Oral Order: (S. Bhujanga Rao, Member)
1) This is a complaint filed u/s 17(1) of the Consumer Protection Act for a direction to the Opposite Parties (Ops) to refund Rs. 96,70,774/- with interest @ 24% p.a., from the date of complaint till the date of realization and refund insurance premium of Rs. 13,104/- with interest @ 24% p.a., together with compensation and costs of Rs. 50,000/- each.
2) The case of the complainant in brief is that Op1 (hereinafter called the developer) floated a venture and agreed to sell apartments situated in Sy196/P etc., at Bachupally of Qutubullapur Mandal, in Ranga Reddy district in an extent of Ac. 85.36 Guntas of land. The developer represented that it had obtained layout permission from HUDA for constructing the independent houses and flats etc. Under the agreement of sale, consideration was agreed to be paid in instalments viz., 10% of the amount on the date of booking, and another 10% within 15 days from the date of booking and the remaining in phased manner and 5% at the time of handing over the flat as shown below:
| Description | ||||
| Flat Details | Instalment | Due Date | Rs. | |
| Mussorie | Booking advance | On Booking 10% | 654534 | |
| Type-5 | Allotment advance | 15 days from booking | 654534 | |
| Floor No. 11 | 1 | 31.01.2007 (12.5%) | 818167 | |
| Flat No. 11D | 2 | 15.03.2007 (12.5) | 818167 | |
| Built up area | 3 | 15.06.2007 (12.5) | 818167 | |
| in sft - 1263 | 4 | 15.09.2007 (12.5) | 818167 | |
| 5 | 15.12.2007 (12.5) | 818167 | ||
| 6 | 15.03.2008 (12.5) | 818167 | ||
| 7 | During hand over (5%) | 327267 | ||
| Total sale consideration | 6545336 | |||
(2.1) It was agreed that the construction was to be completed and hand over the possession of the flat by 24.02.2009. The complainant submits that even after lapse of two years the developer did not complete the flat and deliver the same as of date. The complainant had paid Rs. 15,41,456/- towards EMI and Rs. 12,88,208/- towards interest for the home loan obtained by him from ICICI Bank. As per the terms of home loan agreement, he had obtained insurance policy by paying a premium of Rs. 28,807/-. The complainant further submits that as per clause 7(d) of the agreement of sale in case of delay in delivery of flat, the developer has to pay Rs. 5/- per sft on the built up area for maximum period of 8 months . Consequent on arrest of Chairman of Satyam Computers, and other developments the developer failed to complete the project. Sri Ved Kumar Jain was appointed as nominee director by the Central Government to oversee the affairs of the developer company. Even after lapse of two years his flat was not completed and delivered possession of the same.
(2.2) Vexed with their attitude, the complainant got issued legal notice on 4.3.2011 demanding refund of amount with interest from the respective dates of payment till the date of realization. The complainant submits that though he had paid almost entire sale consideration to a tune of Rs. 63,90,519/- the developer failed to hand over the flat till date and deprived him from owing and enjoying the flat. He contends that he was forced to pay EMIs and interest to the bank without there being any flat of his own. The complainant has furnished a detailed statement of account showing the instalments paid by him and interest thereon @ 13% p.a., from 22.5.2011 to 16.6.2011 on principal amount of Rs. 63,90,519/- which came to Rs. 96,70,774/-. As there is deficiency of service on the part of developer in not delivering the flat on time, he filed this complaint for the reliefs aforementioned.
3) Op1 developer filed written version adopted by Op Nos. 5 and 7. Op1 submits that the said project of Maytas Hill County commenced as per schedule but thereafter suffered acute shortage of funds as the private equity investors and the financial institutions recalled the financial assistance and the delay in completing the Hill County Project is because of force majeure which is beyond the control of Ops. Op1 further contends that various court orders had also delayed the project and that the case was referred to Company Law Board (CLB) which passed orders on 5.3.2009 appointing a director who is the nominee of the Central Government and accordingly Sri Ved Kumar Jain was appointed as Nominee Director by the Central Government.
(3.1) SBI Capital Markets Ltd. was appointed as transaction advisor for identifying a suitable strategic investor and the process of selection of its strategic investors was entrusted to be supervised by Honble Justice A. R. Laxmanan under whose concurrence the Company Law Board on 13.1.2011 passed an order inducting M/s. ILandFS Financial Services and its two other concerns into the company as 80% shareholders by allotment of preferential shares. The ILandFS group have initiated steps of injecting funds into Op1 company and have started the process of paying off the liabilities.
