BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION : AT HYDERABAD
CC No.107 OF 2012
Between :
1. Mrs C.Sita Prasad W/o C.Venkateshwara Prasad
aged 47 years
2. C.Venkateshwara Prasad, S/o C.Nagendra Prasad
Aged 53 years
Both R/o Plot No.19, Huda Heights
Road No.12, Banjara Hills, Hyderabad-034
Complainants
A N D
M/s Lodha Healthy Construction & Developers Pvt Ltd.,
Regd.Office: 216, Shah & Nahar Industrial Estate
Dr.E.Moses Road, Worli, Mumbai-018, rep. by
its Managing Director
Opposite party
Counsel for the Petitioners M/s CV Narasimham
Counsel for the respondent M/s A.Venkatesh
QUORUM: SRI R.LAKSHMI NARASIMHA RAO, HON’BLE I/C PRESIDENT
SRI THOTA ASHOK KUMAR, HON’BLE MEMBER
AND
SRI S.BHUJANGA RAO, HON’MEMBER
MONDAY THE TWENTY FIFTH DAY OF NOVEMBER
TWO THOUSAND THIRTEEN
Oral Order:(Per Sri R.Lakshmi Narasimha Rao, Hon’ble Member.)
***
1. The complaint is filed claiming for declaration that the opposite party has resorted to unfair trade practice and for relief of compensation `19,87,951/- for the delay in delivery of the apartment for the period from 1.7.2011 to 31.12.2011, 1.11.2012 to till the date of filing of the complaint i.e., 20.08.2012, interest @ 18% per annum from the date of complaint till delivery of possession of the apartment and completion of common facilities and club house, relief for adjustment of amounts due from the complainants towards the compensation amount liable to be paid by the opposite party and for withdrawal of demand-cum-invoice dated 5.5.2012 and for declaration that the opposite party is not entitled to claim service tax till submission of invoice.
2. The averments of the complaint are that on promise made by the opposite party, the complainants entered into agreement of sale on 22.12.2009 to purchase apartment No.1700 on 17th Floor, Belvedere Building with saleable area of 4761 sft and 3 car parking spaces for a consideration of `2,42,30,799/- to be paid in instalments. The complainants submitted that the opposite party promised them that it would deliver possession of the flat with all amenities on 30.06.2011. Apart from the sale consideration, the complainants agreed to pay `13,21,443/- towards society charges and other charges at the time of taking delivery of possession of the flat or at an earlier date.
3. The complainants submitted that as per the terms of agreement of sale they had paid a sum of `2,31,59,573/-. The opposite party was allowed a grace period of six months and the opposite party failed to complete the construction of flat within the grace period. The opposite party had sent reports on the progress of construction from time to time and the complainants felt that the apartment could not be ready by 31.6.2011 or within the grace period. The opposite party did not notify the complainants about any force majeure event or it did not make any claim for extension of time for delivery of possession of the flat.
4. The opposite party issued letter dated 08.01.2011 demanding an amount of `10,71,225/- towards instalments payable on commencement of brick work and the complainants found that the opposite party had not commenced the brick work of the building. The opposite party issued letters on 09.02.2011, 09.03.2011 and 09.04.2011 demanding the amount of `10,71,225/- and subsequently it had sent email along with architect certificates and pictures of the building on 11.05.2011. The opposite party issued another letter on 09.06.2011 demanding an amount of `11,02,186/- towards instalment against commencement of internal plastering and the demand is not in accordance with clause 6 (p) of the Agreement of Sale which stipulates payment of instalment against commencement of internal plaster is `10,71,225/-.
5. The opposite party caused considerable delay in construction of club house and providing of common facilities and it refused to permit the complainants to visit the site to know the progress of construction. The complainants had not paid further payment to the opposite party without any firm assurance about the date of delivery of possession of the flat. The complainants are entitled to compensation for delay in delivery of possession of the flat as per clause 24 of the agreement of sale. There was exchange of correspondence between the complainants and the opposite party regarding the delay in construction, delivery of possession and payment of compensation for the delay etc.
6. The complainants submitted that the demand for `3,01,444/- towards service tax is not tenable without raising separate invoice. The opposite party admitted on 7.11.2011 that there was delay in handing over possession of the flat and confirmed its liability to pay compensation. The complainants paid penultimate instalments of `10,71,225/- on 22.12.2011 and the opposite party assured them that it would adjust the amount towards internal plaster instalment and not towards interest. The opposite party issued letter on 12.1.2012 extending the date of delivery of possession to 15.03.2012. The floods in Thailand cannot be claimed as force majeure in Hyderabad. The claim of the opposite party is unsupported and do not come within the scope of clause 24 of the agreement for sale.
7. The opposite party issued demand for final instalment on 19.4.2012 even though the apartment and facilities were not taken full shape. The opposite party issued demand-cum-invoice on 05.05.2012 demanding an amount of `15,51,741/- and demand for service tax which is contrary to the terms of the contract. The complainants through email on 13.08.2012 sought for break-up of the amount of `30,75,453/- demanding by the opposite party. The complainants got issued notice on 1.05.2012 to the opposite party for which the opposite party issued reply on 09.08.2012.
8. The complainants submitted that arbitration clause in the agreement of sale is not a bar to maintain the complaint before this Commission. The opposite parties failed to deliver possession of the flat even after 14 months from the prescribed period mentioned in the agreement of sale which amounts to deficiency in service on the part of the opposite party.
