Nbcc (India) Limited vs Shri Ram Trivedi on 8 March, 2021


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Supreme Court of India

Nbcc (India) Limited vs Shri Ram Trivedi on 8 March, 2021

Author: Hon’Ble Dr. Chandrachud

Bench: Hon’Ble Dr. Chandrachud, M.R. Shah

                                                             1


                                                                                             Reportable


                                           IN THE SUPREME COURT OF INDIA
                                            CIVIL APPELLATE JURISDICTION

                                              Civil Appeal No 274 of 2020


     NBCC (India) Limited                                                         .... Appellant(s)


                                                          Versus


     Shri Ram Trivedi                                                             ....Respondent(s)




                                                     JUDGMENT

Dr Dhananjaya Y Chandrachud, J

1 Admit.

2 This appeal arises from a judgment of the National Consumer Disputes Redressal

Commission1 dated 20 September 2019.

3 In 2012, the appellant floated a group housing project at Sector 89, Gurgaon. An

advertisement was issued, inviting prospective flat buyers. The respondent

submitted an application on 14 March 2012 for the allotment of a dwelling unit in

the project described as “NBCC Heights”. The terms and conditions for

allotment were set out in a standard form. Instalments towards the purchase

Signature Not Verified
price were payable under a time-linked plan. An allotment letter was issued to
Digitally signed by

the respondent on 30 June 2012 for dwelling unit F-402 in the project. The terms
Sanjay Kumar
Date: 2021.03.12
17:54:02 IST
Reason:

of allotment envisaged that the appellant would “endeavour” to hand over

1 “NCDRC”
2

possession within two and a half years from the date of allotment. Clause 20

provides as follows:

“20. Subject to the terms of this Application and the
Agreement including but not limited to timely payment
of the Total Price, stamp duty and other charges due and
payable according to the payment plan applicable to the
Applicant or as per demand raised by NBCC and the
Applicant complying with all the terms and conditions of
the Application, NBCC shall endeavor to complete
the construction of the Dwelling Unit within 2 ½
(two years and six months) from the date of
allotment letter. NBCC on obtaining certificate of
occupation and / or use from the competent authorizes
shall offer the Dwelling Unit to the Applicant for his / her
occupation & use and subject to the applicant having
complied with all the terms and conditions of the
agreements.

In the event of the Applicant failure to clear all the
outstanding dues including interest, if any and / or
takeover / occupy the Dwelling Unit within 30 days
from the date of intimation in writing by NBCC,
then the same shall lie at the Applicant’s risk and
cost and the Applicant shall be liable to pay a
compensation to NBCC (for maintaining the
complex) @ Rs. 2/-per sq. ft. of the super area per
month for the entire period of such delay. This
compensation shall be in addition to the other dues /
claims of interest etc. as per terms of sale / allotment.

The applicant agrees that if however the completion of
the said Complex is delayed due to force majeure
(such as acts of god or the public enemy,
expropriation, compliance with any order or
request of government authorizes, act of war,
rebellions, sabotage, fire, floods illegal strikes, or
riots etc.) then NBCC shall be entitled to extension
of time for delivery of possession of the Dwelling
Unit. NBCC agrees to pay to the allottee and subject to
the applicant not being in default under any terms of this
Application/ agreement Compensation @ Rs. 2/- per sq ft
of the use super area of the Dwelling Unit per month for
the period of such delay beyond One year (plus valid
extend period due to force majeure reasons) from the
stipulated date of completion of the complex. Thus the
compensation, if any shall be payable only after four
years plus valid extension due to force majeure reasons
from date of alIotment. The adjustment of such
compensation shall be done only at the time of
execution of conveyance deed of the Dwelling Unit.”

(emphasis supplied)
3

4 In January 2017, the respondent instituted a consumer complaint before the

NCDRC2 since possession of the unit had not been handed over. The appellant

obtained an occupation certificate from the Town and Country Planning

Department of Haryana on 19 July 2017. Upon receiving the occupation

certificate, the appellant issued a notice to allottees on the same day, informing

them of the receipt of the occupation certificate and requesting them to clear all

their dues before taking possession. A letter of possession was issued to the

respondent on 9 February 2018. The respondent made part payment towards

the fifth and sixth instalments on 28 February 2018 and the balance payment on

6 March 2018. Possession was eventually handed over to the respondent on 26

July 2018 against an indemnity, as directed by the NCDRC in its order dated 6

June 2018. The NCDRC, in its impugned order dated 20 September 2018,

directed the appellant to pay compensation computed at 10% per annum on the

amount deposited by the respondent from June 2015 till the actual date of

possession. In addition to this, the respondent was awarded an amount of Rs

2,00,000 towards loss of rent and costs of Rs 25,000. Time for payment was

fixed at four weeks from the date of receipt of a copy of the order, failing which

interest was to be payable at 12%.

