Chandigarh Housing Board vs M/S. Parasvanath Developers Pvt. … on 17 December, 2019


Supreme Court of India

Chandigarh Housing Board vs M/S. Parasvanath Developers Pvt. … on 17 December, 2019

Author: Mohan M. Shantanagoudar

Bench: Mohan M. Shantanagoudar, R. Subhash Reddy

                                                                    REPORTABLE


                                  IN THE SUPREME COURT OF INDIA
                                   CIVIL APPELLATE JURISDICTION

                                  CIVIL APPEAL NO. 10748 OF 2016


           Chandigarh Housing Board                                ...Appellant

                                                   Versus

           M/s. Parasvanath Developers Pvt. Ltd. & Anr              …Respondents




                                         J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

1. Delay condoned in filing appeal.

2 This appeal arises out of the final order dated 11.05.2016

passed by the National Consumer Disputes Redressal

Commission at New Delhi ( hereinafter ‘National Commission’)

in Consumer Complaint (C.C.) No. 19 of 2011, vide which the

Respondent No.1 and Appellant herein were directed to pay

Respondent No. 2 herein a principal sum of Rs. 1,03,31,250/-
Signature Not Verified

Digitally signed by
GULSHAN KUMAR

with interest @ 10% p.a., Rs.1,00,000 for mental harassment
ARORA
Date: 2019.12.17
16:36:40 IST
Reason:

1
and agony, and Rs.1,00,000 towards litigation costs in the ratio

of 70:30.

3. The factual background to this appeal is as follows:

3.1 The Appellant herein, Chandigarh Housing Board

(hereinafter ‘CHB’) invited bids to implement an integrated

project with residential, commercial, and other related

infrastructure facilities at the Rajiv Gandhi Chandigarh

Technological Park in Chandigarh. The bid sent by Respondent

No. 1 herein, M/s. Parasvanath Developers Ltd. ( hereinafter

‘Developer’) was accepted by CHB. Consequently, CHB and the

Developer entered into a Development Agreement dated

06.10.2006 for the grant of development rights in respect of

land measuring 123 acres. The said land was allotted to the

Developer by CHB for constructing residential units, who then

advertised its project for the sale of flats and pent houses as

“Parsvanath Pride Asia”.

3.2 Respondent No. 2 herein ( hereinafter ‘the Complainant’)

applied for the allotment of a five-bedroom apartment in this

project and paid a sum of Rs.1,03,31,250/- towards the total

tentative price of Rs. 3,93,25,000/-. Later, a tripartite flat buyer

agreement (hereinafter ‘Tripartite Agreement’) was executed

2
between the Developer, CHB, and the Complainant on

23.04.2008. Clause 9(a) of this agreement stated that the

construction of the flat was likely to be completed within a

period of 36 months from the signing of the Development

Agreement between CHB and the Developer, i.e., 06.10.2006.

3.3 Having received no intimation from the Developer about

the status of the project, between September-October 2009,

the Complainant inquired and found that construction had not

been commenced at the project site. Consequently, he sought

a refund of the deposit amount of Rs.1,03,31,250 with interest

at 20% p.a. When the refund was not made, the Complainant

approached the National Commission on 24.02.2011. It is

crucial to note here that similar complaints were filed by other

flat buyers before the State Commission and the National

Commission.

3.4 Before the National Commission, it was the case of the

Developer that the construction could not be carried out in

time, as CHB had failed to hand over the possession of

unencumbered land to it for raising the construction. On the

contrary, CHB argued that disputes only existed for land

earmarked for commercial activities, and there was no dispute

3
with respect to the 123 acres of land handed over to the

Developer for the construction of residential units. Therefore, it

was contended by CHB that the Developer was liable to satisfy

the claim of the flat buyer and the complaint was bad as

against CHB for misjoinder of party. Notably, the dispute

between the Developer and the CHB with respect to the

Development Agreement was referred to arbitration.

