BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT BANGALORE (URBAN)

                               COMPLAINT NO.761/2014

O R D E R

SRI.P.V.SINGRI, PRESIDENT

This complaint is filed by the complainant under Section 12 of Consumer Protection Act, 1986 against Opposite Parties (herein after referred as OPs)for an order directing the OPs to refund a sum of Rs.17,00,000/- with interest or in the alternative hand over the vacant possession of flat bearing No.001 in the apartment complex “Raghava Royal”along with the undivided interest in the land together with cost. 

2.  The brief averments made in the complaint are as under:

The complainant was looking out for an apartment for him and for his family for residential purpose. At that time the OPs represented him that they have undertaken construction of apartment under the name and style of “Raghava Royal” and handed him over a brochure depicting the said project and on their representation, the complainant entered into two agreements with the OPs.  The first agreement dated 09.10.2007 was styled  as agreement of sale of undivided interest in respect of land and the second one was in respect of the flat bearing No.001 situated in the ground floor of the said apartment complex.  That both the agreement were entered into between the parties on 09.10.2007.  That the first agreement regarding the undivided interest of the land was for a sum of Rs.4,50,000/- whereas  the construction agreement of the flat bearing No.001 was Rs.23,00,000/-.  That the complainant paid the entire amount of Rs.4,50,000/- in respect of first agreement and he paid as sum of Rs.12,50,000/- towards the construction agreement of flat bearing No.001 out of  Rs.23,00,000/-.  It was agreed between the parties that the remaining amount was to be paid at the time of registration of the flat in terms of agreement as mentioned in the said agreement.  That the OPs were expected to hand over the constructed and completed flat bearing No.001 to the complainant within 15 to 18months from the date of entering into the both agreements dated 09.10.2007.  However, the OPs did not commence the construction immediately after the above mentioned agreement and they commenced the construction of the building some time during the middle of the year 2010.That the OPs obtained sanctioned plan in respect of the said project only on 17.05.2008, after a clear lapse of more than 7 months from the date of the above mentioned agreements.

To the utter dismay and anguish of the complainant the project was progressing at a very slow pace and even as on this day and date of filing this complaint, the said project stands not finished in all respect and more over the flat bearing No.001, situated in the ground floor, to be handed over to the complainant.  The said flat bearing No.001was incomplete as on the date of filing of the complaint in most respects including installation of many amenities.  The complainant right from the date of execution of the above mentioned agreement has been continuously monitoring the progress of the project as well as the flat in question and being not satisfied with the progress, the complainant on various occasion sought for completion of the project and the flat in question at an earlier date.  That the OPs for the reasons best known to them failed to deliver the flat in question to the complainant within the stipulated period. The complainant who was all along visiting the construction site and who was monitoring the flat bearing No.001 was surprised and shocked to note that some days prior to the filing of the complaint a board under the name and style of ‘Spacesonic’ had been put up on the flat bearing No.001.That the OPs even in the stage of furnishing of the said flat obviously with an intention to deny occupation of the said flat by the complainant  trying to hand over the same to some third party.  On questioning the OPs the complainant was told that the said board was nothing but an advertisement regarding the business of the son of the OPs and he had not occupied the said flat.  That the OPs are making attempts to hand over the possession of the said flat to some third person thereby denying the right of the complainant over the same.

The complainant being suspicious about the intentions of the OPs, applied for information regarding as to OPs had indeed obtained occupancy certificate from the BBMP authority.  The complainant was shocked to know that occupancy certificate has not yet been issued to the OPs in respect of the said project. That without occupancy certificate occupation of the apartments is strictly prohibited under law.  That the OPs have been dilly-dallying over the project ever since the date of its commencement and have systematically killed the complainant and his patience with delays and laches and even as on the date of filing the complaint, the possession of the flat seems to be a dream.  Frustrated by the attempts of the OPs in completing the construction of flat bearing No.001 and hand over its possession to the complainant, the complainant was constrained to cause a legal notice dated 21.02.2014 calling upon the OPs to hand over the flat bearing No.001 by completing the same in all respects and that possession along with necessary documents etc., within seven days from the receipt of said notice.  That the OPs instead of complying with the legitimate demands of the complainants sent an untenable reply dated 28.02.2014.  The complainant who by that time became aware of the dilatory tactics in completing the project and also delay in handing over the vacant possession of the flat in question and execute the regular deed of conveyance which on the face of it is illegal, illegitimate and capricious was constrained to modify the legal notice earlier issued and issued a fresh legal notice dated 17.03.2014 calling upon the OPs to refund the amount of Rs.17,00,000/- towards sale consideration of the undivided interest in the land and cost of construction of the flat bearing No.001 together with interest at 24% per annum from the date of execution of the agreement in question up to the date of refund along with compensation of Rs.5,00,000/- and other  incidental expenses.  Despite receipt of the said notice OPs chosen to remain silent.

