Supreme Court Upholds MRTP Commission Order in DLF Housing Dispute: B.B. Patel & Ors. vs. DLF Universal Ltd. (25 January 2022)

Date of the Judgment: 25 January 2022

Citation: 2022 INSC 79

Judges: L. Nageswara Rao, J., B.R. Gavai, J., B.V. Nagarathna, J.

Can a builder be held liable for unfair trade practices if they delay handing over possession of a flat and impose extra charges? The Supreme Court of India recently addressed this question in a case involving a dispute between apartment buyers and a real estate developer. The core issue revolved around whether the builder’s actions constituted unfair trade practices under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The Supreme Court upheld the decision of the Monopolies and Restrictive Trade Practices Commission, finding no unfair trade practice by the builder. The judgment was delivered by a three-judge bench comprising Justices L. Nageswara Rao, B.R. Gavai, and B.V. Nagarathna, with the opinion authored by Justice L. Nageswara Rao.

Case Background

In 1993, the appellants applied for the allotment of four apartments in the “Beverly Park-I” project in Gurgaon, developed by the respondent, DLF Universal Ltd. The appellants chose a payment plan where they would pay 40% of the cost within 2.5 years and the remaining amount in equated installments over the next 7.5 years. The Apartment Buyer Agreement (ABA) was executed on March 23, 1993. According to the agreement, possession of the apartments was to be given to the appellants as “Licensees” upon payment of 40% of the cost, with the balance to be paid in installments. The basic sale price was set at Rs.7,525 per sq. meter, with additional charges for External Development Charges (EDC), construction deposit, and a lump sum security.

Timeline

Course of Proceedings

The appellants filed a complaint with the Monopolies and Restrictive Trade Practices Commission (MRTP Commission) in 1999, alleging unfair trade practices by the respondent. The MRTP Commission initially rejected a preliminary objection by the respondent regarding jurisdiction. However, the Commission ultimately dismissed the complaint, stating that there was no misrepresentation or unfair trade practice. The Commission noted that the ABA allowed for reasonable extensions in handing over possession and that extra charges were in accordance with the agreement. The appellants then appealed to the Supreme Court.

Legal Framework

The case is primarily governed by the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), specifically Sections 36-A, 36-B(a) and (d), 36-D, and 36-E, read with Sections 2(i) and 2(o). Section 36A of the MRTP Act defines “unfair trade practice” as a trade practice that adopts any unfair method or deceptive practice to promote the sale, use, or supply of goods or services. The Act aims to control monopolies and prohibit restrictive trade practices. The Consumer Protection Act, 1986, also defines “unfair trade practice” similarly, and was referred to by the appellants in their arguments. The relevant clauses of the Apartment Buyer Agreement (ABA) are:

• Clause 2(b): Allows the company to charge for external electrification and fire safety measures.
• Clause 2(c): Deals with preferential location charges.
• Clause 4: Stipulates that the price is based on material and labor costs as of January 1, 1993, and allows for additional charges due to increases in these costs.
• Clause 16: States that possession is proposed to be delivered within 2.5 to 3 years but allows for reasonable extensions due to various reasons.
• Clause 18: Permits the allottee to terminate the agreement if the company fails to deliver possession within the specified time.
• Clause 21(d): States that the company will endeavor to hand over possession as a licensee upon payment of 40% of the sale price.

Arguments

Appellants’ Arguments:

• The appellants contended that the respondent misled them through advertisements and brochures which promised possession within 2.5 to 3 years from the date of signing the ABA. They argued that the construction did not even commence until after the expiry of this period.
• The appellants argued that the ABA was a one-sided contract favoring the respondent, with clauses that were unconscionable and void.
• They submitted that the demand for extra charges was impermissible, as they were not informed about such charges at the time of entering the ABA. They contended that these extra charges were imposed arbitrarily, amounting to an unfair trade practice.
• The appellants sought a direction to the respondent to hand over possession of the apartments after appropriating the amounts already paid towards the basic sale price and to pay liquidated damages for loss of rental income.

