook various measures to put the project back on track basing on the recommendations of Hon’ble Justice A.R. Laxmanan.
The CLB order dt. 13-1-2011 reads as follows:
(i) I permit the induction of IL & FS group (consisting of Infrastructure Leasing & Financial Services Limited (IL&FS). IL&FS Financial Services Limited (IFIN) and IL&FS Engineering & Construction Company Limited (IECL) as the new promoter of MPL and permit reconstitution of the Board of MPL as provided hereunder.
(ii) The IL &FS group shall invest Rs.20 lakhs in equity share
capital of the MPL whereupon its shareholding in MPL would
become 80%.
(iii) The IL &FS group on induction as the strategic investor
shall take-over the management control of the MPL and
reconstitute the Board of Directors of MPL as under:
a) There shall be 4 nominees of the IL &FS group as directors on the Board of MPL including the Chairman.
b) The existing Directors of MPL, i.e., Mr.Rama Raju, Mr.D.Gopla Krishnam Raju and Mr.D.Venkata Satya Subba Raju shall resign as Directors of MPL immediately on induction of IL&FS group as the strategic investor in MPL.
c) Mr. Ved Jain , the nominee Director, appointed by the Union of India, Pursuant to the directions contained in the order dt. 5.4.2009 shall continue as Director in MPL for a further period of 3 years.
(iv). The IL &FS group shall mobilize funds of Rs.150 crores in MPL within a period
of 3 months from today.
(v) The IL&FS group shall complete the Maytas Hill Country Residential
Project Phase-I within 18 months of its induction as promoter in MPL and
shall arrange the required finances to complete the project.
The order required the above said group to complete the project within 18 months. Pursuant to it, the developer has been taken over by new inductives. It is not known as to the steps that are initiated in compliance of the orders.
17) The learned counsel for the developer relied the following decisions for the proposition that this Commission cannot go ahead and adjudicate the dispute in view of the above orders:
The supreme Court in Sangramsinh P.Gaekwad v.Shantadevi P.Gaekwad, reported in (2005) 123 Comp. Cas 566, held that Section 402 of the Companies Act, 1956 is without prejudice to the generality of the powers of the Company Law Board under Section 397 & 398 and may provide for directions to achieve the objects for which the above sections are enacted. These statutory powers have been vested to administer justice and equity, giving broad discretion applying general standard of fairness to meet the ends of justice.
In Manish Mohan Sharma v. Ram Bahadur Thakur, reported in AIR 2006 SC 1690, the Supreme Court held that the powers under Section 402 are residuary in nature and in addition to the powers available to the Company Law Board under Sections 397(2) and Section 398(2) which permit the Company Law Board to make such order as it thinks fit with a view to bringing to an end the matters complained under 397(1) and 398(1).
In Ravi Kiran Agarwal & Anr. v. Moolchand Shah & Ors., reported in [2009] 152 Comp Case 637 (Bom), it was held that there is no reason to confine the words “ any other person” under section 405 to those categories of persons who are elucidated in clause (e) of Section 402. Further, it was also held that the exercise of those wide powers, may in a given situation affect the interest of third parties. The court opined that Section 402 describes the nature of reliefs that can be granted in a petition under section 397 and 398. Clauses (a) to (g) of Section 402 are not exhaustive of the reliefs that can be granted by the Board but are only illustrative of the wide powers that are granted upon the Board with a view to ameliorating the situation of mismanagement and oppression.
In MSDC Radharaman v. MSD Chandrasekara Raja, reported in (2008) 6 SCC 750, the Supreme Court held that the jurisdiction of the Company Law Board having been couched in wide terms and as diverse reliefs can be granted by it to keep the company functioning, is it not desirable to pass an order which for all intent and purport would be beneficial to the company itself and the majority of the members? A court of law can hardly satisfy all the litigants before it. This however, by itself would not mean that the Company Law Board would refuse to exercise its jurisdiction, although the statute confers such a power on it.
