Sheela Thomas vs JAYALAKSHMY BUILDERS PVT. LTD.

COMPLAINT for a direction for the return of the amount paid to the opposite parties for construction and delivery of Apartment No. 8-C on the 8th floor of the building and the consideration paid towards the undivided interest in the property with interest and compensation.

THE allegations in the complaint in brief are, first complainant is the mother of the second complainant and the 3rd complainant is the husband of the first complainant, since they wanted to have accommodation, they entered into Exbt. P1 agreement with the opposite party on 17th May, 1995 whereby the opposite party agreed to construct and convey Apartment No. 8-C on the 8th floor of the building towards the construction costs and also the consideration for the undivided interest in the land, total consideration of Rs. 87,000/- was fixed which the complainants agreed to pay to the opposite party, opposite party agreed to complete the construction within 18 months from the date of the agreement and the consideration thereof has to be paid as per the payment schedule, the total payment has to be made two months before the expected date of the completion of the work . In August, 1996, the opposite party made a demand of enhanced amount of Rs. 1,00,000/-, complainants made a total payment of Rs. 9,37,000/- as on 4.11.1996, yet the construction of the building did not progress as was expected, an additional sum of Rs. 50,000/- was also paid before 17.11.1996, the opposite parties diverted the fund to purchase Rubber Estate, the construction was not complete even by August, 1997; and on 20.8.1997 the opposite parties by Exbt. P3 wrote to the complainant expressing regret and assuring to hand over the building soon, but no time was mentioned. THE structure has come up but the front-yard was not levelled and made usable, lifts are not installed in full, car parking etc. are not yet provided, no step was taken for drawing electric connection, the construction also is sub-standard. Inspite repeated demands to perform its obligation under the contract since opposite party did not hand over the apartment etc. complainant wanted the opposite parties to return the amount paid by them with interest at 20%, that was not complied with. THE failure of the complainant to construct the building and deliver the same as it undertook would constitute negligence and also unfair trade practice. Hence they wanted direction to be issued as stated above. In the version by the opposite parties they contend that the complaint is not maintainable, the same is barred by limitation. Admits, agreement was entered into with the first and second complainants for construction of the apartment on 15.7.1995, as per the agreement, the opposite party undertook to construct the apartment for complainants 1 and 2, it would not constitute a consumer relation. As per para 3 of Exbt. P1 agreement the mutual obligations and rights are stated, the opposite party was bound to complete the construction only after the complainant fulfilled obligation under the contract. There was stipulation in the agreement as to the date of payments and the amount to be paid, the complainant did not comply with the said conditions. The opposite party has the right to change the schedule without notice when there is inordinate increase in the total construction costs; it is also provided that the complainant has to pay the stamp duty and other incidental expenses for registration of documents, Deposits with KSEB etc. along with sale tax and building tax, the complainant had to complete the payment by 15.9.1996 which they did not comply, a total amount of Rs. 2,18,850/- is still due from the complainant as per the terms of the agreement. Had complainant been ready to make the aforesaid payments in time, the construction of the apartment would have been completed. On the arrears the complainants are bound to pay interest at 20%, opposite party has taken all steps for getting electric connection. The complaint is liable to be dismissed. Complainant filed a rejoinder in which they reiterate their allegations in the complaint and also alleges that the complainant came to know that in the first week of July, 1999 while the contract between the complainant and the opposite party was in force, the opposite party obtained a loan of Rs. 1.30 crores on 24.3.1998 from the KFC as per loan No. 12026666/1998 by hypothecating the property and the building in question, that was secured by the opposite party fraudulently and in secret manner. As soon as the said information was received, the complainant addressed the KFC through their Lawyer detailing the aforesaid fact, and received a reply dated 27.7.1999 confirming the said loan transaction. This itself would constitute breach of contract and unfair trade practice which would qualify the complainant for a direction for return of the amount with interest and compensation.

The first complainant was examined as P.W. 1 and the complainants produced Exbts. P1 to P6, on the side of the opposite parties no evidence was tendered. A commission was issued, he filed Exbt. C1 report. The points that would arise for consideration are : (1) Whether the complaint is barred by limitation ? (2) Whether the complaint is maintainable ? (3) Whether the allegation of breach of contract is true ? And whether there is deficiency in service and unfair trade practice ? (4) Reliefs and costs.

