Case: WG. CDR. ARIFUR RAHMAN KHAN AND ALEYA SULTANA Vs. DLF SOUTHERN HOMES PVT. LTD. (NOW KNOWN AS BEGUR OMR HOMES PVT. LTD.)

the entire project of 1830 apartments through individual ll KV feeders from Golahalli 66/llKV Substation. On this basis, the costing for infrastructure towards provisioning of utilities as per clause 1.14, 1.15, 23(b) and JDC of ABA was estimated at rate Rs. 127.96/sft., which was reflected in the Final Demand to D Block customers. However, after a detailed evaluation of the load requirement for the project as per norms, BESCOM has now stipulated that, in accordance with clause 3.2.4 of KERC Regulations, we establish a dedicated 66/11 kv Substation within our project site to cater to the needs of the project, instead of the earlier proposed scheme of 11 Kv feeders from Golahalli. The increase in cost because of this new sub-station and allied works, over and above the originally envisaged 11KV scheme is estimated @Rs. 18.01 Cr., thereby increasing the total infrastructure cost recovery towards provisioning of utilities to Rs. 188.00/sft. In view of the above said amounts are being recovered on the basis of provisional estimates. On commissioning and energizing the substation, the company shall arrange a certificate from independent chartered accountant/ chartered engineer to arrive at the actual cost incurred. Your share of the said actual cost by the Company shall be duly intimated to you accordingly. If it is found that excess amount paid by you, over and above the actual cost incurred by the company, said excess amount so collected shall be refunded to you without interest. If the actual expenses exceeds the estimated amount computed @Rs. 188/-sq. ft. then demand for the shortfall amount shall be raised through further demand on the owner of the property and shall be payable by you. We would further like to bring to your kind attention that the provision of 66/llKV substation will ensure better quality uninterrupted power supply as compared with the previously planned scheme of 11KV reeders. 50. Mr. R. Balasubramanian, learned Senior Counsel contends that clause 23(b) relates to receiving and distributing the bulk supply of electrical energy to the said project /said complex which is defined as project under the name and style of New Town DLF BTM Extension. According to the submission, the charges have been collected for the entire New Town project and not for Westend Heights alone. In this context it has also been submitted that distribution of electricity is governed by the KERC Regulations 2006. While planning the project, the developer calculated the cost of the 66/11 KV sub-station and collected charges from each of the 1830 buyers. Hence, it has been submitted that there was no requirement of additional bulk supply of electricity for the nineteen hundred buyers. In this context, the formulation in the written submissions is extracted below: (under) regulation 3.02 (e) of KERC (Conditions of Supply of Electricity by the Distribution Licensee) Regulations 2004, it is mandatory to set up 66 KV supply line/ KV substation if the demands goes beyond 7500 KVA. Further under regulation 3.2.4 KERC (Recovery of Expenditure for Supply of Electricity) Regulations 2004 :In case of layouts/buildings requiring power supply and the requisitioned load is more than 7500 KVA, the developer/ Applicant shall provide the space for erection of sub-station and also bear the entire charges of such a sub-station and associated lines/equipments. The work shall be carried out either by the Licensee duly recovering the charges as per estimate or by the Applicant himself through appropriate class of licensed contractor by paying 10% of the estimate as supervision charges to the Licensee. 51. The NCDRC has upheld the collection of the charges towards electricity based on the terms of the ABA. There is no infirmity in the finding of the NCDRC, which is based on the provisions contained in clause 23(b) of the ABA. The charges recovered are not contrary to what was specified in the contract between the parties. Parking 52. The appellants seek a refund of an amount of Rs. 2.25 lacs collected from each buyer towards car parking. The submission is that under Section 3(f) of the Karnataka Apartment Ownership Act 1972 (KAO Act) , common areas and facilities include parking areas. According to the appellants, the flat buyers had already paid for the super area in terms of clause 1.6 of ABA including common areas and facilities which would be deemed to include car parking under the KAO Act. The relevant portion of clause 1.6 is extracted below: 1.6. The Allottee agrees that the Total price of the said Apartment is calculated on the basis of its Super Area only (as indicated in clause 1.1.) except the parking space, additional car parking space which are based on fixed valuation….(emphasis supplied) 53. We are unable to accede to the above submission. The ABA contained a break-up of the total price of the apartment. Parking charges for exclusive use of earmarked parking spaces were separately included in the break-up. The parking charges were revealed to the flat buyers in the brochure. The charges recovered are in terms of the agreement. 54. The decision of this Court in Nahalchand Laloochand Private Limited v. Panchali Cooperative Housing Society Limited (2010) 9 SCC 536 turned on the provisions of the Maharashtra Ownership Flats Act 1971, as explained in the subsequent decision of this Court in DLF Limited v. Manmohan Lowe (2014) 12 SCC 231 . The demand of parking charges is in terms of the ABA and hence it is not possible to accede to the submission that there was a deficiency of service under this head. 55. For the above reasons we have come to the conclusion that the dismissal of the complaint by the NCDRC was erroneous. The flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities. The reasoning of the NCDRC on these facets suffers from a clear perversity and patent errors of law which have been noticed in the earlier part of this judgment.