PER A.P. SAHI, J., PRESIDENT

IA/16507/2024 (Application for condonation of delay)

          This application has been filed for condoning the delay of 2 days in the filing of the appeal.

          Having heard learned counsel Ms. Anusuya Salwan, we are satisfied that the cause shown is sufficient and the delay deserves to be condoned. 

          Accordingly, the application is allowed and the appeal is treated to be within time and has been taken up for hearing at the admission stage itself.

Appeal

          This appeal questions the correctness of the order of the SCDRC Delhi (hereinafter referred to as the State Commission) dated 24.09.2024 whereby Consumer Complaint No. 649 of 2017 filed by the respondents no. 1 and 2/complainants has been allowed, recording findings on deficiency and unfair trade practice holding the appellant along with the builder/developer/respondent no.3 herein liable and directing refund of Rs.25,05,500/- along with interest as per directions contained therein.

          The appellant has come up challenging the said direction on the ground that there is no privity of contract between the appellant and the complainants/respondents no.1 and 2, hence fixing of any liability as against the appellant is unjustified and unenforceable in law.  It is urged that the State Commission has simply brushed aside this issue and has arrived at a wrong conclusion regarding the involvement of the appellant/Ansal Buildwell Ltd. who were only consultants of the project and nothing more.  It is urged by the learned counsel that no consideration has passed on to the appellant and there was no contract for delivery of possession or refund in the absence of delivery by the builder.  That responsibility was entirely of the developer, namely, M/s Pacific Construction & Management, the respondent no.3 herein.

          Learned counsel has taken us extensively through the Agreement between the appellant and the respondent no.3 dated 02.02.2011 and also the Flat Buyers Agreement between the complainants/respondents no. 1 & 2 and the developer/respondent no.3 dated 22.12.2011.  By reading out the relevant clauses, it has been urged that none of the clauses bind the appellant to any contract or its failure so as to create any liability on the appellant, and hence the State Commission has committed a manifest error by imposing the liability on the appellant as well.  Learned counsel submits that it is the developer who is answerable for non-delivery of possession or otherwise liable for any refund but so far as the appellant is concerned, in the absence of any connect or relationship pertaining to the sale, purchase or refund regarding the premises in question, the State Commission ought not to have decreed the claim as against the appellant.

          Learned counsel has therefore urged that the findings recorded by the State Commission in the impugned order in paragraphs 15, 16 and 17 are erroneous and against the principles of law of contract.

          There is no service rendered by the appellant to the complainants/respondents no. 1 and 2 in terms of the definition of ‘service’ as contained in Section 2(1)(o) of the Consumer Protection Act, 1986.  It is further submitted that neither the housing construction was undertaken by the appellant nor was there any obligation cast on the appellant under the agreement between the complainants/respondents no. 1 & 2 and the developer/respondent no.3 and in such circumstances the impugned order cannot be sustained and deserves to be set aside.

          We have gone through the entire pleadings on record as well as the agreements and we find that the conclusions drawn by the State Commission do not suffer from any error of fact or of law for the reasons given hereinafter.

          The agreement between the developer/respondent no.3 and the appellant, i.e. Agreement to enter into Project Management Consultancy Agreement, is dated 02.02.2011, Annexure A-4 to the appeal. The developer had acquired the land from one Mr. Bharat Vaidya who through an irrevocable General Power of Attorney dated 09.11.2009 had entrusted the entire developmental work to the developer and also authorized the developer to enter into any kind of agreement with third parties, including “Project Management Consultant” (PMC).  It is also recited in the said Agreement that the developer was desirous of using the sales organisation capabilities of the PMC, namely the appellant herein, and therefore the PMC had undertaken the complete responsibility for disposal of the scheme with or without built-up unit or other areas and spaces of the project or land.  The agreement further demonstrates the terms and conditions in clause-2 as follows:

“2.That as per existing sanctioned plan the project has a total 190 units besides shopping, club & parking as detailed in ANNEXURE-E. Out of 190 units/ apartments the DEVELOPER has already allotted/ sold few apartments in the following manner i.e.

i) 19 apartments (10-2BHK, 9-Three BHK, Club and Shopping Centre) to the landowner Mr. Bharat Vaidya, and;

ii) 26 apartments (20-One BHK, 3-Two BHK and 3- Three BHK) have already been sold.”