9. The opposite party resisted the claim on the premise that this Commission has no pecuniary jurisdiction as the complainants sought for relief in respect of flat whose sale consideration is `2,42,30,799/- and that the complaint is not maintainable in view of the complainants residing in a residential flat and purchased the flat from the opposite party with a view to earn returns by way of letting out the flat. It is contended that the complainants deliberately suppressed material facts and relevant documents exchanged between them and the opposite party. The relief sought for pertaining to service tax cannot be granted under the provisions of C.P.Act.
10. The opposite party submitted that due to force majeure events delay in construction of the building and club house etc., was caused and the force majeure reasons are Telangana Agitation, Floods in Thailand. The opposite party issued letter dated 19.04.2012 informing the complainants the flat was ready and requested them to take possession of the flat by making payments due and the complainants declined to take delivery of possession of the flat and refused to make the requisite payment in respect of the flat.
11. As per the terms and conditions of the application form the complainants were required to pay the instalments of sale consideration in progressive manner. The complainants failed to pay the sale consideration as per the terms of the agreement of sale despite receiving demand notice regularly from the opposite party. The complainants delayed making the payment of the amounts and frequently raised queries on the details of the amount due towards consideration value, sale tax and VAT and the opposite party by sending email informed them the details sought for and that they were informed that the service tax is payable on the basis of the amount of consideration value as per the terms of the agreement of sale. The complainants do not possess requisite professional knowledge to comment about specific technicalities of the construction status of the site and they have not sought for any expert advice.
12. The opposite party submitted that floods in Thailand caused severe delay in delivery of air conditioning units for the flat by carrier and lot of testing and finishing work was required to be done after the air conditioning units were installed and as such the construction of the flat was delayed. Telangana agitation in 2011 had severely affected the moment of raw material and labour. The opposite party informed the complainants of the delay in delivery of possession of the flat in the month of January 2012, well before the revised possession time line, viz., March 2012. The complainants failed to make payments till date.
13. The opposite party submitted that there is no specific condition in the agreement of sale which obliges the opposite party to register an apartment only before possession is offered. The occupation certificate was awaited from the government and as such possession to offer fit out possession in respect of the flat was made. The opposite party demanded the charges towards society registration and all other charges in accordance with the terms of agreement of sale. The opposite party is entitled to reasonable extension of time for completing construction and delivering possession of the flat in case of force majeure events.
14. In the additional written version the opposite party has pleaded that as per clause 24 of Agreement of Sale, the opposite party is entitled to reasonable extension of time for giving delivery of flat and if the completion of the building is delayed for the reasons beyond its control, the opposite party is entitled to the extension of time to deliver possession of the flat. The opposite party prepared a detailed chart before commencing construction of the project which shows consultation and coordination with many departments such as construction, management, procurement, liaison, design and marketing.
15. The opposite party submitted that the delay in construction of the flat was caused among the other reasons, due to delay in supply of raw material on account of traffic restrictions, delay on account of shortage of sand delay in completion of façade windows, delay in completion of finishing doors, delay in stage of finishing agglomerate marble, delay in construction due to supply of fire handling equipment from third party contractors, delay in receiving approvals required for applying for occupation certificate. The opposite party submitted that there was no breach of terms and conditions of agreement of sale or deficiency in service on the part of the opposite party and that the complainants are not entitled to any relief sought for.
16. The second complainant filed his affidavit and the documents Exs.A1 to A27. On behalf of the opposite party, its Managing Director fied his affidavit and the documents, Exs.B1 to B49.
17. The learned counsels for the complainant and the opposite party have filed written arguments.
18. The points for consideration are:
i) Whether the opposite party rendered deficient service in the matter of completion of construction of the Flat?
ii) To what relief?
19. POINT NO.1: It is beyond any dispute that the complainants entered into Agreement of sale for purchase of Apartment No.1700 in 17th Floor, Belvedere Building having an area of 4761 sq.ft. and car park space for 3 cars for consideration of `2,42,30,799/- to be paid on installment basis and apart from the sale consideration, the complainant is required to pay a sum of Rs.13,21,443/- towards ‘society charges’ at the time of the opposite party handing over possession of the apartment or earlier at the discretion of the Complainants. The complainants paid an amount of `2,31,59,573/- which constitutes about 95.57% of the total cost of the apartment.
20. The letter dated 08.01.2011 addressed to the complainants demanding them an amount of `10,71,225/- towards installments payable on commencement of Brickwork is the root cause of the dispute between the parties which ultimately resulted in the complainants filing the complaint. The learned counsel for the complainants contend that the demand for the installments without completing the construction of the Flat is not tenable and the opposite party is liable to pay rent for the delayed period of construction as also that the rental amount due can be adjusted towards the instalments and society charges etc.. he has submitted that the complainant cannot be made to suffer due to delay caused in construction of the Flat on account of a third party who is not privy to the contract between the complainants and the opposite party.
