2019 Supreme(SC) 861

SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, HEMANT GUPTA, JJ.
Suman Jindal & Anr. – Appellants
Versus
M/s. Adarsh Developers – Respondent
Civil Appeal No 4284 of 2019, (@ Special Leave Petition (c) No. 16227 of 2013)
Decided On : 25-04-2019

IMPORTANT POINT
Developer is statutorily obliged to execute an agreement to sell before receiving any advance money.

Headnote:

(a) Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972 - Section 4 - Booking amount being 25% of consideration reduced to 15% - Appellants paying more than that - Still developer cancelling allotment on ground that booking amount (25%) was not paid - Held, misconceived. (Para 14)

       (b) Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972 - Section 4 - Appellants all along been insisting on execution of agreement to sell to facilitate disbursement of loan amount sanctioned by Bank - Developer obliged to enter into a written agreement for sale while receiving advance payment,- - Held appellants’ insistence for execution of agreement to sell held consistent with statutory obligation of developer. (Para 15)

       (c) Property law - Developer erroneously cancelling allotment of appellants - On dismissal of appellants’ appeal by NCDRC developer executing agreement to sell with third party - Held, the subsequent agreement must necessarily be subordinate to the rights of the appellant. (Para 15)

       Facts of the case:

       The respondent had launched a construction project called “Adarsh Palm Retreat” situated at Bangalore. The appellants booked an apartment which was split into two, bearing no. X 903 (a) and (b).

       The dispute in the present case arises out of two letters of allotment issued by the respondent to the appellants in respect of flat X 903 (a) and (b). The agreed sale consideration was Rs 40,95,801. The letter of allotment stipulated that the allotment would be confirmed on the payment of 25% of the value of the flat as the booking amount. The appellants initially paid an amount of Rs 1 lakh to the developer on or about 12 February 2005 which was followed by a second payment of Rs 3 lakhs on 24 March 2005. On 21 February 2008 a personal meeting took place between the appellants and the representatives of the developer wherein the booking amount which was initially 25% of the agreed sale consideration was reduced to 15%. On 28 February 2008, the appellants paid an amount of Rs 2,50,000 to the developer towards flat X 903 making up a total payment of Rs 6,50,000 which was marginally in excess of an amount representing 15% of the agreed sale consideration. Following this payment, the developer by an email dated 12 March 2008 stated that the agreement for flat X 903 would be ready by the first week of March. On 20 March 2008, the developer demanded the balance of the sale consideration failing which, it was stated, that the delay will attract penal interest.

       On 2 April 2008 the appellants confirmed receipt of the email and sought the tentative dates by which the agreement and other documents required for the loan disbursal would be ready. In the meantime, the Assistant Manager- Marketing of the developer stated in an email that they were in the process of executing the agreement and required the appellants to fill up a data sheet. This was done by the appellants.

       On 27 May 2008 the developer refused to execute the agreement on the ground that payments were delayed. The appellants addressed a communication to the Managing Director of the developer stating that the loan had already been sanctioned and the bank was willing to release the payment upon the execution of necessary documentation. Thereafter, by communications dated 4 June 2008, 12 July 2008, 27 July 2008, 1 September 2008 and 3 October 2008 the appellants called upon the developer to execute the agreement to sell. The respondent, however, cancelled the allotment on 30 November 2008 on the ground that the appellants had failed to pay 25% of the total cost of the flat required as the booking amount. The amount of Rs 2,50,000 which had been paid by the appellants on 28 February 2008 was adjusted to the cost of flat F 703.

       Protesting against the cancellation, the appellants filed a consumer complaint before the Karnataka State Consumer Disputes Redressal Commission “SCDRC”.

       The SCDRC dismissed the complaint holding that : (i) the appellants are not ‘consumers’ within the meaning of Consumer Protection Act 1986; (ii) the appellants had not paid the booking amount; and (iii) it was open to the appellants to yet pay the entire sale consideration and to seek an allotment from the builder failing which a refund could be sought.

       In appeal, this order has been substantially affirmed by the NCDRC. The view taken by the NCDRC is that the appellants failed to make payment for the flat and hence, there was no deficiency of service.

       Finding of the Court:

       Decisions of the Fora below are misconceived.

       Result: Appeal allowed.