Supreme Court Upholds Consumer Complaint Dismissal: Sudha & Ors. vs. Jaiprakash Associates Limited (2022)

Date of the Judgment: 16 September 2022

Citation: (2022) INSC 859

Judges: Abhay S. Oka, J. and Surya Kant, J.

Can a homebuyer demand a refund for a delayed property possession before the grace period stipulated in the agreement expires? The Supreme Court of India recently addressed this question in a case involving a dispute between homebuyers and a real estate company. The Court examined the terms of the agreement and the timeline of events to determine if the homebuyers were entitled to a refund. The judgment was delivered by a two-judge bench comprising Justice Abhay S. Oka and Justice Surya Kant.

Case Background

On 27th January 2013, the third appellant, a member of the Bar, booked a two-bedroom flat in the respondent company’s project, Garden Isles. Due to significant delays in construction, the respondent company suggested that the appellants cancel the booking and instead book an apartment in Imperial Court – Tower-1 in the Jaypee Greens project in NOIDA. The appellants agreed, and an allotment letter dated 11th July 2015 was issued for Unit Reference No.IMP0128A4, with an approximate covered area of 3072.48 sq. ft., for a consideration of Rs. 2,77,91,313/-. The possession was agreed to be handed over within 24 months from the date of the allotment letter.

The appellants secured a loan from ICICI Bank, and a Quadripartite Agreement dated 9th December 2016 was executed between the appellants, the respondent company, Jaypee Infratech Limited, and the bank. The loan was to be disbursed directly to the respondent company. The respondent company, on 24th October 2016, informed the appellants that the apartment was ready for pre-possession formalities and handover, noting that the completion certificate had been issued on 20th July 2016. The letter also stated that the apartment area had increased slightly and called for a payment of Rs. 1,82,26,309.30 by 23rd November 2016. The company stated that possession would be handed over within 45 days of the payment. The appellants claim that despite this offer, the apartment was incomplete. They made a payment of approximately Rs. 1.80 crores on 31st December 2016, and also agreed to forego certain amenities for a discount. Despite repeated communications from the appellants about the incomplete state of the apartment, the respondent company did not complete the work. The appellants obtained e-stamp paper by depositing stamp duty on July 2017, but the apartment was still not ready. Finally, on 21st September 2017, they filed a consumer complaint, seeking a refund of the entire amount.

Timeline

Course of Proceedings

The National Consumer Disputes Redressal Commission (NCDRC) dismissed the appellants’ complaint, stating that the appellants were not entitled to claim a refund because they filed the complaint before the expiry of the grace period of three months from the stipulated 24 months for possession as per the allotment letter. The NCDRC also noted that the appellants did not comply with the interim order to submit an architect’s report specifying the defects in the apartment. The appellants then appealed to the Supreme Court of India against the NCDRC’s decision.

Legal Framework

The case revolves around the interpretation of the Consumer Protection Act, 1986, specifically the definitions of ‘defect’ and ‘deficiency’ in service. Section 2(f) of the Consumer Protection Act, 1986, defines “defect” as:

“any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods;”

Section 2(g) of the Consumer Protection Act, 1986, defines “deficiency” as:

“any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;”

The standard terms and conditions of the allotment letter, specifically Clause 9.5(a), also play a crucial role. It states:

“9.5(a) The Applicants/Allottee shall be entitled to cancel the Allotment only on default of the Company to deliver possession of the Said Premises within the stipulated period as mentioned hereinabove and within the further period of three months thereafter. Upon expiry of stipulated period and upon the request of the Applicant/Allottee, the Company shall refund the amount (a) had been received from the Applicant/Allottee along with simple interest of the rate of 12% per annum (subject to deduction of tax as applicable).”

Clause 7.1 of the standard terms and conditions specifies that possession will be handed over within the period described in the allotment letter, which is 24 months from the date of the allotment letter.

Arguments

Appellants’ Arguments:

• The appellants argued that the respondent company caused significant delays in completing the construction of the flat initially booked.
• They contended that they were forced to accept the allotment of the new apartment due to the respondent company’s delays.
• The appellants stated that they had paid the entire balance consideration by 31st December 2016 and the respondent company was obligated to complete the apartment within 45 days and hand over possession.
• They argued that despite repeated protests, the respondent company failed to complete the work.
• The appellants claimed that they were forced to pay for amenities that did not exist.
• They argued that the standard terms and conditions were not provided to them, and therefore, Clause 9.5(a), which grants a grace period of three months, should not be binding on them.
• The appellants relied on Clause 17(d) of the Quadripartite Agreement, which states that in case of termination of the allotment, the respondent company is obligated to refund at least 90% of the consideration to the bank. They argued that their demand for a refund constitutes a termination and thus, the respondent company should refund the amount.
• They submitted that they are entitled to a refund of the entire consideration and other charges, along with interest.
• The appellants cited Bangalore Development Authority v. Syndicate Bank [2007 (6) SCC 711] and United India Insurance Company Limited v. Antique Art Exports Private Limited [2019 (5) SCC 362] to support their claim for a refund with interest.

