TaxTMI 
TaxTMI 
2020 (8) TMI 852
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....st of 1980 units, spread across nineteen towers each consisting of a stilt and eighteen floors. 3. The Brochure of the first Respondent advertised the nature of the project and the amenities which would be provided to buyers. It held out the following representations on the basis of which buyers were induced to invest: New Town-the premier choice for Bangalore living. A premium residential enclave that celebrates life in all its resident splendor. Featuring spacious apartments and a rich selection of amenities, you will find in New Town, a residence specially appointed to maximize your comfort and convenience. In New Town premium high rise apartments are set against the backdrop of a vibrant living environment where fun, comfort, security, and serenity blend in perfect unison. Life at New Town satisfies all your needs and fulfils your heart's desire. Imagine a place where leisurely pursuits are always within reach. Imagine living where convenience is never more than around the corner. Westend Heights at New Tower DLF, BTM Extn. Designs, keeping in mind the modern day requirements and meeting them with apt amenities, Westend Height....
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.... Let New Town set your mind at rest when it comes to security. Our advanced, state-of-the-art security system ensures comfort & peace of mind for you and your loved ones, with monitored gates, CCTV for parking and entrance lobby, video surveillance system and a rigorously screened 24-hour security guard workforce, New Town offers you a secure and a well-protected abode. (emphasis supplied) 4. Responding to the representation held out by the developer, the complainants booked flats in the residential project. The flat buyers entered into agreements with the developer. Clause 11(a) of the ABA indicated that the developer would endeavour to complete construction within a period of thirty-six months from the date of the execution of the agreement save and except for force majeure conditions. Clause 11(a) provided: 11. (a) Schedule for Possession of the Said Apartment The Company/LOC based on the present plans and estimates and subject to all just exceptions, endeavors to complete construction of the Said Building/Said Apartment within a period of thirty six (36) months from the date of execution of this Agreement unless there shall be del....
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....entire group of flat purchasers, a notice of the complaint Under Section 12(1)(c) of the Consumer Protection Act 19863 was published in the newspapers. 7. Numerous applications for impleadment were allowed by the NCDRC and an amended complaint was ordered to be filed. On the complainants moving an application Under Section 12(1)(c), the NCDRC by its order dated 21 November 2017 permitted them to file the complaint on behalf or for the benefit of all the flat buyers who were interested in the reliefs. However, flat buyers who had (i) executed deeds of conveyance; or (ii) executed affidavits while accepting the agreed compensation in full and final satisfaction; or (iii) received possession within the stipulated time period; or (iv) had sold their flats after the execution of the conveyance; or (v) who were subsequent purchasers having purchased the flat after the execution of the conveyance deed were to remain outside the purview of the proceedings. Further, the buyers from whom Preferential Location Charges, charges for the preferential location of the apartment, were not charged and were not chargeable were to remain out of the class on whose behalf or benefit the complaint was....
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....s Court dated 28 September 2018 to 339 complainants, now covers a more restricted field of 171 flat purchasers. Annexure-1 to Civil Appeal No. 6239 of 2019 contains a tabulation of (i) names of the flat purchasers; (ii) dates on which the flats were booked; (iii) dates on which the ABAs were signed; (iv) dates by which possession was to be handed over under the ABAs; and (v) dates on which the letter for possession was issued by the developers. 12. The NCDRC divided the group of 339 flat buyers into six groups based on whether or not they had taken possession, executed deeds of conveyance, settled the dispute or sold the flats before or during the pendency of the complaint or their applications for impleadment: * Group A: Complainants who took possession of their flats before the filing of the complaint/impleadment applications. * Group B: Complainants who took possession and executed deeds of conveyance during the pendency of the complaint/impleadment applications. * Group C: Complainants who took possession during the pendency of the complaint/impleadment applications but have not executed deeds of conveyance. * Group....
