BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION
AT HYDERABAD
CC 25 of 2010
Between:
Nikhil Penmetsa
S/o. P. Bhaskara Raju
Rep. by GPA P.Bhaskara Raju
S/o. Late Narasimha Raju
H.No. 8-3-677/45,
SKD Nagar, Yellareddyguda
Hyderabad. *** Complainant
And
1. M/s. Maytas Properties P. Ltd,
Rep. by its Vice-Chairman
Maytas Hill County, Bachupally
Miyapur, Hyderabad- 500 072.
Regd Office : 6-3-1186/5/A
3rd Floor, Amogh Plaza
Begumpet, Hyderabad-16.
2) The Chief Manager
State Bank of India
Abid Road, 3rd Floor
Near Surya Lok
D.No. 5-9-300, Gunfoundry
Hyderabad.
3) The Asst. General Manager
State Bank of India
Retial Assets Central Processing Centre
Hyderabad Zonal Office
Patny Centre, 3rd Floor
Secunderabad-500 003.
4) D.V.S. Subba Raju
S/o. Late D. Krishnam Raju
Nominee, M/s. Maytas Properties Ltd.
Flat No. 102, Plot No. 97
Dhanunja Nest, Rajeev Nagar
Yousufguda, Hyderabad-45.
5) B. Rama Raju
S/o. B. Ramalinga Raju
Director, Mayatas Properties Ltd.
Bachupally, Hyderabad-500 072.
6) M. Teja Pratap Raju
S/o. Hari Prasad Raju
Flat No. 32, Sneha Siri Sampada Apartments
B.K. Guda, S.R. Nagar
Hyderabad-500 038. *** Opposite Parties
Counsel for the Complainants : M/s. G. Narender Raj
Counsel for the Opposite Parties M/s K. Vishveshwara Reddy (MPL)
M/s. G. Shyamala (Bank)
CC 26 of 2010
Between:
Nikhil Penmetsa
S/o. P. Bhaskara Raju
Rep. by GPA P.Bhaskara Raju
S/o. Late Narasimha Raju
H.No. 8-3-677/45,
SKD Nagar, Yellareddyguda
Hyderabad. *** Complainant
And
1) The Chief Manager
State Bank of India
Abid Road, 3rd Floor
Near Surya Lok
D.No. 5-9-300, Gunfoundry
Hyderabad.
2) The Asst. General Manager
State Bank of India
Retial Assets Central Processing Centre
Hyderabad Zonal Office
Patny Centre, 3rd Floor
Secunderabad-500 003.
3) M/s. Maytas Properties P. Ltd,
Rep. by its Vice-Chairman
Maytas Hill County, Bachupally
Miyapur, Hyderabad- 500 072.
Regd Office : 6-3-1186/5/A
3rd Floor, Amogh Plaza
Begumpet, Hyderabad-16. *** Opposite Parties
Counsel for the Complainants : M/s. G. Narender Raj
Counsel for the Opposite Parties M/s K. Vishveshwara Reddy (MPL)
M/s. G. Shyamala (Bank)
CORAM:
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) Since the facts and law involved in the above complaints are similar filed against the very same complainant with the following prayers, we dispose of them by this Common order.
CC No. 25/2010
i) Direct the opposite parties 1, 4 to 6 to refund an amount of Rs. 33,48,088/- to the complainant with interest @ 24% p.a., by returning illegal collections from loan account of the complainant to Ops 2 & 3 till realization.
ii) Grant a compensation of Rs. 50 lakhs to the complainant
iii) Award costs of this complaint
CC No. 26/2010
i) Direct the Ops 1 & 2 to receive Rs. 4,73,064/- and issue the loan discharge certificate, title deeds, cheques etc.
ii) Direct the Ops 1 & 2 to pay a compensation of Rs. 20 lakhs to the complainant for deficiency of service committed by them.
iii) Grants costs of the complaint.
