1. Ghaziabad Development Authority (GDA) started construction of 14 Multi-storyed Residential Apartment Towers. However, the construction of the aforesaid residential towers ran into difficulties and came to be a grinding halt, in the year 1995. The Authority then decided to dispose them off, either through an outright sale/lease deed or through a joint venture agreement, where the joint venture would complete and market the flats on behalf of the GDA in such a manner that it was able to recover full cost of its investment and highest possible margin, without any further risk on its investments and, thereafter, allow the joint venture partner to obtain a return on its investments. The flats were to be advertised and marketed by the joint venture partner and the deed of conveyance was to be executed only by GDA, which continued to be the sole owner of the property.
The opposite party which is a partnership firm of two companies submitted highest bid for Module II in Indirapuram Scheme, which was accepted by the GDA. As per the MOU executed between the opposite party No. 1 (hereinafter referred to as the developer) and GDA, a Monitoring Committee under the chairmanship of Vice-Chairman, GDA was to be constituted for monitoring the progress for timely completion of the project. It was also agreed between the developer and GDA that a joint account in the name of the Authority and the Developer shall be opened in a nationalized Bank and all the monies received out of the proceeds of bookings, etc. will be credited to the said account. The minimum amount stipulated in the MOU was to be paid to the Authority out of the accumulation in the said account and shortfall, if any, was to be met by the developer from his own sources. After meeting the aforesaid minimum liability, the proceeds in the account were to be distributed between the Authority and the developer in the ratio of 60:40. Once all the amount due to the authority had been paid, all the proceeds in the account were to go to the developer. It was also agreed in the MOU that the developer would complete the construction and internal development within seven years from the date of the agreement. It was also agreed between the GDA and the developer that in case of any litigation by the purchaser, the responsibility will be that of the developer and the said clause should be incorporated in the Flat Buyers Lease Deed.
The complainant Smt. Kavita Ahuja submitted three separate applications for purchase of flats in the aforesaid project and paid the booking amount of Rs. 5.00 lacs each against all the three bookings. Three separate
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Letters of Allotment were issued to the complainant, allotting flats Nos. Deodar 1301, Deodar 1302 and Deodar 1303, to her for a consideration of Rs. 1,09,76,100, 1,13,93,825 and 1,25,66,150 respectively. The construction was to be completed within 22 months of the date of commencement. The complainant paid a total sum of Rs. 65,85,800, 68,36,400 and 75,39,730 respectively against flat Nos. Deodar 1301, Deodar 1302 and Deodar 1303 respectively. However, the developer failed to complete the construction within the stipulated time and according to the complainant when she visited the site on 2.2.2008, she found that the construction had barely commenced with no prospects of its being completed in near future. The complainant wrote a letter to the developer, seeking complete details as to the stage of construction of the flats and the date on which the possession would be handed over to her. The developer, however, did not respond to the said letter of the complainant. Later, vide letter dated 12.3.2009; the developer intimated a revised installment schedule on 31.3.2009. In reply, the complainant pointed out to the developer that it had failed to hand over the possession of the flat and sought refund of the money she had paid along with interest on that amount @ 21% per annum. In reply, the developer offered a rebate of Rs. 5 per sq. ft. per month to the complainant which was not acceptable to her. Being aggrieved from the failure to refund the amount paid by her, the complainant is before this Commission, seeking refund of the aforesaid amount, along with interest @ 21% per annum, compensation and cost of litigation. Initially, the complaint was filed only against the developer. Later on, opposite party Nos. 2 and 3 were impleaded in view of the preliminary objection taken by the developer.
2. The complaints have been resisted by the developer on the ground that (i) time was not the essence of the contract between the parties (ii) the delay in completion of the project took place due to adverse global market scenario which seriously affected the infrastructure and development projects across the Globe (iii) in case of delay, compensation is payable only in terms of Clause-11 of the Agreement, which provides for compensation at the rate of Rs. 5 per sq. ft. of the super area of the flat per month, for the period of delay in the cases where delay was due to reasons other than force majeure, unknown availability of material, change of Laws etc., (iv) if the complainant wants to cancel the booking, 10% of the price of the flat is liable to be forfeited by the developer, (v) the complainant having booked the flats for investment cannot be said to be a consumer.
