BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION

AT HYDERABAD.

CC 81 of 2012

Between:

1) Rupinder S. Arora

S/o.  HS Arora

2)  Smt. ArneetKaur

W/o. Rupinder S Arora

R/o. Flat No. 107/B,

Shripal Towers, Kirlampudi,

Visakhapatnam-530017.

(Presently residing at Flat No.TJ,

Jains Ashrya,Block-2, Phase-2,

Kamalakhannan Gardens,

Vembulliamman Koil Street,

West KK Nagar,

Chennai-600 078.                                                ***                         Complainants

                                                                   And

1)  M/s. Maytas Properties (P) Ltd,

Formerly known as Hill County Private Ltd.

Rep. by its Nominee,

DVS Subba Raju,

S/o  Krishnam Raju

O/o Customer Support Department,

Hill County,  Bachupally, Miyapur,

Hyderabad-500 072.

2) DVS Subba Raju,

S/o.  Krishnam Raju,

O/o. Customer Support Department,

Hill County, Bachupally,

Miyapur, Hyderabad-500 072.

3) Arun Kumar Saha

(Additional Director/Promoter 

Maytas Properties Ltd.,)

S/o. Brindavan Chandra Saha,

R/o. 601-602, Green Acres CHS,

Pali Hill, Bhandra (W),

Mumbai-400 050.

4) Vimal Kishore Kaushik

(Additional Director/Promotor

Maytas Properties Ltd.,)

S/o. Sadananda Shastri,

R/o. S-27/1-D, DLF Qutab Enclave;

Gurgaon-122002, Haryana.

5) Ramesh Chandra Bawa

(Additional Director /Promotor 

Maytas Properties Ltd.,)

S/o.  Sharadananda  Bawa

R/o. W-78, Greater Kailash Part-1,

New Delhi-110 048.

6) Ramchand Karunakaran

(Additional Director /Promotor 

Maytas Properties Ltd.,)

S/o.  Kalapara Vadasseri Karunakaran,

R/o. 3rd Floor, Victoria Building,

E-23, Gajdhar Scheme,

Sarojani Naidu Road,

Santacruz, Mumbai-400 054.

7) The Branch Manager,

IDBI Ltd.,

1st Floor, Mahaveer House,

Chappel Road,

Near LB Stadium,

Basheerbagh, Hyderabad.

8) The General Manager/

Vice President (Credit),

IDBI Bank Ltd.,

IDBI Towers, WTC Complex,

Cuffe Parade,

Mumbai-400 005.                                       ***                         Opposite Parties

CC  29  of 2010  

Between:

M. Mahesh,

S/o.  M.R. V. Subba Rao,

Aged about 34 Years,

Rep. by his G.P.A.

Sriram Murthy Nittala,

S/o. Kameswara Rao Nittala

Aged about 30 Years,

Software Engineer, R/o. C-73

Ground Floor, Indira Residency,

Rukminipuri, ECIL Post,

Hyderabad-500 062.                                   ***                         Complainant

And

1)   IDBI Bank Ltd;

IDBI Towers, WTC Complex,

Cuffe Parade, Mumbai-400 005                  

Rep. by its Managing Director.

2) IDBI  Bank Ltd.

Retail Asset Centre, 3^rd Floor.  

D.No. 5-9-89/1&2

P.B. No. 370, Chapel Road

Opp. Khan Latif Khan Complex

Abids,  Hyderabad-500 001.                                         

Rep. by its  Asst. Manager (Credits)

3)  M/s. Maytas Properties Ltd.,

O/o.  6-3-1186/5/A, III Floor,

Amogha Plaza, Begumpet,

Hyderabad- 500 016

Rep. by its Managing Director                                       

4)   Datla Gopala Krishnam Raju

S/o. Satyanarayana Raju

Director, M/s. Maytas Properties Ltd.,

H.No. 17, Tulasi Apartments

Madhuranagar, S.R. Nagar

Hyderabad-38

5)  Bayrraju Rama Raju

S/o. Rama Linga Raju

Whole Time Director

M/s. Maytas Properties Ltd.,

Plot No. 1254A, Road No. 63

Jubilee Hills, Hyderabad-33.

6)   Bayrraju Teja  Raju

Director, M/s. Maytas Properties Ltd.,

Plot No. 1254A, Road No. 63

Jubilee Hills, Hyderabad-33.

7)   M/s. Himagiri Bio-tech P. Ltd., 

Registered Office At H.No. B-55,

Flat No.202,  Sai Vaishnavi Vihar

Vengalrao Nagar, S.R. Nagar Post,

Hyderabad-500 038.