2) The brief facts as stated in the complaint in CC 25 of 2010 are that the complainants purchased a residential flat No. 302 in 6th floor, type 3 of Kodai apartment complex of 2158 sft with two covered car parking areas and an undivided share of land admeasuring 132 sq.yds in the Hill County in Ranga Reddy district for a sale consideration of Rs. 85,32,352/-. The complainant submits that Op1 is the developer and Op6 is its nominee who signed the construction agreement on 6.12.2008. Ops 4 to 6 are directors of Op1 and Ops 2 & 3 is the State Bank of India (Bank) which has financed the home loan. Op1 received booking advance of Rs. 22,49,040/- and the remaining amount shall be financed by the bank by way of home loan. The complainants submit that as per the terms of the agreement Op1 has not completed the construction nor handed over the possession of flat as agreed upon. Op1 executed a sale deed on 6.12.2008 in respect of transfer of undivided share of land admeasuring 132 sq.yds and unfinished and semi-finished flat for a consideration of Rs. 33,48,088/-.
3) The complainants further state that the bank ought to have released the loan amount as per the Tripartite Agreement depending on the progress of construction but the home loan banker charged interest and other charges though the flat remained unfinished. The complainant got issued a legal notice on 20.12.2009 and 31.7.2009 to the developer and also to the banker but did not receive any reply. Hence the complainant filed the above complaint for the reliefs aforementioned.
4) Op1 developer filed counter resisting the complaints and contended that this complaint is not maintainable as the complainant filed two different complaints viz., CC 25/2010 and CC 26/2010 arising out of same facts to clutch the pecuniary jurisdiction of this Commission since the claim made by the complainant in both cases put together would exceed more than Rs. 1 crore which is not permissible under law. Op1 further submits that this Commission has no jurisdiction to entertain the matter in view of Company Law Board (CLB) order dt. 13.1.2011 in Company Petition No. 4/2009. Op1 while quoting various citiations contended that it is settled and established principle that courts would abide by the concept of ‘Comity of Courts’ to ensure that no inconsistency and mutually repugnant orders are passed. Op1 contended that in the light of CLB order 13.1.2011 and in view of arbitration award in Case Nos. 11 of 2011, 33 of 2011 and 106 of 2011 dt. 8.2.2012 between the three customers of Maytas Properties Ltd., Vs. C. Manav, I. Surendra, G. Poleru & MPL this Commission has no jurisdiction to try the matter.
Op1 submits that any order of refund would jeopardize the entire scheme and arrangement made by the CLB and that various steps were taken to complete the project on time as per the revised schedule. Op1 submitted that in the apartment complex the construction work is going on in respect of 9 towers out of 11 towers. With respect to customers who purchased in the balance two towers namely Kodai and Coonoor, the company has requested for consolidation in the other 9 towers providing the facility of swapping of apartments in order to expedite the delivery. Op1 submitted that pursuant to CLB order dt. 13.1.2011 the new promoter M/s. IL&FS Group which holds 80% shareholding Op1 company came into the picture and would complete the project within 18 months. Op1 is in a position to hand over the apartments to good number of complainants as per the revised schedule.
Without prejudice to the above contentions, on the directions of the National Commission Order dt. 10.7.2012 the Opposite Party No.1 (MPL) gave an affidavit before the National Commission on the compensation proposed by the MPL to its customers for the delay in handing over the apartments/villas.
Op1 admitted that in the instant case an agreement has been entered into on 9.11.2006 and the apartment booked by the complainant has to be delivered by 9.2.2009 including three months grade period. As per the agreement MPL/IL&FS is ready to pay the compensation @ 5% per sft for the period of delay as under :
| S.No. | Phase | Period | Amount |
| 1. | A | 8 months after grace period @ Rs. 5/- per sft | 86,320/- |
| 2. | D | From 1.8.2012 to till date of possession/ Delivery @ Rs. 5/- per sft | 1,18,690/- |
| | | | |
Op1 further submits that as per the CLB order the new management would complete 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 complainant 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 this complaint is not maintainable and prayed for dismissal of the complaint .
5) Ops 2 & 3 bank filed its counter stating that the complainant has approached Op1 on 26.10.2006 to sanction the loan for meeting the payments as agreed between the complainant and MPL under the agreement of sale dt. 9.11.2006 and Op2 sanctioned housing term loan of Rs. 76.70 lakhs on 2.2.2007 for purchase of apartment No. 6E in type 3 of Kodai Block with built up area of 2697 sft along with undivided share of land 132 sq.yrds in MPL project repayable in 161 EMI @ Rs. 86,440/-. The complainant while accepting the terms and conditions of the Op2 executed the following documents :
i). Memorandum of term loan agreement for housing loan granted to
public dt. 2.2.2007.
ii) Agreement to mortgage dt. 2.2.2007.
iii) Tripartite agreement dt. 2.2.2007 between MPL, bank and the
complainant.
