M. Shreesha, Incharge President
These complaints are being disposed of by a common order, since common questions of fact and law are involved in all these complaints, and against the same opposite parties, we are of the opinion that they can be disposed of by a common order.
C.C.No.80 of 2011
1. The brief facts as set out in the complaint are that the complainant entered into an agreement of sale and a construction agreement on 16-8-2007 with Opposite parties 1 to 6 for plot No.248 admeasuring 218 sq. yds. and bungalow admeasuring 2,300 sq. ft. for a sale consideration of Rs.25,50,000/- for the land and Rs.34,50,000/- at the rate of Rs.1500/- per sft. for the construction, which as per the terms of the agreement was to be completed within 21 months from the date of agreement. Opposite party No.1 is the developer and O.Ps. 2 to 6 are the land owners and O.P. 7 is the bank with which O.P.1 had a tie up arrangement for providing finance.
The complainant submits that O.P.1 arranged for loan from opposite party No.7 bank and the consideration amount was paid on the following dates:
a) Rs.11,50,000/- at the time of agreement i.e. 16-8-2007
Amounts released by bank to O.P.1
b) Rs.29,00,000/- on 31-3-2008
c) Rs. 4,00,000/- on 23-5-2008
d) Rs.2,00,000/- on 23-6-2008
e) Rs.2,00,000/- on 04-9-2008
f) Rs.2,00,000/- on 01-8-2008
g) Rs. 62,000/- on 27-11-2008
Total Rs.39,62,000/-
2. The complainant further submits that in spite of paying 85% of the amounts as shown above, the opposite parties did not complete even 40% of the work and in spite of repeated requests, no progress was made. Thereafter the complainant got issued a legal notice on 27-8-2009 stating that the repayment schedule of the bank has begun and the complainant is being forced to pay interest and therefore demanded the opposite parties to complete the construction, for which O.Ps. replied with all false allegations and subsequently the complainant also issued a notice to O.P.7 on 07-9-2009 stating that O.P.1 did not make any progress in the construction and therefore the complainant will not pay the EMI as O.P.7 had released the amounts without monitoring the stages of construction. O.P. 7 replied on 05-10-2009 refusing to take any steps and demanded the complainant to pay the EMIs. O.Ps. 1 and 2 approached the complainant promising to complete the construction within a period of six months from December, 2010 and agreed to pay the interest amount if the possession is not delivered by 31-5-2011, they will refund the entire amount and once again failed to deliver possession and again on 21-6-2011, the O.Ps. called for a meeting and sought further time.
The complainant submits that O.P.7 disbursed the amount colluding with O.Ps. 1 to 6 without verifying the stages of construction and therefore there is deficiency in service on behalf of all the O.Ps. and the complainant submitted that he paid amounts which includes interest of Rs.13,92,686/-. The complainant further submitted that as OP 1 agreed to refund total amount if possession was not handed over by 31-5-2011, the complainant got issued a legal notice on 29-6-2011 calling upon O.Ps. 1 to 6 to refund the amount with interest and compensation and the said notices were acknowledged by O.Ps. and they replied with false allegations and also demanded that the matter be referred to arbitration. The complainant did not choose to appoint any arbitrator on his behalf and instead approached this Commission seeking direction against O.Ps. 1 to 6 to refund Rs.51,12,000/- with interest at 12% p.a. and direct O.Ps. 1 to 7 to pay a sum of Rs.13,92,686/- together with interest at 12% p.a. from the date of complaint till the date of payment, compensation of Rs.10,00,000/- and costs.
3. O.Ps 1 to 6 filed written version admitting the execution of the sale agreement and the construction agreement on 16-8-2007. In their written version, O.Ps. 1 to 6 relied on the following clauses of the construction agreement.
Clause No.7.7 completion time: The said bungalow shall be completed by the Contractor within 21 months from the date of hereof (completion Date). The contractor shall not however incur any liability or be held liable nor the owner shall claim any amount from the Contractor, if the contractor is unable to deliver possession of the said bungalow within the completion date or if the completion of the said bungalow is delayed by or an account of 1) non availability of steel, cement or any other building materials 2) any notice, order of injunction of the court, rule or notification of the Government or any other public authority 3) delay in the grant of the water, sewerage and drainage connection, electric or cable connection or any other permission or sanction by the Government or the appropriate authority or due to any other circumstances beyond the control of the contractor 4) any act of God, 5) delay on the part of the owner to make payments 6) any other reasonable cause ( for what is a reasonable cause or not, the certificate of the Architects shall be final and conclusive) whereby the contractor is prevented from completed the said bungalow or any portion thereof, 7) circumstances beyond control of the contractor and 8) force majeure circumstances as defined in this agreement and as provided by statute or equity. In no event shall the owner be entitled to claim any amount from the contractor on account of consequential losses and damages or otherwise if the said bungalow is not completed within the completion date.
7.8.3 Delay in possession: Without prejudice to the provisions of clause 7.7 above, and subject to the same, in the event of the contractor failing to deliver the possession on the completion date, the contractor shall pay compensation at Rs.5000/- per month to the owner, till the possession is actually delivered.
