MOFA –  Non Execution of Sale Agreement

1.      The complainants before us booked residential flats with the opposite party-Kunal Builders & Developers, a proprietorship concern of Mr. Shailesh Mulchand Savla in a building which the opposite party was seeking to develop being CTS No.195, Juhu Taj Society, 10^th Road, Juhu Vile Parle, Mumbai.  The complainants paid amount of Rs.10 Lakhs, Rs.2 Lakhs, and Rs.2 Lakhs in CC/217/2015, CC/218/2015, CC/219/2015 respectively, followed by further payments, the total payments made to the opposite party being Rs.55 Lakhs, Rs.47 Lakhs, Rs.24.50 Lakhs respectively in CC/217/2015, CC/218/2015, CC/219/2015.  In CC/220/2015, the complainants claim to have been paid a sum of Rs.61 Lakhs out of which Rs.12 Lakhs were paid by cheque and the balance payment is alleged to have been made in cash.  In CC/221/2015, the complainant paid a sum of Rs.33,57,000/- to the opposite party at the time of booking itself and the total payment made by him so far comes to Rs.60.48 Lakhs.

2.      The payment schedule agreed by the parties reads as under:-

3.      The grievance of the complainants is that despite they having paid more than 20% of the agreed sale consideration, the opposite party has not come forward to execute the sale agreement as required by Section 4 of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963.  This is also the grievance of the complainants that they were sold flats on 10^th to 13^th floors and the construction of the said floors has not even started, the building having been constructed only upto 9^th floor.  The construction has been stopped thereafter. The booking was made by the complainants on 25.01.2005, 07.12.2004, 07.12.2004, 07.12.2004, 02.05.2008 in CC/217/2015, CC/218/2015, CC/219/2015, CC/220/2015, CC/221/2015 respectively.

4.      Being aggrieved from the failure of the opposite party to honour his contractual and other obligation, the complainants are before this Commission seeking execution of proper agreement to sell in their favour, completion of the construction and delivery of the possession to them.  They are also seeking compensation and cost of litigation from the opposite party.

5.      The complaint has been opposed by the opposite party taking a preliminary objection that the complainants are not ‘consumer’. It is further alleged in the reply that the opposite party has already offered payment of the investment made by the complainants along with simple interest @ 12% per annum.  According to the opposite party, the allotment letters given to the complainants were merely a security towards investment made by them and the parties never intended to enter into an agreement of sale and purchase of flats.  This is also the case of the opposite party that the purpose of booking was to make capital gains through investments and not to acquire the flats for residential purpose.  Yet another plea taken by the opposite party is that the complaints are barred by limitation, the last payment having been made in the year 2005 and the complaints having been filed in the year 2015.

6.      On merits, the opposite party has admitted payments alleged by all the complainants except the complainants in CC/220/2015, where the case of the opposite party is that he had received only a sum of Rs.12 Lakhs by way of a cheque and no cash payment was received.  It would be pertinent to note here that according to the complainants in CC/220/2015, besides payment of Rs.12 Lakhs by cheque, they had also made payment in cash amounting to Rs.49 Lakhs to the opposite party.  This is also the contention of the opposite party that there was no contract between the parties as no specific time for delivering the possession of the flats was agreed.

In their notice dated 09.06.2013 sent to the opposite party, the complainants in CC/220/2015 namely Raju V Manwani and Mrs. Nimmi R Manwani inter-alia alleged that they had paid Rs.5 Lakhs, Rs.10 Lakhs, Rs. 10 Lakhs, Rs.9 Lakhs, Rs.12 Lakhs, Rs.10 Lakhs in cash on 06.12.2004, 08.12.2004, 09.12.2004, 13.12.2004, 20.12.2004, 24.12.2004  respectively.  However, in his letter dated 23.05.2013 responding to a previous letter of the complainants dated 22.04.2013, the opposite party admitted receipt only of Rs.12 Lakhs from them.