(3.2) Op1 submits that the complaint is liable to be dismissed for non-joinder of necessary parties i.e., land owners and further submits that it is liable to be dismissed for lack of jurisdiction as arbitration proceedings have already been laid down. Op1 admits that the complainant has entered into an agreement of sale on 16.2.2007 and that there is a delay in completion of the project and has now come up with a new schedule for completion of the apartment blocks. Op1 further submits that the complainant got issued legal notice on 5.3.2011 and as per clause-14 of the agreement of sale an arbitrator was appointed and that most of the customers are entering into an Addendum agreement and SWAP agreement with Ops. Op1 further contends that new promoters are taking all necessary steps to complete the construction and to hand over the same and letters have been communicated to all the customers on 16.5.2012. As per the directions of CLB on 13.1.2011 the new management of the answering opposite party is entitled to an additional time for completing the project and submits that the complainant is not entitled for any amounts as the present complaint was filed subsequent to 13.1.2011 and submits that there is no deficiency in service on their behalf.
(3.3) Op1 developer filed additional written version on 5.12.2013 stating among other things that Op1 is strictly acting in accordance with the direction of the Company Law Board. The new management has taken various measures and also invested more than Rs. 450 crores for early completion of the project. They have completed 285 independent houses out of which 212 were handed over to the respective customers. Out of 595 apartments 104 were handed over to the concerned customers with all infrastructure facilities like, power, sewage, water, storm water drainage, club house, road works, gas connection, e-deck greenery development, beautification, internet, telephone, DTH and Security System etc. After lifting of ban by the High Court of A.P. on 5.12.2012 the registrations have been commenced and till date 62 units were registered. They have taken steps for restructuring of loans with various bankers and also negotiated with private equity investors for regulatory approvals. Op1 expressed its willingness to pay compensation @ Rs. 5/- per sft for the period of delay in delivering the apartment from the date of possession promised under the agreement of sale till the date of possession and the same has been communicated to all the customers through letter dt. 23.8.2013. Op1 furthers submits that most of the customers are willing to occupy their respective flats by withdrawing the complaints filed by them before various courts. Op1 submits that keeping in view the subsequent developments they prayed that the complaint be dismissed.
4) The learned counsel for the complainant made an endorsement that the claim against Op4 Mr. Ved Kumar Jain, Nominee Director of the developer is not pressed.
5) Both sides filed their affidavit evidence and got marked Exs. A1 to A17 and Exs. B1 to B28.
6) Op1 and Ops 2 and 3 filed their written arguments.
7) The points that arise for consideration are :
i. Whether the complainant is entitled for refund of the amount, if so, to what amount?
ii. Whether the complainant is entitled to compensation?
iii. To what relief?
8) The facts not in dispute are that the complainant had booked a residential flat No. 554 in 11th floor, type 5 of Mussorie apartment complex of 1263 sft with one covered car parking area along with 80 sq.yds of undivided share of land in Hill County Project in Ranga Reddy District for a sale consideration of Rs. 65,45,336/- evidenced under Ex. A7 agreement for sale with a promise to complete the flat by 24.2.2009. Ex. A9 is the Tripartite Agreement entered into between the developer, complainant and the bank. Ex. A10 shows the disbursal amounts made by the bank to the developer. Ex. A11 is the statement of loan account of complainant issued by the bank. Ex. A14 is the legal notice got issued by the complainant to the developer and its directors calling upon them to refund an amount of Rs. 63,90,579/- and insurance amount of Rs. 28,704/- with interest @ 14% p.a., from the respective dates of payment till the date of realization on the ground that they have miserably failed to complete the flat in question and deliver possession of the same even after lapse of two years from the schedule date of delivery.
9) The developer among other documents filed Ex. B15 colour photographs showing the stage of construction pertaining to Mussorie Block as on 12.10.2012. Ex. B27 is the colour photographs showing the status of unit 554 of Mussorie block which was allotted to complainant. Ex. B28 is the letter dt. 31.12.2012 addressed by the developer to the complainant with a request to visit the site to see the progress of work relating to his unit between 1st and 15 January, 2013.
10) The developer raised another contention that by virtue of the orders of the Company Law Board (CLB for short) dt. 5-3-2009 and 13-1-2011, the complainant(s) cannot seek relief before this Commission and they have to approach the CLB for redressal and moreover, it cannot be said to be guilty of rendering deficiency in service.