12.1 Force majeure: The contractor shall not be held responsible for any consequences or liabilities under this agreement if it is prevented in performing its obligation under the terms of this agreement by reason of contingencies caused by neither of the parties and unforeseen occurrences such as acts of god, acts of nature, acts of war, fire, insurrection, terrorist action, civil unrest, riots/strike by material suppliers, workers and employers, delay on account of seeking statutory permission, litigation attachments etc. and acts of government such as change in legislation or enactment of new law, restrictive governmental laws or regulations. The contractor shall not be deemed to have defaulted in the performances of its contractual obligations whilst the performance thereof, is prevented by force majeure, and the time limits laid down in this agreement for the performance of obligations shall be extended accordingly upon occurrence and cessation of any event constituting force majeure.
15.1 Disputes: The parties shall attempt to settle any disputes or differences in relation to or arising out of or touching the agreement or the validity, interpretation, construction , performance, breach or enforceability of this agreement (collective disputes) by way of negotiation. To this end, each of the parties shall use reasonable endeavours to consult or negotiate with the other party in good faith, and in recognizing the parties mutual interests, attempt to reach a just and equitable settlement satisfactory to both parties.
15.3 No legal proceeding without recourse to arbitration: The parties shall not commence legal proceedings or have any receiver appointed over the said bungalow project without first referring the matter to arbitration and till the arbitration tribunal has given its award.
4. The opposite parties submit in their written version that the complainant is not a consumer and that he has to seek the remedy of arbitration and that the O.Ps had already appointed one M.Sreedhar Murthy as their nominee arbitrator and hence the complainant should appoint one arbitrator to represent the complainant to adjudicate the matter and submit that there is no deficiency in service on their behalf.
5. O.Ps. 1 to 6 also filed additional written version stating that the complainants in CCs 80 to 83/2011 approached O.Ps. 1 to 6 for an exchange i.e. to provide 3 bigger bungalows and accordingly the following agreements were executed.     a) Agreement of sale in respect of Plot No.166 containing land admeasuring 281 sq. yds. comprised in the layout named âThe Neighbourhoodâ being created on land 49.111 acres situated in Survey Nos. 163, 164/1, 165, 166, 167, 168, 169, 170, 171/1, 172/2, 173/1, 174/1, 177, 178 and 179 of Gundla Pochampally village, Medchal Mandal, Ranga Reddy District. Andhra Pradesh bounded on North:167, South :Plot No.165, East:Plot No.184 and West:40 feet wide road was executed in favour of Mr.Anand Joshi S/o.Hanuman Joshi on 17-1-2011, followed by construction agreement executed by Mr.Anand Joshi S/o.Mr.Hanuman Joshi in favour of M/s Omegha Shelters Private Limited on 17-1-2011.
b) Agreement of sale in respect of Plot No.172 containing land admeasuring 281 sq. yds. comprised in the layout named âThe Neighbourhoodâ being created on land 49.111 acres situated in Survey Nos. 163, 164/1, 165, 166, 167, 168, 169, 170, 171/1, 172/2, 173/1, 174/1, 177, 178 and 179 of Gundla Pochampally village, Medchal Mandal, Ranga Reddy District. Andhra Pradesh bounded on North:173, South :Plot No.171, East:Plot No.178 and West:40 feet wide road was executed in favour of Mr.Sanjay Joshi S/o.Ganeshlal Joshi on 17-1-2011, followed by construction agreement executed by Mr.Sanjay Joshi S/o.Ganeshlal Joshi in favour of M/s Omegha Shelters Private Limited on 17-1-2011.
c) Agreement of sale in respect of Plot No.173 containing land admeasuring 281 sq. yds. comprised in the layout named âThe Neighbourhoodâ being created on land 49.111 acres situated in Survey Nos. 163, 164/1, 165, 166, 167, 168, 169, 170, 171/1, 172/2, 173/1, 174/1, 177, 178 and 179 of Gundla Pochampally village, Medchal Mandal, Ranga Reddy District. Andhra Pradesh bounded on North:173, South :Plot No.171, East:Plot No.178 and West:40 feet wide road was executed in favour of Mr. Pankaj Joshi S/o.Gopal Joshi on 17-1-2011, followed by construction agreement executed by Mr.Pankaj Joshi S/o.Gopal Joshi in favour of M/s Omegha Shelters Private Limited on 17-1-2011.
6. The opposite parties submit that the above agreements were executed in favour of and by the sons of the complainants and therefore is just and necessary for O.Ps. 1 to 6 to file this additional written version and in view of the agreements referred above, C.Cs.80/2011, 81/2011, 82/2011 and 83/2011 have become infructuous and the complaints are liable to be dismissed and they also taking steps for impleading the sons of the complainants as proposed parties in view of the developments.