Respondent’s Arguments:

• The respondent company argued that the appellants failed to comply with the National Commission’s interim order to submit an architect’s report on the alleged defects.
• They submitted that the appellants were aware of the standard terms and conditions, as they were referred to in the allotment letter and the Quadripartite Agreement, and their signatures were on the last page of the terms and conditions.
• The respondent company contended that Clause 9.5(a) of the standard terms and conditions allowed them a grace period of three months after the initial 24 months for handing over possession.
• They argued that the appellants filed the complaint before the expiry of the 27-month period, which was premature.
• The respondent company stated that the possession of the apartment was offered to the appellants via email on 23rd November 2017.
• They argued that there was no deficiency in service on their part.
• The respondent company stated that they were willing to transfer the apartment to a buyer brought by the appellants, or to give possession to the appellants, waiving approximately Rs. 30 lakhs, due to the third appellant being a member of the Bar and the health issues of the first appellant’s family members.

Issues Framed by the Supreme Court

The main issue before the Supreme Court was:

1. Whether there was any deficiency in the service rendered by the respondent company?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Court did not find the cases of Bangalore Development Authority v. Syndicate Bank [2007 (6) SCC 711] and United India Insurance Company Limited v. Antique Art Exports Private Limited [2019 (5) SCC 362] applicable to the present case.
• The Court considered the definitions of “defect” and “deficiency” under Section 2(f) and 2(g) of the Consumer Protection Act, 1986.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the contractual terms agreed upon by the parties, specifically the standard terms and conditions of the allotment letter. The Court emphasized that the appellants were bound by the agreement, which included a grace period of three months for the respondent company to complete the construction and offer possession. The Court also noted that the appellants failed to comply with the interim order of the National Commission, which further weakened their case. The Court was also influenced by the fact that the appellants had not completed the pre-possession formalities within the stipulated time.

The Court’s reasoning was primarily based on the legal interpretation of the contract and the timelines involved.

“The letter of allotment dated 11th July 2015 records that possession of the said apartment is expected to be offered to the appellants within a period of 24 months.”

“Clause 9.5 (a) of the standard terms and conditions reads thus: ‘9.5(a) The Applicants/Allottee shall be entitled to cancel the Allotment only on default of the Company to deliver possession of the Said Premises within the stipulated period as mentioned hereinabove and within the further period of three months thereafter.’”

“Thus, as per Clause 9.5(a), the appellants were entitled to seek a refund of the consideration paid provided the possession of the said apartment was not offered within the said period of 27 months from the date of the letter of allotment.”

Key Takeaways

• Homebuyers must adhere to the terms and conditions of their agreements, including grace periods for possession.
• Filing a consumer complaint prematurely, before the expiry of stipulated timelines, can lead to dismissal.
• It is important for homebuyers to comply with interim orders issued by consumer forums or commissions.
• The Court emphasized the importance of contractual obligations and timelines in consumer disputes.
• This judgment reinforces the binding nature of contractual terms and the need for consumers to exhaust all contractual remedies before approaching consumer forums.

Directions

The Supreme Court provided the following directions:

• The appellants were given two months to find a buyer for the apartment.
• If a buyer is found, the respondent company shall transfer the apartment within one month of the offer letter, with the proceeds going to settle the loan and the balance to the appellants.
• If no buyer is found, the appellants can take possession of the apartment within three months, after giving a seven-day notice to the respondent company.
• The respondent company cannot demand any additional amount from the appellants for handing over possession or transferring the apartment.
• If the appellants fail to take possession within three months, they will lose all claims to the apartment, and the respondent company can alienate it.

Development of Law

The ratio decidendi of this case is that a consumer cannot claim a refund for a delayed property possession before the expiry of the grace period as per the agreement. This judgment reinforces the importance of contractual terms and timelines in consumer disputes and clarifies that consumer complaints filed prematurely are liable to be dismissed. There is no change in the previous position of law, but rather a reiteration of the importance of adherence to contractual terms.

Conclusion

The Supreme Court dismissed the appeal, upholding the National Commission’s decision. The Court emphasized that the appellants were bound by the terms of the agreement, which included a grace period for the respondent company to complete the construction. The Court also noted that the appellants filed the complaint prematurely and failed to comply with the interim order of the National Commission. While dismissing the appeal, the Court provided directions to facilitate either the sale of the apartment to a third party or the possession of the apartment by the appellants, without any additional charges.