11) Despite the fact that developer company is the party, it did not bring it to the notice of the Company Law Board as to the claims made by various complainants. Except stating that the Maytas Hill Owners Association was a party to such order, there is no proof that the complainant(s) are parties to the said association or any notice was served on them individually in order to bind them. In all fairness, the developer company ought to have impleaded the complainant(s) as parties to the above said proceedings.
12) The learned counsel for the complainant(s) submitted that they learnt that the developer represented before the CLB that all efforts would be made for completion of the project. Evidently no construction activity has been taken up. Even otherwise it is admitted that they did not even start construction as per the orders of CLB and arbitration. These facts are not disputed. The complainant(s) submitted that they have no hopes that the project would be completed within a reasonable time so that they could wait for the project to be completed and then take possession of the apartments. They insist that their amounts be refunded with interest, besides penalty @ Rs. 5/- per sft as agreed upon together with compensation and costs.
13) The learned counsel for the developer contended that the order of the Company Law Board is binding on the complainant(s) and these complaint(s) have to be necessarily dismissed with a direction to approach the CLB. When the developer company originally run by Satyam Computer Services Ltd. founded by Mr. B. Ramalinga Raju went into serious financial troubles and the allegation that funds of Satyam were diverted to Maytas Properties to bail out from liquidation, the Central Government filed Company Application No.4/2009 U/s.388 B, 397, 398, 402 and 403 of the Companies Act before the Principal Bench of Company Law Board, New Delhi. In the said company petition, directions were issued on 13-1-2011, directing the Central Government to nominate a nominee director on behalf of the CLB. The order discloses that Shri Ved Kumar Jain was nominated as director on behalf of the CLB. The nominee director undertook various measures to put the project on track basing on the recommendations of Honble Justice A.R. Laxmanan.
The CLB order dt. 13-1-2011 reads as follows:
i. Permit the induction of IL and FS group (consisting of Infrastructure Leasing and Financial Services Limited (ILandFS). ILandFS Financial Services Limited (IFIN) and ILandFS Engineering and Construction Company Limited (IECL) as the new promoter of MPL and permit reconstitution of the Board of MPL as provided hereunder.
ii. The IL andFS group shall invest Rs.20 lakhs in equity share capital of the MPL whereupon its shareholding in MPL would become 80%.
iii. The IL andFS group on induction as the strategic investor shall take-over the management control of the MPL and reconstitute the Board of Directors of MPL as under:
a) There shall be 4 nominees of the IL andFS group as directors on the Board of MPL including the Chairman.
b) The existing Directors of MPL, i.e., Mr.Rama Raju, Mr.D.Gopla Krishnam Raju and Mr.D.Venkata Satya Subba Raju shall resign as Directors of MPL immediately on induction of ILandFS group as the strategic investor in MPL.
c) Mr. Ved Jain , the nominee Director, appointed by the Union of India, Pursuant to the directions contained in the order dt. 5.4.2009 shall continue as Director in MPL for a further period of 3 years.
(iv). The IL andFS group shall mobilize funds of Rs.150 crores in MPL within a period of 3 months from today.
(v) The ILandFS group shall complete the Maytas Hill Country Residential Project Phase-I within 18 months of its induction as promoter in MPL and shall arrange the required finances to complete the project.
The order required the above said group to complete the project within 18 months. Pursuant to it, the developer has been taken over by new inductees. It is not known as to the steps that are initiated in compliance of the said orders.
14) In fact the question whether the complainant(s) have to approach the CLB or pursue their remedy before this Commission is covered by a decision of our High Court in PRUDENTIAL CAPITAL MARKETS Limited, Calcutta v. State of A.P. Department of Law reported in 2000 ALT-5-468. It held as follows:
There are three categories of cases. The first category of cases are those where the depositor filed a consumer dispute case before the competent District Forum for refund of the deposit made by the depositor with the PRUDENTIAL CAPITAL MARKETS LIMITED (PCML for short) and on the District Forum allowing the application, the petitioner herein approached the State Commission which dismissed the appeal filed and whereupon the depositor approached District Forum under Section 27(1) of the Consumer Protection Act, 1986 by filing penalty petition. The second category of cases are those where the depositor filed a penalty petition before the District Forum for implementation of the order in consumer dispute case and where the petitioner did not approach the State Commission which is the appellate forum. The third category of cases are those where the orders of the appellate forum are challenged by the petitioner.
