DLF UNIVERSAL LTD. v. EKTA SETH & ANR

Citation: [2008] 10 S.C.R. 999

Court: Supreme Court of India

Bench: S.B. SINHA, MUKUNDAKAM SHARMA

Case summary

DLF UNIVERSAL LTD. v. EKTA SETH & ANR.pdf

Judgment text

[2008] 10 S. C. R. 999 ~4 DLF UNIVERSAL LTD. V. EKTA SETH & ANR. (Civil Appeal No. 4380 of 2008) JULY 15, 2008 -,, [S. B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ. ] Monopolies and Restrictive Trade Practices Act, 1969; S.

12-B: Unfair trade practice - Compensation - Apartment Buyer's Agreement - Default in payment of instalment by buyer - Cancellation of allotment and earnest money forfeited - Application claiming compensation on ground of unfair trade practice - MRTP Commission directing return of earnest L money with interest - Correctness of - Held: Parties to cont tract are governed by terms and conditions thereof - In terms of clause 4 of agreement, seller vested in itself unrestricted power to increase the cost - Allottee stopped payment of instalment after certain period as increase in cost of the flat was beyond his means - However, there were bonafide reasons · on the part of the seller for not handing over possession of the flat in time and increase in cost - In such peculiar facts and circumstances of the case, in exercise of discretionary Jurisdiction under Article 142 of the Constitution the seller directed ,), to refund 50% of the amount of earnest money forfeited by it ·\; to the buyerlallottee - Indian Contract Act, 1872 - Contract·- Enforcing of Respondent booked a flat by entering into an Apartment Buyer's Agreement with the appellant.

The sale price of the flat was payable in instalments. Respondent after making payment of certain instalments stopped further ";.. ,. payment. The appellant demanded further sum on account of escalation of cost etc. in terms of the agreement, which was also not paid by the respondent. Therefore, appellant cancelled the allotment of the flat, forfeited the · earnest money and returned the balance amount due. Aggrieved, the respondent filed an application before the M. R. T. P. Commission claiming compensation on the ground of unfair trade practice. The Commission directed the appellant to return the earnest money with certain rate ~of interest. · Hence the present appeal. Appellant contended that its action in forfeiting the earnest money was legal and justified. Respondent submitted that the posse:ssion was proposed to be given to him within three years from the date of booking, i. e.

in 1993 but the possession was not given even till 1998, therefore, the appellant could not have resorted to the power of forfeiture of the •~arnest money; that a sum of Rs. 4,21,474. 06/- demanded itowards cost of 0 escalation,. increase in area, external electrification, fire fighting system and stand-by generators was exorbitant; and that it is unfair on the part of the appeillant to dema. nd such a huge amount in such a short span of six months. · Disposing of the aJ>peal, the Court H~LD: 1. 1. The parties to the contract are governed and bound by the terms and conditions c>f the agreemen~ entered into. In the case in hand though it cannot be denied that the respondents at the time of s,igning the Apartment Buyer's Agreement was well awarn of the fact that ~additional amount could be demanded oin account of factors enumerated in clause 4 of the agreiement, but what would be the max. iinum enhancement was not prescribed in' the agre·ement.

It seems that by inserting the words "the decision of the Company in this regard would be final and blnding on the Apartment Allottee" in clause 4 of the agreement, the com·pany has vested in itself unrestricted power -¥ ~ to' increase the cost. (Para - 10) [1006-G,D & "E] . . , . . 1. 2 As per clause 16 of the agreement, it was pro- ANR. posed that the possession could be given within three years from the date of booking i. e. by 16th June, 1996 but · the same was not done even till September 1998 and it is evident from letter dated 22"d February, 1999 issued by the Company that there was still some time and further work to be done by it to enable it to hand over the pos- -y session. The only option given was that if there is delay in delivering the possession t~en the allottee would be entitled for refund of entire amount deposited with the appellant but without any interest. In other words,.

as per the terms of the agreement no liability will accrue upon the appellant due to delay in handing the possession. (Para - 11) [1006-F,G & H] 2. 1 The instalments were duly paid by the respondent for at least five years and payment was stopped thereafter on the ground that the increase in the cost of the flat was >'. )- beyond his means and also the fact that appellant had failed to deliver the possession of the flat in time. On the other hand, there was bona fide reason on the part of the appellant for their inability to handover the said possession with the stipulated time and the increase in cost was on account of factors specifically enumerated in clause 2 (b) and clause 4 of the agreement. (Para -12) [1007-A & B] 2. 2 In the facts and circumstances of the case, the interest of justice would be subserved if this Court, in ).

exercise of its discretionary jurisdiction under Article 142 -~ of the Constitution of India, direct that 50% of the amount which was forfeited, to be refunded by the appellant to the respondent within three months from the date of this judgment and the balance 50% would be considered as forfeited in terms of the provisions of the agreement. However, if the appellant fails to pay the said amount within the stipulated period the same will carry an inter- \" -r· est @ 8% p. a. which will be calculated from the date when the abovementioned period expires till the date of payment. (Para - 13) [1007-C,D & E] 3. It is clarified that this order is passe! d in the peculiar facts and circumstances of this case ;3nd would not be considered as precedence in any other matter. (Para - 14) [1007-E] CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4380 8 of 2008 ·y- From the final Order dated 3/7/2006 of the Monopolies & Restrictive Trade Practices Commission, New Delhi in Compensation Application No.