21. The learned counsel for the opposite party has contended that due to Force majeure events, the construction of the Flat could not be completed within the stipulated period and the complainants acquiesced with such delay in construction of the Flat. He has submitted that the complaint is not maintainable in view of arbitration clause in the Agreement of sale, on account of commercial purpose involved in the purchase of the Flat and the opposite party is entitled to reasonable extension of time for handing over possession of the Flat and that the opposite party cannot be made liable to pay compensation on account of delay caused in completion of the construction of the Flat for the reasons beyond the control of the opposite party and the delay caused in completion of construction to the building cannot be construed as deficiency in service on the part the opposite party.
22. Preliminary objections on maintainability of the complaint regarding arbitration clause in the agreement of sale and pecuniary jurisdiction of this Commission to entertain the complaint in the backdrop of sale consideration of the Flat being a sum of `2,42,30,799/- has already been addressed by order dated 06.08.2013 holding that the relief sought for is not possession of the Flat and the complaint being maintainable on the anvil of ratio laid in National Seeds Corporation Limited Vs M.Madhusudhan Reddy reported in (2012) 2 SCC 506.
23. The learned counsel for the opposite party has contended that the complaint is not maintainable in view of the commercial purpose for which the complainants purchased the Flat under sale. This objection is also overruled by the same order dated 6.8.2013 placing reliance upon the decision of the Hon’ble Supreme Court in “Fakir Chand Gulati Vs Uppal Agencies Pvt Ltd., 2008(4) CPR 449(SC) and M/s Narne Constructions Pvt Ltd., Vs Union of India and others” CDJ 2012 SC 370. It was held that there is no material on record to show that the complainants intended to give the flat under sale on lease to others. The decision of the National Commission in “JK Agarwal Vs Three C.Dot Universal Developers Pvt Ltd.,” MANU/F/0403/2011 was distinguished on the premise that the company purchased the flat for its use, i.e., its day to day business affairs.
24. Even otherwise, the complainants possessing an existing flat by itself may not be a ground to infer that they purchased the flat under sale for the purpose of earning profit. It is not the case of the opposite party that the complainant being an individual sought for purchase of the another flat. The complainants being two individual persons can be considered to own a flat each which by no means can be considered as commercial purpose.
25. Both parties are bound by the terms of the Agreement of sale which provide for payment schedule and construction of the building. The payment of the sale consideration of the Flat has to be made in instalments in progressive manner commensurate with the stage of the construction of the building. The Agreement of sale provides for handing over possession of the Flat to the complainants on or before 30.06.2011 or with a grace period of 6 months which would extend the time till December,2009. Clause 24 of Agreement of Sale reads as under:
24. The Builder/Promoter shall give possession of the said Residential Apartment to the Purchaser on or before 30th day of June 2011. The Builder/Promoter shall be entitled to a grace period of 6 months if he fails or neglects to give possession of the said Residential Apartments to the Purchaser on or before the date aforesaid on account of reasons beyond its control. In the event, the Builder/Promoter fails to handover the possession of the Residential apartment to the Purchaser beyond the said grace period of 6 months, then and in that event, the Builder/Promoter shall, on demand, be liable to refund to the Purchaser the compensation calculated at the rate of 12 per cent per annum on the amounts paid by the Purchaser from the date of expiry of such grace period of 6 months, the Purchaser from the date of expiry of such grace period of 6 months till the possession, of the Residential Apartment, and handed over to the Purchaser. Alternatively, on such expiry of the said grace period of 6 months, the Purchaser may by giving notice in writing to the builder elect to terminate this agreement and in such event, the Builder/Promoter shall on demand be liable to refund to the Purchaser the amounts already received by the Builder/Promoter in respect of the said Premises with simple interest at 12 per cent per annum from the date the Builder/Promoter received such demand till the date of refund.
In the event of such termination neither Party shall have any claim, against the other, in respect of the said flat or arising out of this agreement and the Builder/Promoter shall be at liberty to sell and dispose of the Residential Apartment to any other person at such price and upon such terms and conditions as the Builder/Promoter may deem fit. If as result of any legislative order or regulation or direction of the Government or Public authorities, the Builder/Promoter are unable to complete the aforesaid building and/or give possession of the said Residential Apartment to the Purchaser, the only responsibility and liability of the Builder/Promoter will be to pay over to the Purchaser such amount attributable to the said Residential Apartment that may have been received by the Builder/Promoter without any interest within such time and in such manner as may be decided by the Builder/Promoter. Save as aforesaid neither party shall have any right or claim against the other under or in relation to this agreement or otherwise. However, that the Builder/Promoter shall be entitled to reasonable extension of time for giving delivery of Residential Apartment on the aforesaid date, if the completion of Building is delayed for reasons beyond the control of the Builder/Promoter including on account of Non-availability of steel, cement, other building material, water or electric supply, war, civil commotion or act of God, any notice, order, rule notification of the Government and/or other public or competent authority or for any reason beyond the control of the Builders/Promoter, economic hardship that may be caused to the Builder/Promoter.
26. The complainants have submitted that the opposite party has failed to deliver possession of the Flat till date as per the terms of the Agreement of sale and the opposite party failed to furnish copy of occupancy certificate. As mentioned in the Agreement of sale, the opposite party was to hand over possession of the Flat on or before 30th June,2011. The opposite party contends that the delay has been caused for the reasons beyond it control and the reasons thereof are mentioned are below:
i) Telangana agitation
ii) Failure of the contractor to arrange for the labour
iii) Shortage of sand
iv) Traffic restrictions
v) Failure of the vendor to supply the Façade windows in time.
vi) Failure of the vendor to supply finishing doors in time.
vii) Failure of the vendor to supply air conditioners in time.
viii) Failure of the vendor to supply the agglomerate marble in time.
ix) Financial problems of Fire prosystems Pvt LTd.
x) Delay in receiving approval required for applying for occupation certificate.