Point No. 1 : In the version there is contention that the complaint is barred by limitation. The agreement Exbt. P1 was executed on 17th May, 1995, the undertaking was, the construction would be completed within 18 months from the date of the agreement. That is, the performance has to be by 17th November, 1996. Therefore, according to the opposite party the period of two years for filing the complaint from the said date expired long before the filing of the complaint as the complaint was filed only on 19.6.1999. The allegation in para 8 of the complaint to the effect that the opposite party sent Exbt. P3 to the complainant on 20.8.1997 wherein they said that due to various reasons beyond their control they expect that they would be able to complete the project within 7 to 8 months. The eight months could have expired on 20.4.1998. As has noted, as per Section 24(A) of the Consumer Protection Act the complaint has to be filed within two years of the accrual of the cause of action. As on the date of the complaint even the building was not delivered. As perusal of Exbt. C1 Commission report would show that still there are work to be completed. And as per the allegation of the complainant and the limitation would start to run only from 20.4.1998. The complaint having been filed on 19.6.1999 the same is within the period of limitation. The point is found in favour of the complainant. Point Nos. 2 and 3 : In the circumstances of the case these points can be considered together. In Exbt. P1 it is agreed that the opposite party would complete the construction within 18 months from the date of the same, which was on 17th May, 1995. Admittedly the building was not complete on that appointed day, as could be evident from Exbt. P3 letter issued by the opposite party. Further it is relevant to see the stage of construction, Exbt. C1 report by the Commissioner gives the details of the construction. Commissioner visited the building on 20.12.2000. He gives the description of the building in Exbt. C1, he states that structure has been completed, flooring is finished with ceramic tiles. He observes that work inside the flat is almost complete, except electric connection, water supply and drainage connection. Though electrical wiring is almost completed, inside the flat no distribution box or circuit breaker is installed. Further he says that installation or drainage connection in Apartment No. 8-C is completed in the sense that it is connected to the main drainage pipe but the main pipe is not connected with the drainage line, and that there is no water connection. Electric connection is not complete, the flooring of the common area is not complete. There is provision for lift in the apartment, one side the lift car is provided with outside doors but no inside door is provided, and the work is yet to be completed. He concludes by stating that no apartment is ready for occupation because there is no water, electric or drainage connection and he adds that no flat is occupied. The picture that emerges from a reading of Exbt. C1 as to the stage of construction as on 20.12.2000 is that though the structure is complete, apartment is not fit for occupation because of the aforesaid details noted by the Commission. Now as has noted the undertaking was within 18 months to Exbt. P1, the construction would be completed. What is stated in Exbt. P3 shows that as on 20.8.1997 the construction was not complete which they say was due to causes beyond their control, yet they undertake to complete the construction within 7 to 8 months. In the succeeding paragraph it is stated, they are confident of completing the project very soon. Adding to this Exbt. P4, another communication from the opposite party states that they are reaching the final stage of completion of the project, but wants the complainant to pay an additional amount of Rs. 1,68,850/-. What is to be noted is, even on 7.6.1999 the construction of the flat was not complete. 7. Now having noted that the apartment is not constructed and delivered within the time, the question for consideration would be whether as contended by the opposite party, the complainants have also contributed to the slow progress of the construction. The complainant has produced Exbt. P2 series receipts showing payments; the details of the payments are also mentioned in the complaint itself. In the version what is projected by the opposite parties is, the said payments were not in accordance with Exbt. P1 agreement. Exbt. P1 states that the consideration has to be paid in six instalments starting with 2,00,000/- on the date of registration. Now the opposite party states that the very look at the allegation in the complaint as to the said payments would demonstrate that the complainants did not adhere to the said requirement though they have made payments subsequently. As on 4.11.1996 a total amount of Rs. 9,37,000/- was paid whereas the value fixed in Exbt. P1 was Rs. 8,87,000/-. The case of the opposite party is, subsequently there was a payment of Rs. 1,00,000/- before 17.11.1996 and that he had paid Rs. 50,000/- in addition to the amount fixed in Exbt. P1. The justification attempted by the opposite party is it insisted additional payment as per Exbt. P1 agreement, its Clause 3 gives the opposite party authority to demand additional payments. It is pointed out that Clause 3(a) of the agreement reserves the right of the opposite party to change the schedule without notice when there is inordinate increase in the total construction costs; that is what is contended in para 7 of the version. The very plea itself would show that such change of schedule could only be when there is inordinate increase in the total construction cost. Here the opposite party has not tendered any evidence either oral or documentary, that means there is no material to show there was inordinate increase in the total construction costs.

At no stage of the construction before Exbt. P4, did the opposite party protest that the progress of the construction is retarded because of the delay in payment or regular payment by the complainant. In Exbt. P3 dated 20.8.1997, the opposite party does not state that the progress is effected because of the failure of the opposite party to discharge their obligation. On the other hand it expresses regret in not completing the construction and adds that due to various reasons beyond their control, the construction would not progress satisfactorily. Of course in Exbt. P4 in 1999 the opposite party insists that the complainant has to make the payments mentioned in the said letter. The case of the complainant is that even if Exbt. P1 gave them authority to make such demand that cannot be arbitrarily made there must be justifying circumstance enabling them to make those demands. The enhancement of the amount primarily is not supported by any material. Though it may be that the complainant has to pay the registration fee and the deposit towards the sale tax etc., those could arise only at as stage when the construction is complete.