8)   M/s. Sindhu Greenlands Pvt. Ltd.,

 Registered Office At Flat No.102,

Dhanunjaya Nest,

Rajiv Nagar, Yousufguda,

Hyderabad-500 045.

9)   M/s. Goman Agro Farms P. Ltd.,

Registered Office At Plot No. 392,

HMT Hills, 2^nd Venture,

Opp: JNTU College, Kukatpally,

Hyderabad-500 072.

10) M/s. Himagiri Green Fields P. Ltd.,

Registered Office At Flat No. 102,

Dhanujaya Nest,

Rajiv Nagar, Yousufguda,

Hyderabad- 500 045.

11) M/s. Nagavali  Green Lands P. Ltd., 

Registered Office At Flat No. 102,

Dhanujaya Nest,

Rajiv Nagar, Yousufguda,

Hyderabad- 500 045.

12) M/s. Swarnagiri Green Fields Pvt Ltd,

Registered Office H.No. 2-13/31,

S.S. Nagar,Opp: Hyder Nagar,

Hyderabad-500 072.

13) M/s. Konar Green Land Pvt Ltd,

Registered Office H.No. 2-13/31,

S.S. Nagar, Opp: Hyder Nagar,

Hyderabad-500 072.

14) M/s. Medravati Agro Farms P. Ltd.,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

15) M/s. Yamuna Agro Farms P. Ltd.,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

16) M/s. Wardha Green Fields P. Ltd.,

Registered Office H.No. 2-13/31,

S.S. Nagar, Opp: Hyder Nagar, 

Hyderabad-500 072.

17) M/s. Vindhya Green Lands Pvt. Ltd,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

18) M/s. Vamsadhara Agro P. Ltd.,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

19) M/s. Uttarashad Bio-Tech P. Ltd., 

Registered Office H.No. 2-13/31,

S.S. Nagar, Opp: Hyder Nagar,

Hyderabad-500 072.

CC  30  of 2010  

Between:

1) Satish Panchumarthy,

S/o. P.V. Krishna Rao,

Rep. his by GPA  

Panchumarthy Venkata Krishna Rao,

S/o. Panchumarthy Nagaiah

R/o. H.No. 1-3-69, Flat No.301,

Prashanthi Residency,

Street, No.6, Habsiguda,

Hyderabad-500 007.                                   ***                         Complainants

And

1)   M/s. IDBI Bank Ltd;

IDBI Towers, WTC Complex,

Cuffe Parade, Mumbai-400 005                  

Rep. by its Managing Director.

2) IDBI  Bank Ltd.

Retail Asset Centre

D.No. 5-9-89/1&2

P.B. No. 370, Chapel Road

Opp. Khan Latif Khan Complex

Abids,  Hyderabad-500 001.                                         

Rep. by its  Asst. Manager (Credits)

3)  M/s. Maytas Properties Ltd.,

O/o.  6-3-1186/5/A, III Floor,

Amogha Plaza, Begumpet,

Hyderabad- 500 016

Rep. by its Managing Director                                       

4)   Datla Gopala Krishnam Raju

S/o. Satyanarayana Raju

Director, M/s. Maytas Properties Ltd.,

H.No. 17, Tulasi Apartments

Madhuranagar, S.R. Nagar

Hyderabad-38

5)  Bayrraju Rama Raju

S/o. Rama Linga Raju

Whole Time Director

M/s. Maytas Properties Ltd.,

Plot No. 1254A, Road No. 63

Jubilee Hills, Hyderabad-33.

6)   Bayrraju Teja  Raju

Director, M/s. Maytas Properties Ltd.,

Plot No. 1254A, Road No. 63

Jubilee Hills, Hyderabad-33.

7)   M/s. Himagiri Bio-tech P. Ltd., 

Registered Office At H.No. B-55,

Flat No.202, Sai Vaishnavi Vihar

Vengalrao Nagar, S.R. Nagar Post,

Hyderabad-500 038.

8)   M/s. Sindhu Greenlands Pvt. Ltd., 

Registered Office At Flat No.102,

Dhanunjaya Nest,

Rajiv Nagar, Yousufguda,

Hyderabad-500 045.

9)   M/s. Goman Agro Farms P. Ltd.,  

Registered Office At Plot No. 392,

HMT Hills, 2^nd Venture,

Opp: JNTU College, Kukatpally,

Hyderabad-500 072.

10) M/s. Himagiri Green Fields P. Ltd.,

Registered Office At Flat No. 102,

Dhanujaya Nest, Rajiv Nagar,

Yousufguda,

Hyderabad- 500 045.

