Apex Court asks builder to return deposited amount to flat purchasers, says NCDRC overstepped its jurisdiction in deciding future course of action of parties
Justices Aniruddha Bose & Sanjay Kumar [22-02-2024]

Read Order: Venkataraman Krishnamurthy and another v. Lodha Crown Buildmart Pvt. Ltd [SC- CIVIL APPEAL NO. 971 OF 2023]

Tulip Kanth

New Delhi, February 26, 2024: In a dispute relating to delayed possession of flats, the Supreme Court has observed that it was not for the National Consumer Disputes Redressal Commission (NCDRC) to rewrite the terms and conditions of the contract between the parties and apply its own subjective criteria to determine the course of action to be adopted by either of them.

As per the facts of the case, the appellants intended to purchase an apartment in a building to be constructed by the respondent-company at New Cuffe Parade, Wadala, Mumbai. The parties executed Agreement to Sell whereby a 4BHK apartment on the sixth floor of the proposed building named ‘Lodha Evoq’. The sale consideration was fixed at Rs.7,55,50,956. As per the payment schedule, this sale consideration was to be paid in four sets of ‘application money’ and the balance amount, being Rs.5,83,53,615, was to be paid on initiation of fit outs.

The appellants paid Rs.2,25,31,148 in all to the respondent-company by the date of institution of their consumer complaint before the NCDRC and were not in default. As per the Agreement, possession of the apartment was to be delivered to the appellants for fit outs by 30.06.2016 or, with a grace period of one year, by 30.06.2017.

Alleging that the respondent-company had not delivered possession of the apartment for fit outs by the said date and that they had terminated the Agreement, the appellants approached the NCDRC. Dissatisfied with the judgment of the NCDRC, the appellants approached the Top Court. The appellants asserted their right to terminate the Agreement and claim unconditional refund of the total amount paid by them with interest thereon.

The NCDRC had noted that there was some delay in handing over of possession of the apartment by the respondent-company, but opined that it was not unreasonable, whereby the appellants could cancel the Agreement and seek a refund. The NCDRC further opined that in the event they wish to seek a refund, the respondent-company was entitled to deduction/forfeiture of the earnest money as per the provisions of the Agreement. Having said so, the NCDRC observed that the respondent-company was still bound to provide actual physical possession of the apartment, complete in all respects.

By a letter dated 29.11.2017, the respondent-company informed the appellants that their apartment was ready for possession and called upon them to make the payment due at the earliest to enable the process to hand over possession being initiated.

The Division Bench of Justice Aniruddha Bose and Justice Sanjay Kumar was of the view that once the parties committed themselves to a written contract, whereby they reduced the terms and conditions agreed upon by them to writing, the same would be binding upon them. In the event such a written contract provided for the consequences that are to follow in the event of breach of the conditions by one or the other of the parties thereto, such consequences must necessarily follow and if resisted, they would be legally enforceable.

The Agreement stipulated the date of delivery of possession of the apartment for fit outs with a grace period of one year. In terms thereof, the date for delivery of possession of the apartment for fit outs, with the grace period, was 30.06.2017. Admittedly, the respondent-company did not offer delivery of possession of the apartment for fit outs by that date. Referring to various clauses, the Bench observed that the right of election given thereunder to the appellants to either continue or to terminate the Agreement within ninety days from the expiry of the grace period was absolute and it was not open to the NCDRC to apply its own standards and conclude that, though there was delay in handing over possession of the apartment, such delay was not unreasonable enough to warrant cancellation of the Agreement. “It was not for the NCDRC to rewrite the terms and conditions of the contract between the parties and apply its own subjective criteria to determine the course of action to be adopted by either of them”, the Bench said.

The response of the appellants on 12.06.2017 disclosed that the Part Occupancy Certificate was not even made available to them at that time and the first appellant specifically requested the respondent-company to update him as soon as the Occupancy Certificate was uploaded on its website, so that he could initiate steps for securing a loan. It was agreed by and between the parties that the appellants would be permitted to visit the apartment on 14.06.2017 but it was an admitted fact that the apartment was not shown to them on that day.

“As there was no novation of the contract in writing by the parties and as it was not open to one of the parties thereto, viz., the respondent-company, to unilaterally change the agreed terms and conditions, the action of the appellants in terminating the Agreement on the first available date, as provided therein, couldnot be found fault with. Mere exchange of correspondence by and between the parties prior to expiry of the grace period, when the appellants were not even seized of all the facts, couldn’t be held against them by treating it as an act in acceptance of or acquiescence with the change impliedly suggested by the respondent-company”, the Bench held.

The Top Court also held that the fact that the appellants were anxious to avoid the additional tax liability, owing to the introduction of the Goods and Service Tax regime, cannot be held against them or be imputed to them as an underhand motive for backing out of the Agreement. “Avoidance of tax is neither illegal nor equivalent to tax evasion and, therefore, the urgency shown by the appellants in trying to complete the process quickly so as to avoid an additional tax burden was natural. Further, it cannot be presumed that the appellants, who were willing to spend over Rs.7.5 Crore for the apartment, would back out at the eleventh hour only because the tax component was increasing by Rs.40 lakh or so”, it added.

The Bench further observed, “…we have no hesitation in holding that the NCDRC overstepped its power and jurisdiction in ignoring the binding covenants in the Agreement and in introducing its own logic and rationale to decide as to what the future course of action of the parties and more particularly, the appellants, should be.”

Noticing that the appellants did not choose to act upon the belated offer of the respondent-company and were still intent on terminating the Agreement, the Bench set aside the order passed by the NCDRC and allowed the Consumer Complaint directing the respondent-company to refund the deposited amount of Rs.2,25,31,148 in twelve equal monthly instalments.