The bank submits that at no point of time the complainant did ever inform the bank that the amounts should not be disbursed from their loan account to MPL. In fact the complainant himself requested the bank to make payments to MPL before the due date to avoid penalties. The bank is no way concerned with the progress of the construction and the complainant authorised them to make payments from their loan account to the developer on the basis of agreement of sale. The important features of tripartite agreement reads as follows :
i) The borrower hereby authorizes SBI to make disbursement of the sanctioned loan to the developer directly on his behalf to ensure steady and expeditious progress of construction
ii) SBI shall make disbursement of the sanctioned loan by making payments to the developer directly on behalf of the borrower/and payments made to the developer shall be deemed to be payments made to the borrower and the borrower shall in each case shall be liable for the amount of the loan disbursed on his behalf to the developer as though the same had been disbursed directly to him.
iii) 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 disbursements would be sufficient for SBI to effect disbursement as aforesaid.
The bank submits that they should not be held responsible for the delay in construction by the developer. In case of default in repayment of loan amount the complainant has no right to proceed against it. For recovery of loan amount, the bank has every right to enforce all or any of the security furnished by the complainant by public auction and they have got unqualified right to disclose or publish the names of the complainant as ‘defaulter’. The bank submits that in the light of arbitration clause this Commission has no jurisdiction to entertain the matter. The bank has nothing to do with the transaction of sale or purchase between the complainant and the developer and that the complainant has to repay the loan as per the schedule irrespective of the fact whether the flat is completed or not. The bank reiterated that the payments made to the developer should be treated as payments made to the complainant and they are not responsible or liable to ensure or ascertain the progress of the construction and mere demands for disbursements would be sufficient for the bank to effect payments. The complainant has to work out his remedy against the developer but not against the bank. The complaint is vexatious without any reasonable ground and prayed for dismissal of the complaint.
6) Both sides filed their affidavit evidence and got marked Exs. A1 to A25 and Exs. B1 to B18 in CC 25/2010 and Exs. A1 to A14 and Exs. B1 to B12 in CC 26/2010.
7) The points that arise for consideration are :
i. Whether there is deficiency of service on behalf of the developer and whether the complainant is entitled to the reliefs sought for in the complaint.
ii. Whether the bank was justified in releasing the entire amount, contrary to the terms of agreement and whether there is deficiency of service on behalf of the bank?
8) The facts not in dispute are that the complainant had booked a residential flat No. 302 in 6th floor, type 3 of Kodai apartment complex of 2158 sft with two covered car parking areas and an undivided share of land admeasuring 132 sq.yds in the Hill County in Ranga Reddy district for a sale consideration of Rs. 85,32,352/- evidenced under Ex. A9 & A10 (CC 25/2010). Ex. B2 is the Tripartite Agreement entered into between the developer complainant and the bank. Ex. A10 is the agreement for construction dt. 6.12.2008 entered into between the developer and the complainant for a consideration of Rs. 51,84,264/- and the schedule shows that this amount has been paid. Construction Schedule which is part of Ex. A10 shows that the flat has to be completed and handed over by 9.11.2008. Ex. A1 is the legal notice got issued by complainant to the developer calling upon them to hand over the flat as per the agreement and pay penalty amount or to refund the amounts paid by the complainant as per clause 5(a)(ii) of the agreement. Ex. A1 (CC 26/2010) is the legal notice got issued by the complainant to the bank stating that Rs. 76,70,000/- was sanctioned as home loan but as the flat has not been completed and the nature of disbursement of home loan should be in accordance with agreement but the loan instalments have been disbursed contrary to these terms and therefore the complainant sought for recovering the dues from the developer as notice was issued to the developer for termination of agreement. Ex. B3 to B6 are the documents relating to sanction of loan.