5 The submissions which have been urged on behalf of the appellant are that:

(i) The respondent had been allotted a residential unit under a time-linked

plan which envisaged the making of payments in accordance with a

prescribed schedule. While the first four instalments were paid on time,

there was a delay in paying the fifth instalment which was due on

September 30 2014, while the final instalment was payable on the

2 Consumer Case No 84 of 2017
4

issuance of the letter of possession;

(ii) Since the respondent had delayed in the payment of the fifth instalment,

there was no reason or justification to award interest;

(iii) The appellant committed that it would “endeavour” to complete the

project within two and a half years of the date of allotment and there was

no unconditional commitment for delivery by a specific date;

(iv) Clause 20 stipulated compensation at the rate of Rs 2 per sq ft of the

super area; and

(v) The appellant was entitled to the benefit of supervening force majeure

conditions.

6 The NCDRC rejected the submission that the appellant had only agreed to

“endeavour” to provide possession within two and a half years of the date of

allotment. It held that even if time is not the essence of the contract,

substantial reasons have to be furnished by the developer for not handing over

possession in terms of the date agreed in the letter of allotment. The NCDRC

computed the period of two and a half years from the month of June 2012 when

the letter of allotment was issued and, thus, concluded that possession ought to

have been delivered by December 2014. Giving the appellant a further grace

period of six months, it directed the payment of interest at 10% per annum from

July 2015 till the actual date on which possession was handed over. The

correctness of the decision falls for determination in the backdrop of the

submissions recorded earlier.

7 Clause 20 of the letter of allotment provides that the appellant shall

“endeavour” to complete the construction of the dwelling unit within two and a
5

half years from the date of the letter of allotment. The expression ‘endeavour’

meant that the appellant would make an earnest effort to hand over possession

by that date. Even if the expression does not mean an absolute commitment to

hand over possession on or before a specified date, this expression has to be

read in the context of the entirety of the clause. To construe the expression as

leaving the date for handing over possession indefinite and at the absolute

discretion of the developer would leave the purchaser at the mercy of the

builder. Clause 20 must be construed to require the builder to make all

reasonable efforts to comply with the duty to hand over possession by the

stipulated date. The burden would lie on the developer to explain the steps

taken to comply with the contractual stipulation. Clause 20 envisages that, save

and except for delay on account of force majeure, the appellant would pay

compensation at the rate of Rs 2 per sq ft of the super area of the dwelling unit

per month for the period of delay beyond one year from the stipulated

date. It stipulates that compensation would be payable after four years (plus a

valid extension due to force majeure) from the date of allotment. The above

condition would indicate that beyond a period of one year, from the expiry of two

and a half years, which was envisaged under Clause 20, the appellant agreed to

pay compensation to the flat buyer. The latter stipulation of four years is

incongruous, because previously, a period of one year beyond the stipulated

period of 2.5 years is fixed, beyond which compensation becomes payable. This

indicates that three and a half years was by all accounts the period for handing

over possession beyond which the purchaser was entitled to compensation.

8 The NCDRC held that the condition in the allotment of payment of compensation

at the rate of Rs 2 per sq ft is one-sided and constitutes an unfair trade practice.

In Pioneer Urban Land and Infrastructure Limited v. Govindan

Raghavan3, a two-judge bench of this Court considered a similar agreement

3 (2019) 5 SCC 725
6

where there was a delay on the part of the Builder. This Court upheld the

NCDRC’s award of compensation at the rate of 10 per cent per annum, instead

of the contractually stipulated rate by holding the following:

“6.8. A term of a contract will not be final and binding if it is
shown that the flat purchasers had no option but to sign on the
dotted line, on a contract framed by the builder. The contractual
terms of the agreement dated 8-5-2012 are ex facie one-sided,
unfair and unreasonable. The incorporation of such one-sided
clauses in an agreement constitutes an unfair trade practice as
per Section 2(1)(r) of the Consumer Protection Act, 1986 since it
adopts unfair methods or practices for the purpose of selling the
flats by the builder.”

A two judge bench of this Court in Wg. Cdr. Arifur Rahman Khan and

Aleya Sultana & Ors. v. DLF Southern Homes Pvt Ltd (now known as

Begur OMR Homes Pvt Ltd)4 followed the decision in Pioneer Urban in

interpreting an Apartment Buyers’ Agreement that was, inter alia, breached by

the Developer on the ground of a gross delay. This Court noted:

“22 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. 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

4 Civil Appeal No 6239 of 2019
7

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….

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 to protect 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.”
8

In adverting to the facts of this case, the NCDRC was justified in taking the view

that the condition in the allotment of payment of compensation at the rate of Rs

2 per sq ft is one-sided and constitutes an unfair trade practice. The letter of

allotment is in a standard form. The purchaser has no option but to sign on the

dotted line. On the other hand, under Clause 16, as noted by the NCDRC, if the

buyer were to delay in the payment of any instalment, a liability to pay simple

interest at the rate of 12% per annum is attracted. Clause 20, in other words, is

not even-handed. While, on the one hand, it contemplates only compensation at

the rate of Rs 2 per sq ft in the event that there is a delay on the part of the

appellant, the buyer is required to pay a substantially higher rate of interest

(12%) for any delayed payment on his part.