27. Before discussing the reason for delay in construction of the Flat beyond the scheduled time, it is essential to consider the construction timeline which is segmented by the opposite party as under:
a) Civil Works – Earthworks
b) Civil Works – Substructure
c) Civil Works – Superstructure
d) Civil Works – Others-Masony
e) Civil Works-Other-internal Plaster
f) Finshing Works
g) Façade Works
h) Service Works
28. The complainants submitted application form on 5.01.2009 for allotment of a Flat in the project, “Lodha Bellezza, East Block, Eden Square Off , KPHB road, Hyderabad fir consideration of `2,54,23,695/-. ExA1 Application Form indicates payment schedule to be adopted by the complainants. The complainants paid an amount of `4,50,000/- through cheque towards earnest money and the opposite party acknowledged receipt of the amount by issuing receipt in favour of the complainants.
29. The learned counsel for the complainants submit that the opposite party has not constructed the Flat within the stipulated period whereas the learned counsel for the opposite party would contend that the complainant was aware of the force majeure was the cause for the delay in construction of the Flat for which it cannot be held liable as also the complainant acquiesced for the delay caused in completion of construction of the Flat.
30. The complainants submitted application form on 5.01.2009 for allotment of a Flat in the project, “Lodha Bellezza, East Block, Eden Square Off , KPHB road, Hyderabad fir consideration of Rs.2,54,23,695/-. ExA1 Application Form indicates payment schedule to be adopted by the complainants. The complainants paid an amount of Rs.4,50,000/- through cheque towards earnest money and the opposite party acknowledged receipt of the amount by issuing receipt in favour of the complainants.
31. The learned counsel for the complainants submit that the opposite party has not constructed the Flat within the stipulated period whereas the learned counsel for the opposite party would contend that the complainant was aware of the force majeure was the cause for the delay in construction of the Flat for which it cannot be held liable as also the complainant acquiesced for the delay caused in completion of construction of the Flat.
32. The opposite party has raised objection as to maintainability of the complaint on the foot of claim on account of loss of rental value mentioned in the notice dated 30.04.2012 got issued by the complainants which, in other words is a commercial purpose.
33. The complainants in their notice dated 30.04.2012 have claimed rental income that they lost the rental income over the Flat owing to the delay in construction of the Flat. The material portion of the notice reads as under:
“19. That due to the delay in the project, as stated above my clients has lost rental income generable by the Flat. Average rental incomes are 4% of market value. The amount of which comes to Rs.1 lakh. Due to the deficiency of service on your part, my clients lost rental value of the Flat for 10 months, the amount of which comes to Rs.10 lakhs. Therefore, you are liable to pay the said amount to my clients.”
34. Surendran Nair who filed his affidavit on behalf of the opposite party-company has stated :
“I say and submit that clause 19 of the aforesaid legal notice, which is reproduced hereunder for ready reference of this Hon’ble Commission, states:
“19. That due to the delay in the project, as stated above, the Respondent has lost rental income generable by the Flat. Average rental incomes are 4% of market value. The amount of which comes to Rs.1 lakh per month. Due to the deficiency of service on your part, the Respondent lost rental value of the Flat for 10 months, the amount of which comes to Rs.10 lakhs. Therefore you are liable to pay the said amount to the respondent”.
I thus say and submit before this Hon’ble commission that since the complainants have purchased the said Flat purely for commercial/investment purposes by letting out/putting on rent the said Flat and thus earning profits, the complainants do not fall within the ambit of the definition of ‘consumer’ under the provisions of Section 2(d) of the Consumer Protection Act, 1986. I say and submit that the complaint is not maintainable and should be dismissed as the complainants are not, and cannot be deed to be a ‘consumer’ under the provisions of the Consumer Protection Act, 1986.
35. The complainant no.1 in his affidavit explained the reason for demanding the loss of rental value of the Flat and he stated that the rental value was assessed and demanded in order to quantify the amount to be sought as compensation. He has stated:
“The allegations of the Opposite Party that the Complainants are not consumers are denied. It is submitted that the complainants had purchased the flat for use of their own family and not for any commercial purposes. The opposite party in the agreement has made it clear that the flat is to be used only for residential purpose. Merely because the complainants have a residential property the flat purchased by them cannot become a commercial purpose. The statement made in the legal notice issued by the complainants regarding rental values of the flat was only for the purpose of estimating the compensation. The complainants demand that the opposite party should issue invoices as per the law for the Service Tax claimed is merely a demand to comply with the requirement of law and does not convert the flat into commercial purpose. The decision in JK Agarwal case is totally irrelevant since in that case the flat was booked by the company for the use of the company whereas in the present case the complainants have purchased the flat for their use.”
36. The claim for rental value of the Flat for a period of 10 months on the premise that the opposite party delayed completion of construction of the Flat in progressive manner stipulated in the application form by itself cannot be made platform to brand the complainants’ claim as for commercial purpose. The complainants have not purchased two or more apartments and the mere demand for loss of rental value cannot partake character of commercial purpose. As such the contention of the opposite party that the complaints intended to purchase the Flat for commercial purpose is not sustainable.