11) M/s. Nagavali  Green Lands P. Ltd., 

Registered Office At Flat No. 102,

Dhanujaya Nest,

Rajiv Nagar, Yousufguda,

Hyderabad- 500 045.

12) M/s. Swarnagiri Green Fields Pvt Ltd,

Registered Office H.No. 2-13/31,

S.S. Nagar, Opp: Hyder Nagar,

Hyderabad-500 072.

13) M/s. Konar Green Land Pvt Ltd,

Registered Office H.No. 2-13/31,

S.S. Nagar, Opp: Hyder Nagar,

Hyderabad-500 072.

14) M/s. Medravati Agro Farms P. Ltd.,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

15) M/s. Yamuna Agro Farms P. Ltd.,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

16) M/s. Wardha Green Fields P. Ltd.,

Registered Office H.No. 2-13/31,

S.S. Nagar, Opp: Hyder Nagar, 

Hyderabad-500 072.

17) M/s. Vindhya Green Lands Pvt Ltd,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

18) M/s. Vamsadhara Agro P. Ltd.,

Registered Office H.No. B-79,

Madhura Nagar,

Hyderabad-500 038.

19) M/s. Uttarashad Bio-Tech P. Ltd., 

Registered Office H.No. 2-13/31,

S.S. Nagar,

Opp: Hyder Nagar,

Hyderabad-500 072.                                   ***                         Opposite Parties

Counsel for the Complainants :         M/s.  V. Appa Rao

                                                          M/s. Prabhakar Sripada

Counsel for the Opposite Parties       M/s  K. Vishveshwara Reddy  (MPL)

                                                          M/s.  C. Naresh Reddy, (land owners)

                                                          M/s. K. P. Saradhi (Bank)

QUORUM:

                              SMT. M. SHREESHA, PRESIDING MEMBER

&

                             SRI S. BHUJANGA RAO, MEMBER

WEDNESDAY,  THE TWENTY FOURTH DAY OF JULY TWO THOUSAND THIRTEEN

ORAL ORDER: (Per Smt. M. Shreesha, Member)

***

1)                 These complaints are filed by different  complainants u/s  17 of the Consumer Protection Act.  against MAYTAS  (herein after called  the ‘developer’)  praying to direct  the  developer to hand over the finished flats  under sale by executing registered sale deeds or in the alternative  refund the sale consideration  with interest, besides penalty amount @ Rs. 5/- per sft  of the super built up area   together compensation and costs  and also  against IDBI  bank (herein after called the ‘bank’) for refund of the amount disbursed by the bank to the developer together with penal interest and credit into their loan account etc. 

2)                Since common questions of fact  and law  are involved in all these complaints,  and  against  the same developer and  the bank,  we are of the opinion that they  can be disposed of by a common order. 

3)                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. 85.36  Guntas  of land.      The developer represented that it   had obtained layout permission from HUDA on 21-3-2006 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:

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  i.e., 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 deeds in favour of some of the complainants in respect of  undivided share of land together with  unfinished structure. 

(3.1)              It was agreed that the construction was to be  completed within   18 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 funds  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.   They  were forced to pay EMIs on the loans borrowed.  Therefore the complainants  are filed for the  above mentioned reliefs.

4)                 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’  along with other opposite parties.   They entered into   agreements of sale   on various dates  agreeing to sell  flats as alleged in the complaints  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  158 independent houses were  constructed and delivered possession and 127 units are  ready to handover  possession to the respective customers.    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.    Op1 further submits  that various measures  have been taken up by the new management  and a meeting was held on 12.9.2011   wherein   the developer came forward with a  new schedule for completing the project  and placed before the customers.    Op1 submitted that  as per the new schedule all the towers/flats  are expected to be completed by  March, 2013.    They are submitting quarterly reports to CLB  in compliance of order dt. 13.1.2011.   As per the agreement they are prepared to pay  compensation @  Rs. 5/-  per sft for  the period of delay as under :

Op1 further submits that  as per the CLB order  the new management would complete  the project as per the revised schedule and  they are ready  and willing to pay compensation for the delay in delivery/possession of apartments/villas as shown above not only to the complainants  but also to all the 800 customers.   The new management is committed to act in conformity with the directions  issued by the CLB  and in the light of subsequent developments  the above complaints are not maintainable and prayed for dismissal of the complaints . 

5)                  O.P. No. 2  Sri D.V.S. Subba Raju filed counter  denying the allegations  made by the complainants and contended that  as  he resigned  as director of   Op1  with effect from 7.2.2011 the complaints are not maintainable against him.    Op2  submits that  he is now no way concerned with the  MPL project  as  the new directors  are looking after the entire  MPL projects  and therefore prayed that the complaints against him be dismissed. 