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....ed. 14. The primary grounds on which compensation have been sought before the NCDRC were: (i) Delay in handing over possession of the flats; (ii) Reimbursement of taxes and interest charged to the flat purchasers under Clause 1.10 of the ABA; (iii) Deficiency in providing amenities; (iv) Levy of electricity charges by the developer; and (v) Failure to construct the club house. 15. The NCDRC, in the course of its judgment, observed that delay in the handing over of flats to the flat purchasers was admitted. While recording a finding of fact that there was an admitted delay on the part of the developer, the NCDRC held that the agreements provided compensation at the rate of Rs. 5 per square foot of the super area for every month of delay. The NCDRC held that the flat purchasers who agreed to this stipulation in the agreements were not entitled to seek any amount in addition. Paragraph 470 of the judgment of the NCDRC contains its finding: 470. There is no dispute to the fact that the completion of the project had been delayed. Delay had been acknowledged by the opposite parties. They had a....
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.... to deposit the tax on time. During the oral arguments, it was clarified that only interest has been recovered from the flat buyers. The above submissions of Mr. Prashant Bhushan have been reiterated in the submissions urged before the Court by Mr. Bishwajit Bhattacharya, learned Senior Counsel appearing on behalf of another group of purchasers. Mr. R Balasubramanian, learned Senior Counsel has, while adopting the submissions which were urged by Mr. Prashant Bhushan, advanced submissions on the levy of electricity charges and charges for parking spaces. 17. Opposing the submissions which have been urged on behalf of the Appellants, Mr. Pinaki Misra, learned Senior Counsel urged that: (i) Despite the order of this Court dated 28 September 2018, no evidence has been led by the complainants to discharge the onus placed upon them to establish coercion or duress while executing conveyances or settlements; (ii) Possession of the complex, which is situated on land admeasuring about 27 acres and comprising of 813 apartments in nineteen towers has been handed over between four to six years ago and the developer has transferred his right, title and interes....
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.... the entire township comprising of 80 acres of which the complex of 27 acres was a part. The flat buyers were aware of the fact that under the terms of the ABA, the allottees have no right, title or interest in the amenities outside their residential complex and forming a part of the wider complex of 80 acres. Moreover, this issue is rendered academic since the area around DLF township has become urbanized where adequate facilities are available; (viii) Clauses 1.3, 1.10, 2 and 3 require the allottees to bear tax liabilities including towards works contract tax. When the project commenced in 2009, there was an absence of clarity in regard to the liability on account of works contract tax which was settled eventually by the judgment of this Court in Larsen and Toubro Limited v. State of Karnataka (2014) 1 SCC 708. It was as a result of this judgment that the issue was settled following which, the developer while computing the amount payable in the final statements of accounts passed on the liability on account of the interest (but not towards penalty) on a proportionate basis in terms of Clause 1.10 of the ABA; (ix) Clause 23(b) entitles the developer t....
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....re conditions. Undoubtedly, the expression 'endeavour' indicates that the developer did not bind itself to an inflexible timeline of thirty-six months. But then again, the timeline of thirty-six moths was subject to just exceptions and could be excused in the event of force majeure conditions coming into operation. By the provisions of Clause 14, the developer agreed to compensate the flat buyers at the rate of Rs. 5 per square feet of the super area of the apartment per month for the period of delay. According to the developer (i) the flat purchasers are bound by the above stipulations under which their entitlement was to receive compensation at the agreed rate (and hence not beyond); and (ii) no evidence has been adduced to indicate that the rate which has been prescribed in the agreement is unreasonable. The developer relies on the observation in the decision of this Court in Dhanda that when parties have agreed to a consequence of delay in handing over possession, there must be exceptional and strong reasons for the consumer fora to award compensation at more than the agreed rate. In assessing these submissions, we must at the outset note the submission of Mr. Prashant ....
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....r 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 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 ....
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....e 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 th....