3. The first question, which arises for consideration in this case is as to whether the complainant can be said to be a 'consumer' within the meaning of Section 2(1)(d) of the Consumer Protection Act. The aforesaid provision, to the extent it is relevant, provides that the 'consumer' means any person, who hires or avails any services for a consideration but does not include a person, who avails of such services for any commercial purpose. The term 'service' has been defined in Section 2(1)(o) of the Act to mean service of any description which is made available to potential users and includes 'housing construction'. Since the complainant had booked three residential flats which were to be constructed by the developer, she would be a 'consumer' unless it is shown that she had booked the said residential flats for a commercial purpose. The plea taken by the opposite parties in this regard is that booking of as many as three residential flats in the same project clearly shows that the said flats were purchased by the complainant for the purpose of making investments, meaning thereby that she did not intend to live in those flats but intended to sell them later at a higher price. Vide letter dated 29.10.2012, the complainant was directed to file an affidavit, disclosing therein that for what purpose the three flats were booked by her. In compliance of the aforesaid direction, the complainant filed an affidavit stating therein that she had booked three residential flat for use and occupation for herself and her family members. She wanted to retain one flat for use as her own residence and the other two were for the use and occupation of her in-laws and younger sister Ms. Priya Chopra. She also stated that she does not have any flat or residential house in her name and is staying in a rented accommodation provided by the company; whereas her in-laws are staying in a house constructed in pre-independence period, which is more than thirty years old. She also stated that her younger sister Priya is staying with her parent and does not own a residential flat in her name. According to the complainant she wanted all the family members to stay together and at the same time also have their respective independence and that is why three flats in the same project were booked by her. No evidence has been led by the opposite parties to rebut the aforesaid averments made by the complainant. If the complainant wanted her younger sister as well as her in-laws to stay in her vicinity so that the family can be together while simultaneously maintaining their individual privacy, it cannot be said that the flats were purchased by her for a speculative purpose or for making profit by selling them at a later date. If one of the family members has resources to buy houses for the other members of the family and utilises those resources with a view to enable the family members to live together in the same complex, it would be difficult to say that such a purchase would be for a commercial purpose.
4. Yet another and probably more important question which arises in this connection, is as to what would constitute the commercial purpose within the meaning of Section 2(1)(d) of the Consumer Protection Act.
The expression 'commercial purpose' has not been defined in the Act and, therefore, as held here in below by the Hon'ble Supreme Court in Laxmi Engineering Works v. P.S.G. Industrial Institute : II (1995) CPJ 1 (SC) : 1995 (SLT Soft) 632 : (1995) 3 SCC 583, we have to go by the dictionary meanings:
"In the absence of a definition, we have to go by its ordinary meaning 'Commercial' denotes 'pertaining to commerce' (Chamber's Twentieth Century Dictionary); it means 'connected with, or engaged in commerce; mercantile, having profit as the main aim' (Collins English Dictionary) whereas the word 'commerce' means 'financial transactions especially buying and selling of merchandise on a large scale' (Concise Oxford Dictionary)".
5. Going by the Dictionary meaning of the expression 'Commerce' as far as hiring or availing services are concerned, a person can be said to have hired or availed services only if they are connected or related to the business or commerce in which he is engaged. In other words, the services in order to exclude the hirer from the ambit of Section 2(1)(d) of the Act should be availed for the purpose of promoting, advancing or augmenting an activity, the primary and of which is to earn profit with use of the said services. It would ordinarily include activities such as manufacturing, trading or rendering services. In the case of the purchase of houses which the service provider undertakes to construct for the purchaser, the purchase can be said to be for a commercial purpose only where it is shown that the purchaser is engaged in the business of purchasing and selling houses and/or plots on a regular basis, solely with a view to make profit by sale of such houses. If however, a house to be constructed by the service provider is purchased by him purely as an investment and he is not undertaking the trading of houses on a regular basis and in the normal course of the business profession or services in which he is engaged, it would be difficult to say that he had purchased houses for a commercial purpose. A person having surplus funds available with him would not like to keep such funds idle and would seek to invest them in such a manner that he gets maximum returns on his investment. He may invest such funds in a Bank Deposits, Shares, Mutual Funds and Bonds or Debentures, etc. Likewise, he may also invest his surplus funds in purchase of one or more houses, which is/are proposed to be constructed by the service provider, in the hope that he would get better return on his investment by selling the said house(s) on a future date when the market value of such house(s) is higher than the price paid or agreed to be paid by him. That by itself would not mean that he was engaged in the commerce or business of purchasing and selling the house(s).