6)                The bank filed counter resisting the case.   The complainants have approached the bank for availing loan for purchase of flats   and they entered into agreement of sale with the developer.   Basing on the application and income profile of the complainants and the agreements  of sale entered into between the complainants and the developer  it (the bank) had agreed to sanction loan as per the norms.    The complainants,  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 complainants as per the agreed terms basing on the disbursal request  submitted by the complainants.    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 complainants 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 complainants 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 flats and paid  the sale consideration by borrowing loans from the bank basing on  construction agreements  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  agreements of sale,   tripartite agreements are  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 complainants, therefore, seek registration of the sale deeds,  and possession of the completed apartments or in the alternative refund of  amounts  or where sale deeds were executed, 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 complaints are  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 this  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)  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  steps would be taken up for completion of  the project.     Evidently the  developer did not  adhere to  schedules  and  failed to  keep up the promises made repeatedly.  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 apartments.   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)              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. 

18)              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.”

19)              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’.

20)              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’.

21)              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 no jurisdiction to  adjudicate the matter.    

22)              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. 

23)              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.   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 the recovery of amount.   Equally so with the bank. 

24)              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. 

25)              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.        

26)               Since  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 banks  without there being any hope of  getting the project completed. 

 27)             The complainants by issuing  notice to the developer  cancelled the above said agreements   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.    However, we do not see any justification in impleading  the original owners of property, who have no subsisting  interest  in the property.  They have parted their title  in favour of developer.   Therefore  the claims against them do not sustain.  The complaints are liable to be dismissed against them.   Equally the complainant 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’.   

28)              We may also state that  recovery of money had of the complainant 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 complainant, and thirdly, that the retention of the enrichment  be unjust.   This justifies restitution. 

29)               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)

30)              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. 

31)               In some of the cases,   sale deeds were  executed in favour of the complainants  by the developer 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 flats 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. 

32)              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.                                      

33)              It is an undisputed fact that  agreement for purchase of  apartment is between  the complainant 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   to above.  Recoursing the above agreement,  a tripartite agreement was executed in between the complainant, 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  they  (complainants) have   consented to release the  amount to the developer in one go.   No security was taken from the builder before release.  

34)              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 letter of such date as stipulated in the schedule from the IDBI bank. 

4)  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 developer/titleholders.

b)       It is agreed between the parties that the developer/titleholder shall intimate the factum of the completion of the flat to IDBI  bank, upon such intimation the developer/titleholder  undertakes to execute the necessary sale deed and till that time, the developer/titleholder shall retain the possession of the flat as a trustee and on behalf of the IDBI bank. 

d)       …….. In the event a cancellation is effected after the due permission of IDBI bank and at the instance of the borrower or developer  or IDBI bank  then the developer shall immediately on receiving the approval for cancellation from IDBI bank refund the entire loan amount disbursed to IDBI bank within 15 days of receipt of such approval. 

f)        If  the developer 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 developer shall  promptly and immediately refund all monies paid by the IDBI bank. 

h)                The terms and conditions of the agreement  to sell entered between developer and the borrower will have precedence over the terms and conditions of the tripartite agreement. 

i)                 That in consideration of the company ageing 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 property along with the proportionate undivided interest in the land, the developer hereby offer themselves as developer 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 developer from the borrower and company only. 

J)                Each party agrees to co-operative with the others to implement the spirit and terms of this agreement.  It is specifically agreed by the bank, borrower and the developer that the obligations of the developer under this agreement shall be effect up to the handing over of the sale deed and the possession of the said property. 

35)              The complainants contend 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. 

36)              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  that the amounts were diverted for some other purpose.  It did not take  steps to recover from the developer, obviously, it knew  that it would  land up in litigation, where it may not be sure for recovery of the amount.  It knew full well  that  the complainants  being salaried persons it was  easy for them to recover. 

37)              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. 

38)              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  the 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 according to  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.  

39)              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. 

40)              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. 

41)              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. 

42)              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. 

43)              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. 

44)              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.

45)              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.  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 complainant are   not liable to pay the EMIs. 

46)              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. 

47)              Recently i.e., on  8.7.2013  the  National Commission while disposing of  FA 327 of 2012  and  batch  preferred by  the developer and  the State Bank of India and  ICICI bank  against the orders of this Commission made the following  observations while  confirming  the directions issued by this Commission against the developer as well as the bank. 