3.5 Pending the arbitration proceedings, the National

Commission passed an order in a similar matter on 05.03.2013,

noting that the flat buyers could not be deprived of their

legitimate claims due to an inter se dispute between CHB and

the Developer. Observing that the Developer had failed to

construct the residential units and hand over possession in

time, the National Commission passed an interim order

directing the Developer to pay compensation to the flat buyer

in terms of Clause 9(c) of the Tripartite Agreement at Rs.

107.60 per sq metre, subject to the final outcome of the

arbitration proceedings. Further, in terms of Clause 9(d) of the

Tripartite Agreement, the Developer and CHB were directed to

pay interest at the uniform rate of 9% p.a. on the amount to be

refunded to the flat buyers in the ratio of 70:30.

4
3.6 Finally, on 09.01.2015, the learned arbitrator passed an

award in the arbitration proceedings between CHB and the

Developer. The award specifically noted that since the flat

buyers were not party to the arbitration, the award would only

bind CHB and the Developer, and the entitlement of the

residential flat buyers would have to be decided based on the

facts of each case in independent proceedings. However, with

respect to the liability to refund the advances collected from

the residential unit buyers, the learned arbitrator found that the

non-completion of the project was a result of breaches

committed by both, the Developer and CHB. Therefore, he

directed that any amount payable on account of refund of

price, interest, or compensation (if and when finally determined

by the National Commission or the Supreme Court) would be

borne by the Developer and CHB in the ratio of 70:30.

3.7 Meanwhile, an order was passed by a 3-judge Bench of

this Court on 21.04.2015 in an SLP filed against the order of the

National Commission dated 05.03.2013 and other connected

matters. Dismissing the SLP, the Court took note of the

arbitration award dated 09.01.2015 and observed that Clause

9(c) of the Tripartite Agreement, which stipulates the payment

5
of compensation, would only be applicable as against the

Developer if it is not in a position to offer a flat to the buyer

after the expiry of 36 months as stated in Clause 9(a) of the

Tripartite Agreement.

3.8 Finally, vide the impugned order dated 11.05.2016, the

National Commission disposed of the consumer complaint filed

by Respondent No. 2 herein. Taking into account the

observations in the final arbitral award attributing responsibility

of breach of the Development Agreement to the Developer and

CHB, as well as the fact that the Developer had received the

deposit sum from the Complainant long ago and had benefited

from it, the National Commission directed CHB and the

Developer to pay the principal sum of Rs. 1,03,31,250/- to the

Complainant at 10% p.a. from the date of deposit till

realization. Further, Rs. 1 lakh was awarded for mental

harassment and another Rs. 1 lakh was awarded towards

litigation charges. Both of these were directed to be borne by

the Developer and CHB in the ratio of 70:30. The instant appeal

has been preferred by CHB against this order, contesting the

liability fixed upon it with respect to the payment for litigation

6
costs and mental harassment, as well as the enhancement in

interest rate.

4. Heard learned Counsel for the parties.

5. Learned Counsel for the Appellant (CHB) submitted that

the impugned order is liable to be set aside as it wrongly

saddles CHB with the liability to pay the Complainant 30% of

the amount due towards mental harassment and litigation

costs. It is argued that such amount is in the nature of

compensation and must therefore be borne by the Developer

as Clause 9(c) of the Tripartite Agreement provides that the

Developer shall be liable to pay compensation to the flat buyer

at Rs. 107.60 per sq metres in case of non-delivery of

possession of the residential units in time. Further, alluding to

a revocation deed dated 04.02.2015 entered into by CHB and

the Developer after the arbitral award, learned Counsel argued

that all third party liabilities have now been taken over by the

Developer and can thus not be affixed on CHB. As far as the

liability to return the principal amount is concerned, it was

submitted that 30% of the principal sum has already been paid

by CHB as per Clause 9(d) of the Tripartite Agreement.

However, as regards the interest rate payable on the same, it

7
was contended that the National Commission erred in

enhancing the rate from 9% p.a. to 10% p.a. without giving any

reasons for the same.