37. The other ground on which maintainability of the complaint challenged is demand for furnishing of service tax in order to claim for exemption therefrom. Surendran Nair in paragraph no.4 of his affidavit has stated:
“I say and submit that in the present complaint, the complainants have sought relief from this Hon’ble Commission directing the respondent to claim service tax in respect of the said Flat in accordance with the CENVAT Credit Rules 2004 (“the CENVAT Rules”), so that the complainants may claim service tax credit, claim set off on output service and other benefits under the applicable CENVAT Rules. However, I say and submit before this Hon’ble Commission that under the applicable service tax laws and CENVAT laws, the complainants can avail the aforesaid for benefits only in respect of commercial purposes and not residential purposes. In the light of the above, it is thus very clear that the complainants have bought the said flat purely for commercial purposes”.
38. We do not find any force in the contention of the learned counsel for the opposite party as the claim for exemption from service tax by itself cannot be considered as ground to brand the transaction infested with the element of commercial activity. Thus, the complaint cannot be said to be not maintainable.
39. The terms of the Application Form required the complainants to pay a sum of `5,00,000/- each towards 1st installment, 2nd installment, 3rd installment and 4th installment on or before 25th day of January, February, March and April, 2009. In response to the letter dated 7.05.2009, the complainants paid an amount of `5,00,000/- and the opposite party issued Allotment Letter dated 26.05.2009 confirming the allotment of Sky Villa # 1700,17th Floor, ’Belvedere’ Lodha Bellezza at East Block Eden Square Hyderabad.
40. The opposite party issued letter dated 7.12.2009 demanding the complainants to pay an amount of `28,48,125/- towards installation of Podium and Basement installments which are due and payable on or before 25.12.2009 which the complainants made payment of and subsequently the parties entered into Agreement of sale in respect of the Flat for consideration of `2,42,30,799/-. The complainants on receiving the demand notice dated 6.01.2010, paid an amount of `23,48,125/- which is the aggregate of outstanding amount towards podium and initiation of 2nd slab. In support of the claim, the learned counsel for the complainant relied upon the following decisions:
1. Delhi Development Authority Vs R.K.Meena reported in II (2009) CPJ 191 (NC)
2. Brig. (Retd) Kamal Sood vs Dlf Universal Limited., reported in III (2007) CPJ 7 (NC)
41. In Delhi Development Authority’s (supra) case the Hon’ble National Commission held:
The State Commission has rightly held that the DDA or any private builder can compel a consumer to take possession of the flat which is not equipped with civic amenities like water and electricity. Offer of possession of the flat without basic facilities like water and electricity is no possession. Accordingly after analysing the case in details, a well-reasoned order was passed by the State Commission and directions were issued to the DDA as mentioned above.
42. In Brig (Retd.) Kamal Sood decision, the National Commission considered the alluring advertisement promising delivery of possession of the building/flat to the purchaser within the stipulated time whether can be considered as unfair trade practice and deficiency in service on the part of the builder. The National Commission held:
Therefore, it cannot be said that the condition contained in the contract would only prevail and not the terms of the brochure which is an alluring promise given by the builder. If the contention of the learned counsel for the DLF is accepted that the terms of the agreement would prevail and not what is stated in the brochure, then it would amount to misleading advertisement with false promise to lure the needy prospective buyers. This would also be unfair trade practice as provided under Section 2(1) (r) of the Consumer Protection Act. Such brochure also gives undue advantage to the builder vis-à-vis other builders. Hence, the said contention cannot be accepted.
In any case, in the present case, the builder is not entitled to have escalation charges because admittedly there was delay in starting construction for no fault of the consumer/buyer of the Apartment. Therefore, the recovery of rs.4,03,617.69p from the complainant under the threat of cancellation of allotment is totally unjustified.
43. The learned counsel for the opposite party relied upon the following decisions:
1. M/s Dhanrajmal Gobindram Vs Shamji Kalidas & Co., reported in AI 1961 SC 1285
2. D.Devi Bhagat and Anr. Vs J.B.Advani & Co., Ltd., reported in 76 CW in 528
3. Pool Shipping Co. vs. London Coal Co. of Gibraltar Ltd., 1939 (2) KBD 432
4. Gomathinayagam Pillai and Ors. vs. Pallaniswami Nadar reported in AIR 1967 SC 868
5. M/s Hind Construction Contractor vs. State of Maharashtra reportred in AI 1979 SC 720
6. Mc Dermott International Inc. vs. Burn Standard Co.Ltd., & Ors reported in (2006) 11 SCC 181
7. Govind Prasad Chaturvei vs. Hari Dutt Shahstri & Anr., reported in AIR 1977 SC 1005
8. Municipal Corporation of Delhi Vs Jagannath Ashok Kumar
reported in AIR 1987 SC 231
9. APSEB vs M/s Patel & Patel, reported in AIR 1977 AP 172
10. Mrs Saradamani Kandappan vs Mrs. S.Rajalakshmi & Ors
reported in (2011) 12 SCC 18
11. Smt Chand Rani vs Smt Kalam Rani reported in (1993) 1 SCC
519
McCardie J. in Lebeaupin v. Crispin ([1920] 2 K.B. 714), has given an account of what is meant by "force majeure" with reference to its history. The expression "force majeure" is not a mere French version of the Latin expression "vis major". It is undoubtedly a term of wider import. Difficulties have arisen in the past as to what could legitimately be included in "force majeure". Judges have agreed that strikes, breakdown of machinery, which, though normally not included in "vis major" are included in "force majeure". An analysis of rulings on the subject into which it is not necessary in this case to go, shows that where reference is made to "force majeure", the intention is to save the performing party from the consequences of anything over which he has no control. This is the widest meaning that can be given to "force majeure", and even if this be the meaning, it is obvious that the condition about "force majeure" in the agreement was not vague. The use of the word "usual" makes all the difference, and the meaning of the condition may be made certain by evidence about a force majeure clause, which was in contemplation of parties.
