Supreme Court Upholds MRTP Commission’s Decision on Unfair Trade Practices in Real Estate: B.B. Patel vs. DLF Universal Ltd. (25 January 2022)

Date of the Judgment: 25 January 2022
Citation: 2022 INSC 912
Judges: L. Nageswara Rao, J., B.R. Gavai, J., B.V. Nagarathna, J. (authored by L. Nageswara Rao, J.)
Can a real estate developer be held liable for unfair trade practices for delays in handing over possession and for imposing additional charges? The Supreme Court of India addressed this question in a recent judgment, examining the scope of unfair trade practices under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The Court upheld the Monopolies and Restrictive Trade Practices Commission’s (MRTP Commission) decision, finding no unfair trade practice by the developer. The judgment was authored by Justice L. Nageswara Rao, with Justices B.R. Gavai and B.V. Nagarathna concurring.

Case Background

In 1993, B.B. Patel and others (the appellants) applied for the allotment of four apartments in the “Beverly Park-I” project in Gurgaon, developed by DLF Universal Ltd. (the respondent). The appellants chose a payment plan where possession was to be given after paying 40% of the cost within 2.5 years, with the remaining amount payable in installments over the next 7.5 years. An Apartment Buyer Agreement (ABA) was executed on March 23, 1993. The agreement stipulated that the possession of the premises was proposed to be delivered within 2.5 to 3 years from the date of booking. However, the construction of the apartments began only in June 1996. The appellants continued to make payments as per the schedule. In 1997, the respondent demanded extra charges, citing increased area, material costs, and additional amenities. The respondent informed the appellants that the completion certificate had been received from the authorities in 1998 and the apartments were ready for use and occupation. After the appellants disputed the extra charges, the respondent cancelled the ABA in 1999.

Timeline

Course of Proceedings

The appellants filed a complaint with the MRTP Commission in 1999, alleging unfair trade practices by the respondent. The MRTP Commission initially rejected the respondent’s preliminary objection regarding jurisdiction. However, after examining the case, the Commission dismissed the complaint, stating that there was no misrepresentation by the respondent and that the extra costs were in line with the ABA. The Commission noted that the ABA allowed for reasonable extensions in the delivery of possession. The appellants then appealed to the Supreme Court against the MRTP Commission’s decision.

Legal Framework

The case primarily revolves around the interpretation of the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), specifically concerning unfair trade practices. Section 36A of the MRTP Act defines unfair trade practice as:

“a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any services, adopts any unfair method or unfair or deceptive practice including any of the practices enumerated in sub-section (1)”

The judgment also references the Consumer Protection Act, 1986, which contains a similar definition of unfair trade practices in Section 2(r). The Court examines the interplay between these two Acts in the context of real estate disputes.

Arguments

Appellants’ Submissions:

• The appellants argued that the respondent misled them through advertisements and brochures, promising possession within 2.5 to 3 years.
• They contended that the ABA was a one-sided contract favoring the respondent, with clauses that were unconscionable and void.
• The appellants argued that the demand for extra charges was impermissible, as they were not informed about these charges at the time of entering into the ABA.
• They also argued that the respondent’s actions constituted an unfair trade practice due to the delay in handing over possession and the imposition of additional costs.

Respondent’s Submissions:

• The respondent argued that the appellants were not coerced into signing the ABA and were aware of its terms.
• They submitted that there was no fixed time for handing over possession, and delays were due to late approvals from authorities and other unforeseen reasons.
• The respondent contended that the appellants had the option to terminate the contract if they were aggrieved by the delay.
• The respondent stated that the demand for extra costs was permissible under the terms of the ABA.
• They also argued that the majority of buyers had taken possession of their apartments without any complaints.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the primary issues that the Court addressed were:

1. Whether the respondent was guilty of unfair trade practice due to the delay in handing over possession of the apartments?
2. Whether the respondent’s demand for extra charges amounted to an unfair trade practice?
3. Whether the terms of the ABA were unconscionable and void?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court upheld the MRTP Commission’s decision, finding no unfair trade practice by the respondent. The Court analyzed the clauses of the ABA and concluded that the agreement allowed for a reasonable extension of time for delivery of possession. The Court also held that the demand for extra charges was permissible under the terms of the ABA. The Court noted that the appellants had not terminated the contract due to the delay, and their primary grievance was related to extra costs and not the delay. The Court also stated that the compensation sought by the appellants cannot be granted as Section 12-B of the MRTP Act empowers the Commission to grant compensation only when any loss or damage is caused to a consumer as a result of a monopolistic, restrictive or unfair trade practice.