6. Generating profit by way of trading, in my view is altogether different from earning capital gains on account of appreciation in the market value of the property unless it is shown that the person acquiring the property was engaged in such acquisition on a regular basis and it was by way of a business activity.
7. As observed by the Hon'ble Supreme Court in Laxmi Engineering Works (supra), what is a 'commercial purpose' is a question of fact to be decided in the facts of each case and it is not the value of the goods that matters but the purpose for which the goods brought are put to. The same would be equally applicable to for hiring or availing services.
8. In any case, it is not appropriate to classify such acquisition as a commercial activity merely on the basis of the number of houses purchased by a person, unless it is shown that he was engaged in the business of selling and purchasing of houses on a regular basis. If, for instance, a person has two-three children in his family and he purchased three houses one for each of them, it would be difficult to say that the said houses were purchased by him for a commercial purpose. His intention in such a case is not to make profit at a future date but is to provide residential accommodation to his children on account of the love and affection he has for his children. To take another example, if a person has a house say in Delhi but he has business in other places as well and, therefore, purchases one or more houses at other places where he has to live presently in connection with the business carried by him, it would be difficult to say that such acquisition is for commercial purpose. To give one more example, a person owning a house in a Metropolitan City such as Delhi, or Mumbai, may acquire a house at a hill station or a place, which is less crowded and more peaceful than a Metropolitan City, in my view, it cannot be said that such acquisition would be for commercial purpose. In yet another case, a person may be owning a house but the accommodation may not be sufficient for him and his family, if he acquires one or more additional houses, it cannot be said that he has acquired them for commercial purpose. Many more such examples can be given. Therefore, it cannot be said that merely because of the complainant had agreed to purchase three flats in the same complex the said acquisition was for a commercial purpose.
9. Clauses 9, 10 and 11 of the allotment letters issued to the complainant reads as under:
"9. The construction of the building is likely to be completed within 22 (twenty-two) months from the date of commencement of construction. The date of commencement of construction shall be informed by the Developer.
10. If due to any reason beyond the control of the Developer or due to any unforeseen circumstances, e.g. non-availability of materials, change of laws by the Government/Local Authorities, etc., there is a delay in handing over possession of the Flat, no claim by way of damages/compensation shall be against the Development.
11. In case of delay in construction of the Flat subject to force majeure and other circumstances as aforesaid under Clause 10, the Developers would pay to the Buyer compensation @ Rs. 5 sq. ft. of the super area of the Flat per month for the period of delay. Likewise, if the Buyer fails to settle the final account within thirty days from the date of issue of the final call notice/offer to hand over possession by the Developers, the Buyer would be liable to pay to the Developers @ Rs. 5 per sq. ft. of the super area of the Flat per month. Further, in the event of his failure to take possession for any reasons whatsoever, the Buyer shall be deemed to have taken the possession of the Flat on expiry of thirty days of final call notice/offer of possession for all intents and purposes under this Clause/Agreement including for liability to payment of holding charges, taxes, levies, outflows and maintenance charges, etc. on account of the Flat."
