JUSTICE V.K. JAIN (ORAL)

The complainants booked a residential flat with the opposite party in a project, namely,  Unitech Habitat, Greater Noida which the said opposite party was to develop in Greater Noida. The complainants were allotted Unit No.304, measuring 2096 sq.ft., on the 3^rd Floor in Tower-18 of the aforesaid project Plot No.9 in Sector Pi-II of Greater Noida. The total sale consideration was agreed at Rs.68,29,952/-, out of which the complainants have already paid a sum of Rs.62,12,807/- to the opposite party. In order to make payment to the opposite party, the complainants took a housing loan of Rs.55 lakhs from  HDFC Ltd. The loan was taken on a floating rate of interest which at the time of filing of the complaint was 12.75% per annum.

As per clause 4.a of the allotment letter, the possession was to be delivered to the complainants within a period of 36 months of execution of the said document, which came to be executed on 8.11.2006, meaning thereby that the possession ought to have been delivered by 7.11.2009. Since the completion of the flat was nowhere in sight,  the complainants vide letter dated 10.4.2009 sought refund of the amount paid by them. This was followed by a letter dated 3.6.2011. Since the refund was not forthcoming, the complainants have approached this Commission seeking refund of Rs.62,12,807/- along with compensation in the form of interest quantified at Rs.23,99,438/- and rental for the period from November 2009 to January 2012  quantified at Rs.2,60,000/-. The complainants have also claimed Rs.20 lakhs as compensation for the mental agony and harassment caused to them. Alternatively, the complainants have claimed interest @ 18% p.a. on the principal amount of Rs.62,12,807/-w.e.f. November 2009 along with compensation for mental agony quantified at Rs.20 lakhs and rental quantified at Rs.2,60,000/-.

2.      The complaint has been opposed by the opposite party on several grounds including that since the amount paid by the complainants is only Rs.62,12,807/-, this Commission lacks pecuniary jurisdiction to entertain the complaint. On merits, the opposite party has admitted the transaction with the complainants and has claimed that in the event of delay, the complainants are entitled only to the compensation specified in clause 4.c of the allotment letter. It is also pointed out in the reply filed by the opposite party that vide letter dated 21.8.2012, they had informed the complainants that they were hoping to release Tower-18 of this project by the 4^th Quarter of 2012, barring  any unforeseen circumstances and had also offered allotment of ready to move in unit in released Towers 11 -17 of the said project to them but the complainants did not show any interest in accepting the said alternative allotment. The opposite party has also sought to rely upon clause 4.e of the allotment letter which provides for offer of alternative property or refund with simple interest @ 10% per annum in case the developer is not in a position to offer the apartment altogether. The delay in offering possession is sought to be justified on the ground that it had happened due to recession in the market on account of economic meltdown in the real estate, which was a reason beyond the control of the opposite party.

3.      As regards, the pecuniary jurisdiction of this Commission to entertain the complaint, the following view taken by this Commission in C.C. No.347 of 2014 - Swarn Talwar & Ors. Vs. Unitech Ltd., decided on 14^th August 2015, is relevant :-

“5.      The first question which arises for our consideration in these cases is as to whether this Commission possesses the requisite pecuniary jurisdiction to entertain these complaints. Section 11(1) of the Consumer Protection Act read with Section 21 of the Consumer Protection Act to the extent it is relevant provides that this Commission shall have jurisdiction to entertain complaints where the value of the goods or services and compensation if any claimed exceeds Rs.1,00,00,000/-. The contention of the learned counsel for the opposite party is that interest claimed by the complainants cannot be termed as compensation and if the interest component is excluded, the pecuniary value of the complaint does not exceed Rs.1,00,00,000/- except in one case. The learned counsel for the complainants on the other hand contended that the interest which they have claimed along with refund of the principal sum even if not so described specifically, is by way of compensation only, since the opposite party has been deficient in rendering services to the complainants by not delivering possession of the flats on or before the time agreed in this regard.

6.      In our view, the interest claimed by the flat buyers in such a case does not represent only the interest on the capital borrowed or contributed by them but also includes compensation on account of appreciation in the land value and increase in the cost of construction in the meanwhile. As noted by us in CC No.232 of 2014, Puneet Malhotra Vs. Parsvnath Developers Ltd. decided on 29-01-2015, there has been steep appreciation in the market value of the land and cost of construction of the residential flats in Greater Noida in last about 7-10 years and consequently the complainants cannot hope to get a comparable flat at the same price which the opposite party had agreed to charge from them. In fact it would be difficult to get a similar accommodation, even at the agreed price plus simple interest thereon at the rate of 18% per annum. Therefore, the payment of interest to the flat buyers in such a case is not only on account of loss of income by way of interest but also on account of loss of the opportunity which the complainants had to acquire a residential flat at a particular price.