53 of 2002 Ravinder Narain, Meghalee Barthakur, Akhil P. Chhabra, Subrat Deb and Rajan Narain for the Appellant. Amar Dave, E. C. Agrawala, Mahesh Agarwal, Rishi Agrawala, Amit Kumar Sharma, Ashutosh Gar{l, Neha Aggarwal and Gaurav Goel for the Respondents. The Judgment of the Court was delivere! d by Dr. MUKUNDAKAM SHARMA, J. 1. L1eave granted. 2. This appeal is filed by the appellant challenging the legality of the judgment and order dated 3rd July, 2006 passed by the Monopolies and Restrictive Trade Practices Commission, New Delhi (for short "the Commission"). By tine aforesaid judgment and order the learned Commission made certain observations and recorded findings against the appellant herein, which are under challenge in this appeal.

The Commission recorded a finding that the action of the appe,llant in increasing the cost which forced the respondent from making further payments resulting in the cancellation referred 1to by the appellant was unfair trade practice and the appellant had no right to forfeit the earnest money. Consequently a direction was issued that the appellant should return the earnest money with interest thereon @ 9% per annum from the date of withholding the earnest money till the date of repayment in respect of the main flat as well as the parking space in respect of the letters dated 26th/ 27th May, 1999. * 3. We may briefly state the facts leading to the aforesaid direction of the Commission. The respondent herein booked a flat along with parking space in the appellant's DLF Regency Park, Gurgaon by entering into an Apartment Buyer's Agreement on 17th June, 1993. The sale price fixed by both the parties was at Rs.

16,37,448/- payable in 42 installments spread - 'f over a period of ten years commencing from 9th March, ending on 9th March, 2003. The respondent, herein admittedly paid all the installments due upto September 1998 which came to a sum of Rs. 9,94,836/-. But thereafter he did not make any payment of installment and therefor was considered to be a defaulter by the appellant. In the meantime by letter date 19th February, 1998 the appellant demanded an additional amount of Rs. 4,21, 474. 06 from respondent on account of cost of escalation, increase in area, external electrification, fire fighting systern and stand-by generators. The said amount was to be paid " } in four equal bi-monthly installment of Rs. 1,05,368. 52/- commencing from 15th March, 1998. The respondent did not honor the said demand. Consequently, the appellant cancelled the allotment of the flat vide its letter dated 26th May, 1999 and forfeited the earnest money and returned the balance amount due. 4.

The respondent sent a legal notice dated 23rd May, 2001 to the appellant contending that the cancellation of the allotment of the flat was illegal and arbitrary. The appellant sent a reply to the legal notice on 25th June, 2001 stating that the deductions made were lawful and in accordance with the terms of the agreement. 5. The respondent, however, was not satisfied with the reply sent by the appellant and instead filed an application under Section 12-B of the Monopolies and Restrictive Trade Practices Act, 1969 before the Commission for payment of compensation on the ground of unfair trade practice. It was contended inter alia, by the respondent that the appellant was not "fentitled to forfeit the earnest money as they themselves were unable to give delivery of the flat within the stipulated time and more particularly, when the appellant has re-sold the said flat at ,:. ,. ~ a good price, therefore, as the appellant did not incur any loss, """ 1.

l they could not and were not, entitled to forfeit th13 earnest money. The aforesaid submission of the respondent found favour with the Commission and it recorded the aforesaid finding and allowed the application filed by the respondent, consequent to which the impugned directiol")S were issued which are under 8 ~challenge in this appeal. 6. The issue which was raised and urged before us, therefore, clearly revolves around the power and jurisdiction of the appellant in forfeiting the earnest money whiclh was to the tune of Rs. 1,80,470/-. On going through the record w1e, however, found that out Rs. 1,80,470/- an amount of Rs. 1,69,012/-was forfeited as earnest money, out of which an amount of Rs. 1,62,412/was for the flat and an amount of Rs. 6600/- was for the parking alloted to the respondent. The balance amount i. e Rs. 9,571/was forfeited by the appellant on account of interest on the de- -" layed payment.

-\ 7~ On behalf of the learned counsel forthE~ appellant a specific contention was raised before us that the appellant was entitled to forfeit the earnest money in terms of the stipulations in the agreement arrived at between the parties with mutual consent. Learned counsel appearing for the appellant has drawn our attention to the various clauses of the said agreement which empowered the appellant to deduct the aforesaid earnest money. In this connection, reference was made to the provisions contained in clause 8 and 9 of the said ;agreement which .. ; ) read as follows: "8. That the Company and the Apartment Allottee hereby agree that the amounts paid on registration to the extent of 10% of the sale price of the said premises and on allotment or in instalments as the case may be, will collectively constitute the earnest money.