7. The complainants filed rejoinder contending that the independent contracts entered by opposite parties with regard to 3 different premises and the complainants are not parties to the documents and has nothing to do with it. The complainants submitted that they entered into agreement of sale with regard to Plot Nos. 248, 249, 255 and 254 which are covered under CCs. 80/11 to 83/11 and deny that they approached the opposite parties for an exchange to provide three bigger bungalows and denied that there was any compromise and with regard to the execution of agreement of sale on 17-1-2011 in favour of the sons of the complainants, it is submitted that they are independent transactions and are not covered by the above case. The complainants further submit that in the additional documents there is no mention about the alleged substitution or else the opposite parties would have taken back the old agreement and cancelled it. The complainants further submit that the consideration paid by the complainant was almost 85% about 52 to 55 lacs paid to the opposite parties under the agreement of sale with regard to each property but in agreement of sale dated 17-1-2011, the consideration paid was shown as Rs.4,49,600/- and hence if the said agreement is in substitution of the agreement in favour of the complainant, it ought to have shown the amount of Rs.52 lacs already paid by the complainant and prayed to allow the complaints as prayed for.
8. O.Ps 1 to 6 filed CC.IA.Nos. 1701/2012 to 1704/2012 to implead proposed parties to the complaint and the same were dismissed by order dt.11/2/2013 holding that they are not necessary parties to the complaint.
9. O.P.7 filed their written version and contended that the complainant had wrongly impleaded it as a party and hence the complaint is liable to be dismissed for mis-joinder of parties and submitted that the complainant did not allege any deficiency in service on behalf of OP 7 and the complainant is not entitled to claim refund of the said amount from OP 7 or payment of interest and submitted as the complainant availed the loan, he is liable to pay EMIs as per his undertaking in various agreements executed by him in its favour. Opposite party No.7 also submitted that the complaint is time barred and is liable to be dismissed. It further submitted that the complainant was sanctioned a loan on 25-3-2008 and it has disbursed Rs.39,62,000/- upto 27-11-2008 and the complainant had not alleged any deficiency in service on the part of OP 7 in disbursing the amounts but only asked OP not to charge interest in his letter dated 07-9-2009 and complained to RBI on the same issue but he later admitted his liability and was paying EMIs.
O.P.7 further submitted that it sanctioned loan for purchaser of villas in OP 1 project, on application filed by the complainant. He obtained letter from the builder expressing no objection of mortgaging the proposed house in favour of OP 7 and denied any tie up with O.P.1. O.P.7 further submitted that the complainant first identified the project, decided to buy a bungalow from OP 1 and then approached OP 7 seeking housing loan for purchase of the bungalow and approached O.P.7 by which time, the owners and developers have jointly executed the Agreement of sale dated 20-8-2007 in favour of the complainant and they also issued letter expressing âno objection for creating mortgage and promised to hand over sale deed after it was executed by the owners and developers. O.P. 7 submitted that as per the conditions of sanction, the laon of Rs.50 lakhs sanctioned to the complainant was to be disbursed directly to seller on request of the borrower and the complainant had accepted the terms and conditions and signed the sanction letter. O.P. 7 further submitted that after the complainant complained on 7-9-2009 about the delay in completion of construction, OP 7 had not disbursed any further amounts in favour of O.P.1 and submitted that the complainant kept quiet from 2008 and made false allegations about collusion between OP 7 and O.P.1 and the correspondence filed by the complainant and OP.1 was not communicated to OP 7.
10. The complainant executed loan agreement dt.26-3-2008 which stipulate that the loan would be disbursed directly to the developer and the disbursement shall be deemed to be disbursement to borrower and it had disbursed an amount of Rs.39,62,000/- to the builder as per the directions of the complainant and the complainant is liable to repay the loan as per the agreed terms at stipulated EMIs with interest.
11. O.P.7 further submitted that the complainant and Developer executed a Tripartite agreement with OP 7 on 26-3-2008 wherein it was clearly stipulated that OP 7 bank shall not be responsible to ensure or ascertain the progress of construction and mere demand for payment by the developer as per the conditions of allotment letter would be sufficient for the bank to effect disbursement as aforesaid and the complainant cannot have any grievance in regard to disbursement made by OP 7. OP 7 also submitted that the complainant issued post dated cheques towards EMIs payable by him and cheque dt.10-9-2009 towards EMI bounced due to stop payment instructions and hence OP 7 issued notice on 07-10-2009 under section 138 of Negotiable Instruments Act, stating that it was not concerned with disputes between the complainant and OP 1 and complainant filed reply dt.05-10-2009 but did not file the notice dt.07-10-2009 and contended that it is the duty of the borrowers to get the sale deed registered and handover the original title deed to OP 7 and till date the sale deed was not handed over to OP 7 which constitutes default and OP 7 is liable to proceed against the complainant and submitted that there is no deficiency and prayed for dismissal of the complaint with costs.
12. The complainant filed affidavit by way of evidence reiterating the facts of the complaint and Exs.A1 to A10 were marked on his behalf in all CCs.