Even assuming that the claim of the complainant for additional payment is justifiable, the further question for consideration is whether the complainant has created a mortgage with respect to building and property in question for an amount of Rs. 1.30 crores after Exbt. P1. Complainants filed a rejoinder in which they allege that they learned in the first week of July, 1999, the opposite party clandestinely raised a loan of 1.30 crores on 24.3.1998 from the KFC as per loan No. 12026666/1998 by hypothecating the property and the building. The complainant sent Exbt. P5 notice to KFC mentioning the aforesaid loan with respect to the property and also the contract between the complainant and the opposite party. To that notice the KFC sent Exbt. P6 reply, in Exbt. P6 reply the KFC states that they have disbursed a short term loan of Rs. 1.50 lakhs to M/s. Jayalakshmy Builders Private Limited, one of the conditions was they should offer collateral security worth Rs. 2.25 lakhs. The reply proceeds to add that with respect to 30 cents in Survey No. 431, and 9.500 cents in Survey No. 431/1 of Pattom Village and the structures thereon owned by Rajendrababu, Kailas, Pettah, Tivandrum and Sri R.S. Balachandran, Jayasree Mandiram, Pattom, Trivandrum, have created an equitable mortgage in favour of the Corporation by deposit of title deeds on 26.3.1998. Exbt. P1 states, the said Rajendrababu and Balachandran are the owners and the proprietors of the land comprised in the A schedule to Exbt. P1. The affidavit of P.W. 1 avers the creation of the said equitable mortgage, P.W. 1 mentions about the notice and P6 reply sent by the complainants. In the cross-examination as regards the same, no suggestion was made to P.W. 1 that no such mortgage or liability was created with respect to the property in question. Of course, it is mentioned in the rejoinder that when the complainant learnt of the aforesaid transaction instituted a suit and obtained an interim injunction. But that was after this complaint.

Now the important aspect to be noted is, the opposite party did not even file an affidavit controverting what the complainant averred in the affidavit. None on behalf of the opposite party has entered into the box to deny the same. When such is the situation, the case of the complainant as regards the same has to be accepted. This would mean that the opposite party created liability on the subject matter of Exbt. P1 including the building without the knowledge or consent of the complainant. From Exbt. P5 what is seen is liability by creating equitable mortgage by deposit of title deed came into existence after Exbt. P1 agreement. What was projected by the opposite party in Exbt. P1 is, they have absolute right over the property and that they would convey the undivided share in the property and also would construct the apartment on behalf of the complainant. That representation and undertaking are clearly violated. Even on 4.11.1996 the complainant had made a total payment of Rs. 9,37,000/- as consideration, it was after that this liability of 1.50 lakhs was created on the property including the construction. This is nothing but breach of the representation made by the opposite party which under law would amount to unfair trade practice. In the decision of this Commission Dr. M. Thomas Abraham & Ors. v. Southern Investments (P) Ltd., 2000 (2) CPR 286, relying on the decision of the Supreme Court in Lucknow Development Authority v. M.K. Gupta, III (1993) CPJ 7 (SC)=1994 (1) CPR 569 (SC), held that a unilateral change of character of one of the contracting parties from a partnership to a limited Company would amount to deficiency in service and on that ground itself complainants are entitled to the return of the amount received by opposite party with compensation. In Lucknow Development Authority''s case Supreme Court held that an agreement to develop lands or allot site or constructs a house for the benefit of common man is as much service. It is held, "If the service is defective or it is not what was represented then it would be unfair trade practice as defined in the Act". Creating the mortgage after Exbt. P1 agreement without the knowledge or consent of the contracting party in the above circumstances should amount to unfair trade practice. On that ground also the complainants are entitled to the return of the consideration. In the context of the decision of the Supreme Court in Lucknow Development Authority''s case referred to early, it cannot be held that the complaint is not maintainable because the dispute is only with respect to breach of contract. In the circumstance it is not merely breach of contract, but is deficiency in service and unfair trade practice. Points found in favour of the complainant.

Point No. 4 : 11. As per Exbt. P1 contract, complainants 1 and 2 entered into contract with the opposite party and the payment as per the receipts were also made by them. Therefore, complainants 1 and 2 are entitled to the return of the amount paid by them, Rs. 9,37,000/- (Nine lakhs thirty seven thousand). They are also entitled to compensation; since there is no independent evidence for quantification of the compensation we consider it appropriate to award interest in lieu of compensation on the amount paid by the complainants 1 and 2. The complainants have claimed interest at the rate of 20%. Defaulted payment as per the case of the opposite parties should bear interest at 20%. In Dr. Thomas Abraham''s case, 2000 (2) CPR 286 of this Commission referred to early, interest is awarded at 18% as per the documents produced in that case. That also was a case of default in constructing the flat and delivery of the same. Having regard to the same we consider in the facts and circumstances interest at the rate of 18% on each of the instalments from the date of receipt of the respective instalments till payment or recovery of the same can be awarded. Since the complainants are successful, they are eligible for their cost which we fix at Rs. 3,000/-. Point found accordingly.

In view of our findings in the earlier points the opposite party is directed to pay complainants 1 and 2, a total amount of Rs. 9,37,000/- (Nine lakhs thirty seven thousand) along with interest at 18% on each of the instalments paid by the complainants from the date of such receipt of the respective instalments till payment of the whole amount or recovery of the same. The complainants shall be entitled to their costs Rs. 3,000/-.

Complaint disposed of.