Sunita Ajay Ramnathkar vs Starlight Systems (I) LLP

This complaint has been filed by the complainant, Mrs. Sunita Ajay Ramnathkar, against the opposite party.

The brief facts of the complaint are that in November/December, 2013, the officials, agents and affiliates of the opposite party approached the

complainant and made representations enticing the complainant to book a unit, being unit No.1304 on the 13 th floor (‘unit’) of ‘SIGNIA

ISLES’ at Bandra Kurla Complex, Bandra (East), Mumbai-400051 (‘Project’). On 31.12.2013, the complainant booked the unit for a

consideration of Rs.18,11,00,000 (Eighteen crore eleven lacs only) and executed a booking application form. On 31.12.2013, the complainant deposited

a sum of Rs.1,00,00,000/- with the opposite party as earnest money and part payment vide cheque dated 31.12.2013 bearing No.000856. On

21.01.2014, the complainant further deposited a sum of Rs.1,00,00,000/- with the opposite party as earnest money and part payment vide cheque dated

24.01.2013 bearing No.000903. On 26.02.2014, a tentative payment schedule was presented to the complainant. On 14.4.2014, the opposite party

issued a letter to the complainant to make payment of INR 2,07,49,890/- as per the tentative payment schedule on or before 30.04.2014. On

07.06.2014, the opposite party issued another letter to the complainant to make payment of INR 11,11,14,508 on or before 30.06.2014.

On 07.08.2014, the opposite party issued a letter to the complainant to make payment of INR 11,42,24,264. On 08.01.2015, the opposite party without

any further reminders of follow up issued a termination notice to the complainant to terminate the booking on the failure of the complainant to make

payments of the overdue sums within 7 days. On 16.01.2015 the complainant responded to the purported notice of termination dated 8.01.2015 by

pointing out that the demand of the opposite party was in contravention of the Maharashtra Ownership of Flats (Regulation of the Promotion of

Construction, Sale, Management and Transfer) Act, 1963. On 11.03.2015, the opposite party sought to coerce the complainant to sign a letter so as to

admit its purported breach of the terms of the booking application form as well as sought to impose an additional interest of 24% per annum. On

16.03.2015, the complainant wrote an email to Mr. Sumesh Mishra and Ms. Barkha Asnani categorically refusing to sign the one sided, self-serving

letter dated 11.03.2015. The complainant also sought cancellation of the booking application form and refund of the monies advanced. On 19.03.2015,

letter from the opposite party to the complainant denying the assurance of refunding the monies advanced by the complainant and also stating that the

booking application form had already been terminated and the sums advanced by the complainant stood forfeited.

Aggrieved with the above act of the opposite party, complainant has filed the present complaint requesting for the refund of the total amount rupees

two crores along with interest.

The complaint has been resisted by the opposite party by filing the written statement. It has been stated that as per the allotment letter and as per

the payment schedule, for cancellation of allotment or for withdrawal of amount, earnest money shall be deducted from the deposited amount and

therefore, total amount of Rupees two crores paid by the complainant has been deducted as the allotment was cancelled after giving many notices and

demand letters to the complainant. It has been prayed in the written statement to dismiss the complaint on various grounds mentioned in the written

statement.

Both the parties also filed evidence in the matter by way of affidavits.

Heard the leaned counsel for the parties and perused the record. The learned counsel for the complainant stated that booking application dated

31.12.2013 nowhere mentions any booking amount. It mentions that earnest money, service tax and payment schedule (copy to be attached), however,

no copies of these documents were enclosed with this application by the opposite party. Thus, though the total consideration of Rs.18.11 crores is

mentioned but no payment schedule has been given at the time of booking. The complainant paid Rupees one crore on the same date i.e. 31.12.2013

when the booking application was filed and another Rupees one crore was paid on 24.01.2014 and by that time no payment schedule was given to the

complainant and obviously complainant paid these amounts as part payments towards the total consideration. The payment schedule was given on

26.02.2014 wherein it is mentioned that earnest money will be six percent and the total amount is mentioned as rupees one crore.