9) The developer filed Exs. B1 to B18 in CC 25/2010. Exs B1 & B2 are CLB orders dt. 5.3.2009 and 13.1.2011. Exs. B3 is Form-32 in respect of resignation of directions and appointment of new directors. Ex. B4 is the letter dt. 8.4.2011 in regard to progress of construction. Ex. B5 & B6 are letters dt. 17.6.2011 and 28.7.2011 to Hill County Home Owners. Exs. B7 to Ex. B12 are letters and photographs with regard to progress of construction addressed to customers. Ex. B13 is the copy of letter dt. 20.7.2012 issued by Gram Panchayat, Bachupally. Ex. B14 is the Board Resolution dt. 2.4.2011. Ex. B15 is the A.P. High Court order dt. 5.12.2012. Ex. B16 is the letter dt. 12.12.2012 in regard to registration and progress of construction. Ex. B17 is the letter addressed by the developer to the customers to complete formalities to hand over possession and Ex. B18 is the proof of deliver of flats addressed to customers on various dates.
10) 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.
11) 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.
12) The learned counsel for the complainants submitted that they learnt that the developer represented before the CLB that all efforts would be taken up for completion of the project. Evidently no construction activity has been taken up. Even otherwise it is admitted that 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 apartments. They insist that their amounts be refunded with interest, besides penalty @ Rs. 5/- per sft as agreed upon together with compensation and costs.
13) 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.
14) 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 Hon’ble 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.
15) 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.”
16) 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’.
17) 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’.
18) 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 we hold that this Commission has jurisdiction to adjudicate the matter.
19) 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. ”
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. None of the directors of the company filed their affidavits to show the stage of construction, nor the fact that the case on hand towers were completed.
20) 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 the recovery of amount. Equally so with the bank.
21) 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.
22) 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.
23) 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 has 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.
24) 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. 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’. The complainant marked a copy of legal notice got issued to the developer but neither of them had given any reply.
25) The principle of unjust enrichment can be applied herein as the developer has been enriched by receipt of a benefit, secondly, this enrichment is at the expense of the complainant, and thirdly, the retention of the enrichment is unjust and justifies restitution.
We may also quote herein the words of Lord Mansfiled C.J.
This kind of equitable action to recover back money which ought not in justice to be kept….. lies only for money which ex acquo et bono the defendant ought to refund ….. It lies for money paid by mistake, or upon a consideration which happens to fail, or for money got through imposition (express or implied) or extortion, or oppression, or undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.
(emphasis supplied)
Section 72 of the Indian Contract Act runs as follows :
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. There must be some undue pecuniary inequality existing in the one party relative to the other which the law recognizes as requiring compensation upon equitable principles.
26) In the instant case sale deed was executed in favour of the complainant 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.
27) 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.
28) 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. 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.
29) We may refer herein some of the important terms of the tripartite agreement:
2) The bank shall make disbursement of the sanctioned loan by making payment to the developer directly on behalf of the borrower and payments made to the developer shall be deemed to be payments made to the borrower and borrower shall in each case be liable for the amount of the loan disbursed or his/her behalf to the developer, as though the same had been disbursed directly to him/her. It is further agreed by the borrower that the bank shall not be responsible or liable to ensure or ascertain the progress of the construction and mere demands by the borrower for disbursement would be sufficient for the bank to effect disbursement as aforesaid provided that all other sanction stipulations are complied by the borrower.
However, the Bank as its sole discretion, shall disburse the loan in suitable instalments, at the request of borrower, or in suitable instalments to be decided by the bank, with reference to need or progress of construction, which decision shall be final and binding on the borrower/developer. The borrower shall be responsible for follow with the bank to make disbursement on his/her behalf as per any agreement, payment schedule he/she may have with the developer. Not withstanding anything to the contrary contained herein, the bank may in its sole discretion refused to disburse the loan until:
(a) Borrowers has paid his/her own contribution in full to the developer (the cost of the dwelling unit less the loan) and the progress and need of the construction justifies the disbursement requested.
3) …… The developer further agrees to total subrogation of borrower’s right to receive refund of all the monies, received by the developer from the bank on behalf of the borrower in favour of the Bank. In any event in which such refund becomes due and payable to the borrower under any agreement/arrangement executed/made between the developer and the borrower, the developer in particular agrees and undertakes not to pay any amount on any account or under any circumstances to the borrower by way of refund or otherwise without first receiving a written consent of the bank. The borrower and the developer also agrees that as soon as the first disbursement is made by the bank, the mortgage/charge in favour of the bank shall, without the necessity of any deed, document or writing, fasten on the said dwelling unit and the same shall continue (notwithstanding its allotment, completion and occupation) until the loan of the bank is fully repaid with interest and all other dues.