In Starlinger & Co. v. Lohia Starlinger Ltd, reported in 2007 (5) ADJ 744, it was held that Clause (g) of Section 402 has illustrated these extraordinary powers in which the Company Law Board may provide for any other matter, which in the opinion of the Company Law Board is just and equitable.
In Bennett Coleman & Co. v. Union of India, reported in (1997) 47 Comp Cas 92, it was held that instead of destroying the corporate existence of a company, the Company Law Board has been enabled to continue its corporate existence by passing such orders as it thinks fit in order to achieve the objective of removing the oppression to any member or members of a company or to prevent the company’s affairs from being conducted in a manner prejudicial to public interest.
In India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd., reported in (2007) 5 SCC 510, observed that the doctrine of comity or amity requires a court not to pass an order which would be in conflict with another order passed by a competent court of law.
In Swadeshi Cotton Mills v Union of India, reported in (1978) 4 SCC 295, it was held that the findings of CLB need to be respected by a Company Court and must not be interfered with unless there is a glaring anomaly.
In Takshila Hospital Ltd. v. Dr.Jaganmohan Mathur, reported in [2003] 115 Com Cas 343 Raj, it was held that an exercise of such option of instituting a proceedings under Section 397 & 398, an independent proceeding came to be instituted which had to be proceeded with independently and uninfluenced by other proceedings which have not even crossed the preliminary stage of admission. In the very nature of the order passed by the learned company judge, the company petition for winding up cannot now be proceeded with until proceedings under Section 397 are finally culminated, which includes the exercise of rights of appeal by any party aggrieved with the order passed by the CLB. Such appeal also lies to the High Court.
The decisions did not lay down any proposition that the proceedings before the consumer fora have to be shelved or the complainants have to approach the CLB.
18) In fact the question whether the complainants have to approach the CLB or pursue their remedy before this Commission is covered by a decision of our High Court in PRUDENTIAL CAPITAL MARKETS Limited, Calcutta v. State of A.P. Department of Law reported in 2000 ALT-5-468. It held as follows:
‘There are three categories of cases. The first category of cases are those where the depositor filed a consumer dispute case before the competent District Forum for refund of the deposit made by the depositor with the PRUDENTIAL CAPITAL MARKETS LIMITED (‘PCML’ for short) and on the District Forum allowing the application, the petitioner herein approached the State Commission which dismissed the appeal filed and whereupon the depositor approached District Forum under Section 27(1) of the Consumer Protection Act, 1986 by filing penalty petition. The second category of cases are those where the depositor filed a penalty petition before the District Forum for implementation of the order in consumer dispute case and where the petitioner did not approach the State Commission which is the appellate forum. The third category of cases are those where the orders of the appellate forum are challenged by the petitioner.’
In the process, the question whether CLB can only entertain the complaint against PCML has arisen. While dealing with the said question the proceedings before CLB vis-à-vis the proceedings before Consumer Forum have also arisen.
19) In the instant case since the developer has clutched the jurisdiction of CLB, the question is whether the provisions of CLB oust the jurisdiction of Consumer Forum. The said question has been discussed in the above decision as follows:
‘The next aspect of the matter is whether the provisions of the Companies Act and the RBI Act impliedly ousts the jurisdiction of the Consumer Forums when the CLB is seized of the matter or passed an order at the instance of some of the depositors of NBFC. Hence, sub-sees. (4-D) and (5) of Section 10-E and Section 58-A(9) of the Companies Act and Sections 45-Q and 45-QA of the RBI Act require to be examined, which are as under:“10-E-(4-D) : Every Bench shall be deemed to be a Civil Court for the purposes of Section 195 and (Chapter XXVI of the Code of Civil Procedure,1973) and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code and for the purpose of Section 196 of that code.(5) Without prejudice to the provisions of sub-sections (4-C) and (4-D), the Company Law Board shall in the exercise of its powers and the discharge of its functions under this Act, or any other law be guided by the principles of natural justice and shall act in its discretion. “58-A(9): Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the company to make repayment of such deposit or part the order: Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the company and the other persons interested in the matter. “Sections 45-Q and 45-QA of the RBI Act are as under: “45-Q: Chapter III-B to override other Laws: The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 45-QA. Power of Company Law Board to order repayment of deposit: (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit. (2) Where a non-banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under Section 10-E of the Companies Act, 1956 (1 of 1956) may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial company and the other persons interested in the matter.”