Respondent’s Arguments:

• The respondent argued that the appellants were not coerced into signing the ABA and that they understood the implications of the clauses.
• The respondent stated that there was no fixed time for handing over possession, and the delay was due to late approvals from authorities and other unforeseen reasons.
• The respondent contended that the appellants could have terminated the contract if they were aggrieved by the delay.
• The respondent argued that the demand for extra costs was permissible under the terms of the ABA, and the appellants had initially accepted and paid some installments towards these charges.
• The respondent submitted that the majority of buyers had taken possession of their apartments without complaint, and those who raised disputes had settled with the respondent.

Issues Framed by the Supreme Court

• Whether the delay in handing over possession of the apartments and the imposition of extra charges by the respondent constitute an unfair trade practice under the MRTP Act?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• M/s Lakhanpal National Limited v. M.R.T.P. Commission & Anr. [1989] 3 SCC 251*: The Court used this case to define and explain the concept of “unfair trade practice” and to emphasize the need to examine whether a representation is misleading to a reasonable person.
• M/s Philips Medical System (Cleveland) v. Indian MRI Diagnostic & Research Limited [2008] 10 SCC 227*: The Court referred to this case to discuss the purpose of the 1984 amendment to the MRTP Act, which was to prevent false or misleading advertisements.
• Rajasthan Housing Board v. Parvati Devi [2000] 6 SCC 104*: The Court cited this case to highlight the need to examine the terms of the agreement and whether the Board adopted unfair methods or deceptive practices.
• Bangalore Development Authority v. Syndicate Bank [2007] 6 SCC 711*: The Court used this case to support its finding that time was not the essence of the contract as there was a clause for reasonable extension of time and that the appellants did not terminate the contract.
• Colgate Palmolive (India) Ltd. v. MRTP Commission & Ors. [2003] 1 SCC 129*: The Court referred to this case to elucidate the five ingredients that constitute an offense of unfair trade practice, and found that none of the ingredients were substantiated by the appellants.
• Central Inland Water Transport Corporation Ltd. & Anr. v. Brojo Nath Ganguly and Anr. [1986] 3 SCC 156*: The Court acknowledged the proposition that an unconscionable term in a contract is void, but found that the appellants did not specify any clause that was unconscionable in the present case.
• Pioneer Urban Land & Infrastructure Limited v. Govindan Raghavan [2019] 5 SCC 725*: The Court distinguished this case, noting that it pertained to a dispute under the Consumer Protection Act where the flat buyer was seeking a refund due to delay, which is different from the present case where the appellants were seeking possession.
• Wing Commander Arifur Rahman Khan And Aleya Sultana & Ors. v. DLF Southern Homes Private Limited [2020] 16 SCC 512*: The Court distinguished this case, noting that it pertained to a dispute under the Consumer Protection Act where the court found the agreement to be one-sided and allowed for compensation more than what was agreed upon.
• Ireo Grace Realtech Private Limited v. Abhishek Khanna & Ors [2021] 3 SCC 241*: The Court distinguished this case, noting that it pertained to a dispute under the Consumer Protection Act where the court held that the consumer fora have the jurisdiction to award just and reasonable compensation.
• Girish Chandra Gupta v. U.P. Industrial Development Corn. Ltd. & Ors. [2012] 13 SCC 452*: The Court cited this case to support its finding that compensation cannot be granted in the absence of a finding of unfair trade practice.
• Sanjay Singh & Anr. v. U.P. Public Service Commission & Anr. [2007] 3 SCC 720*: The Court cited this case to highlight that final relief granted by the Court need not be the natural consequences of the ratio decidendi of its judgment.
• U.P. Public Service Commission v. Manoj Kumar Yadav & Anr. [2018] 3 SCC 706*: The Court cited this case to highlight that final relief granted by the Court need not be the natural consequences of the ratio decidendi of its judgment.

What weighed in the mind of the Court?