7.      In Ghaziabad Development Authority Vs. Balbir Singh (2004) 5 SCC 65, the Hon’ble Supreme Court inter alia observed and held as under:

        “However, the power to and duty to award compensation does not mean that irrespective of facts of the case compensation can be awarded in all matters at a uniform rate of 18% per annum. As seen above what is being awarded is compensation i.e. a recompense for the loss or injury. It therefore necessarily has to be based on a finding of loss or injury and has to correlate with the amount of loss or injury. Thus the Forum or the Commission must determine that there has been deficiency in service and/or misfeasance in public office which has resulted in loss or injury. No hard and fast rule can be laid down, however a few examples would be where an allotment is made, price is received/paid but possession is not given within the period set out in the brochure...

…Along with recompensing the loss the Commission/Forum may also compensate for harassment/injury both mental and physical. Similarly, compensation can be given if after allotment is made there has been cancellation of scheme without any justifiable cause.

That compensation cannot be uniform and can best of illustrated by considering cases where possession is being directed to be delivered and cases where only monies are directed to be returned. In cases where possession is being directed to be delivered the compensation for harassment will necessarily have to be less because in a way that party is being compensated by increase in the value of the property he is getting. But in cases where monies are being simply returned then the party is suffering a loss inasmuch as he had deposited the money in the hope of getting a flat/plot. He is being deprived of that flat/plot. He has been deprived of the benefit of escalation of the price of that flat/plot. Therefore the compensation in such cases would necessarily have to be higher.”

It would thus be seen that the Hon’ble Supreme Court recognized that the interest to the flat buyers in such cases is paid by way compensation. If the amount claimed by the complainants by way of compensation including compensation by way of interest is added to the principal amount paid by them, the aggregate comes to more than Rs.1 crore. In fact, even if only the compensation in the form of simple interest @ 18% p.a. which the complainants have claimed in this case, is added to the principal amount of Rs.62,12,807/-, it comes to more than Rs.1 crore. Therefore, I find no merit in the contention that this Commission lacks pecuniary jurisdiction to entertain the complaint.

4.      As regards the plea of compensation based upon clause 4.c and 4.e of the allotment letter, the following view taken by this Commission in Swarn Talwar & Ors. (supra) is pertinent:-

“8.      As regards the plea that in terms of Clause (c) of the allotment letter the opposite party is required to pay only the holding charges calculated at the rate of Rs.5/- per sq.ft. per month of the super area for the period the possession is delayed, such a contention was expressly rejected by us in Puneet Malhotra (supra) holding that such clause applies only in a case where construction of the flat is delayed but despite delay the buyer accepts the possession of the flat from the seller and consequently the accounts have to be settled between the parties. We observed in this regard that the buyer would have to pay the agreed holding charges to the seller and the seller to pay the agreed compensation on account of delaying the construction of the flat. The said clause, however, does not apply to a case where the buyer on account of delay on the part of the seller in constructing the flat is left with no option but to seek refund of the amount which he had paid to the seller. We further held that such a clause where the seller in case of default on the part of the buyer seeks to recover interest from him at the rate of 24% per annum will amount to an unfair trade practice since it gives an unfair advantage to the seller over the buyer. We also noted in this regard that enumeration of the unfair trade practices in Section 2(r) of the Act is inclusive and not exhaustive.

          This plea was also negatived by us in a batch of complaints CC No.427 of 2014, Satish Kumar Pandey & Anr. Vs. Unitech Ltd. and connected matter, decided on 08-06-2015. All those complaints were filed against none other than the opposite party in these matters, namely, Unitech Ltd..

9.      Coming to the pleas that there was recession in the economy and a disruption due to agitation by farmers and acute shortage of labour, etc., the following view taken by us In Satish Kumar Pandey (Supra) is relevant.

