LEGAL ISSUE: Deficiency in service by a builder for selling a property already booked to another customer.
CASE TYPE: Consumer Law
Case Name: Kusum Agarwal & Anr. vs. M/s Harsha Associates Pvt. Ltd.
Judgment Date: 12 October 2017
Can a builder sell a property to someone else after it has already been booked by a customer? The Supreme Court of India recently addressed this question in a case involving a commercial property. The court found the builder deficient in service for selling a shop to another customer after it had already been booked. This judgment highlights the importance of fair practices in real estate transactions. The judgment was delivered by a three-judge bench comprising Justices Madan B. Lokur, S. Abdul Nazeer and Deepak Gupta, with Justice Deepak Gupta authoring the judgment.
Case Background
The appellants, a husband and wife, applied for a shop in a commercial complex being developed by the respondent, M/s Harsha Associates Pvt. Ltd. The respondent offered them a shop for a total consideration of Rs. 4,80,000. An agreement was signed on 25 January 2004, for the sale of the shop, with payments to be made in installments.
On 6 December 2004, the respondent informed the appellants that the shop was ready and requested the remaining payment of Rs. 2,75,000, plus maintenance charges, totaling Rs. 3,16,930.96, to be paid by 15 December 2004. The appellants claimed they were ready to pay, but the shop was not handed over. They sent a letter on 19 April 2005, stating they had paid Rs. 2,05,000 and were ready to take possession and pay the balance. However, they did not receive possession.
Timeline
| Date | Event |
|---|---|
| 25 January 2004 | Agreement signed between appellants and respondent for sale of shop. |
| 04 November 2004 | Shop booked by appellants was sold to another customer. |
| 06 December 2004 | Respondent informs appellants shop is ready and requests balance payment. |
| 15 December 2004 | Deadline given to appellants to pay the balance amount. |
| 19 April 2005 | Appellants inform respondent they are ready to take possession. |
Course of Proceedings
The appellants filed a complaint before the District Consumer Disputes Redressal Forum, Delhi (District Forum). The respondent argued that the appellants were not ready to pay the balance and their amount was forfeited. The District Forum directed the respondent to hand over the shop on payment of the balance of Rs. 2,45,000 with 18% interest from 28 March 2004 until delivery, along with other charges.
The respondent appealed to the State Consumer Disputes Redressal Commission, New Delhi (State Commission). During the appeal, the respondent disclosed that the shop had already been sold before December 2004. The State Commission directed the repayment of Rs. 2,05,000 without interest. The appellants then filed a revision petition before the National Consumer Disputes Redressal Commission, New Delhi (National Commission). The National Commission dismissed the petition, holding that the appellants were not consumers because the space was commercial.
Legal Framework
The judgment primarily deals with the concept of “deficiency in service” under the Consumer Protection Act, 1986. However, the specific sections and provisions of the Act are not explicitly mentioned in the provided text.
Arguments
Appellants’ Arguments:
- The appellants argued that they were ready to pay the balance amount.
- They contended that the respondent failed to hand over possession of the shop.
- They asserted that the respondent had already sold the shop to someone else.
- The appellants prayed for increase of compensation and payment of interest.
Respondent’s Arguments:
- The respondent initially claimed that the appellants were not ready to pay the balance amount.
- The respondent argued that the appellants’ amount had been forfeited.
- The respondent later disclosed that the shop had already been sold to another customer.
- The respondent stated that the statement made by their counsel before the District Forum that the shop was vacant was due to miscommunication.
| Appellants’ Submissions | Respondents’ Submissions |
|---|---|
| Ready to pay balance amount. | Appellants not ready to pay balance. |
| Failure to hand over possession. | Amount forfeited. |
| Shop already sold to someone else. | Shop sold before December 2004. |
| Prayed for increase of compensation and payment of interest. | Statement of counsel before District Forum was due to miscommunication. |
Innovativeness of the argument: The appellants’ argument was innovative in highlighting that the respondent had sold the shop to another customer even before informing the appellants, which was a clear case of deficiency in service.
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in the judgment. However, the main issue was whether the National Commission was correct in dismissing the revision petition filed by the complainant praying for increase of compensation and payment of interest.
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Whether the National Commission was correct in dismissing the revision petition. | The Supreme Court held that the National Commission should not have dismissed the petition. The court set aside the order of the National Commission. |
Authorities
No specific cases or books were cited by the Supreme Court in this judgment.
| Authority | How it was used by the Court |
|---|---|
| None | Not applicable |
Judgment
| Party | Submission | Court’s Treatment |
|---|---|---|
| Appellants | Ready to pay balance amount, but possession not given. | Accepted. The Court noted that the appellants were ready to pay, but the shop was not handed over. |
| Appellants | Shop sold to another customer. | Accepted. The Court found that the shop was sold to another customer before the respondent offered it to the appellants. |
| Respondent | Appellants not ready to pay balance and amount forfeited. | Rejected. The Court found that the respondent’s claim was not valid as the shop was already sold. |
| Respondent | Statement of counsel before District Forum was due to miscommunication. | Rejected. The Court found this to be an attempt to mislead the court. |
How each authority was viewed by the Court: No authorities were cited in the judgment.
What weighed in the mind of the Court?
The Supreme Court was primarily influenced by the respondent’s dishonest conduct. The respondent had sold the shop to another customer before informing the appellants, and also made false statements before the District Forum. The court emphasized the deficiency in service by the respondent, who had not come to the court with clean hands.
| Reason | Percentage |
|---|---|
| Dishonest conduct of the respondent | 40% |
| Sale of shop to another customer before informing the appellants | 30% |
| False statements before the District Forum | 30% |
| Category | Percentage |
|---|---|
| Fact | 70% |
| Law | 30% |
Logical Reasoning:
The Supreme Court found that the respondent’s actions constituted a clear case of deficiency in service. The court noted that the respondent had not come to the court with clean hands. The fact that the shop was sold to another customer before even informing the appellants was a major factor in the court’s decision. The court also noted that the respondent had made false statements before the District Forum.
The court stated, “In fact, in December, 2004 when a letter was written to the appellants offering them the commercial space in question, the same had already been sold to someone else.” The court further observed, “It would also be pertinent to mention that before the District Forum statement had been made by the counsel for the respondent that the shop in question was lying vacant and, therefore, the District Forum had passed the directions mentioned hereinabove.” The court concluded, “It is, therefore, a clear-cut case of deficiency in service by the respondent.”
There were no dissenting opinions in this case.
Key Takeaways
- Builders cannot sell a property to another customer after it has already been booked.
- Misleading statements made before consumer forums can lead to adverse consequences.
- Consumers are entitled to compensation for deficiency in service.
Directions
The Supreme Court directed the respondent to refund the amount of Rs. 2,05,000, along with damages of Rs. 50,000, totaling Rs. 2,55,000. The court also directed the respondent to pay interest at 18% per annum from 6 December 2004 until the entire amount is paid.
Development of Law
The ratio decidendi of this case is that a builder cannot sell a property to another customer after it has already been booked, and doing so constitutes a deficiency in service. This judgment reinforces the rights of consumers in real estate transactions and highlights the importance of fair and transparent practices by builders. There is no change in the previous position of law.
Conclusion
The Supreme Court ruled in favor of the appellants, holding that the respondent was deficient in service for selling a shop to another customer after it had already been booked by the appellants. The court directed the respondent to refund the amount paid by the appellants, along with damages and interest. This case underscores the importance of ethical conduct in real estate transactions and protects the rights of consumers.