20) The provisions of Reserve Bank of India Act, vis-à-vis., the CLB also came up for discussion. The very same logic could as well be applied to the case on hand. In view of the fact that their Lordships at Para 51 of the above decision opined:
The CLB is constituted by the Central Government and the said Board shall exercise and discourage powers and functions as may be conferred on it by or under the companies Act or any other law and shall also exercise and discharge such other powers and functions of the Central Government under the Companies Act or other law as may be conferred on it by the Central Government. Notwithstanding subsection (1A) of Section 10-E of the Companies Act, the Civil Courts exercised jurisdiction under sec.9 of the Code of the Civil Procedure, till sub-section (9) of Section 58-A was inserted by the Companies (Amendment ) Act, 1977 with effect from 24-12-1977 conferring powers on the CLB to entertain an application of the depositor for repayment of money. After 1977, till the enactment of Consumer Act in 1986, both the Civil Courts as well as the CLB entertained applications from the depositors for refund of deposits. After the Consumer Act, the Forums established under it started granting redressal to the depositors having regard to the broad definition ‘service’ adumbrated in Sec.2(1) (O) of the Consumer Protection Act. Ultimately, to provide an additional speedy remedy, the Parliament enacted RBI ( Amendment) Act, 1997 inserting Sec.45-QA giving power to CLB constituted under Sec.10-E of the Companies Act which ‘may, either on its own motion or on application of the depositors’ order NBFCs to make repayment of such deposits. This background should be kept in mind while examining the order of the CLB, Eastern Region Bench, Calcutta, dated 27-5-1998.
Their lordships also held at para-57 as follows:
‘Sub-section (5) of Sec.10-E of the Companies Act lays down that the CLB shall in the exercise of its powers and the discharge of its functions under the Companies Act or any other law be guided by the principles of natural justice. The proviso to sub-section (9) of Sec.58A categorically lays down that CLB may, before making any order under sub-sec. (9), give a reasonable opportunity of being heard to the Company and the other persons interested in the matter. Likewise, the proviso to sub-section (2) of Sec.45-QA mandates that CLB may, before making any order under sub-section (2), give an opportunity of being heard to NBFC and the other persons interested in the matter., Elaborate reasoning is not required to infer that “the other persons interested in the matter’ appearing in the proviso to subsection (9) of Sec.58-A of the Companies Act and the proviso to sub-section (2) of Sec.45-QA of the RBI Act also include the depositors and other creditors of NBFC. It also does not require any authority to say that any provision which adumbrates the principles of natural justice should be interpreted as a mandatory provision. Though the two provisions use the word ‘may’, the same should be interpreted as mandatory.
Obligation is on the part of the CLB to order notices to all the depositors in a matter like this. How a notice is sent or information is communicated about the cases filed before the CLB under Sec.45-QA (2) of the RBI Act or Sec.58-A (9) of the Companies Act is altogether different matter’.
21) Coming to the present case, the developer did not make any attempt to place the case of the complainants before the CLB. There is no proof that notices were issued to the complainants while passing the order. It may be stated herein that all these proceedings have been taken only after the complainants have clutched the jurisdiction of this Commission. Even assuming that in one or two cases, the complainants are parties, it makes no difference. Therefore, the learned counsel for the complainants is justified in contending that in so far as complainants are concerned, the order passed by CLB is not binding on the proceedings before this Commission.