“In compliance of our order dated 16.05.13, Developer has filed a detailed affidavit with regard to the status of construction, delivery of the apartments to the Respondents, interest to be charged by the Bank in cases where the Respondents have taken bank loans, Access Roads, Sewerage, Power, water, elevators etc.  It is stated in the affidavit that the 4 towers, i.e. Darjeeling, Khandala, Mussoorie and Nainital have been completed and notices have been issued from November, 2012 onward to the purchasers for handing over possession. 5 towers, namely, Dalhousie, Shimla, Ooty, Munnar and Manali are to be completed within the extended time schedule of end of June, 2013.  With regard to remaining 2 towers, namely, Kodai and Coonoor, it was decided not to commence the construction as the number of bookings in these two towers were under 57 out of a total of 132 apartments. It is further stated that the work of access roads had been completed for the stages 1 to 4 and the similar work for stage 5 is under progress and expected to be completed by Ist week of July, 2013. The tar road connectivity to the areas leading to the apartment towers is under construction and would be completed by end of July, 2013. Permanent Sewage Treatment Plant works have been commissioned. External drainage, sewerage and water line works are in progress and will be completed by end of June, 2013. The application for power connection was submitted with APCPDCL in April, 2012 and final orders were issued by the department on May 10, 2013 for laying the cable to the sub-station of the Appellant for energizing as well as awarding the contract to M/s. Mamtha Constructions vide their letter dated Lr. NO.CGM(O&M)/ SE(O&M)/F.Tender/D.N. 384/13 dated 10.05.13. The cable laying work is expected to commence before end of May, 2012. At present, Hyderbad Metropolitan Water Supply and Sewerage Board is supplying Manjeera water to the residents of Hill Country.  The Developer has made application for supply of additional quantum of water in February, 2013.  The gas piping infrastructure work will be completed by June 30, 2013. It is further stated in the affidavit that the provisional club house is operational with indoor facilities and the permanent club house will be completed by end of July, 2013.

With regard to the home loans taken by the Respondents from the Appellant Banks/Financial Institutions, it is averred in the affidavit that the Developer has been meeting the Banks/Financial Institutions periodically to help the Respondents to arrive at settlement and restricting the payment of loan amount. The Developer filed an application before this Commission on 19.03.13 offering a compensation package to all the apartment owners in Hill Country based on fair rental value. However, It has been submitted in the affidavit that the Developer is not in a financial position and cannot undertake to meet the financial bank interest commitments of the respondents or make refunds. The IL&FS Group has infused Rs.425 crores to complete the project and the has paid substantial income tax dues for the past period in order to negotiate with the Income Tax Department to lift the ban on registration of conveyance deeds in the Hill County Project. It is further submitted that if the funds are diverted in making refunds and making interest payments on behalf of the apartment owners, it would be at the cost of other customers of the Hill County Project as the project may not be completed due to lack of funds. Under these circumstances, the Respondents be granted compensation at the rate of Rs.5/- per sq. ft. per month in proportion to the amounts paid by them for the entire period of delay till the date of handing over possession except the 18 months period granted by the CLB to the Developer to complete the project.

          As per Agreements of Sale, the construction of the flats/apartments was to be completed by the Developer in all the cases on or before 31st December 2008.  Due to Satyam Computer’s scam in 2009, the development of the project remained at standstill.  The matter was referred to the CLB which by order dated 13.01.11 induced the IL & FS Group to complete the project.  IL&FS infused Rs.425 crores to complete the project.  As per statement made in the Affidavit filed by the Developer on 20.05.13 in compliance of our order dated 16.05.13 only four towers out of the 11 towers have been completed. 5 towers, namely, Dalhousie, Shimla, Ooty, Munnar and Manali which were to be completed by the end of June, 2013 are likely to be completed in the end of July, 2013. It has been decided by the Developer not to construct the remaining 2 towers, namely, Kodai and Coonoor. The work of providing basic amenities such as water, electricity, drainage, elevator, gas pipeline, club etc. has yet to be completed by the Developer. Under these circumstances, the Respondents/Complainants are not interested to take possession of the flats/apartments. This apart, most of the Respondents by issuing legal notices to the Developer cancelled the Agreements of Sale as they were not willing to take possession of the flats. Since there was nothing on record to show the stage of construction and when the project would be completed, the State Commission rightly directed the Developer to refund the deposited amount along with interest @ 12% p.a. from the respective dates of deposit till payment together with compensation of Rs.1,00,000/- and costs of Rs.10,000/-.