          The aforesaid complainants have placed on record copies of two cheques issued to them by the opposite party, the first being cheque dated 27.09.2014 for Rs.43 Lakhs and the other being dated 27.09.2014 for Rs.1 Crore.  The cheque of Rs.43 Lakhs, when presented to the bank of the opposite party, was returned with the endorsement ‘payment stopped by drawer’, whereas the cheque of Rs.1 Crore was never presented to the banker of the opposite party.  The case of the complainants is that when they lodged a report with the local police against the opposite party, he was agreeable to refund the amount paid by them along with interest and thereupon aforesaid two cheques one of Rs.1 Crore and other Rs.43 Lakhs were issued by him in favour of the complainant no.1.  This is also the case of the complainants that when the cheque of Rs.43 Lakhs was dishonoured on being presented to the bank they immediately contacted the opposite party who gave evasive reply to their queries, whereupon the said complainants realized that the act of the opposite party in handing over the said two cheques was a malafide action intended to stop the police proceedings.  The case of the opposite party with respect to the aforesaid two cheques is that they were issued under duress since he could be got arrested by the complainants if the said amount were not paid to them.  It is pointed out by the learned counsel for the opposite party that in the communication dated 22.04.2013, which is the first written communication, sent by the complainants, there was no allegation of cash payment and only a payment of Rs.12 Lakhs was alleged towards sale consideration of the flat.  She also pointed out that the complainants had also claimed a sum of Rs.2.88 Crores towards commission payable to their sister concern M/s Akshar Marketing.

7.      There is no writing from the opposite party, admitting the issue of the aforesaid two cheques, one of Rs.43 Lakhs and the other Rs.1 Crore towards refund of the sale considered received from the complainants along with interest.  The aforesaid two cheques could possibly have been issued towards payment of the commission amount which the complainants were claiming payable to their sister concern M/s Akshar Marketing.  In these circumstances, we are unable to accept the case of the complainants, to the extent cash payment of Rs.49 Lakhs as sale consideration is alleged. Even otherwise, there could be good reason for the complainants to pay such a huge amount in cash when the balance amount of Rs.12 Lakhs was paid by way of a cheque.  Therefore, we hold that the complainants in CC/220/2015 paid only a sum of Rs.12 Lakhs to the opposite party.

8.      As noted earlier, the first plea taken by the opposite party is that there was no intention to sell flats to the complainants and the allotment letters were issued only as a security for the investment made by them. However, the reply filed by the opposite party does not disclose as to what was the investment agreed to be made by the complainants and what was the return proposed to them on the said investment. Ordinarily, if the investment is made by giving loan, it would carry interest on the loan amount and there would also be a time frame for payment of interest as well as refund of the loan amount. The reply filed by the opposite arty is conspicuously silent on these aspects. Moreover, the payments to the opposite party were not made only once, they were made in installments. The opposite party does not claim in its reply that every payment made by the complainants was a different investment. This is yet another circumstance which creates serious doubts on the veracity of the plea taken by the opposite party in this regard.

9.      Yet another circumstance which clearly shows that the transaction between the parties was a transaction for sale of flats and not investment transaction, is that the opposite party issued demand letters to the complainants in CC No. 217/2015, CC No. 218/2015 and CC No. 219/2015, on 03.08.2005, 29.09.2005, 08.10.2005 and 19.12.2005 making demand of the balance sale consideration after adjustments of the payments already made by that time. He also issued demand letters to the complainants in CC No. 220/2015 and CC No. 221/2015 though the dates of those demand letters were different. Vide demand letter dated 03.08.2005, the opposite party informed the flat purchaser that the construction of the building was 30% complete and sought payment of the balance amount within a period of seven days. It was further stated in the said letter that delay in remittance of the aforesaid amount would attract interest @ 21% per annum. It was also stated, in the aforesaid letter, that in case of non-payment within seven days, it will be assumed that the flat buyer was not interest in possession and the amount paid shall be forefeited and the builder will be at liberty to allot the flat to a new buyer at the cost and consequence of the flat purchaser. Vide letter dated 29.09.2005, further demand was raised with a reminder that failure to make payment would attract interest @ 21% per annum. Almost identical demand was made vide notice dated 08.10.2005. As noted earlier, identical letters were also sent to the complainants in CC No. 220/2015 and CC No. 221/2015. Had the transaction between the parties been loan/investment transaction, there would have been no occasion for the opposite party to issue the above referred demand letters.

10.    It has also been alleged in the reply filed by the opposite party that the complainants had not taken the apartments for residence, but had taken the same for making profit. However, there is no evidence or any circumstance from which it may be inferred that the flats were acquired by the complainants for non-residential purpose. In the absence of any evidence/circumstance indicating acquisition for a non-residential purpose, we are unable to accept the aforesaid plea taken by the opposite party, when admittedly the flats in question were residential flats, meant to be used as residence.        