6. Per contra, learned Senior Counsel for Respondent No. 1

emphasized that the finding of the arbitrator that both the

Developer and CHB are guilty of breach, and are therefore

liable to make refund of price, interest, or compensation in the

ratio of 70:30, should be given utmost importance. This is

because the order of the National Commission dated

05.03.2013 passed in a similar matter, made the direction as to

the payment of compensation under Clause 9(c) subject to the

outcome of the arbitration proceedings. Similarly, the interim

order of this Court dated 21.04.2015 affirms the findings in the

arbitration award as to the interpretation of Clause 9(c) of the

Tripartite Agreement. Thus, it was argued that in all these

orders, the inter se apportionment of liability has been

relegated in terms of the arbitration award, and therefore, the

ratio of 70:30 stipulated therein should be given effect. Further,

learned Senior Counsel argued that Clause 9(c) was not made

applicable to the instant case, as this clause deals with

compensation payable upon non-performance of obligations,

8
which is different from the nature of compensation awarded in

the impugned order.

7. In addition to this, learned Senior Counsel representing the

Complainant (Respondent No. 2) argued that the amount

awarded to the Complainant vide the impugned order is only in

the nature of a general, lump sum amount and is not the

compensation contemplated under Clause 9(c) of the Tripartite

Agreement. In any case, he submitted that an inter se dispute

between CHB and the Developer as to the apportionment of

liability should not come in the way of the Complainant’s right

to receive compensation.

8. Upon perusing the record and hearing the arguments

advanced by the parties, two issues arise for our consideration

in this appeal:

(a) whether the National Commission was right in

directing the payment of amount towards mental

harassment and litigation costs in the ratio of 70:30, or

whether such amount falls within the purview of

compensation under Clause 9(c) of the Tripartite

Agreement so as to be paid solely by the Developer.

9

(b) whether the interest rate awarded on the principal

sum was rightly increased from 9% p.a. to 10% p.a.

9. As regards the first issue, it would be useful to refer to the

relevant portions of the Tripartite Agreement executed

between the Complainant, CHB, and the Developer on

23.04.2008:

“9. (a) Construction of the residential units is likely
to be completed within a period of thirty six (36
months) of the signing of the Development
Agreement on 06.10.2006 between the Developer
and CHB and/or as may be extended terms of the
Development Agreement shall be subject to force
majeure and circumstances beyond the control of the
developer, and any restrain restrictions from any
Courts/Authorities. The delay in grant of development
clearances beyond 12 months of the signing of the
Development Agreement shall not be counted
towards the said portion of 36 months.

…(c) In case possession of the built up area is not
offered to the buyer within a period of 36 months or
extended period as stipulated in sub-clause (a)
above, the buyer shall be entitled to receive from the
developer compensation @ Rs.107.60 per Sq. Mtrs.
(Rs. 10/- per Sq. Ft.) of the super area of the unit per
month and to no other compensation of any kind. In
case the buyer fails to clear his account and take
possession of the unit within 30 days of offer, the
buyer shall be liable to pay to the developer holding
charges @ Rs. 107.60 per Sq Mtrs. (Rs. 10/- per Sq.
Ft.) of the super area of the unit per month in
addition to the liability to pay interest to the sellers
and other consequences of default in payment.

10

(d) If as a result of any Rules or directions of the
Government or if any competent authority delays,
withholds, denies the grant of necessary approvals
for the Project, or if due to any force majeure
conditions, the developer is unable to deliver the unit
to the buyer, the developer and CHB shall be liable to
refund to the buyer the amounts received from the
buyer with interest at the SBI term deposit rate as
applicable on the date of refund.”

From the above, it is evident that the Developer and CHB

agreed to complete the construction of the residential units

within a period of 36 months from the date of signing of the

Development Agreement on 06.10.2006. In the event that such

construction was not done, Clause 9(c) would come into

operation and the Developer would become liable to

compensate the buyer at Rs. 107.60 per sq metre of the super

area of the unit, per month.