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

• Contractual Terms: The Court emphasized that the Apartment Buyer Agreement (ABA) allowed for a reasonable extension of time for delivery of possession and that the extra charges were in accordance with the agreement.
• Lack of Termination: The appellants did not terminate the agreement despite the delay, which indicated that they did not consider time to be of the essence.
• No Misrepresentation: The Court found no evidence of misrepresentation by the respondent that would constitute an unfair trade practice.
• Absence of Unconscionable Clauses: The appellants did not specifically point out any clause in the ABA that was unconscionable.
• Distinction from Consumer Protection Act Cases: The Court distinguished the cases cited by the appellants, which were primarily related to disputes under the Consumer Protection Act, where the flat buyers were seeking refunds or compensation due to delays.

Fact:Law Ratio

The Court’s reasoning was heavily based on the legal interpretation of the clauses in the ABA and the relevant provisions of the MRTP Act. The factual aspects of the case, such as the delay in construction and imposition of extra charges, were considered in light of the legal framework.

Logical Reasoning:

The Court considered the alternative interpretation that the delay and extra charges were unfair, but rejected it because the ABA allowed for reasonable extensions and the extra charges were in accordance with the agreement. The Court also noted that the appellants did not terminate the agreement, which indicated that they did not consider time to be of the essence. The final decision was reached by a thorough analysis of the contractual terms and the relevant legal provisions.

The Court’s decision was based on a careful consideration of the contractual terms and the legal framework, and the Court concluded that the respondent was not guilty of unfair trade practice.

“The extra charges that were demanded by the respondent were pursuant to clauses 2(b), 4, 15 and 16 of the ABA.”

“There is no dispute that appellants had paid initial instalments towards extra charges.”

“We are convinced that there is no misrepresentation made by the respondent and, therefore, we reject the allegation of unfair trade practice.”

There were no dissenting opinions in this case. All three judges concurred with the judgment.

The implications of this judgment are that it reinforces the importance of contractual terms in determining whether a party is guilty of unfair trade practices. It also highlights that time is not of the essence in a construction contract unless specifically stated and that parties must take action to terminate the contract if they are aggrieved by delays.

No new doctrines or legal principles were introduced in this judgment. The Court relied on existing legal principles and precedents to reach its decision.

The Court analyzed the arguments for and against the claims of unfair trade practice and concluded that the appellants failed to prove that the respondent had indulged in any unfair trade practice.

Key Takeaways

• Contractual Obligations: Parties are bound by the terms of the contract they enter into, and it is essential to carefully review all clauses before signing an agreement.
• Time is Not of the Essence: In construction contracts, time is not considered to be of the essence unless explicitly stated in the agreement.
• Termination of Contract: If a party is aggrieved by a delay, they must take action to terminate the contract as per the terms of the agreement.
• Unfair Trade Practice: To establish an unfair trade practice, there must be clear evidence of misrepresentation or deceptive practices.
• Consumer Protection Act: Cases under the Consumer Protection Act are distinct from those under the MRTP Act, and the remedies available may differ.

Directions

The Supreme Court directed the appellants to pay Rs. 25,00,000 (Rupees Twenty-Five Lakhs Only) for each flat within four weeks from the date of the judgment. The respondent was directed to hand over possession of the flats to the appellants within a week from the date of payment.

Development of Law

The ratio decidendi of this case is that a delay in handing over possession of a flat and the imposition of extra charges by a builder do not automatically constitute an unfair trade practice under the MRTP Act. The court emphasized the importance of the specific terms of the contract and the actions of the parties in determining whether an unfair trade practice has occurred. There is no change in the previous positions of the law.

Conclusion

The Supreme Court upheld the order of the Monopolies and Restrictive Trade Practices Commission, finding no unfair trade practice on the part of DLF Universal Ltd. The Court emphasized the importance of contractual terms and the need for clear evidence of misrepresentation to establish an unfair trade practice. While the appellants were directed to pay a reduced amount to obtain possession of the flats, the Court’s decision underscores the significance of carefully reviewing and adhering to the terms of contractual agreements in real estate transactions.