44. In Durga Devi’s case (supra) the High Court of Calcutta held:
The word ‘impossible’ in relation to a contract between two commercial people should be understood in its commercial and practical sense and Mukherjea J. in (11) Satyabrata case at pp.46, 48 of the report said:
This much is clear that the word ‘impossible’ has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view’ and if an untoward event or change of circumstances totally unsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to do the act which he promised to do.
45. ‘Pool Shipping Company’ (supra) is a case where excuse for non-performance of contract on the premise of exceptions clause in the agreement was considered holding that the court is entitled to look beyond the buyer and seller and considered the seller’s commitment under contract with other buyers in the backdrop of the circumstances where normal working of the contract was prevented. It was held that contract must be construed in a business sense as also the circumstances continuing to prevent the normal working of the contract.
46. In ‘Hind Construction’ (supra) it felt to the consideration of the Hon’ble Supreme Court as to the time is essence of contract and determination and mode thereof. The Supreme Court held:
It will be clear from the aforesaid statement of law that even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental, for instance, if the contract were to include causes providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contract. The emphasised portion of the aforesaid statement of law is based on Lamprell v. Billericay Union, Webb v. Hughes and Charles Rickards Ltd. v. Oppenheim. It is in light of the aforesaid position in law that we will have to consider the several clauses of the contract Ex. 34 in the case. The material clauses in this behalf are cls. 2 and 6 of the "Conditions of Contract" which run as follows: "Clause 2:-The time allowed for carrying out the work as entered in the tender shall be strictly observed by the contractor and shall be reckoned from the date on which the order to commence work is given to the contractor. The work shall throughout the stipulated period of the contract be proceeded with, with all due diligence (time being deemed to be of the essence of the contract on the part of the contractor) and the contractor shall pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide, of the amount of the estimated cost of the whole work as shown by the tender for every day that the work remains uncommenced, or unfinished, after the proper dates. And further to ensure good progress during the execution of the work, the contractor shall be bound, in all cases in which the time allowed for any work exceeds one month, to complete.
1/4 of the work in 1/4 of the time
1/2 of the work in 1/2 of the time
3/4 of the work in 3/4 of the time".
"Clause 6:-If the contractor shall desire an extension of the time for completion of the work on the ground of his having been unavoidably hindered in its execution or on any other ground, he shall apply in writing to the Executive Engineer before the expiry of period stipulated in the tender or before expiry of 30 days from the date on which he was hindered as aforesaid or on which the cause for asking for extension occurred, whichever is earlier and the Executive Engineer, may if in his opinion there are reasonable grounds for granting an extension, grant such extension as he thinks necessary or proper. The decision of the Executive Engineer in this matter shall be final." Two aspects emerge very clearly from the aforesaid two clause. In the first place under cl. 6 power was conferred upon the Executive Engineer to grant extension of time for completion of the work on reasonable grounds on an application being made by the contractor (appellant- plaintiff) in that behalf; in other words, in certain contingencies parties had contemplated that extension of time would be available to the contractor. Such a provision would clearly be inconsistent with parties intending to treat the stipulated period of 12 months in cl. 2 as fundamental. Similarly, in cl. 2 itself provision was made for levying and recovering penalty/compensation from the appellant-plaintiff at specified rates during the period the work shall remain unfinished after the expiry of the fixed date. Such provision also excludes the inference that time (12 months period) was intended to be of the essence of the contract. Further with regard to the provision that is to be found in cl. 2 whereunder a time schedule for proportionate work had been set out (namely, 1/4 of the work in 1/4 of the time, 1/2 of the work in 1/2 of the time and 3/4 of the work in 3/4 of the time), the evidence of the Superintending Engineer Pandit (D.W. 1) is very eloquent. In para 13 of his deposition this is what he has stated:
"In the agreement (Ex. 3.1) the rate of work is based on the valuation 1/4th time mentioned means 1/4th in 12 months. The suit contract is for Rs. 1,07,000/-. 1/4th work means the work of about Rs. 27,000/-. It is not possible to do the work of Rs. 27,000/- in 1/4th time as the days were rainy. This was not reasonable." The witness in para 12 of his deposition has also given the following admission:-
"It is not specifically mentioned in the agreement (Ex. 34), that the suit work was urgent and that it was to be completed within 12 months. In this agreement (Ex. 34) there are the clauses of imposing a penalty and extension of time."