Their Lordships in the above case at Pare-59 pointed out as follows:
‘Further, as per the legal position, the proceedings before appropriate Bench of CLB should be initiated by the aggrieved party at the place of company’s registered office. This is cumbersome procedure. Therefore, all the depositors cannot be expected to appear before the CLB, Calcutta, especially when there is no notice validly served on all the depositors. The judgments of the Supreme Court referred to above support the view that when the ordinary remedy provided under the alternative law is cumbersome, the consumer cannot be deprived of the remedy before the Consumer Forums.
At para 60, their Lordships asserted as follows:
‘The summary of the findings under point No.1 for consideration may now be given. (i) A writ of prohibition cannot be granted unless want of jurisdiction is apparent and if want of jurisdiction is not apparent, the applicant must wait until the decision making body passes orders and seek a writ of certiorari. (ii) A writ of prohibition ordinarily cannot be granted to stop execution or implementation of the decision; (iii) The grant of writ of prohibition is also governed by other principles which ordinarily govern the grant of extraordinary writs like delay and laches, availability of alternative remedy etc. (iv) The provisions of Sec.45-Q, 45-QA of the RBI Act and Sec.58-A(9) of the Companies Act, do not either expressly or impliedly bar the jurisdiction of the forums constituted under the Consumer Protection Act, from entertaining a consumer dispute case at the instance of the depositor claiming repayment of the deposit from a non-banking finance company. In view of Sec.3 of the Consumer Protection Act, remedy under the said Act is an additional remedy and the same cannot be taken away either by the RBI Act or by the Companies Act. (v) The order of the Company Law Board, Eastern Region Bench, Calcutta dated 27-5-1998 cannot be construed as either taking away the right of the depositors in these cases to approach the consumer forum or nullifying the orders passed by the District Forum/State Commission’.
22) Equally the National Commission in Lloyds Finance Ltd. Vs. Ms. Napeena Singh reported in I (2006) CPJ 163 NC considering this aspect of the matter held:
“It is the case of the complainants before us that they did not apply to the Company Law Board under Section 45QA. They were not served with any notice of any proceedings before the Company Law Board and they were not aware of any notice being published in any newspaper to which they subscribe to or is otherwise in circulation in the locality in which they reside. They say it is perversity of justice that Company Law Board situated in Mumbai could be approached by small depositors in the far flung corner of the country. The whole scheme as framed is floated and tilted in favour of NBFC. That is, however, not for us to consider. What the requirement of law is that a depositor may either approach the Company Law Board under Section 45QA or file a complaint under the Consumer Protection Act before the appropriate forum. A depositor cannot certainly choose both the remedies simultaneously and once he files an application under Section 45QA of the RBI Act before the Company Law Board, he cannot file a complaint in a Consumer Forum under the Consumer Protection Act.”
It is not the case of the developer that complainants have invoked the jurisdiction of CLB. Therefore this Commission has jurisdiction to adjudicate the matter.
23) The learned advocate for developer contended that in the order dt. 13.1.2011 of CLB it has considered the interests of investors, banks stakeholders, and the allottees. It held:
“Having perused CA 24/2011 and the above mentioned documents and the fact that the petitioner, the existing directors of MPL, shareholders and the Hill County Owners’ association are supporting the application, and the prayer made in the application deserves to be granted since it is in the best interests of the company as also of all the stakeholders including banks, employees, investors and the aloottees in the Maytas Hill County Residential Project, and would serve the public interest, the following order is passed in supersession of the earlier order dt. 5.3.2009.
I permit the induction of IL&FAS (consisting of Infrastructure, Leasing & Financial Services Ltd. (IL&FS). IL&FS Financial Services Ltd. (IFIN) and IL&FS Engineering & Construction Company Ltd. (IECL) as the now promoter of MPL and permit reconstitution of the board of MPL as provided hereunder :
The IL&FS group shall invest Rs. 20 lakhs in equity share capital of the MPL whereupon its shareholding in MPL would become 80%
The IL&FS group on induction as the strategic investor shall take over the management control of the MPL and reconstitute the board of directors of MPL as under :
There shall be four nominees of the IL&FS group as directors on the board of MPL including the Chairman
The existing directors of MPL Mr. Rama Raju, Mr. D. Gopala Krishnam Raju and D. Venkata Satya Subba Raju shall resign as directors of MPL immediately on induction of IL&FS group as strategic investor in MPL.