(5) If for any reason there is an increase in the cost of the dwelling unit such increase in the cost of the dwelling unit shall be paid/borne by the borrower without any reference to the bank bank and until such payment is made UTI bank shall have the right to suspend further disbursement of the sanctioned loan
7(a) Upon cancellation of the allotment of schedule property, made to the borrower for any reason, the developer shall immediately intimate about the same in writing to the Bank. Upon receipt of such intimation, The Bank shall notify the developer all amounts due to it from the borrower. In such an event, the developer shall forthwith pay the Bank all amounts received by it from the bank on behalf of the borrower within 60 days of receipt of such statement during which period, the developer shall pay interest to the Bank, at the rate of interest on such amount shall be the same as agreed between the Bank and borrower in the loan agreement.”
7 (b) Further the developer hereby agrees that it shall also pay all the remaining amounts due and payable to the Bank from the borrower such as defaulted payments, additional interest, etc. after deducting reasonable expenses (as agreed by the developer, and the Bank) incurred by the developer from the sale proceeds of the property. Further any such sale by the developer can be effected only after obtaining a consent from the Bank.
9) That in the event of default in payment of any dues to the bank by the borrower the Bank may at its sole discretion enforce the security by sale of the land and dwelling unit for which the loan has been availed by the borrower and the developer shall not raise any objection/obstruction for the same and shall accept another purchaser for the house or flat in place of the borrower, however subject to the substitute purchaser complying with the necessary requirements of the developer in this respect. If there are any dues/ outstanding payable by the borrower to the developer the same shall be subordinate/secondary to that of the liability of the borrower to the Bank.
30) The complainant 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.
31) 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 bank 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 the complainants being salaried persons it was easy for them to recover.
32) 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.
33) 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 such a ‘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.
34) 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.
35) 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 fully well that it could recover the amount from the complainants.
36) The banks and financial institutions promising to lend money 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.
37) 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.
38) 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.
39) This Commission can take judicial cognizance of the fact that various banks have financed the builder obviously in view of the 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 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.
40) 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.
41) The bank has to collect the loan amount plus whatever interest and other legally permissible charges from the developer and credit it to the complainant’s loan account. It shall not collect further EMI’s nor entitled to any more amount except the amount, if any, remained unpaid by the complainant 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.
42) 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 very State Bank of India and ICICI bank against the orders of this Commission made the following observations while confirming 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.”
43) We also observe from the above order that the developer filed a detailed affidavit before the National Commission among other things stating “ With regard to remaining two towers, namely, Kodai and Cooner, 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.” The case on hand also pertains to Kodai tower. In the light of submission made by the very developer that it has not yet commenced the construction, 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 bank also. Taking into consideration the 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 following terms:
CC 25 of 2010 & CC 26 of 2010
44) In the result both the complaints are allowed in part directing Ops 1, 4 to 6 in CC 25/2010 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 Ops 1, 4 to 6 are directed to refund the amount disbursed by the bank (Ops 2 & 3) 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. As CC 26 of 2010 is also clubbed with CC 25 of 2010, the aforementioned directions with respect to developers and the bank hold good in this complaint also. Time for compliance eight weeks.
45) As sale deed was executed on compliance of aforementioned directions, the complainant shall re-convey the same to the developer and the registration charges and stamp duty etc., shall be borne by the developer.
1) _______________________________
PRESIDING MEMBER
2) ________________________________
MEMBER
*pnr
CC 25 of 2010
APPENDIX OF EVIDENCE
WITNESSES EXAMINED FOR COMPLAINANT: None
WITNESSES EXAMINED FOR OPS: None
DOCUMENTS MARKED ON BEHALF OF COMPLAINANT:
Ex.A1: 20.12.2009 Legal notice got issued by complainant to MPL.
Exs A2 to A5 Post receipts.
Exs.A6 & A7 Postal acknowledgments
Ex.A8 10.01.2009 Letter addressed by MPL to its customer.