It was pointed by the learned counsel for the complainant that even going from this payment schedule only Rupees one crore can be treated as

earnest money. However, the opposite party has forfeited total amount of Rs.2 crores. The learned counsel further argued that the earnest money can

only be taken after some loss has been suffered by the opposite party and in the present case the opposite party has not proved or produced any

evidence that they have suffered any loss. It was further argued by the learned counsel that if the builder has not suffered any loss he cannot claim

forfeiture of earnest money for any booking amount. However, if he has suffered any loss then the court can consider providing for any lump sum

amount to be deducted by the opposite party. To support her contentions, the learned counsel relied upon the following cases:

“(1) Kailash Nath Associates Vs. Delhi Development Authority and Another, (2015) 4 SCC 136. (2) Soji Peter Vs. K.B. Vijayan & Ors., AIR

2017 (NOC 1052) 359â€​

Learned counsel further pleaded that the opposite party kept on sending demand letters for further payments. A letter dated 14.04.2014 was sent

for Rs.2,07,49,890/-. Similarly, the opposite party sent another letter dated 07.06.2014 for Rs.11,11,14,508/-. All these demands were made against the

provisions of Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, which

clearly prescribed that builder/developer has to enter into an agreement with the buyer if he is taking more than 20% of the total consideration. This

provision clearly bars the opposite party to make demand of these amounts. It was the duty of the opposite party to have first entered into the buyer-

builder agreement with the complainant. As the demand of opposite party was against the provisions of MOFA, the complainant did not agree to pay

these amounts and finally demanded refund from the opposite party. As there was no builder-buyer agreement signed between the parties, the

opposite party cannot claim any deduction of any amount on the basis of earnest money or on the basis of any other plea.

The opposite party has taken a plea that complainant is an investor and therefore not a consumer. In this regard learned counsel stated that the

complainant is not in the business or in the trading of property and therefore, the complainant cannot be denied the right of a consumer. To support this

argument, learned cited the judgment of this Commission in Kavit Ahuja Vs. Shipra Estate Ltd. & Jai Krishna Estate Developers Pvt. Ltd. and Ors., I

(2016) CPJ 31 (NC) wherein following has been observed:

“5. Going by the Dictionary meaning of the expression ‘Commerce’ as far as hiring or availing services are concerned, a person can be said

to have hired or availed services only if they are connected or related to the business or commerce in which he is engaged. In other words, the

services in order to exclude the hirer from the ambit of Section 2(1)(d) of the Act should be availed for the purpose of promoting, advancing or

augmenting an activity, the primary aim of which is to earn profit with use of the said services. It would ordinarily include activities such as

manufacturing, trading or rendering services. In the case of the purchase of houses which the service provider undertakes to construct for the

purchaser, the purchase can be said to be for a commercial purpose only where it is shown that the purchaser is engaged in the business of purchasing

and selling houses and / or plots on a regular basis, solely with a view to make profit by sale of such houses.

If however, a house to be constructed by the service provider is purchased by him purely as an investment and he is not undertaking the trading of

houses on a regular basis and in the normal course of the business profession or services in which he is engaged, it would be difficult to say that he

had purchased houses for a commercial purpose. A person having surplus funds available with him would not like to keep such funds idle and would

seek to invest them in such a manner that he gets maximum returns on his investment. He may invest such funds in a Bank Deposits, Shares, Mutual