The complainant even thereafter insisting the OPs for the completion of the project and for handing over of the possession of the flat.  But the OPs for one or the other reason went on postponing the same.  That the deprivation of the flat in question is not because of any form of laches or delay on the part of the complainant, on the other hand it is a sheer deficiency in service which the OPs have rendered unto the complainant by not conveying the promised flat in question by receiving balance amount.  The mental agony coupled with physical discomforts and the loss of hard earnings have literally reduced the complainant to a mental wreck which cannot be compensated in any manner.  That the complainant has suffered both mental and physical harassment in the hands of OPs which has resulted in high levels of sugar and blood pressure.

For the foresaid reasons the complainant prays for an order directing the OPs to refund him a sum of Rs.17,00,000/- with interest from the date of payment till the date of realization or in the alternative direct the OPs to hand over the  vacant possession of the flat bearing No.001 completed in all respects situated in ground floor of the apartments complex of “Raghava Royal” along with undivided interest by executing necessary sale deed with cost.

3. In response to the notice issued, OP appeared through their Advocate and filed their version contending in brief as under:-

That the averments made in the para 4 of the complaint make it clear that the complainant is not a consumer as defined under the Act as such the present complaint is not maintainable and the complainant is not entitled to any reliefs.  That there is no deficiency in services on the part of the OPs as alleged by the complainant and on the other hand it is the complainant who had failed to perform his part of contractual obligations stipulated in the agreement even though it is of the year 2007.That when the complainant himself has committed the breach of the terms of the agreement he cannot make allegations against the OPs complaining deficiency of service.  The complainant can question the act of the OPs only after performing his part of contractual obligations stipulated.  That the complainant has failed to perform his part of contractual obligations stipulated in the agreement.  Clause 4(a) of the construction agreement dated 09.10.2007 makes it clear that if the complainant commits default with regard to payments, the OPs shall be entitled to exercise their option to put an end to the contract. Since the complainant has committed breach of terms of the agreement the OPs have exercised the option of termination and absolutely there is no enforceable agreement in existence either on the date of issuance of legal notice or on the date of institution of this complaint.

That the clause 7 of the construction agreement makes it clear that if any dispute or differences arises between parties such disputes shall be referred to the arbitration under the provision of Arbitration and Conciliation Act.  As such when the parties have mutually agreed to resolve the disputes under the provisions of the Arbitration and Conciliation Act, the complainant cannot approach this forum to invoke the provisions of the C.P Act.  Under the circumstances, the present complaint is not maintainable and is liable to be dismissed on this score alone. 

That the complainant came into contact with OPs and expressed his desire to purchase a residential apartment in the proposed residential apartment complex known as “Raghava Royal” and OPs have furnished with relevant copies of the documents and after securing legal opinion and after satisfying himself with regard to the title of the OPs, entered into two separate agreement on 09.10.2007.  First in regard to undivided interest (with regard to purchase of 1/18^th share in the land) and construction agreement for the purpose of putting up residential apartment.  That it was mutually agreed between the parties that the complainant was obligated to make payments to them as stipulated under clause 4(a) and if he fails to do so the consequences will flow as per clause 5(a) of the said construction agreement.  As per clause III (3) of the said agreement the cost of putting up construction was agreed between the parties at Rs.23,00,000/- excluding the payment of statutory deposits.  That on the date of execution of the construction agreement the complainant had paid only a sum of Rs.12,50,000/- as against Rs.23,00,000/-.  That as per the terms of the agreement the complainant was liable to pay 15% on balance amount when they cast 3^rd slab, 15% of balance amount when they cast 4^th slab, 10^% of balance amount when they cast 5^th slab, 5% of the balance amount at the time of execution and registration of the sale deed.  The complainant did not made payment as per clause 4(a)of the construction agreement inspite of repeated remainders.  As such the complainant had committed default with regard to payment of cost of construction as stipulated under the terms of construction agreement at the initial stage itself.  That the complainant did not possess sufficient money for honouring contractual obligations as some of his cheques issued to the OPs in regard to some other transactions were dishonoured.  