In the process, the question whether CLB can only entertain the complaint against PCML has arisen. While dealing with the said question the proceedings before CLB vis-Ã -vis the proceedings before Consumer Forum have also arisen.
15) In the instant case since the developer has clutched the jurisdiction of CLB, the question is whether the provisions of CLB oust the jurisdiction of Consumer Forum. The said question has been discussed in the above decision as follows:
The next aspect of the matter is whether the provisions of the Companies Act and the RBI Act impliedly ousts the jurisdiction of the Consumer Forums when the CLB is seized of the matter or passed an order at the instance of some of the depositors of NBFC. Hence, sub-sees. (4-D) and (5) of Section 10-E and Section 58-A(9) of the Companies Act and Sections 45-Q and 45-QA of the RBI Act require to be examined, which are as under:œ10-E-(4-D) : Every Bench shall be deemed to be a Civil Court for the purposes of Section 195 and (Chapter XXVI of the Code of Civil Procedure,1973) and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code and for the purpose of Section 196 of that code.(5) Without prejudice to the provisions of sub-sections (4-C) and (4-D), the Company Law Board shall in the exercise of its powers and the discharge of its functions under this Act, or any other law be guided by the principles of natural justice and shall act in its discretion. œ58-A(9): Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the company to make repayment of such deposit or part the order: Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the company and the other persons interested in the matter. œSections 45-Q and 45-QA of the RBI Act are as under: œ45-Q: Chapter III-B to override other Laws: The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 45-QA. Power of Company Law Board to order repayment of deposit: (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit. (2) Where a non-banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under Section 10-E of the Companies Act, 1956 (1 of 1956) may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial company and the other persons interested in the matter.?
16) The provisions of Reserve Bank of India Act, vis-Ã -vis., the CLB also came up for discussion. The very same logic could as well be applied to the case on hand. In view of the fact that their Lordships at Para 51 of the above decision opined:
The CLB is constituted by the Central Government and the said Board shall exercise and discourage powers and functions as may be conferred on it by or under the companies Act or any other law and shall also exercise and discharge such other powers and functions of the Central Government under the Companies Act or other law as may be conferred on it by the Central Government. Notwithstanding subsection (1A) of Section 10-E of the Companies Act, the Civil Courts exercised jurisdiction under sec.9 of the Code of the Civil Procedure, till sub-section (9) of Section 58-A was inserted by the Companies (Amendment ) Act, 1977 with effect from 24-12-1977 conferring powers on the CLB to entertain an application of the depositor for repayment of money. After 1977, till the enactment of Consumer Act in 1986, both the Civil Courts as well as the CLB entertained applications from the depositors for refund of deposits. After the Consumer Act, the Forums established under it started granting redressal to the depositors having regard to the broad definition service adumbrated in Sec.2(1) (O) of the Consumer Protection Act. Ultimately, to provide an additional speedy remedy, the Parliament enacted RBI ( Amendment) Act, 1997 inserting Sec.45-QA giving power to CLB constituted under Sec.10-E of the Companies Act which may, either on its own motion or on application of the depositors order NBFCs to make repayment of such deposits. This background should be kept in mind while examining the order of the CLB, Eastern Region Bench, Calcutta, dated 27-5-1998.
Their lordships also held at para-57 as follows:
Sub-section (5) of Sec.10-E of the Companies Act lays down that the CLB shall in the exercise of its powers and the discharge of its functions under the Companies Act or any other law be guided by the principles of natural justice. The proviso to sub-section (9) of Sec.58A categorically lays down that CLB may, before making any order under sub-sec. (9), give a reasonable opportunity of being heard to the Company and the other persons interested in the matter. Likewise, the proviso to sub-section (2) of Sec.45-QA mandates that CLB may, before making any order under sub-section (2), give an opportunity of being heard to NBFC and the other persons interested in the matter., Elaborate reasoning is not required to infer that œthe other persons interested in the matter appearing in the proviso to subsection (9) of Sec.58-A of the Companies Act and the proviso to sub-section (2) of Sec.45-QA of the RBI Act also include the depositors and other creditors of NBFC. It also does not require any authority to say that any provision which adumbrates the principles of natural justice should be interpreted as a mandatory provision. Though the two provisions use the word may, the same should be interpreted as mandatory.