Ex.A9 06.12.2008 Sale Deed executed in favour of complainant.
Ex.A10 : 06.12.2008 Agreement for construction entered into between the parties.
Ex.A11: 09.06.2008 GPA executed by complainant in favour of P. Bhaskara Raju
Ex. A12 to
Ex. A19 Acknowledgment cum receipts
Ex.A20: 02.02.2007 Agreement letter housing finance of SBI
Exs.A21 Colour Photographs of under construction flats.
to
Ex. A 23
Ex.A 24: 09.11.2006 Agreement of sale
Ex.A 25: 08.01.2010 Letter addressed by MPL to complainant.
DOCUMENTS MARKED ON BEHALF OF O.P(s):
Ex.B1: CLB order dated 5.3.2009.
Ex.B2: CLB order dated 13.1.2011.
Ex.B3: Form No. 32
Ex.B4: Letter of MPL to its customer informing progress of construction dt. 8.4.2011.
Ex.B5: Letter of MPL to Hill County Home Owners dt. 17.6.2011
Ex.B6: Letter of MPL to Hill County Home Owners dt. 28.7.2011
Ex.B7: Letter of MPL to its customers on progress of construction dt. 8.9.2011.
Ex.B8: Letter of MPL to its customers on progress of construction dt. 25.10.2011
Ex.B9: Letter of MPL to its customers on progress of construction dt. 29.12.2011
Ex.B10: Letter of MPL to its customers on progress of construction dt. 02.03.2012.
Ex.B11: Pictorial progress status as on June, 2011.
Ex.B12: Photostat copy of various towers as on June, 2011.
Ex.B13: Letter dt. 20.07.2012 of Grama Panchayat quoting the fair rental value at Bachupally.
Ex.B14: Board resolution of MPL dt. 2.4.2011
Ex.B15: High Court ordered in WP No. 9227 of 2010 & Batch dt. 5.12.2012.
Ex.B16: Letter of MPL to its customers dt. 12.12.2012
Ex.B17: Letters of MPL to its customers to visit the site to complete interiors.
Ex.B18: Letter of MPL to its customer to take over the flats for completion of
Interior fit outs dt. 22.12.201.
CC 26 of 2010
APPENDIX OF EVIDENCE
WITNESSES EXAMINED FOR COMPLAINANT: None
WITNESSES EXAMINED FOR OPS: None
DOCUMENTS MARKED ON BEHALF OF COMPLAINANT:
Ex.A1: Lgal Notice, dt. 31.07.2009 got issued by the complainant to bank
Exs.A2, A3: Postal Receipts dt. 01.08.2009
Exs. A4 & A5 : Postal delivery statement.
Exs.A6: Statement of account dt. 29.6.2009.
Exs.A7 : Sale deed dt. 06.12.2008
Exs.A8 : Agreement for construction dt. 6.12.2008
Exs.A9 : General Power of Attorney dt. 9.6.2008
Ex.A10: Agreement letter of SBI for Housing Finance dt. 2.2.2007
Exs. A11, 12 & 13: Photos of Apartments
Ex.A14 : complaint copy of CC No. 25/2010.
DOCUMENTS MARKED ON BEHALF OF OP(s).:
Ex.B1: Board Resolution of MPL dt. 4.2.2009
Ex.B2: Tripartite Agreement dt. 2.2.2007
Ex.B3: Form No. A – details of the property furnished as security.
Ex.B4: Letters issued by complainant to bank for release of amounts.
to
Ex. B6
Ex.B7: Statement of account of complainant dt. 30.11.2011.
Ex.B8: Interim Award of Arbitral Tribunal, Hyd. Dt. 8.2.2012.
Ex.B9: High Court order in WP No. 9227/2010 & Batch dt. 5.12.2012
Ex.B10: Letter of MPL to its customers on progress of construction dt. 12.12.2012
Ex.B11: Letters of MPL to its customers to visit the site to complete interiors.
Ex.B12 Letter of MPL to its customer to take over the flats for completion of
Interior fit outs dt. 22.12.2012
1) _______________________________
PRESIDING MEMBER
2) ________________________________
MEMBER
24/07/2013
UP LOAD – O.K