The OPs have exercised their right under clause 5(a) (b) of the construction agreement. That they have terminated the contract and forfeited the amounts paid under the said agreements towards liquidated damages as well as the interest for the amounts due, as stipulated under the agreement.  The fact of termination of the agreement was also brought to the personal knowledge of the complainant himself as early as in the second week of January 2008 itself and the complainant has also accepted his default with regard to the payment of balance of cost of construction under the terms of the said agreement.  Therefore, the complainant who himself has committed breach of the terms of the construction agreement cannot allege deficiency in service on the part of the OPs.

  The complainant gets right of enforcement of agreement of sale of undivided interest dated09.10.2007 under which he has paid a sum of Rs.4,50,000/- to acquire 1/18^th share of undivided interest in the land only if he fulfils his obligations referred to in the construction agreement dated 09.10.2007.  The OPs have terminated the construction agreement for the default committed by the complainant by exercising their right under 5 (a) (b) of the said agreement.  The OPs have terminated the agreement and forfeited amounts towards liquidated damages as well as interest for the amounts due from the complainant.  That when the OPs have received the first legal notice they have sent their interim reply for the reasons stated therein.   After receipt of the second notice from the complainant the OPs have sent their detailed reply.  That the complainant is not entitled to any of the relief sought by him.  That the complainant has not approached this forum with clean hands. 

For the aforesaid reasons the OPs prays for dismissal of the complaint with exemplary cost.

4. On the rival contention of both the parties, the points that arise for our determination in this case are as under:

        5. The complainant to substantiate the allegations made in the complaint filed his affidavit in lieu of oral evidence.  The OPs also filed the affidavit evidence of one Sri.D Suresh Kumar.  Both parties have submitted their written arguments and the relevant documents pertaining to the case.

6. Perused the allegations made in the complaint, averments made in the version, the sworn testimony of both the parties, written arguments and the documents filed by both the parties so also the authorities.

7. Our answer to the above points are as under:

REASONS

8. The agreement of sale in respect of undivided portion of the land as well as in respect of Flat No.001 in the Apartment complex ‘Raghava Royal’ is admitted by both the parties.  The OPs admitted that the complainant paid a sum of Rs.4,50,000/- in pursuance of the agreement of sale dated 09.10.2007 in respect of undivided share in the land.  Further the OPs admit that as per the construction agreement dated 09.10.2007, the price of the Flat No.001 was agreed at Rs.23,00,000/-, out of which the complainant has paid a sum of Rs.12,50,000/- on the same day.

9. The complainant alleges that it was mutually agreed between the parties that the OPs shall complete the construction of the said Apartment complex within a period of 15 to18 months from the date of agreement i.e., 09.10.2007 and hand over the vacant possession of Flat No.001 to the complainant by receiving the balance amount and by executing necessary registered sale deed and by handing over the relevant documents pertaining to the said Flat.  The complainant alleges that though the OPs executed the agreement of sale on 09.10.2007, they obtained the necessary sanctioned plan from BBMP only on 17.05.2008, after a lapse of more than 7 months.  This allegation of the complainant is not disputed by the OPs.  The OPs have also not explained as to the delay of 7 months in obtaining the necessary sanctioned plan from the BBMP.