Obligation is on the part of the CLB to order notices to all the depositors in a matter like this. How a notice is sent or information is communicated about the cases filed before the CLB under Sec.45-QA (2) of the RBI Act or Sec.58-A (9) of the Companies Act is altogether different matter.
17) Coming to the present case, the developer did not make any attempt to place the case of the complainant(s) before the CLB. There is no proof that notices were issued to the complainant(s) while passing the order. Therefore, the learned counsel for the complainant(s) is justified in contending that in so far as complainants are concerned, the order passed by CLB is not binding on the proceedings before this Commission.
Their Lordships in the above case at Pare-59 pointed out as follows:
Further, as per the legal position, the proceedings before appropriate Bench of CLB should be initiated by the aggrieved party at the place of companys registered office. This is cumbersome procedure. Therefore, all the depositors cannot be expected to appear before the CLB, Calcutta, especially when there is no notice validly served on all the depositors. The judgments of the Supreme Court referred to above support the view that when the ordinary remedy provided under the alternative law is cumbersome, the consumer cannot be deprived of the remedy before the Consumer Forums.
At para 60, their Lordships asserted as follows:
The summary of the findings under point No.1 for consideration may now be given. (i) A writ of prohibition cannot be granted unless want of jurisdiction is apparent and if want of jurisdiction is not apparent, the applicant must wait until the decision making body passes orders and seek a writ of certiorari. (ii) A writ of prohibition ordinarily cannot be granted to stop execution or implementation of the decision; (iii) The grant of writ of prohibition is also governed by other principles which ordinarily govern the grant of extraordinary writs like delay and laches, availability of alternative remedy etc. (iv) The provisions of Sec.45-Q, 45-QA of the RBI Act and Sec.58-A(9) of the Companies Act, do not either expressly or impliedly bar the jurisdiction of the forums constituted under the Consumer Protection Act, from entertaining a consumer dispute case at the instance of the depositor claiming repayment of the deposit from a non-banking finance company. In view of Sec.3 of the Consumer Protection Act, remedy under the said Act is an additional remedy and the same cannot be taken away either by the RBI Act or by the Companies Act. (v) The order of the Company Law Board, Eastern Region Bench, Calcutta dated 27-5-1998 cannot be construed as either taking away the right of the depositors in these cases to approach the consumer forum or nullifying the orders passed by the District Forum/State Commission.
18) Equally the National Commission in Lloyds Finance Ltd. Vs. Ms. Napeena Singh reported in I (2006) CPJ 163 NC considering this aspect of the matter held:
œIt is the case of the complainants before us that they did not apply to the Company Law Board under Section 45QA. They were not served with any notice of any proceedings before the Company Law Board and they were not aware of any notice being published in any newspaper to which they subscribe to or is otherwise in circulation in the locality in which they reside. They say it is perversity of justice that Company Law Board situated in Mumbai could be approached by small depositors in the far flung corner of the country. The whole scheme as framed is floated and tilted in favour of NBFC. That is, however, not for us to consider. What the requirement of law is that a depositor may either approach the Company Law Board under Section 45QA or file a complaint under the Consumer Protection Act before the appropriate forum. A depositor cannot certainly choose both the remedies simultaneously and once he files an application under Section 45QA of the RBI Act before the Company Law Board, he cannot file a complaint in a Consumer Forum under the Consumer Protection Act.?
It is not the case of the developer that complainant(s) have invoked the jurisdiction of CLB, therefore we hold that this Commission has jurisdiction to adjudicate the matter.
19) The learned advocate for developer contended that in the order dt. 13.1.2011 of CLB it has considered the interests of investors, banks stakeholders, and the allottees. It held:
œHaving perused CA 24/2011 and the above mentioned documents and the fact that the petitioner, the existing directors of MPL, shareholders and the Hill County Owners association are supporting the application, and the prayer made in the application deserves to be granted since it is in the best interests of the company as also of all the stakeholders including banks, employees, investors and the aloottees in the Maytas Hill County Residential Project, and would serve the public interest, the following order is passed in supersession of the earlier order dt. 5.3.2009.