10. A close reading of Clause 9(c) of the Tripartite Agreement

indicates two salient features– first, the liability to pay

compensation under this Clause can only be affixed on the

Developer if it fails to fulfill the condition under Clause 9(a) and

perform its obligations under the Development Agreement, i.e.

if it does not hand over the possession of the flat to the buyer

within a period of 36 months from the date of signing of the

Development Agreement. The second feature of Clause 9(c) is

11
that it envisages a fixed compensation of Rs. 107.60 per sq

metre per month to be paid to the flat buyer.

10.1 When the facts of the instant case are examined in light

of these observations, it becomes clear that Clause 9(c) is not

attracted in the present case at all. First, there has been no

fulfilment of the condition under Clause 9(a) for Clause 9(c) to

come into operation. This is because the Developer never even

began construction at the project site due to the dispute with

CHB about the encumbrances on the allotted land. Thus, the

question of finishing such construction within the period

mentioned under Clause 9(a) does not even arise.

Consequently, Clause 9(c), which is concerned with the non-

fulfilment of this obligation, is also not attracted. It is notable

that the arbitrator has also arrived at a finding to this effect in

his award dated 09.01.2015 as follows:

“296. Consequently, if any amount is payable on
account of refund of price, interest, or compensation
(if and when finally determined), respondent is liable
to bear and pay 30% thereof, the balance of 70%
being payable by the claimant (PDL). Article 14.2.5
no doubt makes the developer solely and exclusively
responsible to residential unit buyers, but that is only
in regard to non-performance of its obligations. The
said provision does not make claimant responsible
for the breaches committed by the respondent, nor
absolve the respondent from liability for the

12
consequences of its defaults/breaches, which
contributed to the non-performance of the
obligations by the developer towards the residential
unit buyers.”
(emphasis supplied)

Thus, given that the breach of the Development

Agreement is attributable to both, CHB and the Developer, the

failure to hand over possession of the flat to the buyer cannot

be said to be on account of the non-performance of the

obligation of the Developer alone. Consequently, Clause 9(c) is

not applicable to the present case. This reading of Clause 9(c)

has also been affirmed by this Court in its order dated

21.04.2015, and for the reasons mentioned supra, we do not

deem it fit to interfere with the same.

10.2 Secondly, we find that the amount awarded by the

National Commission in the impugned order, i.e. Rs. 1 lakh

each towards mental harassment and litigation costs, cannot

be read as compensation contemplated under Clause 9(c) of

the Tripartite Agreement. Evidently, the litigation costs cannot

be construed as compensation. Even with respect to the award

of Rs. 1 lakh for mental harassment, we find that such amount

is in the nature of a general, lump sum compensation, which

falls short of qualifying as compensation under Clause 9(c). This

13
is especially because there is no mention of the stipulated fixed

rate of Rs.107.60 per sq metre of the super area of the unit, per

month in the impugned order. Thus, the liability of paying a

total of Rs. 2 lakhs under those heads cannot be foisted on the

Developer alone in terms of Clause 9(c).

10.3 Hence, the contention of the learned Counsel for the

Appellant that the impugned order is liable to be set aside on

the ground that the amount towards mental harassment and

litigation costs is in the nature of compensation that is solely

payable by the Developer in terms of Clause 9(c) of the

Tripartite Agreement, cannot be accepted.

11. We also find that the Appellant’s reliance on the

revocation deed dated 04.02.2015 is misplaced, as para 4 of

this deed clearly states that “ the parties have accepted the

award” and chosen to act in accordance with the same. Thus, it

cannot be argued that this revocation deed displaces the

arbitration award dated 09.01.2015 and the direction therein

for the Developer and CHB to pay compensation (if and when

determined) in the ratio of 70:30. In any case, this revocation

deed may, at best, arguably settle the rights and obligations or

disputes between the parties in respect of the Development

14
Agreement dated 06.10.2006. In our considered opinion, such

settlement of rights and obligations cannot be extended in a

manner that enables the Developer and CHB to wriggle out of

their liability under the Tripartite Agreement with the

Complainant. Thus, we find that the revocation deed dated

04.02.2015 cannot be invoked by the Appellant to escape its

liability flowing from the Tripartite Agreement and the

arbitration award dated 09.01.2015.