13. The opposite parties 1 to 6 filed the affidavit of evidence of their authorised signatory, Mr.M.P.Agarwal and marked Exs.B6 and B7 in C.C.Nos.80/11, 82/11 and 83/2011 and OP 7 filed affidavit of evidence of its officer and Exs.B1 to B5 are marked on its behalf.
14. O.Ps. 1 to 6 also filed petitions to receive additional documents by way of evidence and these documents were also taken on file and marked as Exs.B6 and B7 in C.C.Nos.80/11, 82/11 and 83/2011.
1. Whether this complaint is maintainable, before this Commission, as the counsel for the O.Ps. 1 to 6 submit that an arbitrator was appointed on their behalf?
2. Whether there is any deficiency in service on behalf of the opposite parties 1 to 6 and if the complainant is entitled to the relief claimed for in the complaint?
3. Whether there is any deficiency in service on behalf of O.P.7 bank i.e. whether it has adhered to the terms of the tripartite agreement in release of the amounts?    Â
15. First we address ourselves to the aspect of maintainability of the complaint raised by the O.Ps. The learned counsel for O.Ps. 1 to 6 submitted that they had appointed one Mr.M.Sridhar Murthy, Advocate as their nominee arbitrator and that this complaint is not maintainable as the dispute resolution method of arbitration is provided in the contract itself and without exhausting the said remedy, the complainant had approached this Commission. The learned counsel for the O.Ps. 1 to 6 relied on the following decisions:
a) AIR 2003 Supreme Court 2252;
b) CO No.223/2009 dt.01-4-2010 of Honble High Court of Calcutta
c) (2006) 7 Supreme Court cases 275
d) 2011 (5) ALT 126 (DB) of Honble High Court of AP
e) 1996(6) Supreme court cases 385
f) (2005) 8 Supreme Court cases 618
and drew our attention to the judgement of the Apex court reported in (2006) 7 Supreme Court cases 275 in RASHTRIYA ISPAT NIGAM LTD., AND ANOTHER v. VERMA TRANSPORT CO. in which the Supreme Court held that a party cannot be said to have waived its right to invoke arbitration clause or acquiesced itself to jurisdiction of court before its filing of âfirst statement on the substance of the disputeâ. In the instant case, the opposite parties have stated that an advocate has been appointed as nominee arbitrator vide their reply notice Ex.A8 dt.15-7-2011. It is pertinent to note that the complainant as part of his fulfilment of the contract should appoint an arbitrator on his behalf also but he did not choose to do so and instead he clutched the jurisdiction of this Commission which in the instant case is not a bar.
The learned counsel for the O.Ps. 1 to 6 also relied on the judgement of High Court of Calcutta in CO No.223/2009 in Indusind Bank Ltd., v. Gadadhar Banerjee in which the Supreme Court held that Section 8 is a Mandatory provision and allowed the petitioner prayer for reference U/s.8 of Arbitration and Conciliation Act as there was arbitration clause in the agreement but the facts in the instant case are different.
We rely on the judgement of the Apex court in National Seeds Corporation Ltd., V. M.Madhusudhan Reddy reported in (2012) 2 SCC 506 has discussed the jurisdiction of the Consumer Fora and Commissions while adjudicating matter wherein there is an arbitration clause in the contract and held as follows:
âThe remedy of arbitration is not the only remedy available to a grower. Rather, it is an optional remedy. He can either seek reference to an arbitrator or file a complaint under the Consumer Act. If the grower opts for the remedy of arbitration, then it may be possible to say that he cannot, subsequently, file complaint under the Consumer Act. However, if he chooses to file a complaint in the first instance before the competent Consumer Forum, then he cannot be denied relief by invoking Section 8 of the Arbitration and Conciliation Act, 1996 Act. Moreover, the plain language of Section 3 of the Consumer Act makes it clear that the remedy available in that Act is in addition to and not in derogation of the provisions of any other law for the time being in force.â
In fact in Fair Air Engineers Pvt. Ltd. Vs. N.K. Modi(1996) 6 SCC 385 rejecting the contentions of the opposite party that the proceedings under the Consumer Protection Act, 1986 could not continue in view of the Arbitration Clause in the agreement entered into between the parties, Supreme Court observed as under:
âIt must be held that the provisions of the Act are to be construed widely to give effect to the object and purpose of the Act. It is seen that Section 3 envisages that the provisions of the Act are in addition to and are not in derogation of any other law in force. It is true, as rightly contended by Shri Suri, that the words âin derogation of the provisions of any other law for the time being in forceâ would be given proper meaning and effect and if the complaint is not stayed and the parties are not relegated to the arbitration, the Act purports to operate in derogation of the provisions of the Arbitration Act. Prima facie, the contention appears to be plausible but on construction and conspectus of the provisions of the Act we think that the contention is not well founded. Parliament is aware of the provisions of the Arbitration Act and the Contract Act, 1872 and the consequential remedy available under Section 9 of the Code of Civil Procedure, i.e., to avail of right of civil action in a competent Court of civil jurisdiction. Nonetheless, the Act provides the additional remedy.â
This judgment of the Supreme Court has been followed in a number of subsequent cases. Similarly, Supreme Court in Indochem Electronic and Another Vs. Additional Collector of Customs, A.P. reported in (2006) 3 SCC 721 , Secretary, Thirumurugan Cooperative Agricultural Credit Societyreported in (2004) 1 SCC 305, CCI Chambers Coop. Hsg. Society Ltd. reported in (2003) 7 SCC 233 and State of Karnataka Vs. Vishwabharthi House Building Coop. Society and Others reported in (2003) 2 SCC 412, has held that Consumer Protection Act, 1986 seeks to provide remedy in addition to the remedy provided under other Acts.