Mr. Ved Jain, the nominee director appointed by the Union of India pursuant to the directions contained in the order dt. 5.4.2009 shall continue as director in MPL for a further period of 3 years.
The IL&FS group shall mobilize funds of 150 crores in MPL within a period of three months from today.
The IL&FS group shall complete the Maytas Hill County Residential Project phase-I within 18 months of its induction as promoter in MPL, and shall arrange the requires finances to complete the project. ”
It is not known whether the said order has been complied viz., raising of Rs. 150 crores etc. The opposite parties could not confirm the order was implemented. Though he 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.
24) The contention of the developer is that the complainants are ‘stakeholders’. Simply by using such term, the complainants cannot be taken into its fold in order to bind the orders of CLB. At the cost of repetition, we may state that it is not known why the opposite parties did not try to implead these parties to the application filed before the CLB so that they could agitate their grievances including recovery of amount. Equally so with the bank.
25) A reading of the order passed by CLB shows that it was not aware of the cases pending before the Consumer Commission in Andhra Pradesh. Undoubtedly, the developer has with-held the information pertaining to these cases before the CLB. In the light of the above said decision, we are of the opinion that this Commission has jurisdiction. The orders passed by CLB have nothing to do with the cases on hand. The CLB was not appraised about the cases that were filed before this Commission. In view of the above decision, we are of the opinion that the orders of CLB would in no way prevent or prohibit us from passing appropriate orders as the case may be.
26) The learned counsel for the developer contended that any order directing cancellation of allotment or refund of amount would result in disbursement of the amount of the company, and therefore the complainants cannot seek refund of the amount paid by them. It is not known as to the exact amount that the developer had availed as finance from banks and other financial institutions. 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.
27) 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 have been paying EMIs to the bank, 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.
28) The complainants by issuing notice to the developer cancelled the above said agreement and directed the developer to pay the consideration received so far, as no construction was taken up nor completed, and sought for refund of the amount paid by the bank to it with penalty @ Rs. 5/- per sft as per clause 7 (a to d) of the agreement. Equally the complainants had issued notice to the bank 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’. They have enclosed the termination notice issued to the developer while sending notice to the bank. Though bank has given reply the developer did not give any reply.
29) We may also state that recovery of money had of the complainants by 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 complainants, and thirdly, that the retention of the enrichment be unjust. This justifies restitution.
30) 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)
31) 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.
32) The opposite party no.1 executed sale deed in favour of the complainants conveying the title. Obviously, the complainants cannot have title as well as refund of the amount, since the very sale has been frustrated, in such a case, when the developer has executed the sale deed and there is no prospect of either constructing flat or delivering the property to the complainants, the Hon’ble Supreme Court in somewhat similar case Vinod Kumar Thareja Vs. M/s. Alpha Construction reported in CPJ II (2011) CPJ -3 SC while giving directions to refund the amount also directed to re-convey the property to the builder. Therefore, we direct the complainants to execute re-conveyance deed on receipt of amount payable by the developer and the bank. The registration charges shall be borne by the developer. This is in conformity with the above said decision of the Hon’ble Supreme Court.
33) 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. These contentions do not sustain.
34) 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 as per the schedule which we have adverted at para-3 of this order. 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 bank cannot resile from the tripartite agreement and terms of the agreement by alleging that the complainant has consented to release the amount to the developer in one go. No security was taken from the builder before release.
35) We may refer herein some of the important terms of the tripartite agreement:
3) The borrower has also deposited an amount stipulated in the schedule, being the margin money towards part payment of the sale consideration of such amount as stipulated in the schedule. The borrower has, for the balance, been sanctioned a loan vide offer dated of such date as stipulated in the schedule from the IDBI bank.