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]19. Clause 11(a) of the ABA indicates that subject to all just exceptions the developer endeavoured to complete construction within a period of thirty-six months from the date of the execution of the agreement unless hindered by force majeure conditions. Undoubtedly, the expression endeavour indicates that the developer did not bind itself to an inflexible timeline of thirty-six months. But then again, the timeline of thirty-six moths was subject to just exceptions and could be excused in the event of force majeure conditions coming into operation. By the provisions of clause 14, the developer agreed to compensate the flat buyers at the rate of Rs. 5 per square feet of the super area of the apartment per month for the period of delay.21. The existence and extent of the delay constitute an admitted factual position. In fact, in the written submissions which have been filed by the developer, it has been admitted that out of 171 appellants, 145 were given compensation in terms of the rate prescribed in clause 14 of the ABA. Once the developer has accepted that there was a delay on his part which triggered of the liability to pay compensation (albeit, according to the developer, in terms of clause 14) there can be no manner of doubt that:(i) the developer assumed an obligation in terms of the ABA to endeavour to hand over possession in thirty-six months of the date of the execution of the agreement;(ii) there was a failure on the part of the developer to comply with the contractual obligation;(iii) the failure of the developer was neither relatable to a just exception or the prevalence of force majeure conditions referable to clause 11; and(iv) the payment of compensation to the flat buyers or at least 145 of the group of 171 represents an admission by the developer of its breach, thereby triggering a liability to pay compensation.In assessing the legal position, it is necessary to record that the ABA is clearly one-sided. Where a flat purchaser pays the instalments that are due in terms of the agreement with a delay, clause 39(a) stipulates that the developer would at its sole option and discretion waive a breach by the allottee of failing to make payments in accordance with the schedule, subject to the condition that the allottee would be charged interest at the rate of 15 per cent per month for the first ninety days and thereafter at an additional penal interest of 3 per cent per annum. In other words, a delay on the part of the flat buyer attracts interest at the rate of 18 per cent per annum beyond ninety days. On the other hand, where a developer delays in handing over possession the flat buyer is restricted to receiving interest at Rs 5 per square foot per month under clause 14 (which in the submission of Mr Prashant Bhushan works out to 1-1.5 per cent interest per annum). Would the condition which has been prescribed in clause 14 continue to bind the flat purchaser indefinitely irrespective of the length of the delay The agreement stipulates thirty-six months as the date for the handing over of possession. Evidently, the terms of the agreement have been drafted by the developer. They do not maintain a level platform as between the developer and purchaser. The stringency of the terms which bind the purchaser are not mirrored by the obligations for meeting times lines by the developer. The agreement does not reflect an even bargain.The agreement did not stipulate that the developer would pay any interest on the amount which had already been received. A large chunk of the purchase price was thus available to the developer to complete construction. The court must take a robust and common-sense based approach by taking judicial notice of the fact that flat purchasers obtain loans and are required to pay EMIs to financial institutions for servicing their debt. Delays on the part of the developer in handing over possession postpone the date on which purchasers will obtain a home. Besides servicing their loans, purchasers have to finance the expenses of living elsewhere. To postulate that a clause in the agreement confining the right of the purchaser to receive compensation at the rate of Rs 5 per square foot per month (Rs 7,500 per month for a flat of 1500 square feet) precludes any other claim would be a manifestly unreasonable construction of the rights and obligations of the parties. Where there is a delay of the nature that has taken place in the present case ranging between periods of two years and four years, the jurisdiction of the consumer forum to award reasonable compensation cannot be foreclosed by a term of the agreement.24. A failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. There is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. The expression service in Section 2 (1) (o) means a service of any description which is made available to potential users including the provision of facilities in connection with (among other things) housing construction. Under Section 14(1)(e), the jurisdiction of the consumer forum extends to directing the opposite party inter alia to remove the deficiency in the service in question. Intrinsic to the jurisdiction which has been conferred to direct the removal of a deficiency in service is the provision of compensation as a measure of restitution to a flat buyer for the delay which has been occasioned by the developer beyond the period within which possession was to be handed over to the purchaser. Flat purchasers suffer agony and harassment, as a result of the default of the developer. Flat purchasers make legitimate assessments in regard to the future course of their lives based on the flat which has been purchased being available for use and occupation. These legitimate expectations are belied