2021 (9) TMI 1154 - SC - Indian Laws

Court rules possession starts from Fire NOC, not building plan sanction

The court determined that the 42-month period for possession commencement should start from the date of Fire NOC issuance, not building plan sanction. The ... Computation of contractual possession period from fulfilment of pre-conditions - mandatory pre-condition of Fire NOC before commencement of construction - unfair trade practice and one-sided contractual terms in apartment buyer agreements - consumer fora power to grant relief for deficiency of service including setting aside unfair contractual terms - concurrent remedies under RERA and Consumer Protection Act - election of remedies - entitlement to refund and award of interest as compensation for delay in possessionComputation of contractual possession period from fulfilment of pre-conditions - mandatory pre-condition of Fire NOC before commencement of construction - the date from which the 42 months Commitment Period for offering possession is to be computed - HELD THAT: - Clause 13.3 computed the Commitment Period from the date of approval of the Building Plans and/or fulfilment of the pre-conditions imposed thereunder. The Haryana Fire Safety Act, 2009 (Section 15), the sanctioned Building Plans (Clause 3) and the Environmental Clearance made fire-approval a mandatory pre-condition prior to commencement of construction. Therefore the 42 months period must be computed from the date on which the Fire NOC was issued. Applying the facts, Fire NOC was granted on 27.11.2014; the Commitment Period plus Grace Period (42 + 6 months) thus culminated on 27.11.2018 and this date is the relevant due date for offer of possession. [Paras 18]The 42 months Commitment Period is to be computed from the date of issuance of the Fire NOC (27.11.2014), making 27.11.2018 the relevant due date for offer of possessionUnfair trade practice and one-sided contractual terms in apartment buyer agreements - consumer fora power to grant relief for deficiency of service including setting aside unfair contractual terms - whether the terms of the Apartment Buyer's Agreement are one-sided and enforceable against the buyers - HELD THAT: - A close analysis of the Agreement shows multiple provisions heavily weighted in favour of the Developer (including high delayed-payment interest on buyers, minimal delay compensation payable by Developer, restricted termination rights for buyers, forfeiture provisions and waiver clauses on acceptance of possession). Such terms are oppressive and constitute an unfair trade practice and a deficiency of service within the Consumer Protection Act, 1986. The consumer fora possess the power, as an incident of their jurisdiction to redress deficiency and discontinue unfair trade practices, to refuse to enforce such one-sided contractual terms. While the 2019 Act expressly defines 'unfair contract', the power to remedy unfair terms was implicit under the 1986 Act and may be exercised by consumer fora. [Paras 19]The contractual clauses are oppressive and one-sided, constitute an unfair trade practice/deficiency of service, and the buyers cannot be compelled to be bound by themConcurrent remedies under RERA and Consumer Protection Act - election of remedies - application of special statute vis-a -vis general consumer law - whether RERA remedies displace or have primacy over remedies under the Consumer Protection Act in the present disputes - HELD THAT: - RERA provides specific remedies (including refund with interest and compensation) and contains provisions (Sections 71, 79, 88 and Section 18's 'without prejudice' language) recognising its regime. However, RERA's provisions are in addition to and not in derogation of other laws. Where concurrent remedies exist, an allottee may elect the remedy to pursue; election doctrine applies only where appropriate and does not operate to oust consumer fora jurisdiction where no statutory bar exists. The absence of an express bar in RERA to initiation of consumer complaints and the saving provision confirm that consumer remedies remain available. Prior decisions of this Court uphold that remedies under the Consumer Protection Act operate in addition to special statutes. [Paras 20]RERA does not oust remedies under the Consumer Protection Act; an allottee may elect which remedy to pursue and consumer fora retain jurisdiction to entertain complaintsEntitlement to refund and award of interest as compensation for delay in possession - distinction between purchasers of ready/OC-granted units and purchasers of units without OC - whether, on account of delay, buyers are entitled to terminate the agreement and claim refund with interest, and the appropriate relief for different categories of allottees - HELD THAT: - The factual position disclosed two categories: (A) buyers of Phase I units where Occupation Certificates were granted and possession offered; and (B) buyers of Phase II units where OCs were not granted and apartments were not ready. For Chart A: purchasers at specified serials whose apartments were complete and possession offered are obliged to take possession, but are entitled to Delay Compensation for the period from 27.11.2018 until offer of possession; where a specific allottee had an NCLT undertaking for refund, the Developer was directed to refund within time with interest starting from the date of that undertaking, failing which default interest. For Chart B: purchasers of units without OC and where construction remained incomplete are not bound to accept alternate offers and are entitled to refund of the entire amount paid. The contractual