The learned counsel for the Ops contended that the courts as well as consumer fora cannot resolve the dispute, where an arbitration clause is provided in the agreement, in such a case, necessarily it had to be referred to arbitration. We may mention herein that in Fair Air Engineers case which we have already referred to above their Lordships had categorically opined that consumer fora have jurisdiction despite an arbitration clause in the agreement.
In Hindustan Petroleum Corporation Ltd. Vs. Pinkcity Midway Petroleum reported in (2003) 6 SCC 503 the Supreme Court held that Section 8 of the 1996 Act in clear terms mandates that a judicial authority before which an action is brought in a matter which is subject matter of an arbitration agreement to refer such parties to arbitration, and that the language of the said Section is unambiguous. The Supreme Court also held that the Civil Court discharges administrative function and, therefore, it cannot go into the question whether the Arbitral Tribunal has jurisdiction to decide the said issue.
This conclusion is based on the Constitution Bench judgment of the Supreme Court in Konkan Railway Corporation Ltd. Vs. Rani Constructions Pvt. Ltd. (2002) 2 SCC 388. A seven Judge Bench of the Supreme Court in M/s. S.B.P. and Co. Vs. M/s. Patel Engineering Ltd. AIR 2006 SC 450 however, overruled the decision in Konkan Railway Corporation Ltd. by holding that the power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the 1996 Act is not an administrative power but it is a quasi judicial power and in case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated judge would be that of the Chief Justice as conferred by the Statute.
In fact in W.P. No. 4205/2008 of the High Court of A.P. wherein his Lordship has considered all these decisions and opined that :
âHaving regard to the interpretation given by the Supreme Court in FAIR AIR ENGINEERS PVT. LTDwith regard to Section 3 of the 1986 Act and the ratio in LUCKNOW DEVELOPMENT AUTHORITY, I am of the view that the 1986 Act, being a special enactment, which created an additional remedy in favour of the consumers by raising consumer disputes before the Fora constituted under the said Act, Section 8 of the 1996 Act does not have the effect of taking away such a remedy from the consumers as in the case of civil suits, which are in the nature of common law remedies. To my mind, the true purport of Section 3 of the 1986 Act is that if a party chooses to avail a remedy other than the consumer dispute, he shall be free to do so because the remedy under the 1986 Act is not in derogation of the other remedies available to such a party. But, conversely if he chooses to avail the remedy before the Consumer Fora, such a right cannot be denied to him on the ground of availability of an alternative remedy, such as arbitration. Put it briefly, Section 3 of the 1986 Act is intended to provide an additional remedy to a party and the same is not meant to deny such a remedy to him. In this view of the matter, in my opinion, the order passed by the District Forum does not suffer from any legal infirmity and it cannot be said that the District Forum has inherent lack of jurisdiction to entertain and adjudicate the complaint.â
It upheld the order confirming the jurisdiction on the consumer fora despite arbitration clause in the agreement.
We may state that consistently the Honble Supreme Court is of the opinion that arbitration clause in the agreement would not debar the consumer fora from entertaining the complaint. Taking a sentence out of context and harping that it is perincurium would not justify for taking such a stance. Â Â Â Â Â Coming to the question of jurisdiction, admittedly the petitioner/opposite party has been engaged in housing construction activity at Hyderabad. It comes under âService as defined u/s 2(1)(o) of the Consumer Protection Act which reads as follows :
(o)Â "service" means service of any description which is made availÂable to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;
By virtue of Section 2(1)(o) of the Consumer Protection Act the complainants are undoubtedly entitled to prosecute this case before this Commission in the light of housing activity taken upon by the petitioner. Importing the provisions of C.P.C to oust the jurisdiction of the Consumer Fora would not hold good.
It is pertinent to note that the complainant never approached or appointed an arbitrator on his behalf but instead chose to file a case before this Commission and it is also pertinent to note that no Arbitration Award has been passed. Therefore we hold that the complainant is a consumer and this complaint is maintainable before this Commission.
2. Whether there is any deficiency in service on behalf of the opposite parties 1 to 6 and if the complainant is entitled to the relief claimed for in the complaint?
Now we address ourselves if there is any deficiency in service on behalf of the opposite parties.