when the developer as in the present case is guilty of a delay of years in the fulfilment of a contractual obligation. To uphold the contention of the developer that the flat buyer is constrained by the terms of the agreed rate irrespective of the nature or extent of delay would result in a miscarriage of justice. Undoubtedly, as this court held in Dhanda, courts ordinarily would hold parties down to a contractual bargain. Equally the court cannot be oblivious to the one-sided nature of ABAs which are drafted by and toprotect the interest of the developer. Parliament consciously designed remedies in the CP Act 1986 to protect consumers. Where, as in the present case, there has been a gross delay in the handing over of possession beyond the contractually stipulated debt, we are clearly of the view that the jurisdiction of the consumer forum to award just and reasonable compensation as an incident of its power to direct the removal of a deficiency in service is not constrained by the terms of a rate which is prescribed in an unfair bargain.Since the decision of this Court in Lucknow Development Authority v. M K Gupta (1994) 1 SCC 243 , it has been a settled principle of law that the jurisdiction of the consumer forum extends to the award of compensation to alleviate the harassment and agony to a consumer.31. The judgment in Dhanda s case does not prescribe an absolute embargo on the award of compensation beyond the rate stipulated in the flat buyers agreement where handing over of the possession of a flat has been delayed. Dh an d as case was preceded by consent terms which were presented before this Court in two earlier civil appeals under which interest at the rate of 9 per cent had been granted. The decision lays down that the award of interest cannot be arbitrary and without nexus to the default which has been committed. Hence, the award of interest at the maximum rate of interest charged by a nationalised bank for advancing home loans was construed to be arbitrary. It was in this context that the court observed that the parties having agreed to a consequence for delay, exceptional and strong reasons must exist for the consumer fora to depart from the agreed rate. The decision, in other words, does not lay down that there is an absence of jurisdiction in the adjudicatory fora constituted under the CP Act 1986 to award remedial compensation to a flat buyer for the delay of the developer in handing over possession on the agreed date.32. In the present case, there exist, clear and valid reasons for not holding down the flat buying consumers merely to the entitlement to receive compensation at the rate of 5 per square foot per month in terms of clause 14 of the ABA32. In the present case, there exist, clear and valid reasons for not holding down the flat buying consumers merely to the entitlement to receive compensation at the rate of 5 per square foot per month in terms of clause 14 of the(i) There has been a breach on the part of the developer in complying with the contractual obligation to hand over possession of the flats within a period of thirty-six months of the date of the agreement as stipulated in clause 11(a);(ii) The failure of the developer to hand over possession within the contractually stipulated period amounts to a deficiency of service within the meaning of Section 2 (1) (g), warranting the invocation of the jurisdiction vested in the NCDRC to issue a direction for the removal of the deficiency in service;(iii) The triggering of an obligation to pay compensation on the existence of delay in handing over possession is admitted by the developer for, even according to it, it has adjusted compensation at the agreed rate of Rs 5 per square foot per month to 145 out of the 171 appellants;(iv) The agreement is manifestly one-sided: the rights provided to the developer for a default on the part of the home buyer are not placed on an equal platform with the contractual right provided to the home buyer in the case of a default by the developer;(v) There has been a gross delay on the part of the developer in completing construction ranging between two and four years. Despite successive extensions of time to deliver possession sought by the developer, possession was not delivered on time;(vi) The nature and quantum of the delay on the part of the developer are of such a nature that the measure of compensation which is provided in clause 14 of the ABA would not provide sufficient recompense to the purchasers; and(vii) Judicial notice ought to be taken of the fact that a flat purchaser who is left in the lurch as a result of the failure of the developer to provide 33 possession within the contractually stipulated date suffers consequences in terms of agony and hardship, not the least of which is financial in nature. Having paid a substantial amount of the purchase price to the developer and being required to service the debt towards loan installments the purchaser is unable to obtain timely possession of the flat which is the subject matter of the ABA.The developer does not state that it was willing to offer the flat purchasers possession of their flats and the right to execute conveyance of the flats while reserving their claim for compensation for delay. On the contrary, the tenor of the communications indicates that while executing the Deeds of Conveyance, the flat buyers were informed that no form of protest or reservation would be acceptable. The flat buyers were essentially presented with an unfair choice of either retaining their right to pursue their claims (in which event they would not get possession or title in the meantime) or to forsake the claims in order to perfect their title to the flats for which they had paid valuable consideration. In this backdrop, the simple question which we need to address is whether a flat buyer who seeks to espouse a claim against the developer for delayed possession can as a