Supreme Court Modifies Compensation Calculation for Delayed Flat Possession: Kaushik Narsinhbhai Patel & Ors. vs. M/s. S.J.R. Prime Corporation Private Limited (22 July 2024)

Date of the Judgment: 22 July 2024

Citation: 2024 INSC 542

Judges: C.T. Ravikumar, J. and Sanjay Kumar, J.

Can a consumer forum ignore a specific clause in a construction agreement when calculating compensation for delayed possession of a flat? The Supreme Court of India recently addressed this question, clarifying the importance of contractual terms in consumer disputes. This case involved a group of homebuyers who experienced significant delays in receiving possession of their flats and approached the National Consumer Disputes Redressal Commission (NCDRC) seeking compensation. The Supreme Court, in this judgment, has clarified the method of calculation of compensation in case of delay in handing over possession of flats.

Case Background

The case involves 46 appellants and several proforma respondents who had booked flats in the ‘Fiesta Homes by SJR Prime’ project developed by M/s. S.J.R. Prime Corporation Private Limited (Respondent No. 1). A Construction Agreement was signed on 31 March 2012, stipulating that possession of the flats would be handed over by March 2014, with a grace period of six months. However, the possession was delayed by approximately four years. The complainants also alleged deficiencies in construction, and they approached the NCDRC seeking various reliefs, including compensation for the delay, refund of illegally charged fees, and the provision of promised amenities like a Green Jogging Track and Convenience Store.

Timeline

Course of Proceedings

The complainants filed a consumer complaint with the NCDRC in May 2019, seeking compensation for delayed possession and other grievances. Despite the ongoing complaint, the builder sent emails to the complainants asking them to contact their legal department. The NCDRC initially issued a notice to the builder, allowing them to file a written statement within 30 days. This order was challenged by the complainants in the Supreme Court. The Supreme Court, in its order dated 11 August 2021, held that the builder had forfeited its right to file a written statement due to their conduct. The NCDRC then proceeded with the case, and issued the impugned order, which was challenged by the complainants in this appeal.

Legal Framework

The case primarily revolves around the interpretation of the Construction Agreement and the application of consumer protection laws. The Supreme Court referred to the following legal provisions:

• ✓ Section 38(3)(a) of the Consumer Protection Act, 2019: This section deals with the procedure for issuing notices to the opposite party in a consumer complaint.
• ✓ Section 38(9) of the Consumer Protection Act, 2019: This section specifies the extent to which the Code of Civil Procedure, 1908 applies to proceedings before the Consumer Forums.
• ✓ Order VI, Rule 1 of the Code of Civil Procedure, 1908 (CPC): Defines “pleading” as the plaint or written statement.
• ✓ Order VI, Rule 2 of the CPC: States that every pleading shall contain a concise statement of material facts relied upon by the party.
• ✓ Order VI, Rule 7 of the CPC: Mandates that no pleading shall raise a new ground of claim or contain any allegation of fact inconsistent with the previous pleadings of the party.

The Court also emphasized that while the Consumer Protection Act is a special law, the general principles of civil procedure, particularly those regarding pleadings, are relevant in the absence of specific provisions.

Arguments

The appellants argued that the NCDRC erred by:

• ✓ Ignoring the Supreme Court’s order (Annexure P-18) which had forfeited the builder’s right to file a written statement.
• ✓ Allowing the builder to introduce new facts through written submissions, which effectively circumvented the forfeiture order.
• ✓ Calculating the due date for possession based on the payment schedule rather than the specific date mentioned in Clause 6.1 of the Construction Agreement.
• ✓ Not awarding compensation as per Clause 6 of the Construction Agreement.

The respondent argued that:

• ✓ The NCDRC’s method of calculating the compensation was just and reasonable.
• ✓ There was no reason to interfere with the NCDRC’s decision.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues:

1. Whether the NCDRC was correct in allowing the builder to introduce new facts through written submissions, despite the forfeiture of their right to file a written statement?
2. Whether the NCDRC was justified in calculating the due date for possession based on the payment schedule, rather than the specific date mentioned in Clause 6.1 of the Construction Agreement?
3. Whether the NCDRC was right in not awarding compensation as per Clause 6 of the Construction Agreement?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

The Court also considered the following legal provisions:

• ✓ Clause 6.1 of the Construction Agreement: This clause specified the promised date for handing over possession of the flats as “on or before the month of March year 2014 with Six months grace period additionally.”
• ✓ Clause 6 of the Construction Agreement: This clause stipulated the compensation for delay in handing over possession of flats at the rate of Rs. 2 per sq. ft. super built-up area per month of delay.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

✓ Nanda Dulal Pradhan & Anr. v. Dibakar Pradhan & Anr. [2022 SCC OnLine SC 822]*: The Court used this case to clarify that forfeiture of the right to file a written statement does not prevent a party from participating in proceedings and cross-examining witnesses.