16. The facts not in dispute are that the complainant entered into an agreement of sale and construction agreement with O.P.1. evidenced under Ex.A1 and A2 respectively. It is the complainants case that he purchased a plot admeasuring 218 sq. yds. with a constructed building of 2300 sft vide Exs.A1 and A2 for a total sale consideration of Rs.25,50,000/- for the land and Rs.34,50,000/- for the bungalow. It is also not in dispute that as per the terms of the agreement, the O.Ps. have to deliver the said bungalow within 21 months from the date of agreement i.e. May, 2009 as per clause 7.7. The payments made by the complainant to O.ps. 1 to 6 are also not in dispute. The complainant paid
- Rs.11,50,000/- at the time of agreement;
-Rs.29,00,000/- on 31-3-2008
- Rs.4,00,000/- on 23-5-2008
-Rs.2,00,000/- on 23-6-2009
-Rs.2,00,000/- on 04-9-2008
-Rs.2,00,000/- on 01-8-2008
-Rs. 62,000 on 28-11-2008
Total : Rs.51,12,000/-
The complainant got issued Ex.A3 legal notice on 27-8-2009 to O.P.1 calling upon them to complete the construction and deliver possession as O.P.7 bank is insisting on payment of the outstanding dues and interest. O.Ps. replied vide Ex.A4 on 08-9-2009 stating that the complainant has paid only Rs.48,62,000/- out of the total sale consideration of Rs.60,00,000/- and that as per clause 7.8.3, if there is any delay in possession, the contractor will pay Rs.5,000/- per month to the owner till the possession is delivered. The opposite parties also relied on 12.1 which is a force meajure clause stating that if their contractual obligations are prevented by force measures, they are not liable and also clause 15.3 that parties shall first approach an arbitrator.
17. It is the complainants case that O.P.7 bank has without adhering to the stages of construction released the amounts to O.Ps. 1 to 6 and is now demanding the complainant to pay the interest and outstanding dues vide their notice, Ex.A5 dated 7-10-2009. Ex.A6 is a letter issued by the bank to the complainant on 05-10-2009 calling upon the complainant to pay the EMIs as the builder has not executed any agreement with the bank to pay the EMIs on behalf of the complainant. The complainant then sent Ex.A7 notice to O.P.1 on 29-6-2011 calling upon the O.Ps. to refund the amount of Rs.62,54,686/- together with interest at 12% p.a. for which O.P.1 replied on 15-7-2011, Ex.A8 calling upon the complainant to appoint an arbitrator on his behalf to represent him and once the arbitral tribunal is constituted, the case can be adjudicated. Exs.A9 and A10 refer to the letter, facilities, time frame to be provided by O.Ps. 1 to 6 and the details of O.P.1 company and certificate of incorporation respectively. In the first page of Ex.A9, O.P.1 promised that by September, 2009 this ânew home would be ready.
18. It is the further case of the complainant that till April, 2011 there was no progress inspite of communication by emails and therefore a meeting was held on 21-6-2011 and the O.P.s stated that they would positively deliver the possession by six months i.e. by December 2011 or else pay the interest to the bank for the delayed period and in the event of default, they would refund the entire amount along with the interest charged by the bank. This is reflected in the legal notice sent by the complainant on 29-6-2011 evidenced under Ex.A8.
19. The learned counsel for O.Ps. 1 to 6 contended that the agreement entered into with the complainants i.e. Exs.A1 and A2 are superseded as new agreements were entered into with their relatives on 17-1-2011. It is the case of the complainants that the new agreements filed by the O.Ps i.e. Exs.B6 and B7 are in no way connected with the agreements executed in favour of the complainants. It is pertinent to note that there are also no substantial grounds put forth by opposite parties 1 to 6 with respect to the reasons as to why they executed Exs.B6 and B7 without the cancellation of Exs.A1 and A2, if truly it is their case that Exs.B6 and B7 were entered into only as a matter of compromise. The amounts paid are not in dispute and the delay in the construction is also not in dispute.
It is the only case of the O.Ps. that arbitration clause should have been adhered to which is already answered in point 1 and that Exs.B6 and B7 supersede Exs.A1 and A2 which is unsustainable in the light of the fact that Exs.A1 and A2 have not been cancelled and neither have O.Ps. 1 to 6 filed the affidavits of the parties who entered into Exs.B6 and B7. The complainant in his rejoinder to the additional written version submitted that it is false to state that the complainants sons entered into Exs.B6 and B7 only as a compromise to supersede the said agreements in question and stated that his son entered into a separate agreement which is an independent transaction and has nothing to do with this transaction. Therefore we are of the considered view that O.Ps. 1 to 6 have committed deficiency in service in taking Rs.51,12,000/- by way of sale consideration way back in 27-11-2008 and inspite of a clause in the agreement that the construction has to be completed in 21 months, the O.Ps. 1 to 6 failed to deliver possession of the bungalow.
3. Now we address ourselves to whether the bank in disbursing the loan amount adhered to terms and conditions of disbursal?