12. We also note that the finding in the arbitration award

dated 09.01.2015 as to the apportionment of liability between

the Developer and CHB to pay the principal sum and general

compensation, must be given effect. To this extent, we find

merit in the argument raised by the learned Senior Counsel for

Respondent No. 1 that the prior National Commission order

dated 05.03.2013 and the subsequent order of this Court dated

21.04.2015 both relegate the inter se apportionment of liability

between the Developer and CHB to the arbitration award. Thus,

the split of 70:30 under the arbitration award must be given

effect, having attained finality.

13. In any case, we find that such division is well-founded as

the sale proceeds from the flat buyers were apportioned in the

15
same ratio of 70:30 between the Developer and CHB. This is

supported by the Escrow Agreement dated 01.06.2007

executed by CHB and the Developer in pursuance of the

Development Agreement dated 06.10.2006. Clause 4(b) of this

Escrow Agreement provides that 30% of the sale proceeds in

respect of the residential units would first be transferred to

CHB, and the remaining amount shall then be transferred to the

Developer. In view of this, we find that the amount directed to

be paid by the National Commission in the impugned order

must be paid by the Developer and CHB in the ratio of 70:30.

14. With respect to the second issue concerning the

enhancement of interest rate, Clause 9(d) of the Tripartite

Agreement is relevant. As mentioned supra, this Clause

requires the Developer and CHB to refund the amounts

received from the buyer with interest if the Developer is unable

to deliver the unit to the buyer due to non-approvals from the

competent authorities. Here, under Clause 9(d), the parties are

liable to refund the principal sum in the ratio of 70:30 as they

had received the sale proceeds in the same ratio. It has been

brought to our notice that CHB has already paid 30% of the

principal sum at 9% interest p.a. in accordance with the

16
directions of the National Commission in order dated

05.03.2013 passed in a similar matter. Notably, the interest

rate was revised to 10% p.a. in the impugned order and has

been challenged by the Appellant. We do not find any reason to

interfere with the same, as the increase was made by the

National Commission in exercise of its discretionary power. It is

possible that the National Commission chose to enhance the

interest rate in view of the fact that it had already imposed

lesser compensation than the significantly higher compensation

stipulated under Clause 9(c). Thus, the contention of the

Appellant on this front is liable to be dismissed.

15. In view of the foregoing observations, we find that the

National Commission was right in directing the Developer and

CHB to pay the principal sum of Rs. 1,03,31,250/- at 10% p.a. to

the Complainant herein. Further, it is found that the direction to

pay Rs. 2 lakhs in toto towards mental harassment and

litigation costs in the ratio of 70:30 between the Developer and

CHB, is also correct.

Accordingly, the instant appeal deserves to be dismissed.

We note that the Appellant herein (CHB) has already paid its

share of the principal sum along with interest at 9% p.a.

17
Further, in pursuance of the order of this Court dated

04.12.2019, the Developer has also deposited the amount

awarded by the National Commission with interest at 10% p.a..

In view of our findings, we now direct CHB to pay the remaining

amount, i.e. 30% of the total Rs. 2 lakhs awarded by the

National Commission to the Complainant towards mental

harassment and litigation charges, as well as an additional

interest of 1% p.a. on its share of the principal sum. This

amount shall be paid within a period of eight weeks from the

date of this order. The instant appeal stands dismissed

accordingly.

…..……………………………………..J.
(MOHAN M. SHANTANAGOUDAR)

.…………………………………………J.

(R. SUBHASH REDDY)

New Delhi;

December 17, 2019

18



Source link