Funds and Bonds or Debentures etc. Likewise, he may also invest his surplus funds in purchase of one or more houses, which is/are proposed to be

constructed by the service provider, in the hope that he would get better return on his investment by selling the said house(s) on a future date when the

market value of such house (s) is higher than the price paid or agreed to be paid by him. That by itself would not mean that he was engaged in the

commerce or business of purchasing and selling the house (s).â€​

On the other hand learned counsel for the opposite party argued that earnest money is the security for any breach of contract, which may entail

any future loss to the opposite party. In the present case, prima facie the units are ready, but because they are lying idle and, therefore, the opposite

party has suffered loss. Moreover, it was stated that earnest money is taken to safeguard the opposite party against any breach of the contract by the

purchaser. Learned counsel relied upon the decision of Hon’ble Supreme Court in the matter of Satish Batra Vs. Sudhir Rawal, 2012 AIR SCW

5869 wherein the Hon’ble Supreme Court has observed:

“18. When we examine the clauses in the instant case, it is amply clear that the clause extracted hereinabove was included in the contract at the

moment at which the contract was entered into. It represents the guarantee that the contract would be fulfilled. In other words, ‘earnest’ is

given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls

through by reasons of the default or failure of the purchaser. There is no other clause militates against the clauses extracted in the agreement dated

29.11.2011.â€​

Based on the above judgment, the learned counsel argued that earnest money is the guarantee for the completion of the whole work and if further

payments were not made by the complainant, the opposite party would be entitled to deduct the whole earnest money/booking amount.

It was further argued by the learned counsel that the provision of earnest money is clearly written in the payment schedule, which states that

earnest money will be @6% of the total amount. Thus, it is clear that the opposite party was entitled to forfeit money/earnest money.

Learned counsel for the opposite party argued that the complainant is not a consumer as he is basically an investor as has been admitted by the

complainant in his pleadings at several places. Learned counsel mentions that in the complaint itself it is admitted by the complainant that he has

invested this amount. Learned counsel further filed an extract from www.investopedia.com stating that the definition of investment includes the

income that results from investing and can come in many forms, including profit, interest, earnings, or appreciation. Investing refers to long term

commitment. Then the learned counsel specifically clarified if the investment is leading to profit or appreciation then it is clearly a commercial activity

and the complainant cannot be said to be a consumer under the Consumer Protection Act, 1986. Learned counsel for the opposite party further stated

that if the instalments are not paid as per the payment schedule by the buyer, the builder has every right to cancel the allotment and forfeit earnest

money/booking amount. To support his view, the learned counsel relied upon the following judgment:-

RP 1973 of 2014, DLF Southern Towns Pvt. Ltd. Vs. Dipu C. Seminal, decided on 07.01.2015 (NC), it has been held that:-

“11. Admittedly, complainant neither made payment of any instalments nor sent duly signed agreement, though; it was to be remitted within 30 days

from the receipt. Inspite of repeated reminders, complainant has not made payment of any instalments and in such circumstances, OP had every right

to forfeit earnest money on account of failure to comply terms and conditions of the allotment. Learned Counsel for the petitioner has placed reliance

on judgment of this Commission in Sahara India Commercial Corpn. Ltd. Vs. P. Gajendra Chary â€" III (2010) CPJ 190 (NC) in which it was

observed as under:

“12. Observations made by Hon’ble Supreme Court of India in H.U.D.A. vs. Kewal Krishan ’s case (supra) would be applicable to the

facts of the present case. In the said case, the Supreme Court has held that the builder would be entitled to forfeit the amount paid by way of

instalments in a case where the allotte defaults in making the payment of the remaining instalments. That the builder would be fully justified in

forfeiting the earnest money deposited by the allottee. In the present case, petitioner having paid the sum of Rs.46,350/- failed to pay the remaining

amount by way of instalments and asked for the refund of the amount already deposited. As per Clause 8 of the terms and conditions of allotment, the

petitioner was entitled to forfeit the amountâ€​.