47. In ‘McDermot International’ (supra) the import and effect of arbitration clause was considered and it was held that the role of courts was supervisory in so far as the review of arbitral award is concerned and the only parameter is to be ensured is fairness. It was held that interference on the ground of patent illegality in the arbitral award is permissible only if the same goes to the root of the matter and public policy violation which should be unfair and unreasonable as to shock the conscience of the court.
48. ‘Govind Prasad’s’ (supra) is a case where fixation of the period within which the contract has to be performed was held not to make stipulation as to time the essence of the contract. It was held that when a contract relates to sale of immovable property it would normally be presumed that time is not essence of the contract. Further, it was held that the intention to treat time as the essence of the contract has to be gathered from the circumstances which are required to be sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract.
49. ‘Gomathiyagam Pillai’s’ (supra) is a case where the Hon’ble Supreme Court considered the circumstances where the time can be considered as essence of contract. Default clause in contract was held to reveal the intention of the parties to make time of essence. It was held that time can be considered as essence of contract if the parties thereto intend it to be so. Intention of the parties was held to be evidenced either by express stipulation or by circumstances which show that time is not of essence.
50. In ‘Municipal Corporation of Delhi’ (supra) the effect of arbitration award and the circumstances where the award cannot be challenged in special leave petition was considered by the Supreme Court. The decision is not of any help to the case of the opposite party.
51. In ‘Saradamani Kandapan’ (supra) decision whether time stipulated for performance of contract can be considered as essence of contract in regard to terms relating to payment of balance price and not in regard to execution of sale deed. The Supreme Court considered the ambit of Sections 51, 52, 53 and 54 of Contract Act and the Supreme Court justified the decision of the Division Bench of the High Court which granted a decree in favour of the plaintiff for Rs.3,50,000/- with interest.
52. Chanda Rani is a case where the same principle i.e., time is no an essence of contract was considered as under:
19. It is a well-accepted principle that in the case of sale of immovable property, time is never regarded as the essence of the contract. In fact, there is a presumption against time being the essence of the contract. This principle is not in any way different from that obtainable in England. Under the law of equity which governs the rights of the parties in the case of specific performance of contract to sell real estate, law looks not at the letter but at the substance of the agreement. It has to be ascertained whether under the terms of the contract the parties named a specific time within which completion was to take place, really and in substance it was intended that it should be completed within a reasonable time. An intention to make time the essence of the contract must be expressed in unequivocal language.
53. There is substance in the contention of the opposite party that Telengana agitation, restrictions of traffic and failure of its vendors to supply air conditioners, tiles etc., within the stipulated period was the reason beyond its control. However, the opposite party has come with a clear picture that the delay in completion of construction of the flat though beyond its control and it was in its knowledge and promised the complainant that it would pay interest @ 12% per annum on the amount paid by the complainants. In its email dated 7.11.2011 the opposite party has admitted its liability to pay interest on the amount paid by the complainant, as under:
We will not be able to issue an invoice under your name as the booking and allotment is under the name of Mrs C.Sita Prasad.
We regret the financial loss caused to you due to delay in our handover and interest chares arising out of the same will be adjusted as per the T & C’s of the Agreement of Sale.
The late payment charges will have to be paid immediately and will be calculated @ 18% per annum and the interest charges we are liable to pay due to delay in handover will be calculated from 1st Jan’12 @ 12% per annum as mentioned in the Agreement of Sale.
We have already started the civil works for landscaping and the landscaping shall be completed before the complete handover of Phase 1.
54. In the light of its specific admission of its liability to pay interest on the amount paid by the complainants, the opposite party is estopped from contending that it cannot be held liable to pay the amount for the delay in completion of construction of flat for whatsoever reason which is beyond its control. The opposite party is not a private or ordinary firm and it cannot be heard to contend in one breath that it is liable to pay compensation for the delay in construction of the flat and on the other hand that it is not liable to pay any compensation to the complainants on account of the delay in completion of construction of the flat for the reasons beyond its control. The opposite party cannot be permitted to approbate and reprobate.
55. The complainants have claimed interest @ 18% per annum on the amount paid by them on the premise that in terms of the agreement of sale the opposite party is entitled to 18% interest for the default or the delay caused in making payment of the instalments by them and the terms of the contract providing for the oppose party paying interest @ 12% per annum for the lapse on its part is unconscionable and they are entitled to the same rate of interest i.e., 18% per annum as the opposite party is entitled to charge for.
56. Terms and conditions of the contract are binding on both parties. The complainant have consciously proceeded to enter into the contract with the opposite party with knowledge that there has been different rates of interest provided in different circumstances payable by the opposite party and the complainants. It is specifically mentioned in the agreement of sale that in case of delay in completion of construction of flat, the opposite party is liable to pay on the amount received by the complainant. As such, the complainants cannot claim 18% interest from the opposite party.
57. The complainants has claimed a sum of `19.87,951/- towards the interest @ 18% from 1.7.2011 to 31.12.2011 and a s um of `26,55,880/- towards the interest for the period from 1.1.2012 till the date of filing of the complaint. The complainants have sought for the amount calculated on the foot of interest @ 18% per annum which, is not permissible where the contract does not provide and the complainants are held entitled to interest @ 12% per annum on the amount paid to the opposite party company.
