TaxTMI 
TaxTMI 
2020 (8) TMI 852
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....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 Heights is the first phase of New Town, with premium high-rise apartme....
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....eillance 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 delay or failure due to Force Majeure conditions including but not limited to reasons mentioned in Clauses 11(b) and 11(c) or due to failure of Allottee to pay in time the Total Price and other charges taxes, securities etc. and dues/payments or any failure on the pa....
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..... 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 instituted. On a challenge to the order, this Court by an order dated 10 April 2018 directed: Since the complaint filed by the Appellants was only by nine persons jointly for their benefit, the same could not be treated to be in representative capacity. Accordi....
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.... 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 D: Complainants who settled their dispute during the pendency of the complaint/impleadment applications. * Group E: Complainants who sold their flats during the pendency of the complaint/impleadment applications. * Group F: Complainants who have not taken possession of the flats and have not executed a deed of conveyance. 13. The ....
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....; 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 also offered to these complainants the delayed compensation calculated @ Rs. 5/- per sq. ft. of the super area. The NCDRC observed that the developer had while computing the final demand made an adjustment on account of delayed compensation at the rate stipulated in the ABA. The flat purchasers having been provided credit at the rate agreed by the developers, it was held that no further entitlement existed un....
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.... 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 interest to the Residents' Welfare Association ("RWA"); (iii) The allottees have benefited by the appreciation in the value of their flats; (iv) Out of 171 applicants, 145 have received compensation at the agreed rate while handing over possession. The allotments were escalation free and the burden of increased costs has been borne by the developer; (v) Under Clause 14 of the ABA, the flat buyers have been compensated at the rate of Rs. 5 per square foot per month ....
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....ract 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 to raise a demand on a proportionate basis from the flat buyers for electricity charges. Initially, BESCOM provided a connection for electricity but subsequently as a substantial load was required, the developer was permitted to build its own electricity sub-station. This was built at a cost of Rs. 18.01 crores for which the pro rata cost could be allocated to flat buyers in terms of Clause 23(b); and (x) The price of the apartment, as agreed in the ABA, included in the breakup, parking charges for exclusive use of earmarked parking spaces. Parking charges were also r....
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....nder 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 Bhushan, learned Counsel that: There are a total of 4 blocks in 'WESTEND HEIGHTS' project. In Blocks A, B and C, the delay is huge, over 4 years. For block D, the average delay is 2 years. Out of 339 complainants, for 268, the delay is huge, over 4 years. The Builder sought repeated extension of time to deliver possession, vide communications dated 18.06.20136, 8.8.20137, 8.8.20148, 4.5.20159 etc. 20. The extent of the delay as set out in the above submissions has not been controverted in the submissions which were urged before this Court by the developer. On the contrary....
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....he 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 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. 23. On behalf of the flat purchasers it has been urged by Mr. R Balasubramanian (a submission which has not been controverted in rejoinder) that 95 per cent of the purchase price was paid during the course of the first two and a half to three years. The agreement did not stipulate that the developer would pay any interest on the amount which had already been received. A large chunk of the purchase price was thus available to ....
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....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....
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.... 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. Dealing with the submission, this Court observed: 9. We are in agreement with the view of the NCDRC that the rate which has been stipulated by the developer, of compensation at the rate of 3 per sq. ft. per month does not provide just or reasonable recompense to a flat buyer who has invested money and has not been handed over possession as on the stipulated date of 31 January 2014. To take a simple illustration, a flat buyer with an agreement of a flat admeasuring a 1000 sq. ft. would receive, under the agreement, not more than Rs. 3000/- per month. This in a city such as Bangalore does not provide just or adequate compensation. The jurisdiction of the NCDRC to award just comp....
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....e 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, if the Respondent flat purchaser fails to exercise his right of termination within the time limit provided in Clause 11.5, then he shall not be entitled to terminate the agreement thereafter, and shall be bound by the provisions of the agreement. Justice Indu Malhotra speaking for the Court noted: 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....
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....f 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 suffered by the consumer due to the negligence of the opposite party including to grant punitive damages. But the forums under the Act cannot award interest and/or compensation by applying Rule of thumb. The order to grant interest at the maximum of rate of interest charged by nationalised bank for advancing home loan is arbitrary and no nexus with the default committed. The Appellant has agreed to deliver constructed flats. For delay in handing over possession, the consumer is entitled to the consequences agreed at the time of executing buyer's agreement. There cannot be multiple heads to grant of damages and interest when the parties have agreed for payment of damages at the rate of Rs. 10/- per sq. ft. per month. Once the....