7(1) The IDBI bank shall pay the loan of an amount stipulated in the schedule in such instalments as stipulated in the schedule towards sale consideration of the flat/and proportionate land, upon a demand being raised by the Builder/titleholder/s.
f) If the Builder does not execute the Sale Deed in favour fo the Borrower within 60 days from the date of final disbursement for what ever reason or in an event of litigation affecting the property, the builder shall promptly and immediately refund all monies paid by IDBI Bank.
i) That in consideration of the company agreeing to release the sanctioned loan to the borrower, before the creation of equitable mortgage by him, by deposit of registered sale deed in respect of _______ along with the proportionate undivided interest in the land, the builder/title-holder/s here by offer themselves as builder for the loan advanced and obliges themselves jointly and severally along with the borrower to repay the loan advanced or to be advanced to the borrower, out of amounts received by builder from the borrower and company only.
j) Each party agrees to co-operate with the others to implement the sprit and terms of this agreement, ti is specifically agreed by the Bank, Borrower and the Builder that the obligations of the Builder under this agreement shall be effect up to the handing over of the Sale Deed and the possession of the said property.
36) The complainants contends that contrary to the terms of agreement and also various guide lines for releasing loan amounts, the bank has released the entire amount in one go without considering the stages of construction to the detriments of their interests. 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 Ex.A8, revised Sanction Letter where there was specific reference in the column “Special Conditions, if any” that:
Disbursement of Loan is subject to
- Satisfactory Legal & Technical clearance of the property
- Mandatory Verifications Satisfactory Legal & Technical clearance of the property
- 24 PDCs
S/B a/c to be opened with IDBI LTD, Own contribtion should be paid in cheque.
Without satisfying the eligibility criterion the bank could not have sanctioned Advance Disbursement. They contend that the developer was incorporated on 20-1-2005 and the amount was released without completion of 5 years to avail ADF contrary to stipulations.
37) Curiously the bank despite the notices of cancellation of agreements etc. and even filing complaints before this Commission and proceedings before the CLB, did not try to recover the amount paid by it to the developer invoking the above clauses. The banker knew full well the amounts were diverted for some other purpose. It did not take steps to recover from the developer, obviously, it knew it would land up in litigation, where it may not be sure for recovery of the amount. It knew full well the complainants being salaried persons it was easy for them to recover.
38) Evidently the bank did not take any steps to recover the amount, only in the event of bank sustaining loss, this indemnity clause comes into play. The bank had taken a letter from the complainants wherein they had agreed to release the amount without waiting for construction to be made. This is contrary to the guidelines and tripartite agreement. It is not known why the bank had taken such a stance when the guidelines as well as their own agreements 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 apartments.
39) The bank having been a party to the tripartite agreement cannot direct the complainants to execute such a letter without the consent of the developer in this regard. This is contrary to the terms of the tripartite agreement . By taking so called consent from the complainants to release the entire amount, the bank is offending the terms of agreement. There cannot be any objection for the developer to take it. After all it will have the entire amount without corresponding burden to fulfil. It need not construct. Had developer been joined, the complainants could have insisted the developer to construct the property and only after satisfying itself as to the phases of construction, they would have asked the banker to release the amount accordingly. 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. Solely basing on the letter taken from the complainants, the bank cannot give a go bye to tripartite agreement and release the entire 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. It cannot defend that by virtue of letters of the complainants, it was entitled to release the amount in its entirety.
40) 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 convey 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.
41) It is not as though the bank did not know that the developer has clutched the jurisdiction of the CLB. When the matter is pending with CLB, if really it intends to protect its own interest besides that of the complainants, in the light of dispute, it ought to have approached the CLB for recovery of the amounts. It did not even file the proceedings before the appropriate authority for recovery of the amount. Evidently the bank knew full well that it could recover the amount from the complainants.
42) The banks and financial institutions promising to lend moneys or sanctioning loans and the borrower investing in the project thereon will be clothed by the principles of Promisorry 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.
43) 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 funds to any particular party and arrive at a decision after examining the relevant facts and circumstances.
