Rednam Purushothama Rao vs Maradani Rama Mohan

MR. Justice Ashok Bhan, President-This Revision Petition has been filed against the order dated 6th January, 2006 of the State Consumer Disputes Redressal Commission, Andhra Pradesh at Hyderabad (for short, the State Commission). By the impugned order, the State Commission has confirmed the order passed by the District Consumer Disputes Redressal Forum, Visakhapatnam (for short, the District Forum). Factual matrix leading to the filing of this revision petition is set out hereunder:

PETITIONER Nos. 1 to 3 who were opposite party Nos. 3 to 5 before the District Forum, being the owners of the site, entered into a development agreement with M/s. Clcons Promoter and Builders, opposite party No. 1, through their Managing Director-opposite party No. 2, arrayed as respondent Nos. 2 and 3 in this revision petition.

COMPLAINANT is respondent No. 1 herein and will be referred to as respondent No. 1 hereinafter. Petitioner No. 4 herein was opposite party No. 6, namely, M/s. Padmavathi Constructions, before the District Forum.

RESPONDENT No. 1 agreed to purchase flat No. 11 on the second floor which was to be constructed by respondent Nos. 2 and 3. The case of respondent No. 1 was that impressed by the brochure issued by respondent Nos. 2 and 3 he paid, initially, Rs. 1,05,000 on 9th November, 2001 to respondent Nos. 2 and 3 for the purpose of reserving a flat measuring 630 sq. ft. He paid further sums of Rs. 95,000 on 22nd January, 2001 and Rs. 1,00,000 on 21st April, 2001 towards the sale consideration of the flat. In all, he paid a sum of Rs. 3,00,000. The respondent Nos. 2 and 3 abandoned the construction activity. After abandonment of the construction, respondent No. 1 allegedly approached Respondent No. 2 and Managing Director of respondent No. 2 who promised to execute the sale deed of the undivided site in favour of respondent No. 1, but failed to do so in spite of repeated requests made, even though the respondent No. 1 was ready to pay the balance sale consideration of Rs. 1,85,000.

RESPONDENT No. 1 and his friend then approached the owners of the site i.e. the petitioners to make construction on their site and asked them to register the undivided site but petitioners refused to do so. Further, allegation of respondent No. 1 was that the petitioners were making attempts to sell the flats without complying with the earlier promise made by respondent Nos. 2 and 3 to sell the flat No. 11 on 2nd floor to him. Thus, alleging deficiency in service and unfair trade practice, respondent No. 1 approached the District Forum seeking a direction to the opposite parties to complete the construction and deliver flat No. 11 on 2nd floor of the building by collecting balance amount of Rs. 1,85,000 or, in the alternative, to refund the amount paid by the respondent No. 1 i.e. Rs. 3,00,000 along with interest @ 24% per annum from the respective dates of payment till the date of refund and pay compensation of Rs. 2,00,000 for causing mental agony, physical pain, financial hardship and deprivation of the flat and Rs. 5,000 towards litigation cost.

RESPONDENT Nos. 2 and 3 (opposite party Nos. 1, 2) were proceeded ex parte as they did not appear in spite of service.

PETITIONER No. 1 (opposite party No. 3) filed the written statement on behalf of the petitioners. In the written statement, it was admitted that the petitioner Nos. 1 to 3 had entered into a development agreement with the respondent Nos. 2, 3 for construction of a commercial-cum-residential complex. As per Clause 8 of the agreement the developer alone was answerable to the claims, if any, with whom they had entered into an agreement to sell and the petitioners had nothing to do with the so-called agreement entered into by the respondent Nos. 2 and 3 with the respondent No. 1. Allegation of respondent No. 1 that he had approached the petitioners was denied being false. It was asserted that the petitioners had not transferred their undivided share in favour of the respondent Nos. 2 and 3 by executing sale deed. That the development agreement was between the petitioners and respondent Nos. 2 and 3 only. That there was no agreement between the petitioners and respondent No. 1 and, therefore, respondent No. 1 was not a consumer vis-a-vis the petitioners. That there was no privity of contract between the petitioners and respondent No. 1. Question of adopting unfair trade practice and being guilty of deficiency in service on the part of the petitioners under the circumstances did not arise. It was contended that they were not liable to compensate the respondent No. 1 in any manner whatsoever and the petitioners were well within their right to retain the property.