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....mine the loss. Loss could be determined on basis of loss of rent which could have been earned if possession was given and the premises let out or if the consumer has had to stay in rented premises then on basis of rent actually paid by him. Along with recompensing the loss the Commission/Forum may also compensate for harassment/injury, both mental and physical. Where possession has been given, one of the circumstances which must be factored in is that the purchaser has been compensated by the increase in the value of the property. 27. In R.V. Prasannakumaar v. Mantri Castles Pvt. Ltd. under the terms of the ABA, possession of the flats was to be handed over to the buyers on 31 January 2014. However, the developer received an occupation certificate only on 10 February 2016 and it was thereafter from May 2016 that the developer started issuing letters offering possession. Based on this, the NCDRC awarded compensation in the form of interest at the rate of 6 per cent per annum. The developer had pleaded that since the agreement provided compensation at the rate of Rs. 3 per square foot per month for delayed possession, the purchasers were not entitled to anything in addition. De....
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....s for more than 30 days. On the other hand, as per Clause 11.5 of the agreement, if the Appellant builder fails to deliver possession of the apartment within the stipulated period, the Respondent flat purchaser has to wait for a period of 12 months after the end of the grace period, before serving a termination notice of 90 days on the Appellant builder, and even thereafter, the Appellant builder gets 90 days to refund only the actual instalment paid by the Respondent flat purchaser, after adjusting the taxes paid, interest and penalty on delayed payments. In case of any delay thereafter, the Appellant builder is liable to pay interest @9% p.a. only. 6.5. Another instance is Clause 23.4 of the agreement which entitles the Appellant builder to serve a termination notice upon the Respondent flat purchaser for breach of any contractual obligation. If the Respondent flat purchaser fails to rectify the default within 30 days of the termination notice, then the agreement automatically stands cancelled, and the Appellant builder has the right to forfeit the entire amount of earnest money towards liquidated damages. On the other hand, as per Clause 11.5(v) of the agreement, ....
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.... of the buyer's agreements, possession was to be delivered within twenty-four months of the execution of the agreement i.e. 10 February 2013 - failing which the developer was liable to pay compensation at the rate of Rs. 10 per square foot per month for the delay. The developer contended that construction activities were delayed as a result of an injunction granted by this Court over a period of eight months and consequently sought an extension of the period for handing over possession by one year. Alternatively, the developer offered to refund the money deposited with interest at 9 per cent per annum. Construction of 258 independent floors was completed while about 1,500 units were nearing completion. In two sets of Civil Appeals which came up before this Court earlier, agreed terms were arrived at providing for the award of interest at 9 per cent per annum from the date of deposit till refund. While considering the order of the NCDRC, this Court observed: 16. The District Forum under the Consumer Protection Act, 1986 is empowered inter-alia to order the opposite party to pay such amount as may be awarded as compensation to the consumer for any loss or injury su....
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....lats after construction etc. ii) It shall be open to the Complainants to seek the assistance of the maintenance agency to attend to the maintenance work which may arise on account of non-occupation or on account of natural vagaries. iii) Such maintenance work shall be completed by the Appellant within two months of the offer of possession but the payment of interest at the rate of 9 per cent per annum will be for a period of two months from the date of offer of possession in all situations. v) Since the Complainants have been forced to invoke jurisdiction of the consumer forums, they shall be entitled to consolidated amount of Rs. 50,000/- in each complaint on all accounts such as mental agony and litigation expenses etc. The complainant shall not be entitled to any other amount over and above the amount mentioned above. vi) In case, the original allottee has transferred the flat, the transferee shall be entitled to interest at the rate of 9 per cent per annum from the date of expiry of three years from the agreement or from the date of transfer, whichever is later. 31. The judgment in Dhanda's case does not prescri....
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....ctual right provided to the home buyer in the case of a default by the developer; (v) There has been a gross delay on the part of the developer in completing construction ranging between two and four years. Despite successive extensions of time to deliver possession sought by the developer, possession was not delivered on time; (vi) The nature and quantum of the delay on the part of the developer are of such a nature that the measure of compensation which is provided in Clause 14 of the ABA would not provide sufficient recompense to the purchasers; and (vii) Judicial notice ought to be taken of the fact that a flat purchaser who is left in the lurch as a result of the failure of the developer to provide possession within the 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 the purchase price to the developer and being required to service the debt towards loan installments the purchaser is unable to obtain timely possession of the flat which is the subject matter of the ABA. But, it has been submitted by the developer - ....