10. It would thus be seen that the construction of the flats booked by the complainant was required to be completed within 22 months from the date of commencement of the construction. Though it is not known when the construction commenced, the builder could not have postponed the same indefinitely, particularly when the plans have already been sanctioned as recorded in Clause 2 of the allotment letters. Though, Clause 10 of the agreement relieved the builder of the obligation to complete the construction within 22 months, in case of non-availability of material or change of laws by the Government/Local Authorities, this is not the case of the opposite parties that the requisite building material was not available in the market or that the laws applicable to the project in question were changed in such a manner that they were unable to complete the construction within the stipulated time. As far as Clause 11 of the Agreement is concerned, this in my opinion, would apply only in a case where the builder completes the construction and the buyer is willing to take possession from him. In such a case the accounts between the parties have to be settled by developer paying compensation @ Rs. 5 per sq. ft. of the super area of the flat for the period of delay whereas; the buyer is required to pay at the agreed rate if he fails to settle the accounts within thirty days from the date of issue of final call notice/offer to hand over the possession by the developer. The aforesaid clause, in my view, has no application in a case where the developer fails to complete construction within the time agreed with the purchaser and consequently the purchaser is no more interested in the purchase and seeks to take refund of the amount deposited by him with the builder.
This issue came up for consideration of this Commission in CC/232/2014, Puneet Malhotra v. Parsvnath Developers Ltd : II (2015) CPJ 18 (NC) and connected matters decided on 29.1.2015, and an identical view was taken.
11. It is not in dispute that the construction was not completed within the agreed period of 22 months. The construction was not complete even at the time written statement was filed by the opposite parties or even when they affidavit by way of evidence on 4.3.2014. The builder did not claim that the construction of the flats was complete. The initial booking was made by the complainant way back on 29.6.2006. The allotment letters in respect of Flat Nos. Deodar 1301, Deodar 1302 and Deodar 1303 came to be issued to her on 19.2.2008. The construction therefore was not complete even in more than six years after the aforesaid allotment letters were issued. During the course of hearing, it was stated by the learned Counsel for the builder Shipra Estates Ltd. and Jai krishna Developers (P) Ltd. that they are ready to hand over the possession of flats in question to the complainant. However, the said opposite party did not file an affidavit stating therein that the construction of the flats was complete in all respects as per agreed specifications. No note can be taken of such a verbal offer made without any supporting documents and/or affidavit. Moreover, the complainant, in my view, cannot be compelled to accept the possession of the flat after more than eight years of the booking and seven years after issue of allotment letters to her when, admittedly the price in the market have gone down in last 1-2 years. Since the opposite party could not complete the project in which residential flats were booked by the complainant within the stipulated period of 22 months or even within a reasonable time, thereafter, the complainant is entirely justified in seeking refund of the amount which she had paid to them.
12. The opposite parties are therefore, liable to refund the amount which the complainant had paid to them for purchase of the flats in question, along with appropriate interest on that amount. Since they committed default in performing their contractual obligation by not completing the construction within the stipulated time or even within a reasonable period, thereafter, they have no legal right to forfeit any part of the money deposited by the complainant with them, even if the complainant is not more willing to take possession of the said flats. As per the terms of the allotments made to the complainant, she was required to pay interest @ 21% per annum in case of default on her part in paying any installments or any amount or charges due from her. On the reasoning of parity, they also pay interest to the purchaser at the same rate at which it would have charged interest from her in the event of default on her part. Moreover, as observed by this Commission in Puneet Malhotra (supra), we cannot be oblivious to the fact that had the opposite party not agreed to construct the flat in question within the time stipulated in the allotment letter, the complainant who was in need of residential accommodation for herself and her family members might have acquired alternative accommodation instead of tying her funds with the opposite parties. It can hardly be disputed that there was steep appreciation in the market value of the residential land during the period from 2006 when the booking was made and 2010 when these complaints were filed. Though, recently the prices have come down to some extent, they are nowhere near the price prevailing in the year 2006 or even the price prevailing in the year 2008. As far as the cost of construction is concerned, the same has continued to rise unabatedly. Therefore, payment of interest to the flat buyer in such a case is to cover not only the loss of income by way of interest but also compensate her on account of loss of opportunity which she had to acquire residential flat at a particular price in the year 2006.