Delay Compensation (nominal sum translating to c.0.9-1% p.a.) was inadequate; award of compound 20% was rejected as disproportionate. Balancing competing interests (including pandemic impact), the Court fixed interest at 9% simple per annum from 27.11.2018 until payment, with a three-month/ four-week timeline for refunds in specified cases and a default interest of 12% p.a. for further delay. The Developer is prohibited from deducting the 20% earnest money or other deductions under Clause 21.3 when refunding amounts on account of the Developer's defaults, including delay in obtaining Fire NOC. [Paras 21]Allottees of incomplete towers (Chart B) are entitled to full refund of amounts paid; allottees of completed towers (Chart A) where OC issued must take possession but are entitled to delay compensation; refunds to entitled buyers to be made with interest at 9% S.I. p.a. from 27.11.2018 (default interest 12% p.a. for non-compliance) and Developer shall not make deductions of earnest money or other charges under Clause 21.3Final Conclusion: The appeals are disposed by (a) holding that the contractual possession period runs from the date of Fire NOC (27.11.2014), making 27.11.2018 the due date; (b) declaring the impugned apartment agreement clauses to be one-sided and constituting unfair trade practice/deficiency of service disentitling the Developer to rely on them; (c) affirming that remedies under RERA are concurrent and that consumer fora retain jurisdiction; and (d) directing refunds/relief as delineated between Phase I and Phase II allottees with interest fixed at 9% S.I. p.a. from 27.11.2018 and specified default interest for non-compliance Issues Involved:1. Determination of the date from which the 42 months period for handing over possession is to be calculated.2. Whether the terms of the Apartment Buyer’s Agreement were one-sided.3. Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 must be given primacy over the Consumer Protection Act, 1986.4. Whether on account of the inordinate delay in handing over possession, the Apartment Buyers were entitled to terminate the agreement and claim a refund of the amounts deposited with interest.Detailed Analysis:1. Determination of the date from which the 42 months period for handing over possession is to be calculated:The court examined whether the 42 months period should be calculated from the date of issuance of the Fire NOC or from the date of sanction of the Building Plans. The court held that it was mandatory under the Haryana Fire Safety Act, 2009 to obtain the Fire NOC before commencing construction. The 42 months period in Clause 13.3 of the Agreement for handing over possession of the apartments would be required to be computed from the date on which Fire NOC was issued, not from the date of the Building Plans being sanctioned. The Fire NOC was obtained on 27.11.2014, thus the Commitment Period of 42 months plus the Grace Period of 6 months would end on 27.11.2018.2. Whether the terms of the Apartment Buyer’s Agreement were one-sided:The court found that the terms of the Agreement were wholly one-sided and loaded in favor of the Developer. Clauses such as Clause 7.4 requiring buyers to pay interest at 20% per annum on delayed payments, Clause 13.2 imposing “Holding Charges” on buyers who delayed taking possession, and Clause 13.5 limiting compensation for delay to 12 months only, were highlighted as particularly unfair. The court held that these terms constituted an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act, 1986, and were not binding on the apartment buyers.3. Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 must be given primacy over the Consumer Protection Act, 1986:The court held that the remedies under the Consumer Protection Act, 1986 are in addition to, and not in derogation of, any other law applicable, including the RERA Act. The court emphasized that Section 88 of the RERA Act states that its provisions are in addition to and not in derogation of other laws. The court also noted that the Consumer Protection Act provides a remedy for better protection of the interests of consumers, including the right to seek redressal against unfair trade practices. Therefore, the Consumer Protection Act and the RERA Act could coexist, and consumers could choose their remedy.4. Whether on account of the inordinate delay in handing over possession, the Apartment Buyers were entitled to terminate the agreement and claim a refund of the amounts deposited with interest:The court categorized the allottees into two groups: those in Phase 1, where possession was offered after the issuance of the Occupation Certificate, and those in Phase 2, where the Occupation Certificate had not been issued. For Phase 1 allottees, the court held that they were obligated to take possession but were entitled to Delay Compensation for the period of delay. For Phase 2 allottees, the court held that they were entitled to a refund of the entire amount deposited due to the inordinate delay and the absence of an Occupation Certificate. The court directed the Developer to refund the amounts with interest at 9% per annum from 27.11.2018 till the date of payment, and in some cases, within a specified period, failing which a higher rate of interest would apply.Conclusion:The court concluded that the Developer could not compel the apartment buyers to be bound by the one-sided contractual terms and that the remedies under the Consumer Protection Act were available in addition to the RERA Act. The court provided specific directions for refunds and compensation based on the categorization of the allottees.