          As per affidavit filed by the Developer, the Developer could not complete the project within the period of 18 months granted by the CLB. Developer has got the period to complete the project extended by the CLB upto 30.06.13.  Since the contradictory statements were being   made   by   the   Ld.   Counsel   appearing   for   the Developer,   we   asked   the   Developer   to   file   a   fresh   affidavit showing   the stage of construction.  On perusal of the Affidavit, we are   satisfied   that   the project cannot be completed till 30.06.13.  As per Affidavit filed by the Developer, the Developer is not in a position to complete the project upto 30.06.13. Developer has sought further time upto 31.07.13 to complete the project as the basic amenities such as water, electricity, drainage, elevator, gas pipeline etc. have yet to be provided by them.  Since the project is not complete as on the date, we cannot direct the Respondents to take the possession of the flats. For the reasons stated above, we endorse the finding as well as direction given to the Developer by the State Commission to refund the amount to the Respondents.

          The Developer’s primary contention made before us is that the order of refund passed by the State Commission is unsustainable and more so in the present circumstances when the construction is already completed. The affidavit filed by the Developer on 20.05.13 reveals that a substantial part of the work, even according to the Developer, is still going on.  The affidavit, on the face of it, does not inspire any confidence and rather makes it abundantly clear that the apartments are not habitable. Section 455 of the Hyderabad Municipal Corporation Act, 1955 mandates that after completion of the work in a building, the builder should intimate the Municipal Corporation in writing about such completion in the prescribed form.  The Authority after inspection, if it deems fit, would grant a completion certificate and no person shall be allowed to occupy a building until a completion certificate is issued.  This would be possible only if the entire work is complete. It is pertinent to mention here that Section 4 (4) of the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987 mandates that an apartment can be transferred by the Developer only after obtaining a Completion Certificate and Certificate of fitness for occupation from the local authorities.  In view of the mandatory provisions of law, the claim of the Developer that the flats are ready and would be handed over to the Respondents by June, 2013 is factually incorrect. Respondents are not interested in allotment of flats as the Banks/Financial Institutions are to recover the loans on the terms and conditions of the original agreement with interest for the period of six years when there was no construction. If the Respondent are compelled to take the flats, they would be in a state of debt to the Banks/Financial Institutions and would be required to pay interest/penal interest etc. Further, Respondents are facing litigations initiated by the Banks under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; The Recovery of Debts due to the Banks and Financial Institutions Act, 1993 and The Negotiable Instruments Act, 1881. Assuming that the Respondents take possession of their respective flats, the Banks would immediately initiate proceedings for attachment of the flats towards recovery of the alleged dues. It is evident that in the event of the Respondent’s taking over the possession of the flats, they would have to pay huge amounts to the Banks as per the penal provisions for default in the loan agreements, which cannot be repaid by them even after selling the flat. If the Respondents take possession of the flats, they would be left with huge debts to the Banks and continue to litigate in various other Courts for no fault of theirs.

The 66 Respondents in the present batch of Appeals comprise less than 10% of the total flat purchasers in the Developer’s project. It would not make any difference to the Developer, if the Respondents are refunded the amount paid by them.   The Developer can sell the finished flats in the open market at current rates and fetch more money than the amounts at which they agreed to sell the flats to the Respondents herein.

This apart, the earlier judgment on the same/similar facts in Complaint Case No.30/09 based on which the State Commission has allowed the present complaints, was upheld by this Commission with slight modification.  SLP filed by the Developer against the said order was dismissed by the Supreme Court. The earlier judgment is a binding precedent which has been upheld upto Supreme Court. We respectfully follow the same. Complaint No.30/09 was filed against the Developer on the same facts.  The only intervening factor is the order dated 13.01.11 passed by the CLB which according to us makes no difference as the Developer remains the same.  By order dated 13.01.11, CLB had allotted the preferential shares to the IL&FS by virtue of which it has controlling interest in the company.  The liability of the Developer to the Respondents remains the same. The judgment rendered by this Commission in First Appeal No. 189/10 in complaint No.30/09 which had been upheld by the Supreme Court, is a binding precedent and as stated above we are bound by the same.

Even as on today, the flats are not complete.  Developer has not obtained the Completion Certificate or Certificate of fitness for Occupation. Under these circumstances, Respondents cannot be ordered to take possession of the unfinished flats without Completion Certificate and Certificate of fitness for Occupation issued by the local authorities.

          For the reasons stated above, we do not find any merit in the Appeals filed by the Developer and dismiss the same with no order as to costs.

FINDINGS IN FIRST APPEAL NOS. 387 TO 400 OF 2012, 783/12, 29/13 AND 14 TO 25 OF 2013 FILED BY THE STATE BANK OF INDIA AND ICICI BANK LTD.