10. The complainant alleges that though it was agreed by the OPs to complete the construction within a period of 15 to 18 months from the date of agreement of sale but they proceeded with the construction somewhere in the middle of 2010.  The OPs in their version except denying this allegation of complainant did not specifically state as to when they started the construction of the said Apartment complex and when they completed the construction in all respect.  The OPs did not complete the construction within reasonable time much less within the stipulated period and even the Flat No.001 was not completed, in all respect, as on the date of complaint also.  The complainant to substantiate his allegation has produced certain photographs of the said Apartment complex including the interiors of Flat No.001 which certainly show that Flat No.001 was not completed in all respect as on the date of complaint.  The OPs did not explain the inordinate delay in completing the project on time.  The OPs contended that the complainant has not performed his obligation under the construction agreement dated 09.10.2007 and failed to make payment as per the payment schedule.  Therefore, it is contended that he has no right to question the OPs for the delay in completing the construction work.  It is not disputed that the complainant made initial payment of Rs.12,50,000/- on the day the construction agreement was entered between the complainant and the OPs.  As per the payment schedule, the complainant was to make payment of 15% of the amount at the time of putting 3^rd slab, another 15% at the time of 4^th slab and 10% of the amount at the time of putting 5^th slab and remaining 5% of the amount at the time of registration.  Referring to the payment schedule as mentioned in the construction agreement, it is argued by the OPs that the complainant has failed to make payment as agreed in the said agreement of sale.  However, the complainant did not mention as to when or on what day they put up 3^rd slab, 4^th slab and 5^th slab.  It is pertinent to note here that the payment schedule also includes a note.  Clause.4 & 5 of the note which are relevant for the purpose of case reads as under:

4. Intimation will be sent for the payment, payments should be arranged within 7 days from the day of the letter.

5. Delay in payment interest will be charged @ 3% per month.

11. Thus from the above note, the OPs were required to intimate the complainant to make payment of the instalments by sending a letter and the complainant was required to make payment within 7 days from the day of the letter.  In the event of delay in payment, the OPs were empowered to charge interest @ 3% per month.  Absolutely there is no evidence on record that the OPs sent any written intimation to the complainant calling upon him to make payment as per the payment schedule mentioned in the agreement.  The OPs either in their version or in the affidavit also does not state that they issued any letter to the complainant calling upon to make payment of the balance amount as mentioned in the payment schedule.  When the OPs themselves have failed to intimate the complainant to make payment as per the payment schedule, the question of complainant failing in making payment does not arise at all.

12. The OPs referring to the caluse.5 of the construction agreement argued that since the complainant has not complied with the terms of the said construction agreement and failed to make payment as per the payment schedule, the OPs have terminated the said agreement of sale and have forfeited 20% of the cost of the Apartment and adjusted the same as liquidated damages and towards interest on the said amount.  Thus it is argued on behalf of the OPs that, out of Rs.17,00,000/- paid by the complainant under both the agreements a sum of Rs.4,50,000/- has been adjusted towards liquidated damages in pursuance of clause.5 (a) of the construction agreement and the complainant, if at all, is entitled for refund of Rs.12,40,000/- only.  It is further submitted that as on the date of legal notice issued by the complainant as well as on the date of this complaint, the above said agreements no more existed between the parties.  It is argued that since the complainant failed to pay balance amount as per payment schedule the construction agreement was terminated in the year 2008 itself.

13. No doubt, clause.5 (a) and (b) of the construction agreement gives right to the OPs to charge interest on the defaulted instalment at the rate of 3% per month and also to treat a sum equivalent to 20% of the cost of the Apartment as forfeited and adjust it as liquidated damages from out of the moneys already paid and rescind the contract and allot the Apartments in question to any other person on such terms and conditions as the OP deems fit.  As already mentioned above, it is for the OP to intimate the complainant in writing to pay the instalments at appropriate stage as per payment schedule.  In the event, the complainant fails to make payment, the OPs as provided in clause.5 (a) of the construction agreement can levy interest @ 3% per month from the date of default.  If the OPs does not choose to invoke sub clause (a) of clause.5 they can treat a sum equivalent to 20% of the cost of the Apartment as forfeited and adjust it as liquidated damages from out of the monies paid by the complainant and rescind the contract as provided in sub clause (b) of clause.5 of the construction agreement.