9 As the facts of the present case indicate, the period of two and a half years,

which was stipulated under Clause 20 of the letter of allotment, came to an end

at the end of December 2014. Allowing thereafter for an additional period of one

year, the extended period would come to an end by the end of December 2015.

The NCDRC granted interest at the rate of 10% with effect from July 2015. In our

view, while the NCDRC is justified in directing the payment of interest, the

direction should be modified in two respects, firstly, as regards the date from

which interest would become payable and, secondly, as regards the rate of

interest. As regards, the date on which interest would become payable, having

regard to the one year period which is stipulated, beyond two and a half years

from the original period under Clause 20, interest would become payable from 1

January 2016. Secondly, insofar as the rate of interest is concerned, the interest

should be fixed at 7% per annum instead and in place of 10% which has been

awarded by the NCDRC. Interest at the rate of 10% is excessive, in light of

prevailing market conditions.5

5 Central Bank of India v Ravindra, (2002) 1 SCC 367 para 39
9

10 The NCDRC has, in addition to the award of interest, granted compensation of Rs

2,00,000 for loss of rent. Once the NCDRC awarded interest for the delayed

handing over of possession, there would be no justification to award an

additional amount of Rs 2,00,000.

11 The submission of the appellant that there was a delay on the part of the

respondent in paying the fifth instalment does not merit acceptance. The fifth

instalment was payable in the month of September 2014, while the final

instalment, as learned counsel submitted, was payable at the time of the

issuance of the letter of possession. This was to take place in December 2014.

In the present case, it is evident that the appellant itself was not in a position to

hand over possession of the dwelling unit by the end of December 2014. Hence,

the requirement of paying the penultimate instalment in September 2014 must

be looked at from that perspective. Admittedly, as the NCDRC has noticed, the

appellant has paid an amount of over Rs one crore, out of the total sale

consideration of Rs 1,00,54,478.

12 Similarly, there is absolutely no substance in the force majeure defense. The

appellant has alleged that a dispute with the contractor over termination and a

boundary wall dispute with neighbouring landowners constituted a force

majeure condition under Clause 20 of the allotment letter. We find no merit in

this argument as the appellant, being an experienced developer, must be

conscious of routine delays caused by business exigencies. This would not

frustrate the contract or absolve the appellant of the obligations assumed under

the terms of the agreement. Similar delays were rejected as force majeure

grounds by a three-judge bench of this Court in DLF Home Developers Ltd v.

Capital Greens Flat Buyers Association6 where the Court noted:

6 Civil Appeal Nos 3864-3889 of 2020
10

“6. At the outset, we must deal with the force majeure defence.
The NCDRC has carefully evaluated the basis on which the
defence was set up and has come to the conclusion that there is
no cogent evidence in regard to the nature of the delay and the
reasons for the delay in the approval of the building plans. Quite
apart from this finding of fact, it is evident that a delay in the
approval of building plans is a normal incident of a construction
project. A developer in the position of the appellant would be
conscious of these delays and cannot set this up as a defence to
a claim for compensation where a delay has been occasioned
beyond the contractually agreed period for handing over
possession. As regards the stop work orders, there is a finding of
fact that these were occasioned by a succession of fatal
accidents which took place at the site and as a result of the
failure of the appellant to follow safety instructions. This is a
pure finding of fact. There is no error of law or fact. Hence, we
find no substance in the force majeure defence.”

13 We accordingly uphold the principal findings of the NCDRC in regard to the

entitlement of the respondent to receive compensation for the delayed handing

over of possession. The force majeure defense raised by the appellant was

justifiably rejected by the NCDRC. The respondent was entitled to be

compensated for the delay of the appellant for which an appropriate direction for

interest is necessary. However, as indicated above, the order of the NCDRC in

regard to the rate of interest and the date from which it becomes payable has to

be modified. For this purpose, we allow the appeal partially in the following

terms:

(i) Instead and in substitution of the direction issued by the NCDRC, the

appellant shall pay simple interest to the respondent at the rate of 7% per

annum from 1 January 2016 until 26 July 2018 which is the date on which

possession was handed over to the respondent;

(ii) The direction in regard to the payment of an amount of Rs 2,00,000

towards loss of rent shall stand set aside having regard to the
11

compensation which has been granted to the respondent in terms of (i)

above; and

(iii) The appellant shall cooperate in completing all necessary formalities for

completing the documentation (including formalities for registration) in

respect of the dwelling unit which has been sold to the respondent, if not

already completed, within a period of one month from the date of receipt

of a certified copy of this order. The payment of interest in terms of (i)

above shall also be effected within one month.

14 The appeal is disposed of in the above terms. No order as to costs.

15 Pending application, if any, stands disposed of.

…………………………….……………………..J.

[Dr Dhananjaya Y Chandrachud]

..…………….………..……………….………..J.

[M R Shah]

New Delhi;

March 08, 2021

-S-



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