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....tc. 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 prescribe an absolute embargo on the award of compensation beyond the rate stipulated in the flat buyers' agreement where handing over of the possession of a flat has been delayed. Dhanda's case was preceded by consent terms which were presented before this Court in two earlier civil appeals under which interest at the rate of 9 per cent had been granted. The decision lays down that the award of interest cannot be arbitrary and without nexus to the default which has been committed. Hence, the award of interest at the maximum rate of interest charged by a nationalised bank for advancing home loans was construed to be arbitrary. It was in this context that the court observed that the parties having agreed to a consequence for delay, exceptional and strong reasons must exis....
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....nces 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 - a submission which found acceptance by the NCDRC - that the execution of the Deed of Conveyance by a flat purchaser precludes a consumer claim being raised for delayed possession. During the course of the proceedings before the NCDRC, the flat purchasers relied upon the communications which were issued by the developer to demonstrate that the purchasers were not permitted by the developer to execute a Deed of Conveyance or to take possession under protest. The material which was produced before the NCDRC supports this submission, which was urged before the Court by Mr. Prashant Bhushan, learned Counsel. By a communication dated 16 February 2016, the developer informed a flat buyer that in terms of the ABA, the allottee is required to take possession of the apartment by making payments and executing documentation afte....
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....ey 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 can as a consequence of doing so be compelled to defer the right to obtain a conveyance to perfect their title. It would, in our view, be manifestly unreasonable to expect that in order to pursue a claim for compensation for delayed handing over of possession, the purchaser must indefinitely defer obtaining a conveyance of the premises purchased or, if they seek to obtain a Deed of Conveyance to forsake the right to claim compensation. This basically is a position which the NCDRC has espoused. We cannot countenance that view. 35. The flat purchasers invested hard earned money. It is only reasonable to presume that the next logical step is for the purchaser to perfect the title to the premises which have been allotted under the terms of the ABA. But the submission of the developer is that the purchaser forsakes the remedy before the consumer forum by seek....
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....ribe 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 have to be segregated. In the case of these eleven persons, we are of the view that it would be appropriate if their cases are excluded from the purview of the present order. These eleven flat purchasers having entered into specific deeds of settlement, it would be only appropriate and proper if they are held down to the terms of the bargain. We are not inclined to accept the contention of the learned Counsel of the Appellants, Mr. Prashant Bhushan, that the settlement deeds were executed under coercion or undue influence since no specific material has been produced on record to demonstrate the same. 38. Similarly, the three Appellants who have transferred their title, right and interest in the apartments would not be entitled to the benefit of the present order since they have sold their interest in the apartments to third parties. The written submissions which have be....
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....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 state of the art health care facilities. Clause 1.10(a) of the ABA, which imposes the liability to bear taxes on the allottees states that this liability will be proportionate to the ratio of the super area of the apartment to the total super area of all the apartments and other "shops, clubs etc" in the said complex. The grievance in regard to the alleged failure of the developer to provide amenities may be divided into two segments: (i) The club house; and (ii) Other amenities Club house 40. The developer has stated before the court that a club house containing appurtenant facilities including a swimming pool, gymnasium, billiards room, tennis court, indoor badminton court, squash court and community hall has been fully constructed and an occupation certificate has been received on 13 May 2019. The developer has stated that under the building Regulations, it has ....
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....ties 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 payment to the Company in any manner whatsoever and that the Company has not indicated/premised/represented/given any impression of any kind in an explicit or implicit manner whatsoever, that the Applicant shall have any right, title or interest of any in whatsoever in any lands, buildings, common areas, facilities and amenities failing outside the Said Complex... The above stipulation is reiterated under Clause 1.21 of the ABA: The allottee acknowledges and confirms that the allottee is not entitled to or has not paid for the lands outside the said land/said complex whether the same is within said project or other. The said project would comprise of many complexes similar on different to said complex. Allottee has not paid any amount towards any other lands, areas, facilities and amenities including but not limited to those listed below, and as such, the allottee shall have no right interest of any nature....