I permit the induction of ILandFAS (consisting of Infrastructure, Leasing and Financial Services Ltd. (ILandFS). ILandFS Financial Services Ltd. (IFIN) and ILandFS Engineering and Construction Company Ltd. (IECL) as the now promoter of MPL and permit reconstitution of the board of MPL as provided hereunder :
The ILandFS group shall invest Rs. 20 lakhs in equity share capital of the MPL whereupon its shareholding in MPL would become 80%
The ILandFS group on induction as the strategic investor shall take over the management control of the MPL and reconstitute the board of directors of MPL as under :
There shall be four nominees of the ILandFS group as directors on the board of MPL including the Chairman
The existing directors of MPL Mr. Rama Raju, Mr. D. Gopala Krishnam Raju and D. Venkata Satya Subba Raju shall resign as directors of MPL immediately on induction of ILandFS group as strategic investor in MPL.
Mr. Ved Jain, the nominee director appointed by the Union of India pursuant to the directions contained in the order dt. 5.4.2009 shall continue as director in MPL for a further period of 3 years.
The ILandFS group shall mobilize funds of 150 crores in MPL within a period of three months from today.
The ILandFS group shall complete the Maytas Hill County Residential Project phase-I within 18 months of its induction as promoter in MPL, and shall arrange the requires finances to complete the project. ?
Though he contended that various steps were taken to complete the project on time, no evidence is placed to show the exact stage of the project. None of the directors of the company filed their affidavits to show the stage of construction, nor the fact that the case on hand flat was completed.
20) The contention of the developer is that the complainant(s) are stakeholders. Simply by using such term, the complainant(s) cannot be taken into its fold in order to bind the orders of CLB. We may also state that it is not known why the opposite parties did not try to implead these parties to the application filed before the CLB so that they could agitate their grievances including the recovery of amount equally so with the bank(s).
21) A reading of the order passed by CLB shows that it was not aware of the cases pending before the Consumer Commission in Andhra Pradesh. Undoubtedly, the developer has with-held the information pertaining to these cases before the CLB. In the light of the above said decision, we are of the opinion that this Commission has jurisdiction. The orders passed by CLB have nothing to do with the cases on hand. The CLB was not appraised about the cases that were filed before this Commission. In view of the above decision, we are of the opinion that the orders of CLB would in no way prevent or prohibit us from passing appropriate orders as the case may be.
22) The learned counsel for the developer contended that any order directing cancellation of allotment or refund of amount would result in disbursement of the amount of the company, and therefore the complainant(s) cannot seek refund of the amount paid by them. It is not known as to the exact amount that the developer had availed as finance from banks and other financial institutions. The developer except contending that the construction has been taken up and is in progress could not deny the statement of the complainants when they contended that no work was taken up.
23) Since the developer could not prove the stages of construction or that it would hand over possession within a reasonable period, and the period that was originally stipulated has already expired, and all through the complainant(s) have been paying EMIs to the bank, we are of the opinion that it would be unjust that the complainants be directed to go on paying the amounts to the banks without there being any hope of getting the project completed.
24) The complainant(s) by issuing notice to the developer and its directors cancelled the above said agreements and directed the developer to pay the consideration received so far, construction was not completed, and sought for refund of the amount paid by him along with insurance amount but there was no reply from their end.
25) The principle of unjust enrichment can be applied herein as the developer has been enriched by receipt of a benefit, secondly, this enrichment is at the expense of the complainant, and thirdly, the retention of the enrichment is unjust and justifies restitution.
We may also quote herein the words of Lord Mansfiled C.J.
This kind of equitable action to recover back money which ought not in justice to be kept¦.. lies only for money which ex acquo et bono the defendant ought to refund ¦.. It lies for money paid by mistake, or upon a consideration which happens to fail, or for money got through imposition (express or implied) or extortion, or oppression, or undue advantage taken of the plaintiffs situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.
Section 72 of the Indian Contract Act runs as follows :
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. There must be some undue pecuniary inequality existing in the one party relative to the other which the law recognizes as requiring compensation upon equitable principles.
26) It is an undisputed fact that agreement for purchase of apartment is between the complainant and the developer. It is also not in dispute as per the above said agreement the amount is to be paid as per the schedule. Recoursing the above agreement, a tripartite agreement was executed in between the complainant, developer and the bank. The complainant alleges that contrary to the terms of the above said agreement the amount was disbursed. In fact it was duty bound to review the progress of construction before disbursing the amount as mentioned in the tripartite agreement. The bank cannot resile from the tripartite agreement and terms of the agreement by alleging that the complainant(s) have consented to release the amount to the developer in one go. No security was taken from the builder before release of the amount.
27) We may refer herein some of the important terms of the tripartite agreement:
1) The Developer undertakes to complete the construction / development of the property in a timely manner as per the time schedule for construction as specified by the developer to ICICI Bank and undertake to keep ICICI Bank suitably informed at every stage of the progress of construction and payments from ICICI bank Ltd., will be made at stage wise as agreed.