In the light of above discussion, it becomes clear that as complainant failed to perform terms and conditions of the agreement inspite of repeated

reminders, OP was well within its rights to forfeit amount of earnest money and learned District Forum committed error in allowing complaint and

learned State Commission further committed error in dismissing appeal.â€​

I have given a thoughtful consideration to the arguments advanced by both the parties and have examined the material on record. It is true that the

complainant has used at several places the word “investment†for the purchase of this property, but the question required to be seen is whether

the complainant has indulged in trading of house/flats/plots or has booked/purchased many flats simultaneously. Even the interpretation of

“investment†given by the learned counsel for the opposite party that if the profit is generated from the investment, the investment will become

commercial in nature, it is seen that in the present case, there is no profit that can be attributed to the purchase of flat and no proof has been filed by

the opposite party in this regard.

15 . Moreover, this Commission in a number of recent judgments has taken a view that if the complainant is not involved in trade or business of the

house/ flats/plots on a regular basis, he will not be barred from filing complaint. In similar case where the complainant was alleged to have many

residential premises and he booked other villa with the same opposite party, this Commission in the case of Aashish Oberai Vs. Emaar MGF Land

Limited, Consumer Case No. 70 of 2015, decided on 14.09.2016 , held as follows:-

“ In the case of the purchase of the houses which a builder undertakes to construct for the buyer, the purchase can be said to be for a commercial

purpose where it is shown, by producing evidence, that the buyer is engaged in the business of a buying and selling of houses and or plots as a trading

activity, with a view to make profits by sale of such houses or plots. A person cannot be said to have purchased a house for a commercial purpose

only by proving that he owns or had purchased more than one houses or plots. In a given case, separate houses may be purchased by a person for the

individual use of his family members. A person owning a house in a city A may also purchase a house in city B for the purpose of staying in that

house during short visits to that city. A person may buy two or three houses if the requirement of his family cannot be met in one house. Therefore, it

would not be correct to say that in every case where a person owns more than one house, the acquisition of the house is for a commercial purpose â€​.

It has also been observed as follows:-

“ It would be pertinent to note that there is no evidence of the complainant having purchased and then sold any residential property. Therefore, it

would be difficult to say that he was engaged in the business of the buying and selling of the property or that villa in question was booked by him for

speculative purposes â€​.

16 . In another case, Kavit Ahuja Vs. Shipra Estate Ltd. & Jai Krishna Estate Developers Pvt. Ltd., (supra) , wherein three flats were booked by the

complainant, this Commission held the complainant to be a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986.

Apart from the para 5 of this judgment relied upon by the learned counsel for respondent following paras are also important in throwing light on this

aspect of “consumerâ€​:-

Generating profit by way of trading, in my view is altogether different from earning capital gains on account of appreciation in the market value of

the property unless it is shown that the person acquiring the property was engaged in such acquisition on a regular basis and it was by way of a

business activity.

As observed by the Hon’ble Supreme Court in Laxmi Engineering Works (supra) what is a ‘commercial purpose’ is a question of fact to

be decided in the facts of each case and it is not the value of the goods that matters but the purpose for which the goods brought are put to. The same

would be equally applicable to for hiring or availing services.

In any case, it is not appropriate to classify such acquisition as a commercial activity merely on the basis of the number of houses purchased by a

person, unless it is shown that he was engaged in the business of selling and purchasing of houses on a regular basis. If, for instance, a person has

two-three children in his family and he purchased three houses one for each of them, it would be difficult to say that the said houses were purchased

by him for a commercial purpose. His intention in such a case is not to make profit at a future date but is to provide residential accommodation to his

children on account of the love and affection he has for his children. To take another example, if a person has a house say in Delhi but he has business

in other places as well and therefore, purchases one or more houses at other places where he has to live presently in connection with the business

carried by him, it would be difficult to say that such acquisition is for commercial purpose.

To give one more example, a person owning a house in a Metropolitan city such as Delhi, or Mumbai, may acquire a house at a hill station or a place,

which is less crowded and more peaceful than a Metropolitan city, in my view, it cannot be said that such acquisition would be for commercial

purpose. In yet another case, a person may be owning a house but the accommodation may not be sufficient for him and his family, if he acquires one

or more additional houses, it cannot be said that he has acquired them for commercial purpose. Many more such examples can be given. Therefore, it

cannot be said that merely because of the complainant had agreed to purchase three flats in the same complex the said acquisition was for a

commercial purpose â€​.