          We need not recapitulate the facts again. Relevant clauses of the tripartite agreements wherein the Appellant, State Bank of India/ ICICI Bank Ltd. was a party, are reproduced as under:-.

“2.     SBI shall make disbursement of the sanctioned loan by making payments to the Developer directly on behalf of the borrowers and payment(s) made to the Developer shall be deemed to be payment(s) made to the borrowers and the borrowers shall in each case be liable for the amount of the loan disbursed on his/her behalf to the Developer, as though the same has 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 for disbursement would be sufficient for SBI to effect disbursement as aforesaid.

However, SBI at its sole discretion, shall disburse the loan in suitable installments, at the request of borrower/Developer or in suitable installments to be decided by SBI with reference to need or progress of construction, which decision shall be final and binding on the borrower(s)/Developer.  The borrower shall be responsible to follow up with SBI to make disbursement on his/her behalf as per any agreement, payment schedule he/she may have with the Developer.

          Notwithstanding anything to the contrary contained herein, SBI may in its sole discretion refuse to disburse the loan until; (a) Borrower(s) has/have 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.

6.       That in the event of cancellation of allotment to the borrower by the Developer for any reason whatsoever the Developer shall refund to SBI only forthwith the entire amounts received from SBI within 60 days subject to clause No. 7 below. The balance if any after adjusting the dues, interest, costs and other amounts recoverable by the SBI, shall be returned to the borrower by SBI.  The Developer herein undertakes not to refund any amount, on any account, under any circumstances to the borrower without the written consent of SBI.

7(a)    Upon cancellation of the allotment of the schedule property 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 SBI 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.

(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 both Developer and SBI) incurred by the Developer from the sale proceeds of the property”

          Pursuant to the tripartite agreements, the Appellant Bank entered into the loan agreements with the Respondents herein and sanctioned the home loans. Thereafter, the Appellant Bank issued sanction letters. As per clause 13 (c) of the Loan Sanction Letter, the Appellant Bank was obligated to release the loan amount to the Developer directly on the basis of verification of the stage and nature of the construction. In terms of Section 5 of the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987, the Appellant Bank was under an obligation not to release more than 20% of the sale consideration amount as advance to the Developer before commencement of the construction.  The relevant Section 5 reads as under:- 

“ A promoter who intends to transfer any apartment shall before, accepting any sum of money as advance payment or deposit, which shall not exceed twenty percent of the price, enter into a written agreement of sale with the intending transferee and the same shall be registered as a document compulsorily registerable under clause (b) of sub-section (1) of Section 17 of the Registration Act, 1908.”

The Appellant Bank disbursed the entire loan amount to the Developer even before the commencement of construction at the project   site   contrary  to   the   provisions of the Tripartite Agreement.  The   Appellant   Bank   could   not   have   disbursed   the   loan   amount   without   taking  proper  care   and  caution  to find  out  about  the  existence/start of construction of  the  flats  for which  loans  were  sanctioned. Due  to  the  lack  of  supervision  on part  of  the  Appellant  Bank, the  Developer   diverted  the  funds  of the  project  to  the  Satyam  Computers.  The  Appellant Banks having acted contrary to the terms of the tripartite agreement, its own sanctioned terms and provisions of Section 5 of the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987 by disbursing the entire loan amount without any construction being made, cannot be absolved of their responsibility.

The tripartite agreements executed between the Bank, Developer and the Respondents contemplate that in the event of cancellation of allotment of flat, the Developer was liable to refund the entire loan amount to the Appellant Banks within 60 days. Respondents terminated the contracts by filing the complaints. The Appellant Banks in spite of having notice of termination of the contracts did not take any steps for recovery of the loan amount from the Developer. The contention of the Bank that as per tripartite agreements the Bank was bound to review the

progress of the construction only to protect its own interest otherwise no duty was cast upon it does not hold water and appears to be a fallacious argument and a lame excuse. The progress of construction and the manner in which the loan amount was to be disbursed by the Bank were inter-connected issues and the Appellant Bank being the home loan banker who has lien over the flats should have acted cautiously and taken reasonable care to ensure that its money is safe and secure. Moreover, the Appellant Bank cannot have any grievance against the order passed by the State Commission directing it to recover the loan amount from the Developer as the interest of the Bank has been adequately protected by the State Commission.

          For the reasons stated above, we do not find any merit in the Appeals filed by the Banks and dismiss the same with no order as to costs.”