20. It is the complainants case that the land was not registered though the sale consideration was paid and therefore the title was not passed and no mortgage was created by the bank. By 27-11-2008, the total amount disbursed by the bank was Rs.39,62,000/-. The learned counsel for the complainant contended that there was no stage wise disbursal by the bank. Ex.B2 is the tripartite agreement dated 26-3-2008 in which clauses 3 and 3.2 reads as follows:
1. It is further agreed by the Borrower that the Bank shall not be responsible or liable to ensure or ascertain the progress of construction and mere demand for payment by Vendor/Developer as per the terms and conditions of the Allotment letter would be sufficient for the Bank to effect disbursement as aforesaid. Without prejudice to above and not with standing anything to the contrary contained herein the Bank may in its sole discretion refuse to disburse the loan until:
i) The Borrower has paid his contribution in full to Vendor/Developers i.e.
the cost of the dwelling unit (including escalation, if any,) less the loan facility
amount and/or
ii) Progress and need for construction is justified by the Bank, being the sole
judge thereof to decide the disbursement requested.
This tripartite agreement has been executed between the complainant, O.Ps. 1 to 6 and the bank. The learned counsel for O.P.7 submitted that the bank released the amounts only as per the request for disbursement. We observe from Ex.B2, tripartite agreement that there are other clauses also to be considered. They read as follows:
3. VENDORS/DEVELOPERS agrees and undertakes to complete the said Property as per the terms and conditions of the Allotment Letter and within the stipulated time and intimate the Bank and the Borrower in writing with regards the completion.
4. The Bank reserves the right to release final 10% of the disbursement only upon completion of the Project and handing over of the Schedule B Property to the borrower and/or registration and handing over of the Absolute Sale Deed in favour of the borrower to Bank.
5. Vendors/Developers will maintain a separate account for the Borrower and adjust payment of housing loan facility received by them from the Bank/borrower against the full consideration of the said property.
6. All the costs of the said property in excess of the Housing Loan facility sanctioned by the Bank will be borne and paid by the Borrower.
7. If the Borrower withdraws from the Scheme or fails to pay the balance amount representing the difference between the housing loan allowed by the Bank and the actual cost of those (including escalation) or dies or allotment of the house is otherwise cancelled, the entire amount standing to the credit of the Borrower (excluding margin money and Borrowers contribution) will be refunded by Vendors/Developers to the Bank. The Bank shall refund to the Borrower the balance, if any, after adjusting the entire dues, interest, costs and other amount recoverable by the Bank from the Borrower. In any event in which any refund becomes due and payable, under the Allotment letter and/or the Agreements executed/made between the Borrower and Vendors/Developers or otherwise, Vendors/Developers agrees not to pay any amount or any account directly to the Borrower by the way of refund or otherwise without the written consent of the Bank. In case so required, the amount shall be paid by Vendors/Developers to the Bank and the Bank in turn will pay to the Borrower.
Ex.B1, Article 2-2.3, details of Disbursement/Purpose of loan
a) The Bank shall disburse the loan on one lumpsum or in suitable instalments as may be decided by the Bank subject to the fulfilment of condition Precedent as set out in Article 4. The aforesaid decision of the Bank in this regard shall be final and binding on the Borrower.
b) The loan shall be used exclusively for the purposes mentioned in Schedule D hereto and for no other purpose.
Article 4 reads as under:
CONDITIONS FOR DISBURSEMENT
4.1 The obligation of the Bank to make any disbursement under this Agreement shall be subject to the following conditions:
Relevant conditions i.e. âe and âf are reproduced as follows:
e) Evidence for Utilisation of Disbursement: The Bank should be satisfied at the time of making any disbursement that the same is required for the purpose as mentioned in Schedule D and as stipulated by the Borrower and the Borrower shall procure evidence satisfactory to the Bank of the proposed utilization of the proceeds of the disbursement of the loan.
f) Utilization of prior Disbursement: The Borrower shall have satisfied the Bank about the utilization by the Borrower of the proceeds of any prior Disbursements, if any.
21. The complainant contends that contrary to the terms of agreement and also various guide lines for releasing loan amounts, the bank has released the amounts without considering the stages of construction to the detriments of their interests. The bank can directly pay the amount to the developer as agreed upon but not whole of the amount without even verifying the stages of construction and existence of property. It could not have released the amount without verifying the progress of construction jeopardising their claims.
22. The banks and financial institutions promising to lend moneys or sanctioning loans and the borrower investing in the project thereon will be clothed by the principles of Promisorry Estoppel. The doctrine of promissory estoppel is an evolving doctrine, contours of which are not yet fully and finally demarcated. Being an equitable doctrine it should be kept elastic enough in the hands of the court to do complete justice between the parties. If the equity demands that the promissor is allowed to resile and the promisee is compensated appropriately that ought to be done. If, however, equity demands that the promissor should be precluded in the light of things done by the promisee on the faith of representation from resiling and that he should be held fast to his representation that should be done. It is a matter holding scales even between the parties to do justice between them. This is the equity implicit in the doctrine vide State of H.P. Vs. Ganesh Wood Products reported in 1995 (6) SCC 363.