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....come 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, shopping areas that have mushroomed in the immediate vicinity and neighbourhood of the DLF Township which are in fact being regularly and conveniently used by the residents of the DLF residential complex which include the Appellants herein. As such, there is no loss or claim for any damages that could be said to have accrued to the Appellants either under the ABA or otherwise under this alleged head of claim. 43. In other words, what the developer holds out as a defence is that though there has been a failure on their part to provide the amenities, the flat buyers have the benefit of facilities in the surrounding area which has become urbanised. We cannot agree with this line of submissions. The reply of the developer seeks to explain the failure to construct the facilities on the ground that the "existing population cannot sustain these facilities" - a school, commercial complex and health care facilities. This is a case involving an experien....
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....e 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 addition to Total price, the Allottee shall be liable to pay the Taxes, which shall be charged and paid as under: a) A sum equivalent to the proportionate share of Taxes shall be paid by the Allottee to the Company. The Proportionate share shall be the ratio of the Super Area of the said Apartment to the total super area of all the apartments other buildings shop, club etc. in the said complex. b) The Company shall periodically intimate to the Allottee herein, on the basis of certificates from a Chartered Engineer and/or a Chartered Accountant, the amount payable as stated above which shall be final and binding on the Allottee and the Allottee shall make payment of such amount within 30 (thirty days) of such intimation. The ABA also contains the following provisions: 2. Payment for taxes on land, wealth-tax, cesses etc. by Allottee: The Allottee agrees and confirms to pay all Government rates, tax on land, municipal tax, property....
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....ility 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. Hence, it has been urged that the liability to pay interest which arose on account of the default of the developer in discharging the tax liability on time cannot be fastened upon the buyers. 46. On behalf of the developer it has been submitted that when construction commenced in 2009, there was an absence of clarity on whether works contract tax was liable to be paid in relation to agreements between owners-developers and allottees of apartments where the apartments were to be delivered in future. In 2013, this Court delivered its judgment in Larsen and Toubro Limited v. State of Karnataka (2014) 1 SCC 708 as a result of which the liability towards works contract tax was adjudicated upon. Consequently, while computing the amount payable in the final statements of accounts, the developer passed on the interest burden but not the penalty on a proportionate basis in terms of Clause 1.10. The allottees were required to pay their proportionate share of the works contract tax in terms of the ABA and the final demand was r....
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....d 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 infrastructure was, according to the developer, payable by the allottees. When offers for possession were issued to the buyers, the following stipulation was contained in the letter: Our initial effort was to obtain and energize the power supply to the entire project of 1830 apartments through individual 11 KV feeders from Golahalli 66/11KV Substation. On this basis, the costing for infrastructure towards provisioning of utilities as per Clause 1.14, 1.15, 23(b) and JDC of ABA was estimated at rate Rs. 127.96/sft., which was reflected in the Final Demand to D Block customers. However, after a detailed evaluation of the load requirement for the project as per norms, BESCOM has now stipulated that, in accordance with Clause 3.2.4 of KERC Regulations, we establish a dedicated 66/11 kv Substation within our project site to cater to the needs of the project, instead of the earlier proposed scheme of 11 Kv feeders from Golahalli. The increase in cost because of this new sub-station and allied works, over and above the originally envisaged 1....
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....requisitioned load is more than 7500 KVA, the developer/Applicant shall provide the space for erection of sub-station and also bear the entire charges of such a sub-station and associated lines/equipments. The work shall be carried out either by the Licensee duly recovering the charges as per estimate or by the Applicant himself through appropriate class of licensed contractor by paying 10% of the estimate as supervision charges to the Licensee. 51. The NCDRC has upheld the collection of the charges towards electricity based on the terms of the ABA. There is no infirmity in the finding of the NCDRC, which is based on the provisions contained in Clause 23(b) of the ABA. The charges recovered are not contrary to what was specified in the contract between the parties. Parking 52. The Appellants seek a refund of an amount of Rs. 2.25 lacs collected from each buyer towards car parking. The submission is that Under Section 3(f) of the Karnataka Apartment Ownership Act 197210, common areas and facilities include parking areas. According to the Appellants, the flat buyers had already paid for the super area in terms of Clause 1.6 of ABA including common areas and facilities which would ....