Non-fulfillment by the Apartment Allottee of the terms and conditions of ¥"" application fo( allotment, terms and conditions of sale arid those of this Agreement as also in the 1event of failure to sign this Agreement by Apartment Allottee within the time allowed may entail the forfeiture of the earnest money. 9. That the time of payment of installments as stated in schedule of payments (Annexure-11) is the essence of this Agreement. It shall be incumbent on the ApartmentAllottee -y to comply with the terms of payment and other terms and conditions of sale, failing which he shall forfeit to the Company the entire amount of earnest money and the Agreement of sale shall stand cancelled and the Apartment Allottee shall have no right, title, interest or claim of whatsoever nature on the said premises. The Company shall thereafter be free to resell and deal with the said premises in any manner, whatsoever, at its sole discretion.

The amount(s), if any, paid over and above the earnest money shall be however refunded to theApartmentAllottee /.. by the Company without any interest. " >- Relying on the said provision it was contended by the learned counsel for the appellant that the action of the appellant in forfeiting the earnest money was legal and justified. 8. Counsel for the respondent, however, refuted the aforesaid position contending, inter alia that the possession was proposed to be given to the respondent on or before June 16, 1996 i. e. within three years from the date of booking, but the said ,. possession was not given even till 1998, therefore, the appel- ( lant could and would not have resorted to the power of forfeiture of the earnest money. It was submitted on behalf of the respondent that a sum of Rs. 4,21,474. 06/- demanded towards cost of escalation, increase in area, external electrification, fire fighting system and stand by gene. rators was exorbitant.

It was also submitted that it is unfair on the part of the appellant to demand ,;. -,... ,. _. such a huge amount in such a short span of six months. 9. The aforesaid submission of the respondent was also advanced before the Commission and the same found favour with the Commission. The learned Commission observed that substantial portion of the escalation has been attributed towards creating additional facilities and upgrading the flats, thus putting additional and unforeseen burden upon the allottee and that to, to be fulfilled in short span of time. The Commission further held that the contract was one sided and the respondent was required to sign on the doted lines. While corning to the aforesaid conclusion the Commission has relied upon one of its earlier order dated 2nd May, 2006 in Grahak Shayak Gurgon Voluntary Consumer Association and Ors. v. DLF Universal Ltd. & Anr.

wherein in respect to the same complex for which the respondent filled the application for allotment, the escalation made by the appellant has been held to be unfair trade practice. 10. Th. e parties to the contract are governed and bound by the terms and conditions of the agreement emtered into. In the case in hand though it cannot be denied that ithe respondents at the time of signing the Apartment Buyer's A{~reement was well aware of the fact that additional amount could be demanded on account of factors enumerated in clause 4, but what would be the maximum enhancement was not prescribed in the agreement. It seem that by inserting the words "the decision of the Company in this regard would be final and bi. nding on the Apartment Allottee" in clause 4 of the agreement the company has vested in itself unrestricted power to increase the cost. 11.

Coming to the second aspect as per clause 16 of the agreement it was proposed that the possession could be given 1 within three years from the date of booking i. e by 16 h June, 1996 but the same was not done even till September 1998 and it is evident from letter dated 22nd February, 199'9 that there was still some time and further work to be done by th13 appellant to· enable it to hand over the possession. As per clause· 18 the only option given was that if there is delay in delivering the possession then the allottee would be entitled for refund of entire amount deposited with the appellant but without any intemst. In other words as per the terms of the agreement no liability w! ll accrue upon the appellant due to delay in handing the poss1ession. '"): 12.

In the present case we find that the installments were duly paid for at least five years and payment was stopped thereafter on the ground that the increase in the cost of the flat was beyond the means of the respondent and also the fact that ap- - '( pellant had failed to deliver the possession of the flat in time. On the other hand as submitted there were bona fide reasons on the part of the appellant for their inability to handover the said possession within the stipulated time and the increase in cost was on account of factors specifically enumerated in clause 2 (b) and clause 4. 13. Considering the entire facts and circumstances of the case, we are of the considered opinion that the interest of justice would be subserved if we, in exercise of our discretionary jurisdiction under Article 142 of the Constitution o"f India, direct ;_ that 50% of the amount which was forfeited be refunded by the ?

appellant to the respondent within three months from the date of this Judgment and the balance 50% would be considered as forfeited in terms of the provisions of the agreement. However, if the appellant fails to pay the said amount within the stipulated period the same will carry an interest @ 8% p. a. which will be calculated from the date when the abovementioned period expires till the date of payment. 14. We also make it clear that this order is passed in the peculiar facts and circumstances of this case and would not be > considered as precedence in any other matter. 1 15. The appeal stands disposed of in terms of the aforesaid directions. There will be no order as to costs. S. K. S. Appeal disposed of l'~>f-