RESPONDENT No. 1 filed receipt dated 9th January, 2001 for Rs. 1,05,000, receipt dated 22nd January, 2001 for Rs. 95,000, receipt dated 21st April, 2001 for Rs. 1,00,000, letter from respondent Nos. 2 and 3, plan supplied by the respondent Nos. 2 and 3, development agreement dated 26th April, 1999 entered into between the petitioners and the respondent Nos. 2, 3.

DISTRICT Forum after taking into consideration the pleadings and the evidence led by the parties allowed the complaint and directed the petitioners to complete the construction and deliver flat No. 11 on the second floor measuring 630 sq. ft. at the rate prevailing at the time of filing of the complaint i.e. February, 2003 and if the area of flat No. 11 on 2nd floor was more than 630 sq. ft. the complainant was to pay the value of the total area and if, in case, the complainant was not willing to have flat No. 11 on the second floor as per directions given by the District Forum then the petitioners were directed to pay a compensation of Rs. 1,50,000 to the respondent No. 1 and litigation expenses of Rs. 5,000. It was also made clear by the District Forum that the compensation and litigation cost need not be paid if the flat is sold by the petitioners to the respondent No. 1. Relevant portion of the order of the District Forum reads as under: "In case the complainant is not willing to pay the entire cost of the flat No. 11 or a flat now offered in the 2nd floor as per the plinth area and as per sq. ft. rate prevailing by the time of filing of this complaint we direct the opposite parties 3 to 6 to pay compensation of Rs. 1,50,000 and cost of litigation of Rs. 5,000 and till such compliance we direct a charge be created for Rs. 1,55,000 on the building and site mentioned in I.A. schedule."

AS against respondent Nos. 2 and 3 the District Forum passed the following order: "With regard to liability of the opposite parties 1 and 2 it is evidenced that the 2nd opposite party has received the amounts on behalf of the opposite parties 1 and 2 and passed receipts. The opposite parties 1 and 2 are liable to refund the amount of Rs. 3,00,000 with interest @ 9% from 21.4.2001 till the date of realization and they are liable to pay damages for causing mental agony and anxiety and on this score we award Rs. 50,000 towards compensation against the opposite parties 1 and 2."

ORDER passed by the District Forum against respondent Nos. 2 and 3 attained finality as respondent Nos. 2 and 3 did not file any appeal against the order of the District Forum.

APPEAL filed by the petitioners was dismissed by the State Commission observing as under: In Clause 8 of the agreement Ex. A6, it was specifically mentioned that the owner shall have undivided share of the extent of 432.67 sq. yards and the developer will have remaining 674.56 sq. yards of undivided share in the total area of 1107.24 sq. yards. It was also specifically mentioned in this clause that the developers are entitled to allot similar undivided and unallotted share out of their share of the total site to their nominees, in order to safeguard their interest, the opposite parties 3 to 5 have specifically got it mentioned that for no reason if the developer fails to construct the building as undertaken by them after allotting to their nominees, the developer alone is answerable to the claimants of the purchasers of the undivided land and in such case the sale of the undivided shares of the site made by the developer shall be cancelled. The agreement is intended to safeguard the owners and the developer. The owners have taken extra care to safeguard their own interest and they have also forgotten the interests of the prospective purchasers who enter into the agreement with the developer. The opposite parties 3 to 5 have not safeguarded the interests of the 3rd parties who entered into agreement and paid money to the developer acquiring interest in the undivided share of the developer. The appellants/opposite parties 3 to 6 have stepped into shoes of the opposite parties 1 and 2 and they took over the rights and liabilities and interests of the opposite parties 1 and 2. The District Forum has rightly held that there is deficiency in service on the part of the opposite parties 3 to 6 and allowed the complaint. We do not see any ground to interfere with the orders of the District Forum in exercising of appellate jurisdiction. The appeal fails and is, accordingly, dismissed.

WITH the help of the learned Counsel for the parties we have gone through the entire record. Counsel for the parties have been heard at length.