consequence of doing so be compelled to defer the right to obtain a conveyance to perfect their title. It would, in our view, be manifestly unreasonable to expect that in order to pursue a claim for compensation for delayed handing over of possession, the purchaser must indefinitely defer obtaining a conveyance of the premises purchased or, if they seek to obtain a Deed of Conveyance to forsake the right to claim compensation. This basically is a position which the NCDRC has espoused. We cannot countenance that view.35. The flat purchasers invested hard earned money. It is only reasonable to presume that the next logical step is for the purchaser to perfect the title to the premises which have been allotted under the terms of the ABA. But the submission of the developer is that the purchaser forsakes the remedy before the 36 consumer forum by seeking a Deed of Conveyance. To accept such a construction would lead to an absurd consequence of requiring the purchaser either to abandon a just claim as a condition for obtaining the conveyance or to indefinitely delay the execution of the Deed of Conveyance pending protracted consumer litigation.The developer in the present case has undertaken to provide a service in the nature of developing residential flats with certain amenities and remains amenable to the jurisdiction of the Consumer Fora. Consequently, we are unable to subscribe to the view of the NCDRC that flat purchasers who obtained possession or executed Deeds of Conveyance have lost their right to make a claim for compensation for the delayed handing over of the flats.37. However, the cases of the eleven purchasers who entered into specific settlement deeds with the developers have to be segregated. In the case of these eleven persons, we are of the view that it would be appropriate if their cases are excluded from the purview of the present order. These eleven flat purchasers having entered into specific deeds of settlement, it would be only appropriate and proper if they are held down to the terms of the bargain. We are not inclined to accept the contention of the learned counsel of the appellants, Mr. Prashant Bhushan, that the settlement deeds were executed under coercion or undue influence since no specific material has been produced on record to demonstrate the same.38. Similarly, the three appellants who have transferred their title, right and interest in the apartments would not be entitled to the benefit of the present order since they have sold their interest in the apartments to third parties. The written submissions which have been filed before this Court indicate that the two buyers stepped into the shoes of the first buyers as a result of the assignment of rights and liabilities by the first buyer in favour of the second buyer.Even if the three appellants who had transferred their interest in the apartments had continued to agitate on the issue of delay of possession, we are not inclined to accept the submission that the subsequent transferees can step into the shoes of the original buyer for the purpose of benefiting from this order. The subsequent transferees in spite of being aware of the delay in delivery of possession the flats, had purchased the interest in the apartments from the original buyers. Further, it cannot be said that the subsequent transferees suffered any agony and harassment comparable to that of the first buyers, as a result of the delay in the delivery of possession in order to be entitled to compensation.40. The developer has stated before the court that a club house containing appurtenant facilities including a swimming pool, gymnasium, billiards room, tennis court, indoor badminton court, squash court and community hall has been fully constructed and an occupation certificate has been received on 13 May 2019. The developer has stated that under the building regulations, it has to handover 5 per cent of the area of the group housing complex to BDA as a civic amenities ( CA) area. The RWA has to apply to BDA for allotment of the CA area in its favour. Upon allotment, the RWA hands over the area to the builder for construction of the club. The developer relinquished the CA area in favour of the BDA, constituted an RWA and applied to BDA on 22 June 2010 for the allotment of the CA site in favour of the RWA. The written submissions indicate that a dispute over the charges demanded by BDA towards lease rent led to a writ petition before the Karnataka High Court being instituted both by the developer and the RWA which was allowed on 29 June 2015. The developer submitted a building plan to the municipal body. A second writ petition had to be filed in which the High Court on 18 October 2016 directed the municipal body to proceed with the approval of the building plans. Sanction for the building plan was received on 18 May 2017 and after construction of the club building, an occupation certificate was received on 13 May 2019. The developer has stated that it has been following up with BDA to permit them to hand over possession and management of the club to the RWA. Since permission of BDA has still not been received legal action is contemplated again. The developer has produced photographs depicting the amenities which have been provided within the precincts of the club house. Membership fees for the club are stated to have been received in the account of the RWA and not in the account of the developer. The position which has been stated before the court as elucidated above has not been disputed by counsel for the appellants. Hence, we find that there has been no breach by the developer of the obligation to provide a constructed facility of a club for the RWA.42. Now, it is correct as the developer contends that the flat purchasers have no right, title or interest in respect of the amenities which were to be constructed by the developer as a part of the larger township of New Town. The entire