46)              We also observe from the above order that the developer filed   a detailed affidavit before the  National Commission  stating that  it has not yet commenced the construction  of certain towers  then there is no meaning  in asking the developer  to  complete the flat and  hand over the same.      As observed by the National Commission in the aforementioned order, that in  terms of Section 5 of the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987, the bank was under an obligation not to release more than 20% of the sale consideration amount as advance to the developer before commencement of the construction.   Viewed from any angle  there is deficiency in service  and latches on the part of  the bank also.  Taking into consideration totality of the facts and circumstances of the case  and in the light of  judgment of the National  Commission supra, we allow the complaints in part. 

47)              All the  applications  filed by the  past/present  directors  submit that as they are  not liable prayed to delete or strike off  their names/arrayed   as opposite parties in the complaints.   The Hon’ble Supreme Court in Delhi Development Authority Vs. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622 in which the Supreme Court has observed as follows :

“The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people.  Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. 

48)              While  discussing the role of directors in  execution proceedings in  Ravi Kant Vs. National Consumer Disputes Redressal Commission reported in I (1997)  CPJ 271 (DB) the  Delhi High Court  held as follows:

Whether the Directors of the Company are ’persons’ within the meaning of Section 27 ? — (Yes)

Held: Now the Act in question before us has been passed by Parliament, as stated in the preamble, to provide for the better protection of the interests of Consumers and for that purpose to make provision for the establishment of Consumer Councils and for matters connected therewith. Parliament, in our view, was surely aware that substantial part of Consumer goods or services to the Consumers were rendered by "companies" incorporated under the Companies Act and action was necessary under Section 27 of the Act against Companies. There is also evidence in Section 25 of the Act in this behalf because Section 25 states that the District Forum, State Commission and National Commission shall execute their respective orders in the same manner as in suits, and in case of inability to execute, send the execution proceedings to the Civil Courts in whose jurisdiction the registered office of a Company is situate or where the judgment-debtor ("any other person") is residing or carrying on business or is personally working for gain. This section makes it clear that orders passed under the Act could be orders against a Company. When we come to Section 27, it refers to failure or omission to comply with an order passed by the District Forum, State Commission or National Commission against a trader or person i.e., under Section 25. By reading Section 25 and Section 27, it is clear that the word "person" in Section 2(m) must necessarily include a Company against which orders could be executed as stated in Section 25. Therefore, going by the object and purpose of the Act, it is clear that Section 27 of the Act applies to failure or omissions on the part of a "Company" to comply with the provisions of orders passed.

(Para 13)

Whether pendency of proceedings under Company Courts will come in the way of FORA ? — (No).

Held further: The contention is that the liability of the Company or of the petitioners is to be restricted to the value of the shares held by them or has to be dealt with only during the winding up proceedings of the two companies is again untenable. It may be that the proceedings for recovery under Section 25 of the Act may, on the facts, require the taking into account of the pendency of the winding up proceedings but the penal provisions under Section 27 of the Act are in addition to the mode of recovery contemplated by Section 25 and, therefore, the pendency of winding up proceedings will not come in the way of the Commission passing orders under Section 27 of the Act.

Para 19)

49)              Keeping in view  the aforementioned judgements  and also it is pertinent to note that that the  orders of this Commission  were confirmed by the National Commission in  FA No. 387/2012, FA 390/2012, FA 392/2012, FA 398/2012, FA 388/2012  and FA 350/2012  in which  CCs  the same persons were arrayed  as directors were also directors during  the time of cause of action, we see no reason to allow the aforesaid applications.

50)              In the result the complaints  are  allowed in part  in  following terms:

CC  81 of  2012  

i)                  The developer Op1  and Ops 2 to 6 are jointly and severally   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/-

ii)                Further the  developer Op 1 and Ops 2  to 6 are  jointly and severally     directed to refund the amount disbursed by the bank (Op7 & Op8)   to  it  along with penal charges etc. levied by the bank if any, failing which the bank  is  entitled to collect,  and credit the  same to the loan account of the complainants. 

iii)               In case sale deed was executed 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.  

CC  29 of  2010   &  CC 30 of 2010

1. The developer Op3  and Ops 4 to 6 are jointly and severally   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/-

2. Further the  developer Op 3 and Ops 4  to 6 are  jointly and severally     directed to refund the amount disbursed by the bank (Ops 1 & 2)   to  it  along with penal charges etc. levied by the bank if any, failing which the bank  is   entitled to collect,  and credit the  same to the loan account of the complainants. 

3. In  case sale deed was executed 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). 

  iv.         The complaints  against Ops  7 to 19 are  dismissed but without costs.

Time for compliance eight weeks.