          The entire marketing and sales were the responsibility of the appellant PMC which is evident from clause-3 extracted hereunder:

“3. That the PMC will be responsible for conducting marketing and sale of remaining 145 units besides other saleable areas/ spaces and parking etc.”

          What is more important are clauses-10 and 11 that are extracted hereunder:

“10. That the PMC will be compensated by the DEVELOPER in the following manner:

a.   The PMC will be entitled to 13.5% of the total sale proceeds of 145 apartments to be sold by the PMC.

b.   The PMC will be further entitled to 5% of the total sale proceeds of 26 apartments already sold by the Developer. However, if any booking out of 26 allotments done by the Developer is cancelled/ transferred for any reason then the said unit will get added to the units to be sold by the PMC and the PMC will be entitled to 13.5% of the sale proceeds of said units as well.

c.    The PMC will further be entitled to 13.5% of the revenue generated out of one time club charges and shopping centre, parkings and other saleable/ leasable areas.

d.   The taxes such as service tax or any other levies shall be in addition.

The above payments shall be subject to TDS liable to be deducted by the DEVELOPER at the applicable rates.

11.  That the complete revenue generation from sales will be taken in the name of Ansal Buildwell Ltd. A/c Pacific Meadows to be kept in an account to be opened with any bank at Delhi/ Kullu. The account will be opened with joint signatures and any instructions given to the bank will be with joint signatures only. The sales proceeds so collected will be distributed/ transferred in the following ratio:

a)   13.5% from the collection of sale proceed of 145 units and 5% from the collection of sale proceed of 26 units shall be transferred to the account of PMC

b)   A sum of Rs.25,00,000/- (Rupees Twenty Five Lacs Only) will be retained every month out of the monthly sales collection in the main account. If collection is less in any month then the short fall will be made up in the following month. The amount so accumulated every month in the main account shall be released to the developer on part completion of the following sub heads. The detailed process of release shall be detailed out in the main agreement.

a. Club

b. Basement

c. Interior/ Furnishing

d. Roads

e. Sewerage and water supply

f. Street light

g. Horticulture

h. Commissioning of transformer including DG sets & HT Lines

If the amount still falls short to meet the payment requirement then the Developer shall make the same good from their own resources independent of the project account.

c.   Rest to the account of Developer.”

          It then follows in the agreement as to the amount of payments that were to be disbursed by the developer to the PMC which is contained in clause-12 extracted hereunder:

“12. That the DEVELOPER undertakes to pay to PMC a total adjustable sum of Rs. 1.10 Cr. out of which the DEVELOPER has paid a sum of Rs.11.00 Lacs to the First Party at the time of signing of this agreement vide cheque No. 200381 dated 02.02.11 drawn on  Punjab National Bank, Anand Vihar, Delhi-110092. The DEVELOPER undertakes to pay balance adjustable sums strictly in the following manner i.e.

i.    Rs. 35.00 Lacs at the time of signing of the detailed agreement which is to be signed within 45 days from the date of this agreement.

ii.    Rs.32.00 Lacs within next 45 days of 11 (i)

iii.   Rs. 32.00  within next 30 days time of 11 (ii)

The above amount will be adjusted by the PMC in its 13.5% and 5% entitlement of the sale proceeds respectively. However, it has been agreed that the adjustment shall be @10% of their share of (13.5%).”

          The entire marketing decision was left in the hands of PMC as per clause-13 and then it is also stipulated that if the units remain unsold, the rates may be revised mutually by both the parties.  The aforesaid entire agreement came into existence for the purpose of the marketing and sale of the units to be constructed with payments that were to be made to the appellant in the manner as indicated hereinabove.