4) The Developer agrees and confirms that ICICI Bank shall have a right to inspect the project with respect to the progress in construction so as to arrest any delays or diversion of funds by the developer.
5) It is agreed between the parties that ICICI Bank should make the disbursement directly to the developer and such disbursement shall be considered as disbursement made to the Borrower and the same must be acknowledged by borrower and the developer.
9) In the event, the borrower cancels his allotment/booking /allocation of the said house or in the event of ICICI Bank canceling his allotment/booking /allocation of the said building on behalf of the borrower, the developer undertakes to refund all the amounts received from ICICI Bank to ICICI Bank with interest at the prevailing rates.
10) In an event of litigation affecting the property in respect of title possession etc., the developer shall promptly and immediately refund all monies paid by ICICI Bank.
11) ICICI Bank shall have the prerogative to recall the loan disbursed to the developer for and on behalf of the borrower at any given time, if ICICI Bank is of the opinion that funds already released are diverted for other purpose or to be released would not serve the purpose. This step could be taken by ICICI Bank when it is of the opinion that the covenants incorporated herein are not being adhered to by the borrower/ developer or both. In such an event the proposed allotment of the house to the borrower stands automatically cancelled/terminated and both become jointly and severally liable for refund of the loan amount with interest.
12) It is agreed between the developer and borrower that in the case of cancellation of allotment / booking /allocation as above, the developer shall be liable to repay the principal amount disbursed and the borrower shall be liable to repay the interest, penal interest and other charges leviable at the discretion of ICICI Bank.
28) The complainant contends that contrary to the terms of agreement and also various guide lines for releasing loan amounts, the bank has released the entire amount in one go 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.
29) The bank, despite the notices of cancellation of agreements etc. and even filing complaints before this Commission and proceedings before the CLB, did not try to recover the amount paid by it to the developer invoking the above clauses. The bank knew full well that the amounts were diverted for some other purpose. It did not take steps to recover from the developer, obviously, it knew that it would land up in litigation, where it may not be sure for recovery of the amount. It knew full well that the complainant(s) being salaried/NRI persons it was easy for them to recover.
30) Evidently the bank did not take any steps to recover the amount, only in the event of bank sustaining loss, this indemnity clause comes into play. The bank had taken a letter from the complainant(s) wherein they had agreed to release the amount without waiting for construction to be made. This is contrary to the guidelines and tripartite agreement. It is not known why the bank had taken such a stance when the guidelines as well as their own agreements stipulate to release the amount stage wise. The fact remains that the bank released the amounts to the developer contrary to guidelines as well as tripartite agreement to non-existent apartments.
31) The bank having been a party to the tripartite agreement cannot direct the complainant(s) to execute such a letter without the consent of the developer in this regard. This is contrary to the terms of the tripartite agreement . By taking such a consent from the complainant(s) to release the entire amount, the bank is offending the terms of agreement. There cannot be any objection for the developer to take it. After all it will have the entire amount without corresponding burden to fulfil. It need not construct. Had the developer been joined, the complainant(s) could have insisted the developer to construct the property and only after satisfying itself as to the phases of construction, they would have asked the banker to release the amount accordingly. There would be no meaning in releasing the entire amount in one go, the bank having agreed to release the amount in a phased manner. Solely basing on the letter taken from the complainant(s), the bank cannot give a go bye to tripartite agreement and release the entire amount. This would cause unjust enrichment to the developer, and loss to the complainant(s). The terms of the agreement in between three parties were made in order to see that no party suffers from non-implementation of terms of the agreement. The bank cannot act at its own whims and fancies, and release the amount. It cannot defend that by virtue of letters of the complainant(s), it was entitled to release the amount in its entirety.
32) If the bank acts contrary to the agreement and guidelines the complainants are not liable to refund the amount paid to the developer. The bank can as well recover from the developer by recoursing the above clauses. The courts will not come to the rescue of the party which violates the terms and convey benefits to one party in preference to another. It intends to cause loss to a genuine borrower by unduly favouring a defaulting and unfair customer. All this amounts to unfair trade practice.