✓ Nalini Sunder v. GV Sunder [AIR 2003 Kar 86]*: The Court relied on this case to emphasize that a party cannot introduce a case without proper pleadings, reinforcing that the builder could not introduce new facts without a written statement.

✓ R.V. Prasannakumar & others v. Mantri Castles Private Limited & Anr. [(2020) 14 SCC 769]*: The Court followed this case to determine the method of calculating compensation for delayed possession, holding that the due date should be based on the agreement and compensation should be in the form of interest at 6% per annum.

The Supreme Court allowed the appeal in part, modifying the NCDRC’s order. The Court held that the NCDRC was incorrect in calculating the due date for possession based on the payment schedule. Instead, the due date for possession should be determined based on Clause 6.1 of the Construction Agreement, which specified March 2014 with a six-month grace period, i.e., September 2014. The Court upheld the NCDRC’s decision to award compensation in the form of interest at 6% per annum but directed that the calculation of interest should be from September 2014 until the date of offer of possession.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• ✓ The need to adhere to contractual terms, especially the specific date for possession mentioned in the Construction Agreement.
• ✓ The principle that a party cannot introduce new facts without a written statement, especially when the right to file it has been forfeited.
• ✓ The precedent set in R.V. Prasannakumar’s case, which provided a clear method for calculating compensation in cases of delayed possession.
• ✓ The need to ensure that consumers are adequately compensated for delays caused by builders.

Fact:Law Ratio

The court’s reasoning was primarily based on legal principles and precedents, with a lesser emphasis on the factual aspects of the case.

The Court’s reasoning was based on the principle that contractual terms should be respected, and that the forfeiture of the right to file a written statement prevents a party from introducing new facts. The Court also relied on the precedent set in R.V. Prasannakumar’s case to determine the appropriate method of calculating compensation for delayed possession. The Court emphasized that while the builder was allowed to participate in the proceedings, it could not introduce new facts or arguments that would have been included in a written statement.

The Court stated, “In the absence of any specific provisions dealing with non -filing of written statements/forfeiture of the right to file a written statement, taking note of the general position as above, it can only be held that it should bar the opposite party in a proceeding before the Consumer Redressal Forums to bring in pleadings, indirectly to introduce its/his case and evidence to support such case.”

The Court further noted, “A perusal of Clause 6.1 of the Construction Agreement would reveal that it specifically mentions the promised date for handing over the possession viz., the due date for handing over possession as ‘on or before March, 2014’.”

The Court also clarified, “The effect of ‘Construction Linked Payment Plan’ is that it obligates the builder to complete construction up to a particular required level at the given point of time and upon such accomplishment, obligates the buyer to effect the due instalment.”

Key Takeaways

• ✓ Contractual terms, especially those related to the date of possession, are critical in consumer disputes.
• ✓ When a party forfeits the right to file a written statement, they cannot introduce new facts or arguments indirectly through written submissions.
• ✓ Compensation for delayed possession of flats should be calculated based on the agreed-upon date of possession, with interest at 6% per annum as a reasonable measure.
• ✓ Consumer forums must adhere to the principles of natural justice and ensure that all parties are given a fair opportunity to present their case, within the bounds of procedural law.

Directions

The Supreme Court directed the NCDRC to modify its order to calculate the compensation for delay by considering the due date for possession as September 2014 (March 2014 plus six months grace period). The NCDRC was also directed to verify the date on which the offer of possession was made to each flat purchaser and fix the liability on the builder accordingly.

Development of Law

The ratio decidendi of this case is that the due date of possession for calculating compensation in consumer disputes should be determined based on the specific date mentioned in the construction agreement, with any grace period included. This case also clarifies that a party who has forfeited the right to file a written statement cannot introduce new facts or arguments indirectly. The Supreme Court reaffirmed the position of law established in R.V. Prasannakumar’s case regarding the method of calculating compensation for delayed possession of flats, which is to award interest at 6% per annum on the deposit from the due date of possession till the date of offer of possession.

Conclusion

The Supreme Court’s judgment in Kaushik Narsinhbhai Patel & Ors. vs. M/s. S.J.R. Prime Corporation Private Limited clarifies the importance of adhering to contractual terms and procedural rules in consumer disputes. The Court modified the NCDRC order to ensure that compensation for delayed possession is calculated from the date specified in the construction agreement and not based on the payment schedule. This decision reinforces the principle that consumer forums must respect the terms of contracts and that parties cannot circumvent procedural rules to introduce new facts. The judgment also reaffirms the use of interest at 6% per annum as a reasonable measure of compensation for delayed possession, as per the precedent set in R.V. Prasannakumar’s case.