14. As already stated above, even the OPs themselves didn’t state anywhere that they issued any written intimation to the complainant calling upon him to make payment of the instalment as mentioned in the note appended to the payment schedule.  The OPs having failed to intimate the complainant to make payment of balance instalment, cannot invoke sub clause (b) of clause.5 of the agreement and terminate the contract by forfeiting a sum equivalent to 20% of the cost of the Apartment towards liquidated damages.  Therefore, we are of the opinion that the OPs have committed serious mistake in allegedly terminating the construction agreement entered between them and the complainant.  Therefore, we are of the considered opinion that the OPs have absolutely no right to terminate/rescind the construction agreement as they themselves have failed to adhere the terms and conditions mentioned therein.

15. Assuming that the OPs have rescinded the construction agreement by invoking sub clause (b) of clause.5, there is no explanation from the OP as to why they did not intimate the complainant about the same in writing and why they did not return the remaining amount after forfeiting 20% of the monies paid by the complainant.  Therefore, we are of the opinion that the contention put forth by the OPs that the construction agreement was terminated in 2008 is a ruse to overcome the gross deficiency committed by them.

16. The OPs at no point of time have called upon the complainant to make payment of the balance amount.  More over as could be seen from the material placed on record, the construction has commenced subsequent to 2009-2010.  Therefore, we wonder how could the OPs terminate/rescind the construction agreement even without proceeding with the construction of Apartment complex.  This action of OPs amounts to grave deficiency in service.  It is apparent that the OPs to cover up the delay and latches on their part are making futile attempts to take cover under sub clause (b) of clause.5 of the construction agreement.

17. The OPs were to complete the construction of the Apartment complex within 15 to 18 months as claimed by the complainant.  Though the OP denied that any such time was stipulated in the agreement but did not specifically mention as to what was the time fixed for completion of the Apartment complex.  Though both the agreements mentioned above were entered on 09^th October 2007, the OPs had not completed the construction of the Apartment complex including the Flat No.001, in all respect, as on the date of filing this complaint in the year 2014.  Thus, it is apparent that there is inordinate and unexplained delay on the part of OPs in completing the construction of the Apartment complex and the Flat in question.  Absolutely there is no truth in the allegations of the OPs that the complainant failed to perform his part of obligation as per the construction agreement.

18. As stated above, the OPs themselves having failed to adhere to the terms and conditions of the construction agreement are trying to blame the complainant to cover up serious latches on their part.  It is argued on behalf of the OPs that as per clause.17 of the construction agreement, in the event of any dispute or difference arise between the parties to the agreement the same shall be referred to arbitration in accordance with the Arbitration Act, and the decision of the Arbitrator shall be final and binding on both the parties.  Therefore, it is argued that in view of the above said Arbitration clause, this Court has no jurisdiction to entertain the present complaint.  During pendency of the complaint, the OPs made an application U/s.8 of Arbitration and Conciliation Act, 1996 read with section.151 of CPC praying for an order directing the complainant herein to work out his remedy before the Arbitrator and consequently dismiss the complaint as not maintainable before this Forum.  The said application was contested by the complainant.  After hearing, the said application came to be dismissed holding that this Forum has jurisdiction to entertain the complaint despite the Arbitration clause.  The said order has become final, since the OPs have not challenged the same before any appellate authorities.  Therefore, we don’t find it necessary to discuss again about the Arbitration clause.