          The complete revenue generation from sales as per clause-11 was to be taken in the name of M/s Ansal Buildwell Ltd. A/c Pacific Meadows as per clause-11 extracted hereinabove.  It is thus evident that whatever revenue was to be collected from sales had to be routed through the account of the appellant.

          It is after the said agreement that the complainants/respondents no. 1 and 2 came to be allotted a flat in the said project of Meadows at Kullu for a sum of Rs.58,80,000/- on 14.05.2011.  This finds a recital in the Flat Buyers Agreement that was entered into between the complainants/respondents no. 1 & 2 and the developer/respondent no.3.  What is more interesting in this agreement are the notes particularly clauses-5 and 6 which are extracted hereunder:

“5.     All payments are to be made through cheque/ draft to be issued in favour of PACIFIC CONSTRUCTIONS & MANAGEMENT A/C  ANSAL MEADOWS, payable at Delhi.

6.       Ansal Buildwell Ltd., who are reputed real estate Colonizers/ Builders have been appointed Project Sales Management Company (PSMC)”

          A combined reading of both the agreements and the clauses indicated hereinabove would indicate that the finances had to be negotiated and transacted through accounts in favour of the developer with part of the proceeds shared in the proportion referred to above as against the account of Ansal Meadaows.  The connect therefore of the appellant is obvious from these documents.  Apart from this, the remittance notices in respect of the unit has been issued on the letterhead of Meadows which include the stamp of Ansal Buildwell Ltd. indicating that the project is being managed by the appellant.  The legal notice which was sent by the complainants/respondents no. 1 and 2 on 20.01.2016 prior to the filing of the complaint was addressed both to the appellant as well as to the developer, the respondent no.3 herein.  After receipt of the said legal notice, a response was sent on 24.02.2016 by the builder/developer informing about the disposal of a suit pertaining to the title of the property where a compromise was recorded on 19.11.2015 by the High Court of Himachal Pradesh.  It was also informed that the amount realized from the complainants/respondents no. 1 and 2 to the tune of Rs.25,05,500/- has already been invested in the project and therefore the legal notice cannot be acted upon.

          Another reply was sent on 12.04.2016 by the appellant alleging that there was no agreement for sale of flat with them and therefore any remedies which the complainants/respondents no. 1 and 2 are seeking can be exhausted only against the builders, namely, the developer, respondent no.3 herein.

          Having failed to get any response, the complainants/respondents no. 1 and 2 approached the State Commission where the appellant as well as the developer/respondent no.3 were made opposite parties.  Notices were issued and the opposite party no.1 who is the appellant herein filed their response contending that they are neither the owner of the land nor the developer of the project and therefore have been wrongly impleaded.  The payments were made only to the respondent no.3, therefore, there was no cause of action as there was no privity of contract with the appellant.  It has been recorded in paragraph-8 of the impugned order that despite service of notices, the developer who was the opposite party no.2 in the complaint failed to appear and was therefore directed to be proceeded ex-parte vide order dated 21.05.2018.  Thereafter evidence affidavit was filed by the complainants and then the State Commission proceeded to record its findings from paragraphs 15 onwards.

          The State Commission came to the conclusion that services were offered and, as a matter of fact, it is the appellant who had intimated the complainants/respondents no. 1 and 2 about an alleged dispute being pending in their Project Update letter dated 08.01.2015 which is extracted hereunder:

“January 8, 2015

To.

Mr. Kunal Malhotra

Flat No. 28, Sfs Flats,

Hauz Khas Apartments, New Delhi,

M-9711445566, 26866501

Ref: Flat No. DF-1A/TF-304 in Meadows at Kullu.

‘PROJECT UPDATE’

Dear Sir,

This letter is to update you about the latest developments in the project namely, Meadows, Arun Hills at Kullu wherein you had reposed your interest.