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.... Copies of these communications are marked as Annexures P-28, P-29, P-30 and P-31 to Civil Appeal 6239 of 2019. 34. The developer has not disputed these communications. Though these are four communications issued by the developer, the Appellants submitted that they are not isolated aberrations but fit into a pattern. The developer does not state that it was willing to offer the flat purchasers possession of their flats and the right to execute conveyance of the flats while reserving their claim for compensation for delay. On the contrary, the tenor of the communications indicates that while executing the Deeds of Conveyance, the flat buyers were informed that no form of protest or reservation would be acceptable. The 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 the meantime) or to forsake the claims in order to perfect their title to the flats for which they had paid valuable consideration. In this backdrop, the simple question which we need to address is whether a flat buyer who seeks to espouse a claim against the developer for delayed possession c....
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....ssurance was made to the purchasers as to the nature and extent of development that would be carried out by the Appellant Company as a part of package under which a sale of fully developed plots with assured facilities was made in favour of the purchasers for valuable consideration. To the extent the transfer of site with developments in the manner and to the extent indicated earlier was a part of the transaction, the Appellant Company has indeed undertaken to provide a service. Any deficiency or defect in such service would make it accountable before the competent Consumer Forum at the instance of consumers like the Respondents. The developer in the present case has undertaken to provide a service in the nature of developing residential flats with certain amenities and remains amenable to the jurisdiction of the Consumer Fora. Consequently, we are unable to subscribe to the view of the NCDRC that flat purchasers who obtained possession or executed Deeds of Conveyance have lost their right to make a claim for compensation for the delayed handing over of the flats. 37. However, the cases of the eleven purchasers who entered into specific settlement deeds with the developers ha....
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....ession the flats, had purchased the interest in the apartments from the original buyers. Further, it cannot be said that the subsequent transferees suffered any agony and harassment comparable to that of the first buyers, as a result of the delay in the delivery of possession in order to be entitled to compensation. Amenities 39. The brochure that was issued by the developers spoke of a "Distinctive DLF Living" while advertising the project, which was described as "DLF Westend Heights", New Town. This was described as "the premier choice for Bangalore living...a premium residential enclave featuring spacious apartments with a rich selection of amenities." Westend Heights at New Town was described as a project which was being developed on a land area of 27.5 acres. The brochure specifically referred to the amenities being provided. Among them were (i) "The most exclusive club in Bangalore"; (ii) a swimming pool; (iii) gymnasium/aerobics centre; and (iv) a restaurant and Bar together with other sports facilities. Besides this, the brochure contained a representation of the setting up of a convenience shopping centre with an array of outlets, a renowned early-learning school and st....
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....e account of the RWA and not in the account of the developer. The position which has been stated before the court as elucidated above has not been disputed by counsel for the Appellants. Hence, we find that there has been no breach by the developer of the obligation to provide a constructed facility of a club for the RWA. Other amenities 41. As regards the other amenities, the defence of the developer is that these were to be developed as an integral element of the entire township of 80 acres of which the project admeasuring 27 acres (comprised in Westend Heights) was a part. The ABA stipulates that allottees of the complex have no right, title and interest in respect of the amenities or facilities outside the residential complex, which lie within the larger township. According to the developer, no part of the consideration which was paid by allottees, including the Appellants, was towards the amenities and facilities falling outside the boundary of the complex. In this regard, the developer relies on the following stipulation accepted by allottees under Clause 5 of the Booking Application Form: The applicant confirms and represents that he has not made any pay....
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....uilder invited prospective flat purchasers to invest in the project of Westend Heights on the basis of a clear representation that the surrounding area of New Town situated on 80 acres was being developed to provide a wide range of amenities including a shopping centre, health care facilities and an early learning school. The developer has failed to provide these amenities. In the reply, the developer has stated that: It is stated that School, Commercial Complex and Health clinic are part of the facility which will be provided upon the completion of the Whole New Town project as these facilities, with existing population cannot sustain these facilities. Every matter has to be adjudicated in light of its own facts and circumstance... In the written submissions of the developer, the failure to provide the amenities is sought to be glossed over by contending that: ...the issue of these facilities has since become completely academic since the area around the DLF Township has already become totally urbanized and well developed thanks in larger measure due to the DLF's activities in the area and there are now many proximate hospitals, schools, shoppi....