58. The complainants have claimed interest till the date of delivery of possession of the flat. The opposite party has expressed its readiness to deliver fit out possession as also actual possession of the flat to the complainant. The opposite party should also handover copy of occupancy certificate to the complainant. The complainants claimed interest on the amount paid by them till the date of delivery of possession of the flat. At the time of admission as also during pendency of the complaint there has been a serious dispute raised as to pecuniary jurisdiction of this commission to entertain he complaint. In categorical terms the complainant has stated that they have not claimed the relief of possession of the flat or execution of the sale deed by the opposite party. In the circumstances, the complainants cannot claim the interest till the date of delivery of possession of the flat. However they are entitled to the interest @ 12% p.a. till the date of payment of the amount.
59. In the result the complaint is allowed directing the opposite party to pay interest @ 12% per annum from 1.7.2011 till the date of payment on the amount paid by the complainants and adjust the amounts due to be paid by the complainants to the opposite party from the aforementioned amount and pay the balance amount to the complainants together with costs of `5,000/-. Time for compliance four weeks.
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I/C PRESIDENT
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MEMBER
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MEMBER
Dt.25.11.2013
కె.ఎం.కె.*
APPENDIX OF EVIDENCE
WITNESSES EXAMINED
NIL
EXHIBITS MARKED
For complainant
Ex.A1 Copy of Agreement of Sale
Ex.A2 Letter from Opposite Party.
Ex.A3 Letter from Opposite Party
Ex.A4 Letter from Opposite Party
Ex.A5 Letter from Opposite Party
Ex.A6 Email from Opposite Party
Ex.A7 Letter from Opposite Party
Ex.A8 Letter from Opposite Party
Ex.A9 Email from Opposite Party
Ex.A10 Email from Opposite Party
Ex.A11 Letter from Opposite Party
Ex.A12 Email from Opposite Party
Ex.A13 Email from Opposite Party
Ex.A14 Letter from opposite party
Ex.A15 Email from Opposite Party
Ex.A16 legal Notice by Complainant
Ex.A17 Demand Cum Invoice
Ex.A18 Letter from Opposite Party
Ex.A19 Email from Opposite Party
Ex.A20 Email from Complainant
Ex.A21 Email from Opposite Party
Ex.A22 legal Notice by Complainant
Ex.A23 Legal Notice by Opposite Party
Ex.A24 Letter of O.P . Service tax invoices.
Ex.A25 Municipal Building Permit Order.
Ex.A26 Lodha Belevedere letter dated 27.02.13
Ex.A27 Building Permission details.
Opposite Parties
Ex.B1 Application Form
Ex.B2 Demand Letter for Footing
Ex.B3 Letter of Allotment
Ex.B4 Demand Letter for Podium and Basement
Ex.B5 Demand Letter for Podium and 2nd Slab.
Ex.B6 Demand Letter fro 5th Lab
Ex.B7 Demand Letter for 9th Lab
Ex.B8 Demand Letter for 12th Lab
Ex.B9 Demand Letter for 16th Lab
Ex.B10 Demand Letter for 19th Lab
Ex.B11 Demand Letter for 23rd Lab
Ex.B12 Demand Letter for 19th Slab, 23 Slab and 26th Slab.
Ex.B13 Demand Letter for 26th Slab and 30th Slab.
Ex.B14 Demand Letter for 30th Slab.
Ex.B15 Demand Letter for Email from the Complainants.
Ex.B16 Interest Letter for Internal Plaster.
Ex.B17 Receipts for Interest and Internal Plaster.
Ex.B18 Email from Respondent
Ex.B19 Email from Complainant
Ex.B20 Demand cum invoices for milestone instalments along with
service tax amount.
Ex.B21 Interim Reply on Behalf of Respondent.
Ex.B22 Chart showing construction schedule
Ex.B23 Tabular data showing dates of Telangana Banch for the
year 2010
Ex.B24 Tabular data showing dates of Telangana Banch for the
year 2011
Ex.B25 Work Order executed with M/s. Jain Engineers.
Ex.B26 Letter from M/s. Jain Engineers.
Ex.B27 Print copy of an online newspaper report recording the concerns of the ARREDA.
Ex.B28 Copy of the government notification on traffic restrictions.
Ex.B29 Copy of letter addressed by M/s. Chiniwala to the Respondent company.
Ex.B30 Letter from Futura.
Ex.B31 Purchase Order with Carrier
Ex.B32 Letter from Carrier
Ex.B33 Purchase Order
Ex.B34 Copy of the Respondent’s email
Ex.B35 letter from Respondent Company.
Ex.B36 Copy of Provisional NOC
Ex.B37 Copy of Respondents to State Fire Department.
Ex.B38 Copy of letter from State Fire Department.
Ex.B39 Copy of Respondent’s Letter.
Ex.B40 Print copy of a photo taken of the service board of the Andhra Pradesh state fire Department.,
Ex.B41 Respondent’s Letter to State Fire Department.
Ex.B42 Copy of Memorandum.
Ex.B43 Copy of Memorandum
Ex.B44 Final Fire NOC
Ex.B45 Application to GHMC for occupancy Certificate.
Ex.B46 Receive the Occupancy Certificate, dated 25.02.13
Ex.B47 Possession letter dated 27th February 2013
Ex.B48 Building Permit Order for G+5 Floors
Ex.B49 Lodha Bellezza advertisement as appearing in e-paper of Times of India.
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I/C PRESIDENT
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MEMBER
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MEMBER