19. The OPs contended that the complainant is not a ‘Consumer’ as defined under the Act as he is carrying commercial activities namely real estate business.  It is alleged by the OPs that the present transaction of the complainant is an commercial venture therefore he cannot be treated as ‘Consumer’ and cannot invoke the provisions of the Consumer Protection Act.  Therefore, OPs prayed for dismissing the complaint holding that the complainant is not a ‘Consumer’.  The OPs referring to certain sale deeds executed by Smt.M.K Padmini, the wife of the complainant and referring to sale deed dated 01.02.2008 executed by the complainant argued that the complainant and his wife are engaged in real estate business.  Therefore, the complainant is not a ‘Consumer’ as defined under the Consumer Protection Act, 1986.  It is pertinent to note here that in most of the transactions entered into by Smt.M.K Padmini the OPs are also party.  It cannot be said that the complainant is involved in any transactions entered into by his wife.  More over there is no evidence that the said Smt.M.K Padmini made any profit out of any such transactions.  Even assuming that the complainant has entered into a sale transaction of the residential Apartment, such isolated transaction cannot make the present contract as commercial transaction.  Assuming that the complainant has invested some money in certain properties to make profit that itself does not make present transaction as commercial transaction.  Moreover, nowhere in the construction agreement it is stated that the complainant is purchasing the said Apartment for any commercial purpose or for the purpose of reselling it in a future date, for profit.  Several persons invest their money in fixed deposits, debentures, shares; mutual funds with an intention to earn profit out of such investments therefore such transactions cannot be termed as commercial transaction by any strength of imagination.  Similarly if any person has invested money in any landed property that itself does not amount to a commercial transaction, unless there is sufficient material to show that the said investment was made with for commercial purpose.  Therefore, we don’t find any truth in the allegations of the OPs that the present transaction is a commercial transaction and the complainant does not fit into the definition of ‘Consumer’.  Under the given circumstances of the case, we are of the clear opinion that the complainant is a ‘Consumer’ as defined under the C.P Act, 1986 and the present complaint is very well maintainable in this Forum. 

20. Perused the citations relied upon by the OPs.  The facts of the case on hand are entirely different from the facts of the case dealt in the above cited authorities.  Therefore, we are of the opinion that the ratio laid in the above said authorities cannot be made applicable to the case on hand. 

21. It is not denied by the OPs that during pendency of present complaint they have sold the Flat in question in favour of one Pratap J Rairakhia for a whopping sum of Rs.67,50,000/-.  The price for which the OPs have sold the said Flat No.001 makes it abundantly clear the oblique motive of the OPs in denying the complainant possession of the said Flat.  The OPs have deliberately without there being any valid reasons have allegedly terminated the construction agreement only with a sole intention of making huge profit of more than to Rs.50,00,000/-. (Fifty lakhs)

22. The conduct of OPs in not honouring the construction agreement without there being any valid cause amounts to deficiency in service on their part.  In view of the sale of the Flat in question in favour of third party there cannot be an order to hand over the vacant possession of the same to the complainant.  Therefore, under the circumstances of the case, the OPs have to be directed to refund a sum of Rs.17,00,000/- to the complainant with interest @ 18% p.a from the date of receipt till the date of realization.

23. From the price of the Flat in question sold to the third party by the OPs, it appears that if at all the complainant wants to purchase a similar Flat in the said locality he has to shell out more than Rs.57,00,000/-.  Therefore, looking to the steep appreciation of the property in the locality, we feel it appropriate to direct the OPs to pay compensation of Rs.10,00,000/- to the complainant together with litigation cost of Rs.5,000/-.

24. In result, we proceed to pass the following:

  O R D E R

The complaint filed by the complainant U/s.12 of the Consumer Protection Act, 1986 is allowed in part.  The OPs are jointly and severally directed to refund a sum of Rs.17,00,000/- received by them under two agreements dated 09.10.2007 to the complainant together with interest at the rate of 18% p.a from the date of receipt, till the date of realization.  The OPs are further directed to pay compensation of Rs.10,00,000/- to the complainant for the hardship, inconvenience and mental agony caused to him due to deficiency in service on their part together with litigation cost of Rs.5,000/-.

The OPs shall comply the order passed by this Forum within six weeks from today.

Furnish free copy of this order to both the parties.

(Dictated to the Stenographer, got it transcribed and corrected, pronounced in the Forum on this 21^st day of October 2015)

MEMBER                            MEMBER                   PRESIDENT

Nrs/Vln* 

Witnesses examined on behalf of the complainant dated 10.10.2014.

1. Dr.K.R Manjunatha

Documents produced by the complainant:

Witnesses examined on behalf of the Opposite parties dated 30.01.2015.

1. Sri.D. Suresh Kumar  

Document produced by the Opposite parties.

MEMBER                            MEMBER                    PRESIDENT

Nrs/Vln*