“Neither any new legislation was enacted nor an existing rule, regulation or order was amended stopping suspending or delaying the construction of the complex in which apartments were agreed to be sold to the complainants.  There is no allegation of any lock-out or strike by the labour at the site of the project.  There is no allegation of any slow-down having been resorted to by the labourers of the opposite party or the contractors engaged by it at the site of the project.  There was no civil commotion, war, enemy action, terrorist action, earthquake or any act of God which could have delayed the completion of the project within the time stipulated in the Buyers Agreement.  It was contended by the counsel for the OP that the expression ‘slow down’ would include economic slow-down or recession in the Real Estate sector.  I, however, find no merit in this contention.  The word ‘slow down’ having been used alongwith the words lock-out and strike, I has to be read ejusdem generis with the words lock-out and strike and therefore, can mean only a slow down if resorted by the labourers engaged in construction of the project.

          It is an undisputed proposition of law that ordinarily the parties are bound by the terms and conditions of the contract voluntarily agreed by them and it is not for a Consumer Forum or even a Court to revise the said terms.

However, a term of a contract, in my view will not be final and binding if it is shown that the consent to the said term was not really voluntary but was given under a sort of compulsion on account of the person giving consent being left with no other choice or if the said term amounts to an unfair trade practice.  It was submitted by the learned counsel for the complainants that the term providing for payment of a nominal compensation such as Rs.5/- per square foot of the super area having become the order of the day in the contracts designed by big builders, a person seeking to buy an apartment is left with no option but to sign on the dotted lines since the rejection of such term by him would mean cancellation of the allotment.  He further submitted that a person seeking to acquire a built up flat instead of purchasing a plot and then raising construction on it, therefore, is not in a position to protest resist the inclusion of such a term in the Buyer’s Agreement, and has to rely upon the reputation of the builder, particularly if he is a big builder such as Unitech Ltd.  He also submitted that the format of the Buyer’s Agreement is never shown to the purchasers at the time of booking the apartment and if he refuses to sign the Buyer’s Agreement on the format provided by the builder, not only will he lose the booking, even the booking amount/earnest money paid by him will be forfeited by the builder.  I find merit in the above referred submissions of the learned counsel.  A person who, for one reason or the other, either cannot or does not want to buy a plot and raise construction of his own, has to necessarily go in for purchase of the built up flat.  It is only natural and logical for him to look for an apartment in a project being developed by a big builder such as the opposite party in these complaints.  Since the contracts of all the big builders contain a term for payment of a specified sum as compensation in the event of default on the part of the builder in handing over possession of the flat to the buyer and the flat compensation offered by all big builders is almost a nominal compensation being less than .25% of the estimated cost of construction per month, the flat buyer is left with no option but to sign the Buyer’s Agreement in the format provided by the builder.  No sensible person will volunteer to accept compensation constituting about 2-3% of his investment in case of delay on the part of the contractor, when he is made to pay 18% compound interest if there is delay on his part in making payment.

          It can hardly be disputed that a term of this nature is wholly one sided, unfair and unreasonable.  The builder charges compound interest @ 18% per annum in the event of the delay on the part of the buyer in making payment to him but seeks to pay less than 3% per annum of the capital investment, in case he does not honour his part of the contract by defaulting in giving timely possession of the flat to the buyer.  Such a term in the Buyer’s Agreement also encourages the builder to divert the funds collected by him for one project, to another project being undertaken by him.  He thus, is able to finance a new project at the cost of the buyers of the existing project and that too at a very low cost of finance.  If the builder is to take loan from Banks or Financial Institutions, it will have to pay the interest which the Banks and Financial Institutions charge on term loan or cash credit facilities etc.  The interest being charged by the Banks and Financial Institutions for financing projects of the builders is many times more than the nominal compensation which the builder would pay to the flat buyers in the form of flat compensation.  In fact, the opposite party has not even claimed that the entire amount recovered by it from the flat buyers was spent on this very project.  This gives credence to the allegation of the complainants that their money has been used elsewhere.   Such a practice, in my view, constitutes unfair trade practice within the meaning of Section 2(r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practice for the purpose of selling the product of the builder.  Though, such a practice does not specifically fall under any of the Clauses of Section 2(r) (1) of the Act that would be immaterial considering that the unfair trades, methods and practices enumerated in Section 2(r) (1) of the Act are inclusive and not exhaustive, as would be evident from the use of word “including” before the words “any of the following practices”.