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.... A developer who has breached a clear representation which has been made to the buyers of the amenities which will be provided to them should be held accountable to the process of law. To allow the developer to escape their obligation would put a premium on false assurances and representations made to the flat purchasers. Hence, in factoring in the compensation which should be provided to the flat buyers who are concerned in the present batch of appeals, we would necessarily have to bear this issue in mind. Tax 44. The ABA contained specific provisions in regard to the payment of taxes. Clause 1.3 of the ABA provided: 1.3 The Allottee shall make the payment of the Total price as per the payment plan set out in annexure-III of this Agreement. Other charges, securities, payments etc. (as specified in this Agreement), Taxes and increase thereof (as provided in Clause 1.10) shall be payable by the Allottee, as and when demanded by the Company. Clause 1.10 contained a specific provision in regard to the obligation of the allottee to pay taxes in addition to the total price. Clause 1.10 provided: 1.10. The Allottee agrees and understands that in ....
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....her charges, Taxes, securities etc. as mentioned in this Agreement and as per the demand raised by the Company in accordance with the Agreement. The ABA contains the definition of taxes in the following terms: "Taxes" shall mean any and all taxes payable by the Company/LOC and/or its contractors, suppliers, consultants, etc. by way of value added tax (VAT), state sales tax, central sales tax, works contract tax, service tax, cess, levies and educational cess and any other taxes levies, charges by whatever name called levied and collected by Government Agency in connection with Development/construction of the Said Apartment/Said Building/Said Complex. The expression total price is also defined in the ABA so as to be exclusive inter alia of taxes. 45. The two certificates of the Chartered Accountant issued on 26 July 2013 and 9 August 2014 indicate that taxes inclusive of interest have been recovered. According to the Appellants, the builder admitted that it had "not properly discharged" his liability towards taxes for a period of thirty-six months between 2011-2012 and 2013-2014 and that tax dues were paid on 25 March 2015 together with penalty and interest. ....
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.... 23. (b) Payments and other charges for bulk supply of electrical energy If Company or the Maintenance Agency decides to apply for and thereafter receives permission from BESCOM or from any other body/commission/regulator/licensing authority constituted by the Government of Karnataka for such purpose, to receive and distribute bulk supply of electrical energy in the Said Project/Said Complex then the Allottee undertakes to pay on demand to the Company proportionate share as may be determined by the Company of all payments and charges paid/payable by the Company or the Maintenance Agency to BESCOM...The proportionate share of cost incurred by the Company for creating infrastructure like HT feeder, EHT sub stations etc shall also be payable by the Allottee on demand. 49. According to the developer, initially an electricity connection was provided by BESCOM without insisting on the requirement of an electric sub-station. Subsequently as occupation certificates were received for additional towers, BESCOM required a dedicated electric sub-station which was constructed by the developer at a cost of Rs. 18.01 crores. The pro rata cost for setting up this additional....
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....fined as "project under the name and style of "New Town DLF BTM Extension". According to the submission, the charges have been collected for the entire New Town project and not for Westend Heights alone. In this context it has also been submitted that distribution of electricity is governed by the KERC Regulations 2006. While planning the project, the developer calculated the cost of the 66/11 KV sub-station and collected charges from each of the 1830 buyers. Hence, it has been submitted that there was no requirement of additional bulk supply of electricity for the nineteen hundred buyers. In this context, the formulation in the written submissions is extracted below: (under) Regulation 3.02 (e) of KERC (Conditions of Supply of Electricity by the Distribution Licensee) Regulations 2004, it is mandatory to set up 66 KV supply line/KV substation if the demands goes beyond 7500 KVA. Further Under Regulation 3.2.4 KERC (Recovery of Expenditure for Supply of Electricity) Regulations 2004: "In case of layouts/buildings requiring power supply and the requisitioned load is more than 7500 KVA, the developer/Applicant shall provide the space for erection of sub-station and als....