2020 Supreme(SC) 498

SUPREME COURT OF INDIA
Dhananjaya Y. Chandrachud, K.M. Joseph, JJ.
Wg. Cdr. Arifur Rahman Khan and Aleya Sultana and Ors. – Appellants
Versus
DLF Southern Homes Pvt Ltd (now Known as BEGUR OMR Homes Pvt. Ltd.) and Ors – Respondent
Civil Appeal No. 6239 of 2019 and Civil Appeal No. 6303 of 2019
Decided on : 24-08-2020

IMPORTANT POINTS
(1) A developer who has breached a clear representation which has been made to buyers of amenities which will be provided to them should be held accountable to process of law. Difficulties in determining measure of compensation cannot however dilute liability to pay compensation.
(2) Jurisdiction of consumer forum to award reasonable compensation cannot be foreclosed by a term of agreement.
(3) Where possession has been given, one of circumstances which must be factored in is that purchaser has been compensated by increase in value of property.

Headnote:

(A) Consumer Protection Act, 1986 – Section 12(1)(c) – Real estate – Apartment Buyers Agreement – Delay in handing over possession of residential flats and shortcomings in construction of flats – Existence and extent of delay constitute an admitted factual position – Failure of developer was neither relatable to a just exception or prevalence of force majeure conditions – Payment of compensation to flat buyers represents admission by developer of its breach, thereby triggering a liability to pay compensation – Apartment Buyers Agreement is clearly one-sided – Agreement stipulates thirty-six months as date for handing over of possession – Terms of agreement have been drafted by developer – They do not maintain a level platform as between developer and purchaser – Stringency of terms which bind purchaser are not mirrored by obligations for meeting times lines by developer – Agreement does not reflect an even bargain – Besides servicing their loans, purchasers have to finance expenses of living elsewhere – Where there is a delay of nature that has taken place in present case ranging between periods of two years and four years, jurisdiction of consumer forum to award reasonable compensation cannot be foreclosed by a term of agreement. (Paras 21, 22 and 23)

(B) Consumer Protection Act, 1986 – Sections 2(1)(g), 2(1)(o) and 14(1)(e) – Real estate – Apartment Buyers Agreement – Delay in handing over possession of residential flats and shortcomings in construction of flats – Complaint dismissed by NCDRC – Failure of developer to comply with contractual obligation to provide flat to a flat purchaser within a contractually stipulated period amounts to a deficiency – There is a fault, shortcoming or inadequacy in nature and manner of performance which has been undertaken to be performed in pursuance of contract in relation to service – Flat purchasers suffer agony and harassment, as a result of default of developer – Flat purchasers make legitimate assessments in regard to future course of their lives based on flat which has been purchased being available for use and occupation – These legitimate expectations are belied when developer as in present case is guilty of a delay of years in fulfilment of a contractual obligation – To uphold contention of developer that flat buyer is constrained by terms of agreed rate irrespective of nature or extent of delay would result in a miscarriage of justice – Courts ordinarily would hold parties down to a contractual bargain – Equally court cannot be oblivious to one-sided nature of ABAs which are drafted by and to protect interest of developer – Parliament consciously designed remedies in CP Act, 1986 to protect consumers – Where, as in present case, there has been a gross delay in handing over of possession beyond contractually stipulated debt, jurisdiction of consumer forum to award just and reasonable compensation as an incident of its power to direct removal of a deficiency in service is not constrained by terms of a rate which is prescribed in an unfair bargain – Where possession has been given, one of circumstances which must be factored in is that purchaser has been compensated by increase in value of property. (Paras 24 and 26)

(C) Consumer Protection Act, 1986 – Sections 2(1)(g), 2(1)(o) and 14(1)(e) – Real estate – Apartment Buyers Agreement – Delay in handing over possession of residential flats and shortcomings in construction of flats – Complaint dismissed by NCDRC – There has been a gross delay on part of developer in completing construction ranging between two and four years – Despite successive extensions of time to deliver possession sought by developer, possession was not delivered on time – Nature and quantum of delay on part of developer are of such a nature that measure of compensation which is provided in clause 14 of ABA would not provide sufficient recompense to purchasers – Judicial notice ought to be taken of fact that a flat purchaser who is left in lurch as a result of failure of developer to provide possession within 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 purchase price to developer and being required to service debt towards loan instalments purchaser is unable to obtain timely possession of flat which is subject matter of ABA – 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 meantime or to forsake claims in order to perfect their title to flats for which they had paid valuable consideration – This is a case involving an experienced developer who knew nature of representation which was being held out to flat purchasers – Developers sell dreams to home buyers – Implicit in their representations is that facilities which will be developed by developer will provide convenience of living and a certain lifestyle based on existence of those amenities – Having sold flats, developer may find it economically unviable to provide amenities – Flat purchasers cannot be left in lurch – Developer must be held accountable to its representation – Representation held out by developer cannot be dismissed as chaff – Difficulties in determining measure of compensation cannot however dilute liability to pay – A developer who has breached a clear representation which has been made to buyers of amenities which will be provided to them should be held accountable to process of law – To allow developer to escape their obligation would put a premium on false assurances and representations made to flat purchasers – Dismissal of complaint by NCDRC was erroneous – Flat buyers are entitled to compensation for delayed handing over of possession and for failure of developer to fulfil representations made to flat buyers in regard to provision of amenities – 6% simple interest by way of compensation awarded. (Paras 32, 34, 43 and 55)

Facts of the case:

The National Consumer Disputes Redressal Commission1 dismissed a consumer complaint filed by 339 flat buyers, accepting the defence of DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. That there was no deficiency of service on their part in complying with their contractual obligations and, that despite a delay in handing over the possession of residential flats, the purchasers were not entitled to compensation in excess of what was stipulated in the Apartment Buyers Agreement. The only issue which then falls for determination is whether the flat buyers in these circumstances are constrained by the stipulation contained in clause 14 of ABA providing compensation for delay at the rate of Rs 5 per square feet per month.

Findings of Court:

The National Consumer Disputes Redressal Commission1 dismissed a consumer complaint filed by 339 flat buyers, accepting the defence of DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. That there was no deficiency of service on their part in complying with their contractual obligations and, that despite a delay in handing over the possession of the residential flats, the purchasers were not entitled to compensation in excess of what was stipulated in the Apartment Buyers Agreement.

Result : Appeals allowed