44) However, in the present case the complainants by issuing notice put an end to the contract as the developer disabled itself from performing its obligations. The bank did not act in good faith nor it had exercised bonafide discretion while releasing the funds.
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.
45) This Commission can take judicial cognizance of the fact that various banks have 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 interests of the complainants in jeopardy. The banks are picking and choosing certain clauses and contending that the very complainants 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 any of the flats, and equally the bank has been collecting the amounts from the complainants towards EMI. 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 complainants have 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 complainants. This suppression of rules at the time when so called authorization taken from the complainants amounts to unfair trade practise. This cannot be allowed to happen.
46) 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 to a non-existent project or incomplete project, duping its own customers. Now the complainants would be un-necessarily hard pressed, to pay the amounts towards EMI without there being any hope of getting the apartments as the developer is under winding up proceedings. The bank cannot take advantage of its own indiscretion. This is unjust and unethical. 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.
47) 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 him. 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 result the complaint is allowed in following terms:
- The developer Op1 is directed to refund the amounts paid by the complainants with interest @ 12% p.a., from respective dates till the date of payment together with compensation of Rs. 1 lakh, and costs of Rs. 10,000/-
- Further the developer Op1 is directed to refund the amount disbursed by the bank to it along with penal charges etc. levied by the bank if any, failing which the bank is liable to collect, and credit the same to the loan account of the complainants.
- The complainants shall re-convey the same to the developer on compliance of above directions. The registration charges and stamp duty etc. shall be borne by the developer (Op1).
Time for compliance eight weeks.
PRESIDENT
MEMBER
25/09/2012
*kmk
APPENDIX OF EVIDENCE
WITNESSES EXAMINED
For Complainant For opposite parties
NIL NIL
EXHIBITS MARKED
For complainant
Ex.A1 Receipt No.5582 dt.29.4.2008
Ex.A2 Receipt No.5325 dt.2.4.2008
Ex.A3 Receipt No.5150 dt.24.3.2008
Ex.A4 Receipt No.5149 dt.24.3.2008
Ex.A5 Receipt No.4731 dt.28.1.2008
Ex.A6 Receipt No.4602 dt.5.1.2008
Ex.A7 Letter of OP dt.28.1.2008
Ex.A8 Letter dt.30.1.2009
Ex.A9 Agreement of Sale
Ex.A10 Letter to OP2 dt.28.2.2008
Ex.A11 Tripartite Agreement
Ex.A12 Letter dt.7.5.2008
Ex.A13 Sale Deed dt.9.5.2008
Ex.A14 Agreement for construction dt.9.5.2008
Ex.A15 Letter dt.30.12.2008
Ex.A16 Brochure
Ex.A17 Letter dt.10.1.2008
Ex.A18 rediff Mail dt.13.4.2009
Ex.A19 Letter dt.20.6.2009
Ex.A20 Rediff Mail dt.16.10.2009
Ex.A21 Letter dt.2.11.2009
Ex.A22 Rediff Mail dt.6.11.2009
For opposite parties
Ex B-1 CLB order dated : 5.3.2009
Ex B-2 CLB order dated : 13.1.2011
Ex B-3 Letter to customers with respect to commencement
of project dt : 25.2.2011
Ex B-4 Letter to customers with respect to progress of construction commenced dt : 8.4.2011
Ex B -5 Letter to Hill county Home Owners dt : 17.6.2011
Ex B-6 Letter to Hill county Home Owners dt : 28.7.2011
Ex B-7 Letter to customers with respect to progress of construction dt : 8.9.2011
Ex B-8 Letter to customers with respect to progress of construction dt : 25.10.2011.
ExB-9 Letter to customers with respect to progress of construction approvals from water sewerage, addendum agreements
dt.29.12.2011
Ex.B10 Letter to customer with respect ot recent physical progress of Hill
County dt.2.3.2010
Ex.B11 Pictorial progress of construction
Ex.B12 Photographs
Ex.B13 Letter of authority with board resolution dt.2.4.2011
PRESIDENT
MEMBER
