2007 (5) TMI 565 - SC - Indian Laws

Supreme Court sets aside interest award for delayed possession of houses, directs completion of sale deeds

Bangalore Development Authority Versus Syndicate Bank

The Supreme Court allowed the appeal, setting aside the Commission's order awarding interest for delayed possession of houses. It directed the Bangalore ... Whether the facts and circumstances warrant a finding of negligence and deficiency in service on the part of BDA necessitating award of compensation? Held that:- Both parties - BDA as also the Respondent proceeded on the basis that time was not the essence of the contract. The houses were delivered in 1997 at a price agreed in 1986. By 1997, the value had gone up many times (more than 10 times according to BDA). The Respondent had the benefit of such rise in value. The respondent also failed to prove any negligence on the part of BDA. In this factual background, we find it difficult to hold that there was 'deficiency in service' on the part of BDA entitling the respondent for any compensation by way of interest or otherwise. Consequently, the respondent is not entitled to any compensation. Where a development authority undertakes to construct buildings or allot houses or building sites either as amenity or as benefit, it amounts to rendering of a service and will be covered by the expression 'service made available to potential users' referred to in section 2(o) of the Act. But this Court did not examine or deal with the question whether a contract for sale of a house premises, (that is site with a constructed house), as contrasted from a contract of construction amounted to 'providing a service of any description to a potential user including housing construction'. Be that as it may. Though there appears to be some logic in the contention of BDA, we do not propose to decide the issue, as we are allowing this appeal on other grounds, and as this contention was not specifically pressed before the Commission. We leave this question open for decision in an appropriate case. Allow this appeal and set aside the order dated 11.4.2002 of the National Consumer Disputes Redressal Commission. As the main prayer for completion and delivery of the houses was complied with during the pendency of the complaint, and as we have held that respondent is not entitled to interest or compensation, the complaint is disposed of with a direction to BDA to complete the process of execution and registration of sale deed/s in respect of the houses without claiming any extra cost, within three months from today. The cost of stamp duty and registration in respect of such sale deeds will be borne by the respondent. Issues Involved:1. Delay in delivery of houses.2. Entitlement to interest for delayed possession.3. Entitlement to compensation for mental agony and harassment.4. Maintainability of the complaint under the Consumer Protection Act, 1986.Analysis of Judgment:Delay in Delivery of Houses:The Bangalore Development Authority (BDA) introduced a 'Self Financing Housing Scheme' in 1982 for constructing flats/houses categorized as Higher Income Group (HIG), Middle Income Group (MIG), and Low Income Group (LIG). The Syndicate Bank applied for 250 units, including 15 HIG houses. BDA initially set the tentative price of an HIG house at Rs. 2.85 lakhs, later revised to Rs. 4.75 lakhs per unit. BDA informed the respondent that the units would be ready by December 1986. However, due to disputes with the contractor, the delivery of 11 HIG houses was delayed. BDA delivered the houses only in January/March 1997 during the pendency of the complaint before the National Consumer Disputes Redressal Commission.Entitlement to Interest for Delayed Possession:The respondent sought interest on the sum paid for the 11 HIG houses from January 1, 1986, to the date of delivery. The Commission awarded interest at 18% per annum from two years after the deposit of the last installment. However, the Supreme Court found this direction vague and unsustainable. The payment for the HIG houses was made on May 15, 1989, and the houses were delivered in 1997 at the agreed price. The Court held that the respondent, who benefited from the appreciation in the value of the houses, was not entitled to interest on the price paid.Entitlement to Compensation for Mental Agony and Harassment:The respondent also sought compensation for rent paid due to the non-delivery of houses and for mental agony. The Court noted that the respondent did not provide evidence of the rent paid or prevailing rent rates. Moreover, the Court found no negligence or deficiency in service on BDA's part. The delay was due to the contractor's dispute, and BDA took steps to resolve it. The Court emphasized that time was not made the essence of the contract by the respondent, and the houses were delivered at the agreed price under a 'No-Profit No-Loss' scheme. Therefore, the respondent was not entitled to any compensation.Maintainability of the Complaint under the Consumer Protection Act, 1986:BDA contended that it was not a service provider and the respondent was not a 'consumer' under the Act. However, this contention was not pressed before the Commission nor raised as a specific ground in the special leave petition. The Supreme Court referred to the decision in Lucknow Development Authority vs. M. K. Gupta, which held that development authorities providing housing services fall under the Consumer Protection Act. However, the Court did not decide on this issue as it allowed the appeal on other grounds.Conclusion:The Supreme Court allowed the appeal, setting aside the Commission's order awarding interest. It directed BDA to complete the execution and registration of sale deeds for the houses without claiming extra costs within three months, with the respondent bearing the stamp duty and registration costs. Each party was to bear its respective costs.