13. In CC/144/2011, Subhash Chander Mahajan v. Parsvnath Developers Ltd : II (2014) CPJ 719 (NC), another Bench of this Commission directed the opposite party to pay interest @ 18% per annum, besides compensation amounting to Rs. 7.00 lacs and cost of litigation amounting to Rs. 2.00 lacs, in a case where refund was sought from the opposite party Parsvnath Developers Ltd. on account of its failure to complete the construction within the agreed time frame. A Special Leave Petition filed by the opposite party before the Hon'ble Supreme Court vide Diary No. 25053/2014 was withdrawn by the said opposite party on 12.9.2014, after arguing the matter for a while. Interest at the same rate was awarded by this Commission in Puneet Malhotra case (supra).
14. For the reasons stated hereinabove, I hold that the complainant is entitled to refund of the amount which she had deposited with the opposite parties, along with interest on that amount @ 18% per annum form the date on which the deposit was made till the date the said amount is refunded to her. This comprises 8% per annum on account of appreciation in the land value and increase in the cost of construction and 10% on account of loss of interest. However, since compensation is inbuilt in grant of interest @ 18% per annum, I am not inclined to grant any separate compensation to the complainant over and above the interest @ 18% per annum.
15. The next question which arises for consideration in this case is as to whether the complainant is entitled to compensation only from OP. 1. Shipra Estates Ltd. and Jai Krishna Developers (P) Ltd., or also from OP2 Ghaziabad Development Authority, which was impleaded as an opposite party, in view of the objection taken by opposite party No. 1.
A perusal of the booking forms would show that it bears the names of not only OP1 but also of GDA. In fact the name of GDA is printed on the top of the booking form. A perusal of the endorsement of the bank on the application form would show that the cheque issued by the complainants was received by the bank on behalf of the GDA and OP1. The receipt to the complainant was issued on behalf of the GDA as well as OP. 1 Shipra Estates Ltd. and Jai krishna Developers (P) Ltd. The allotment letters issued to the complaint also bear the name of GDA as well as OP1 and it is expressly written on the said letter that the project in question was a joint venture of GDA and OP1.
As noted earlier, as per the MOU executed between the GDA and OP1, the project was to be completed by a joint venture partner and the sale proceeds were to be shared between the GDA and the developer in the ratio of 60:40. As noted earlier, a monitoring committee under the Chairmanship of Vice-Chairman of the GDA was to be constituted for the purpose of overseeing the progress of the project from time-to-time. The entire money collected by the builder was to be deposited in a joint account in the name of the GDA and the Builder in a Nationalized Bank. Therefore, it would be difficult to say that there was no privity of contract between the GDA and the complainant. It was clearly represented to the complainant that the project in question was a joint venture between GDA and OP1, the receipts as well as the allotment letters were issued to her jointly by both GDA and OP1 and the payment from her was accepted by the Bank on behalf of both of them. Therefore, it cannot be disputed that the complainant had hired the services not only of OP1 but also of GDA. Deficiency in the service shall be deemed to be of GDA as well as the OP1 when the booking was accepted and allotment letters were issued to the complainant by both of them. It would be immaterial whether the construction was to be undertaken only by OP1, when both of them had accepted the booking and issued the allotment letter to the complainant. It is quite possible that had GDA not been a party to the project, the complainant might not have booked these flats, with the developer. GDA could easily have monitored the progress of the project and ensured its timely completion by supervision through the monitoring committee, and exercising the powers available to it under the MOU with the developer. Though, as per the joint venture agreement, incase of litigation by the purchaser the responsibility was to be that of the OP1, no such clause was incorporated either in the application form or in the allotment letter issued to the complainant. Therefore, the complainant is not bound by the aforesaid stipulation contained in the MOU between GDA and OP1. Consequently, she is entitled to be compensated by both, GDA and OP1.
For the reasons stated hereinabove, OP1 Shipra Estate Ltd. & Jai Krishan Estate Developers Pvt. Ltd. and OP2 Ghaziabad Development Authority are directed to refund the money deposited by the complainant, along with interest on that amount @ 18% per annum, from the date of deposit till the date of payment, within six weeks from the date of this order. The complainant is not entitled to any relief against OP3 Srishti Welfare Society. No order as to costs