To reiterate, clause 3.2 of Ex.B2 reads as follows:
3.ii) Progress and need for construction is justified by the Bank, being the sole judge thereof to decide the disbursement requested.
23. The bank has not adhered to taking care and caution with respect to disbursal of the amounts visa-vis the stages of construction. Though the learned counsel representing the bank stated that the bank has sole discretion to disburse the amount, progress and need for construction has to be justified by the bank which is the sole judge to decide the disbursement requested which in the instant case obviously the bank did not perform. It is an admitted fact that the construction was not completed and therefore the question of release of the amounts without verifying as per Article 4, 4.1 (e) and (f), the bank should be satisfied at the time of making any disbursement about the utilization by the borrower of the proceeds i.e. the bank should be satisfied as utilizing this money for the purpose of the Bungalow which in turn is connected to the stages of construction.
24. The bank has undoubtedly violated the terms of the tripartite agreement, and released the amount even without bothering to verify as to the stage and nature of construction. In other words, the bank financed an incomplete project, and now the bank cannot take advantage of its own indiscretion. This is unjust and unethical. If the bank releases the amounts contrary to tripartite agreement it has to suffer for the consequential losses. The bank under the terms is entitled to recover from the developer to which it had paid the amounts. The developer also agreed to refund the amount if there are cancellations of the agreements or failure to fulfill its commitments. The agreement that was arrived at earlier was fair and no party would benefit from the lapses or mistakes of the other. Therefore, the complainant is not liable to pay the EMIs.
25. The banks are picking and choosing certain clauses and contending that the very complainants have given authorization to them to release the amount and therefore they have released, forgetting the fact that the very financing of the project was contrary to the scheme issued in this regard. Evidently, the bank as well as the developer benefitted from these transactions. The developer has taken the amount without completing construction and equally the bank has been collecting the amounts from the complainants towards EMI. Necessarily all this amounts to unfair trade practice as well as deficiency in service on the part of developer as well as the bank. Necessarily the complainants have to be compensated. Since terms of the agreement enable the bank to collect from the developer it can as well recover the same. The bank by violating its own rules cannot take advantage and recover the same from the complainants. This suppression of rules at the time when so called authorization taken from the complainants amounts to unfair trade practice. This cannot be allowed to happen.
26. The bank has to collect the loan amount plus whatever interest and other legally permissible charges from the developer and credit it to the complainants loan account. Equally O.Ps. 1 to 6 are liable for having enjoyed money paid towards sale consideration and not completing the construction as stipulated in the agreement of sale i.e. within 21 months when there were no established force majeure conditions. Keeping in view the terms and conditions and deficiency in service on behalf of O.Ps. 1 to 6 and unfair trade practice of OP 7, the agreements entered between them are construed as null and void. We also rely on the judgement of the National Commission reported in FA No.327/2012 dated 08-7-2013 wherein it was held as follows:
The contention of the Bank that as per tripartite agreements the Bank was bound to review the progress of the construction only to protect its own interest otherwise no duty was cast upon it does not hold water and appears to be a fallacious argument and a lame excuse. The progress of construction and the manner in which the loan amount was to be disbursed by the Bank were inter-connected issues and the Appellant Bank being the home loan banker who has lien over the flats should have acted cautiously and taken reasonable care to ensure that its money is safe and secure. Moreover, the Appellant Bank cannot have any grievance against the order passed by the State Commission directing it to recover the loan amount from the Developer as the interest of the Bank has been adequately protected by the State Commission.
For the aforementioned reasons, these complaints are allowed in part directing O.Ps.1 to 6 to refund the amounts with levied interest received by them, for construction of the said bungalows. The amount paid by O.P.7 bank to O.Ps. 1 to 6 should be collected only from them. The interest amount paid by the complainant to OP 7 bank should be refunded to the complainant as the amounts were received by the bank contrary to the terms and conditions. As per Ex.A9, the opposite parties promised that the bungalows will be ready by September, 2009 and in default as per clause 7.8.3 of construction agreement, they stated that in the event of the contractor failing to deliver the possession on the completion date, the contractor shall pay compensation at Rs.5000/- per month to the owner, till the possession is actually delivered and the delay by the date of filing of complaint is about 23 months and hence we are of the considered opinion that a compensation of Rs.1,00,000/- be awarded to each of the complainants for the mental agony and inconvenience they have suffered together with costs of Rs.5,000/- in each complaint.
In the result C.C.Nos. 80/2011 to 83/2011 are allowed in part directing O.Ps.1 to 6 to remit the amounts received by them with levied interest to the complainants accounts in OP7 bank. The amount paid by O.P.7 bank to O.Ps. 1 to 6 should be collected only from these O.Ps. The interest amount paid by the complainant to OP 7 bank should be refunded to the complainant as the amounts were received by the bank contrary to the terms and conditions. All opposite parties should jointly and severally pay compensation of Rs.1,00,000/- to each complainant together with costs of Rs.5,000/- in each complaint to be paid within four weeks from the date of receipt of this order.