33) It is not as though the bank did not know that the developer has clutched the jurisdiction of the CLB. When the matter is pending with CLB, if really it intends to protect its own interest besides that of the complainant(s), in the light of dispute, it ought to have approached the CLB for recovery of the amounts. It did not even file the proceedings before the appropriate authority for recovery of the amount. Evidently the bank knew full well that it could recover the amount from the complainant(s).
34) The banks and financial institutions promising to lend money 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.
35) It is legally open to the bank to take a decision in good faith in the exercise of its bonafide discretion as to whether it was safe to make advances of public funds to any particular party and arrive at a decision after examining the relevant facts and circumstances.
36) However, in the present case the complainant(s) by issuing legal notice put an end to the contract as the developer disabled itself from performing its obligations. The bank did not act in good faith nor it had exercised bonafide discretion while releasing the funds.
37) This Commission can take judicial cognizance of the fact that various banks have financed the builder obviously in view of the reputation the developer was having by then, and the banks contrary to the terms of the agreement as well as guidelines disbursed the amounts keeping the interests of the complainants in jeopardy. The banks are 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 banks as well as the developer benefitted from these transactions. The developer has taken the amount without constructing the flats, and equally the bank has been collecting the amounts from the complainant(s) towards EMI. It is a case of double jeopardy. Necessarily all this amounts to unfair trade practise 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 complainant(s) amounts to unfair trade practise. This cannot be allowed to happen.
38) 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 to a non-existent project or incomplete project, duping its own customers. Now the complainants would be un-necessarily hard pressed, to pay the amounts towards EMI without there being any hope of getting the apartments. 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. Whatever loss caused thereby it could as well approach appropriate forum for recovery of the amount from the developer, to which it has released the amount in one go. The bank under the terms entitled to recover from the developer to which it had paid the amounts. It cannot turn round and claim against the complainants. It is not under original stipulation that the bank had to pay the entire amount to the developer. The developer also agreed to refund the amount if there are cancellations of the agreements or failure to fulfil 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 are not liable to pay the EMIs.
39) 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. It shall not collect further EMIs nor entitled to any more amount except the amount, if any, remained unpaid by the complainant towards loan granted to him. The bank has no authority to complain to CIBIL. In fact if there is a provision, the CIBIL has to enter the name of the bank, as one of the violators of guidelines of the banks.
40) On 8.7.2013 the National Commission disposed of FA 327 of 2012 and batch preferred by the developer and State Bank of India and ICICI bank against the orders of this Commission confirming the directions issued by this Commission against the developer as well as the bank. 41) We also observe from the above order that the developer filed a detailed affidavit before the National Commission among other things stating œ With regard to remaining two towers, namely, Kodai and Cooner, it was decided not to commence the construction as the number of bookings in these two towers were under 57 out of a total of 132 apartments.? In the light of submission made by the very developer that it has not yet commenced the construction, there is no meaning in asking the developer to complete the flat and hand over the same. As observed by the National Commission in the aforementioned order, that in terms of Section 5 of the Andhra Pradesh Apartments (Promotion of Construction and Ownership) Act, 1987, the bank was under an obligation not to release more than 20% of the sale consideration amount as advance to the developer before commencement of the construction. Viewed from any angle there is deficiency in service and laches on the part of bank also.
42) The developer again moved the Honble Supreme Court against the said order of National Commission by way of Special Leave Petitions in S.L.P (C) No. 25206/2013 and batch which were ultimately dismissed on 2.12.2013 The case on hand also squarely covered by aforementioned judgments. Therefore, we have no hesitation in allowing this complaint as stated hereunder.
43) Though the complainant enhanced the claim by amending the prayer portion of the complaint and sought for refund of Rs. 96,70,774/- with interest @ 24% p.a., on principal amount of Rs. 63,90,579/- from 16.6.2011 i.e., from the date of complaint till the date of realization, the complainant is not entitled to compound interest i.e., interest over interest. What all the complainant entitled to is the amounts that were paid by him and the amount disbursed by the bank directly to the developer together with compensation of Rs. 1 lakh.
44) Taking into consideration the totality of the facts and circumstances of the case and in the light of judgment of the National Commission and Honble Supreme Court supra, we allow the complaint in part in following terms as the bank is not made a party to the lis.
45) In the result this complaint is allowed in part directing the Opposite Parties excluding Op4 to pay the entire amount paid by the complainant as well as received through the bank under Tripartite Agreement etc., with interest @ 12% p.a., from respective dates till the date of payment together with compensation of Rs. 1 lakh, and costs of Rs. 10,000/-.Time for compliance eight weeks.