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 applied the principles laid down in this case to determine whether the respondent’s actions constituted an unfair trade practice by examining if there was any misleading representation.
• M/s Philips Medical System (Cleveland) v. Indian MRI Diagnostic & Research Limited [2008] 10 SCC 227*: The Court used this case to understand the objective 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 referred to this case to highlight the need to determine if the representation was misleading and whether the Board adopted unfair methods for promoting sales.
• Bangalore Development Authority v. Syndicate Bank [2007] 6 SCC 711*: The Court relied on this case to conclude that time was not of the essence in the contract, as the ABA allowed for reasonable extensions.
• Colgate Palmolive (India) Ltd. v. MRTP Commission & Ors. [2003] 1 SCC 129*: The Court used this case to identify the five ingredients necessary to constitute an offense of unfair trade practice, and found that the appellants had failed to substantiate any of them.
• Central Inland Water Transport Corporation Ltd. & Anr. v. Brojo Nath Ganguly and Anr. [1986] 3 SCC 156*: The Court acknowledged the principle that an unconscionable term in a contract is void but found it not applicable in this case as no specific clause was pointed out as being unconscionable.
• Pioneer Urban Land & Infrastructure Limited v. Govindan Raghavan [2019] 5 SCC 725*, Wing Commander Arifur Rahman Khan And Aleya Sultana & Ors. v. DLF Southern Homes Private Limited [2020] 16 SCC 512*, and Ireo Grace Realtech Private Limited v. Abhishek Khanna & Ors [2021] 3 SCC 241*: The Court distinguished these cases, noting that they pertained to disputes under the Consumer Protection Act and involved different reliefs, such as refund of amounts and compensation for delay, which were not the primary claims in the present case.

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 the terms of the ABA, which allowed for a reasonable extension of time for delivery of possession. The Court noted that the appellants did not exercise their right to terminate the contract due to the delay.
• Lack of Misrepresentation: The Court found no evidence of misrepresentation by the respondent. The extra charges were in accordance with the ABA, and the appellants were aware of the possibility of such charges.
• Conduct of the Appellants: The Court noted that the appellants’ primary grievance was related to extra costs and not the delay in handing over possession. The Court also highlighted that the appellants did not terminate the agreement due to the delay.
• Distinction from Consumer Protection Act Cases: The Court distinguished the present case from cases under the Consumer Protection Act, where the relief sought was refund of amounts and compensation for deficiency in service.

Logical Reasoning:

The Court considered alternative interpretations but rejected them because the appellants did not prove misrepresentation or that the extra charges were not in accordance with the ABA. The Court reached its final decision based on the contractual terms, the conduct of the parties, and the legal framework.

The Court held that the appellants failed to substantiate their claims of unfair trade practices. The Court noted that the appellants sought possession of the apartments without paying the outstanding amounts. The Court also emphasized that the appellants did not terminate the agreement due to the delay in handing over possession.

“There is no doubt that there has been a delay in completion of the project beyond three years. However, the appellants did not issue any notice for termination of the agreement.”

“There is no dispute that appellants had paid initial instalments towards extra charges. The respondent had also duly informed the appellants of the details of the extra cost being incurred.”

“The compensation sought by the appellants cannot be granted as Section 12-B of MRTP Act empowers the Commission to grant compensation only when any loss or damage is caused to a consumer as a result of a monopolistic, restrictive or unfair trade practice.”

There were no dissenting opinions in this judgment.

Key Takeaways

• Real estate agreements should be carefully reviewed, paying close attention to clauses regarding delivery timelines and additional charges.
• Buyers should be aware of their rights to terminate the agreement if there are significant delays in possession.
• Unfair trade practice claims must be substantiated with clear evidence of misrepresentation or deceptive practices.
• The MRTP Act and the Consumer Protection Act provide different avenues for redressal, and the appropriate forum should be chosen based on the specific nature of the dispute.

Directions

Despite upholding the MRTP Commission’s decision, the Supreme Court directed the respondent to hand over possession of the flats to the appellants on payment of Rs. 25,00,000 for each flat within four weeks from the date of the judgment. The respondent was directed to hand over possession within a week from the date of payment.

Development of Law

The ratio decidendi of this case is that for a claim of unfair trade practice to succeed, the complainant must prove misrepresentation or deceptive practices on the part of the respondent. The judgment also clarifies that a reasonable extension of time for delivery of possession is permissible under a construction contract, and the complainant cannot claim unfair trade practice if they have not terminated the agreement due to the delay. There is no change in the previous positions of law.

Conclusion

The Supreme Court’s judgment in B.B. Patel vs. DLF Universal Ltd. upholds the MRTP Commission’s decision, finding no unfair trade practices by the respondent. The Court emphasized the importance of contractual terms and the need for clear evidence of misrepresentation to establish unfair trade practice. While the Court dismissed the appeal, it directed the respondent to hand over possession of the flats to the appellants on payment of a reduced amount, balancing the interests of both parties.