It is in your interest to be abreast about the details of the agreements signed between the companies involved in the project. The land is owned by M/s. Kuldevi Pacific Infrastructures who then have signed a collaboration agreement with M/s. Pacific Constructions and Management for development of a group housing project namely Meadows, Arun Hills at Kullu.

We, Ansal Buildwell Ltd. were approached by M/s. Pacific Construction and Management to extend our expertise for the above referred project. An agreement was duly entered for project management consultancy with M/s. Pacific Construction and Management only.

Unfortunately, a dispute has arisen between the land owners i.e. M/s. Kuldevi Pacific Infrastructures and the developers i.e. M/s. Pacific Construction and Management. As mentioned by the developers, the land owners has resciled from the contract of M/s. Pacific Construction and Management. The developers thereafter have approached the High Court of Himachal Pradesh and in this regards the High Court of Himachal Pradesh has passed a stay order to maintain status quo quo nature, possession and title of the suit land.

Currently all activities at site are on halt, honouring the order of the High Court of Himachal Pradesh.

Please feel free to contact our sales and marketing team, at our head office, for any further assistance.

Thanking You

For Ansal Buildwell Ltd.

Sd/-

Authorized Signatory.” 

          This letter also indicates that the appellant/Ansal Buildwell Ltd. have admitted their involvement and had informed the complainants/respondents no. 1 and 2 that the project had been halted on account of the orders of the High Court of Himachal Pradesh.  

          The State Commission therefore came to the conclusion that the appellant was equally part of the transaction, and, in our opinion also, even if there was no direct agreement between the appellant and the complainants/respondents no. 1 and 2, the very allotment on 04.05.2011 to the complainants/respondents no. 1 and 2 was made after the Project Management Consultancy Agreement dated 02.02.2011. The PMC namely the appellant was responsible for conducting marketing and sales and the complete revenue generation was to be taken in the name of Ansal Buildwell A/c Pacific Meadows as contemplated therein.  It is virtually the same account as referred to in clause-5 of the notes referred to hereinabove.  The consideration therefore was being realized with the active participation of the appellant and who had a definite share in the proceeds as per the agreement between the appellant and the developer/respondent no.3. 

In the wake of the aforesaid facts, the State Commission was fully justified in arriving at the conclusion that the liability to compensate the complainants/respondents no. 1 and 2 is on both the opposite parties.  We entirely agree with the conclusions drawn by the State Commission. 

          The contention of the learned counsel for the appellant time and again is that there was no privity of contract nor any consideration has passed on directly by the complainants/respondents no. 1 and 2 to the appellant.  It is also their contention that the flat was neither constructed nor was it sold or agreed to be sold by the appellant.  The fact remains that the appellant was a party to the entire transaction with a share in the development project in the shape of PMC with a definite share of compensation out of the proceeds of the said sale.  The trade practice, if has resulted in an unfairness, and the deficiency in service therefore is clearly related to this transaction that commenced with the allotment on 04.05.2011 after the PMC agreement in February, 2011.  The appellant was therefore definitely a part of the transaction and consequently is equally responsible for any deprivation and deficiency in service causing loss to the complainants/respondents no. 1 and 2 that deserves to be compensated.  The State Commission has therefore neither committed any error on fact or in law and has rightly allowed the complaint.  The participation of the appellant demonstrates the obligation cast on the appellant of exclusively carrying out the marketing and sales of the flats.  The appellant therefore cannot absolve itself of the liabilities arising out of the deficiency alleged.  The intertwined execution of the deal by the developer through the appellant PMC confirms the active participation of the appellant in the allotment process and passing of the consideration through the bank accounts jointly operated by the appellant and the respondent no.3.  The contention, therefore, about the absence of privity of contract is untenable and is accordingly rejected.  The service rendered is with the actual participation of the appellant, hence the consumer is entitled to maintain a claim against the appellant.   

In this view of the matter, we see no reason to entertain this appeal in the absence of any legal or factual infirmity in the impugned order and the same is hereby dismissed at the admission stage itself.