17 . This Commission, in Rajesh Malhotra & Ors. Vs. Acron Developers & 2 Ors., First Appeal No. 1287 of 2014, decided on 05.11.2015 held as

follows:-

“12. Therefore, in order to determine whether the goods are purchased for commercial purpose, the basic pre-requisite would be whether the

subject goods have been purchased or the services availed of with the prime motive of trading or business activity in them, for the purpose of making

profit, which, as held in Laxmi Engineering (supra) is always a question of fact to be decided in the facts and circumstances of each caseâ€​.

From the above judgments passed by this Commission it is now clear that the complainant is a consumer as the opposite party has failed to prove

that the complainant is involved in trading of houses/flats/plots. Thus, the consumer complaint is maintainable before this Commission.

Coming to the question of earnest money, first of all it is noted that at the time of booking of the property, no payment schedule was supplied and

there was no information whether any earnest money would be deducted if the contract is not taken forward. Later on the schedule of payment was

supplied. It mentions that the earnest money would be 6% and the amount is Rupees one crore. Thus it is clear that even if the opposite party had to

forfeit the earnest money, the opposite party should have forfeited only Rupees one crore and should have returned Rupees one crore, as Rupees two

crores were paid to the opposite party. This means that the opposite party has not honoured its own commitment as per the payment schedule.

Moreover, as this schedule of payment was not supplied along with booking and there was no other information regarding the deduction of earnest

money at the time of booking, the same cannot be applied to this booking, because it is quite possible that had the complainant known the provision of

forfeiture of earnest money, he may not have booked the property. Moreover, as no builder-buyer agreement has been signed no clause of forfeiture

of earnest money binds the parties. Only mentioning in the schedule of payment does not entitle the opposite party to deduct/forfeit the earnest money

without builder-buyer agreement. Thus, it is clear that the opposite party is not entitled to forfeit any earnest money in this case.

As the allotment has been cancelled by the opposite party and the opposite party is not entitled to deduction of any earnest money, the complainant

is entitled to get refund of the amount paid to the opposite party. This refund has to be with some interest as the money has remained with the opposite

party for some time. Hon’ble Supreme Court in Alok Shanker Pandey Vs. Union of India &Ors., II (2007) CPJ 3 (SC) has held that:-

“9. It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on

capital. For example if A had to pay B a certain amount, say 10 years ago, but he offers that amount to him today, then he has pocketed the interest

on the principal amount. Had A paid that amount to B 10 years ago, B would have invested that amount somewhere and earned interest thereon, but

instead of that A has kept that amount with himself and earned interest on it for this period. Hence equity demands that A should not only pay back

the principal amount but also the interest thereon to B.â€​

From the above judgment of the Hon’ble Supreme Court, the amount retained by the opposite party has carried with itself the liability to pay

interest on this amount at the time of refund. Under the provisions of MOFA, the refund is to be made with an interest of 9% p.a., which seems

reasonable in the current scenario of bank rates. Thus, the complainant is entitled to get refund of the total paid amount of Rupees two cores along

with interest @ 9% p.a. from the date of filing of the complaint i.e. from 4.5.2016.

Based on the above discussion, the complaint is allowed and the opposite party is directed to refund Rs.2,00,00,000/-(Rupees two crores only)

along with interest @9% p.a. from 04.05.2016 till actual payment. As sufficient interest on the deposited amount is being awarded, there is no question

of awarding separate compensation to the complainant. The opposite party is directed to pay cost of Rs.20,000/- to the complainant for this complaint.

This order be complied within a period of 45 days failing which proceedings under Section 25/27 of the Consumer Protection Act, 1986 may be

undertaken by the complainant.