THERE is no dispute that the petitioners had entered into a development agreement-Ex. A6 with respondent Nos. 2 and 3. Petitioners had delivered the possession of the site and respondent Nos. 2 and 3 had started developing the property as per terms and conditions of agreement mentioned in Ex. A6. Respondent Nos. 2 and 3 had further agreed to sell flat No. 11 to respondent No. 1. Respondent Nos. 2 and 3 had received a sum of Rs. 3,00,000 from respondent No. 1 as part payment of the sale consideration. Respondent Nos. 2 and 3 abandoned the construction on the site. As per agreement, respondent Nos. 2 and 3 were to deliver super built up area of 9,800 sq. ft. to the petitioners as per particulars in Annexure-I and development was to be completed within 18 months from the date of agreement. In case, the construction was not completed within two years from the date of agreement the developer was to be penalized at the rate of Rs. 2 per sq. ft. per month. Rest of the built up area was to be retained by respondent Nos. 2 and 3 and they were at liberty to sell the same to third parties. Clause 8 of the agreement (Exhibit A6) reads as under: "The Owners will have the unspecified and undivided share of the extent of 432.67 sq. yards in the schedule mentioned site as per the better particulars contained in Annexure-I. The developers will have the remaining 674.56 sq. yards undivided interest in the total site of 1107.24 sq. yards. The developers shall be entitled to allot the similar undivided and unspecified shares out of their share of the total site in relation to the Developers'' share of built-up area of the building in favour of the Developers or their nominees. In this context it is specifically agreed by both the parties that allotment if any of undivided and unspecified shares in the site in favour of the Developer''s nominees be incidental to the allotment of the built-up area. The persons willing to purchase from the Developers the units in the Developers'' share of the built-up area shall have no independent right over the undivided share of land, if any, allotted to them by the Developers. That means, if for any reason the Developers fail to construct the building as undertaken by them in this Agreement after allotting to their nominees the prospective built-up area together with an undivided and unspecified share of a given extent in the site, they shall not be entitled to claim any right independently over such individual share in the site. The developers alone shall be answerable to the claims, if any of the purchasers of undivided land from the share of the Developers and in such case the sale of undivided shares of the site shall stand cancelled. At the time of final sale deed to be given in respect of the built-up units falling to the share of the Developers in favour of the Developers nominees the owners shall join the Developers in conveying title to the undivided share of the site in relation to such units in favour of the Developers'' nominees.

ON going through the agreement Ex. A6 and in particular Clause 8 we find that there was no privity of contract between the petitioners and respondent No. 1. Petitioners had not transferred their interest in the immovable property in favour of respondent Nos. 2 and 3. Under Section 54 of the Transfer of Property Act, an immovable property of more than Rs. 100 could not be transferred except by executing a registered sale deed in favour of the transferee. No such sale deed has been executed by the Petitioners in favour of respondent Nos. 2 and 3. The State Commission has held that the petitioners while entering into development agreement did not safeguard the third party rights. Question of safeguarding the third party rights on the part of the petitioners did not arise as the petitioners while entering into the development agreement did not know whether respondent Nos. 2 and 3 would sell their share and, if at all they sell their share, in whose favour they would sell and whose interest are to be protected. There was no duty/obligation cast on the petitioners to safeguard the third party rights. It was for the buyers to protect their own interest. Since there was no privity of contract between the petitioners and the complainant, the complainant was not a consumer vis-a-vis the petitioners. Petitioners who were the owners of the site could not be directed to act as developers or fulfil the obligations entered into between the respondent Nos. 2 and 3 and the complainant. The Fora below have erred in directing the petitioners to complete the construction and hand over the possession of the flat to respondent No. 1. No relief could be granted against the petitioners, as there was no privity of contract between the petitioners and respondent No. 1. Respondent No. 1 had not paid any consideration or part of the consideration to the petitioners and, therefore, question of deficiency in service on the part of the petitioners did not arise.

FOR the reasons stated above the directions given against the petitioners by the Fora below are set aside and the complaint filed by respondent No. 1 qua the petitioners is dismissed. Order of the District Forum as against respondent Nos. 2 and 3 is confirmed. Respondent No. 1 would be at liberty to execute the same against respondent Nos. 2 and 3.

REVISION petition is disposed of in the above terms. There shall be no order as to costs.