area comprised 80 acres of which Westend Heights was situated on 27 acres. The absence of a title or interest in the flat purchasers in the amenities to be provided outside the area of 27 acres begs the question as to whether there was a breach of a clear representation which was held out to the flat purchasers by the developer. A deficiency under Section 2(1)(g) means a fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance. This may be required to be maintained under law or may be undertaken to be performed in pursuance of a contract or otherwise in relation to any service. The builder invited prospective flat purchasers to invest in the project of Westend Heights on the basis of a clear representation that the surrounding area of New Town situated on 80 acres was being developed to provide a wide range of amenities including a shopping centre, health care facilities and an early learning school. The developer has failed to provide these amenities.43. In other words, what the developer holds out as a defence is that though there has been a failure on their part to provide the amenities, the flat buyers have the benefit of facilities in the surrounding area which has become urbanised. We cannot agree with this line of submissions. The reply of the developer seeks to explain the failure to construct the facilities on the ground that the existing population cannot sustain these facilities – a school, commercial complex and health care facilities. This is a case involving an experienced developer who knew the nature of the representation which was being held out to the flat purchasers. Developers sell dreams to home buyers. Implicit in their representations is that the facilities which will be developed by the developer will provide convenience of living and a certain lifestyle based on the existence of those amenities. Having sold the flats, the developer may find it economically unviable to provide the amenities. The flat purchasers cannot be left in the lurch or, as in the present case, be told that the absence of facilities which were to be provided by the developer is compensated by other amenities which are available in the area. The developer must be held accountable to its representation. A flat purchaser who invests in a flat does so on an assessment of its potential. The amenities which the builder has committed to provide impinge on the quality of life for the families of purchasers and the potential for appreciation in the value of the flat. The representation held out by the developer cannot be dismissed as chaff. True, in a situation such as the present it may be difficult for the court to quantify the exact nature of the compensation that should be provided to the flat buyers. The general appreciation in land values results in an increase in the value of the investment made by the buyers. Difficulties in determining the measure of compensation cannot however dilute the liability to pay. A developer who has breached a clear representation which has been made to the buyers of the amenities which will be provided to them should be held accountable to the process of law. To allow the developer to escape their obligation would put a premium on false assurances and representations made to the flat purchasers. Hence, in factoring in the compensation which should be provided to the flat buyers who are concerned in the present batch of appeals, we would necessarily have to bear this issue in mind.45. The two certificates of the Chartered Accountant issued on 26 July 2013 and 9 August 2014 indicate that taxes inclusive of interest have been recovered.47. The specific conditions contained in the ABA clearly imposed the liability to bear the proportionate share of taxes on the purchasers. Clauses 1.3 and 1.10 leave no manner of doubt in regard to the position. The developer has offered an explanation of why as a result of pending litigation, the dues towards works contract tax were not paid earlier. Indeed, if they were paid earlier, the purchasers would have been required to reimburse their proportionate share of taxes earlier as well. No part of the penalty imposed on the developer has been passed on to the purchasers. In view of the terms of the ABA and the explanation which has been submitted by the developer, there is no deficiency of service in regard to the demand of interest payable on the tax which was required to be deposited with the revenue.51. The NCDRC has upheld the collection of the charges towards electricity based on the terms of the ABA. There is no infirmity in the finding of the NCDRC, which is based on the provisions contained in clause 23(b) of the ABA. The charges recovered are not contrary to what was specified in the contract between the parties.53. We are unable to accede to the above submission. The ABA contained a break-up of the total price of the apartment. Parking charges for exclusive use of earmarked parking spaces were separately included in the break-up. The parking charges were revealed to the flat buyers in the brochure. The charges recovered are in terms of the agreement.54. The decision of this Court in Nahalchand Laloochand Private Limited v. Panchali Cooperative Housing Society Limited (2010) 9 SCC 536 turned on the provisions of the Maharashtra Ownership Flats Act 1971, as explained in the subsequent decision of this Court in DLF Limited v. Manmohan Lowe (2014) 12 SCC 231 . The demand of parking charges is in terms of the ABA and hence it is not possible to accede to the submission that there was a deficiency of service under this head.55. For the above reasons we have come to the conclusion that the dismissal of the complaint by the NCDRC was erroneous. The flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities. The reasoning of the NCDRC on these facets suffers from a clear perversity and patent errors of law which have been noticed in the earlier part of this judgment.