13. As regards the refund of the principal amount along with interest at the rate of 10% per annum, such an offer in our view would constitute an unfair trade practice considering that as per the agreement between the parties the flat buyers were required to pay interest at the rate of 18% per annum compounded quarterly in the event of default on their part in making payment to the opposite party. It would also be pertinent to note here that this is not the case of the opposite party that the entire money collected by them from the flat buyer in this project was invested by them in this very project. The contention of the complainants during the course of arguments was that the opposite party has been diverting the funds collected for one project to finance their other projects at the cost of the flat buyers. It was also submitted on behalf of the complainants that if the opposite party were to raise finance from the banks and financial institutions for developing the projects to which there funds have been diverted or to complete the project in question it would have to pay more than 18% simple interest. As observed by us in Satish Kumar Pandey & Anr. (Supra) such contracts would constitute unfair trade practice on the part of the opposite party. Such a term in the agreement, therefore, is liable to be ignored.”          

5.      Civil Appeal (D. No.35562 of 2015) was filed by the opposite party against the decision of this Commission in Swarn Talwar & Ors. (supra).  The said appeal was dismissed by the Hon’ble Supreme Court vide order dated 11.12.2015, which reads as under:-

“We have heard learned counsel for the appellant and perused the record. We do not see any cogent reason to entertain the appeal. The judgement impugned does not warrant any interference.

The Civil Appeal is dismissed.”

6.      Vide letter dated 21.8.2012, the opposite party informed the complainants as under:-

“We are hoping to release the Tower 18 of the Project Habitat by 4^th Quarter of 2012, barring any unforeseen circumstances. However, please be assured that for the delay in handing over of the possession, clause 4c (ii) of the terms and conditions of the Allotment Letter shall be applicable  for the above property.

However, if interested, we shall be pleased to offer you a ready to move in unit available with us in the offered for possession Towers 11-17 of the Project Habitat. May we request you to inform us of your acceptance of alternate property at the earliest to offer you the units to reach an amicable resolution.”

7.      The opposite party has not explained, in its reply, as to how the alleged slowdown in the real estate sector had resulted in such a huge delay in completion of the project. There is no evidence on record to substantiate the alleged economic slowdown right from the time the flat was booked by the complainants in the year 2006. The averments made in this regard are vague and remain unsubstantiated.

8.           Though the contention of the complainants is that the OP did not have an Occupancy Certificate even in respect of Towers 11-17 at the time the said letter dated 21.8.2012 was sent and there is no material on record to show that the opposite party did have the Occupancy Certificate in respect of the aforesaid Tower at the time the said letter was sent, in my opinion, considering that the opposite party had failed to perform its contractual obligation of offering possession within three years from the date of allotment, the complainants were not under an obligation to accept the said alternative allotment. Once it is shown that the opposite party had defaulted in performance of its contractual obligation of offering possession within a period of three years from the date of issue of the allotment letter and the delay in offering possession is not found to be justified, the buyer is entitled to seek refund of the money paid by him to the builder along with appropriate compensation.

9.      It was contended by the learned counsel for the opposite party that that they have not diverted any money collected from the flat buyers of this project to any other project and, therefore, cannot be said that they were seeking to make profits at the cost of the complainants. The OP have also filed the affidavits in C.C. No.65 of 2015, stating therein that the entire amount collected by them from the flat buyers in this project was utilized for carrying out development of this very project. Even if that is so, considering the deficiency on the part of the opposite party in delivering possession of the flat, by the committed date coupled with its failure to justify the said huge delay, the complainants, in my opinion, are entitled to compensation for the actual loss suffered by them in the form of interest which they have paid or they have to pay to the bank/financial institution from which loan has been taken by them or the interest which they could have earned by investing their own money in an appropriate financial instrument.

10.    The complainant who is present in the Court states that in order to avoid further litigation and in order to bring the litigation to an end, he is ready to accept refund along with all-inclusive  compensation in the form of simple interest @ 12% per annum w.e.f. the date of each payment till the date the refund is made along with compensation in the form of interest. Considering the cost of finance from the banks and financial institutions at the relevant time, the compensation calculated on the basis of simple interest @ 12% per annum from the date of payment, appears to be justified and reasonable. This is more so in respect of a person who has taken a housing loan and is not pressing for separate compensation for the mental agony and harassment undergone by him.

11.    For the reasons stated hereinabove, the opposite party is directed to refund the principal amount of Rs.62,12,807/- to the complainants along with compensation in the form of simple interest @ 12% per annum from the date of receipt of each payment till the date the said amount is refunded along with compensation in the form of interest in terms of this order. The payment shall be made within six weeks from today.