11.    It is an admitted position before us that the flats sold to the complainants were to be located on the floors 10 to 13 and the said floors are yet to be constructed. The case of the opposite party is that though he had laid foundation strong enough for construction of as many as 13 floors, since the approval released by him was only for 9^th floor, the construction was restricted to 9 floors and he wanted to construct floors 10 to 13 on release of the sanction for construction of those floors, he already having applied for the said construction and the CEO of the Slum Rehabilitation Authority having also approved the same. This is also the case of the opposite party that he could not commence construction of the upper floors since the plans for construction of the said floors were not released, despite having been approved by the CEO of Slum Rehabilitation Authority. It is also pointed out that vide notice dated 01.06.2006 issued under section 53(1) of the Maharashtra Regional and Town Planning Act, 1966, the Executive Engineer of Slum Rehabilitation Authority had directed the opposite party to demolish the structure on the 8^th floor of the Rehab Building, whereas vide notice dated 23.12.2005, issued under the same provision, the Executive Engineer of Slum Rehabilitation Authority had directed demolition of the work alleged to have been carried out beyond the CC and beyond the approval plan in the Sale Building.

12.    A perusal of the notice dated 01.06.2006 would show that the said notice was issued on account of the opposite party having carried out development which was not in accordance with the permission granted to him by the Slum Rehabilitation Authority. A perusal of the notice dated 23.12.2005 would show that the said notice was issued on account of the opposite party having carried out development without the permission required under the Maharashtra Regional and Town Planning Act, 1966 and on account of the construction not being in accordance with the permission granted to him. It thus appears to us that the Slum Rehabilitation Authority was compelled to issue the aforesaid notices on account of the acts of omission and commission done by the opposite party. Had the opposite party not made construction beyond approval in the rehabilitation building, notice dated 01.06.2006 would not have been issued. Similarly, had the opposite party not raised construction without requisite permission under the Maharashtra Regional and Town Planning Act, 1966 and/or contrary to the permission granted to him, there would have been no occasion for the Executive Engineer to issue the notice dated 23.12.2005. The opposite party in our view cannot be allowed to take advantage of its own misdeeds and therefore, the failure to raise construction beyond 8^th floor which is directly attributable to his own misdeeds, would constitute a deficiency in service, towards the complainants. In fact, in our opinion, even before booking the flats sold to the complainants, the opposite party ought to have taken approval for construction upto 13^th floor when he was entering into transaction for sale of flats on 10^th to 13^th floor of the proposed building. Booking the flats without obtaining the requisite approval which may or may not be granted also would be a deficiency in the service to the flat buyers, particularly in a case where such a permission is later refused by the competent authority. For instance, in a given case, the buyer may agree to sell flat on the 10^th floor of a proposed building but the plans may eventually be sanctioned only for nine floors. A responsible builder therefore, should obtain the requisite approvals before booking the flats so that the buyer does not feel cheated in case the permission is later refused by the concerned authority.

13.    The learned counsel for the opposite party has submitted that the permission for construction of upper floors is granted in usual course and that is why anticipating such an approval, they had built strong foundations which would be able to bear the load of 13 floors. Even if we proceed on the basis that there was no illegality or deficiency in service on account of the opposite party having agreed to sale flats on 10^th to 13^th floor of the proposed building without obtaining the requisite approval for construction of those floors, it is evident that the said permission could not be released solely on account of the deviations made by the opposite party himself. Had he carried out construction in accordance with the provisions of Maharashtra Regional and Town Planning Act, 1966 and in conformity with the approvals granted to him, the permission for construction of the upper floors would in all probability have been granted to him. Therefore, from whatever angle we may look at it, there is no escape from the conclusion that the inability of the opposite party to construct floor 10 to 13 is his own creation, on account of his having not complied with the provisions of Maharashtra Regional and Town Planning Act, 1966 and the permission granted to him by the Slum Rehabilitation Authority.

14.    Yet another plea taken by the opposite party is that since no specific time for completion of the construction and delivery of possession to the complainant was agreed between the parties, the complainants cannot be said to be the consumers of the said opposite party. We however, find absolutely no merit in this contention. The building in which flats were sold by the opposite party to the complainant is governed by the provisions of Maharashtra Ownership Flats Act, 1963  and therefore, the opposite party was required to enter into an agreement in terms of Section 4 of the said Act and also give a firm date for delivery of possession of the flats in the said agreement. The builder cannot be allowed to delay/postpone the execution of the agreement in compliance of the aforesaid statutory requirement of Maharashtra Ownership Flats Act and then say that there being no fixed time for delivery of the possession, the flat purchaser is not his consumer and/or, there is no breach of the contract on his part. Even if an agreement for sale of flat in a proposed building does not indicate any specific time period for delivery of possession, the seller is duty bound to deliver possession within a reasonable time.

15.    Therefore, we find no merit in the aforesaid plea taken by the opposite party. One plea taken by the opposite party is that these complaints are barred by limitation. The case of the opposite party is that there was no time agreed between the parties for delivery of possession of the flats to the complainants. If that is so, the flat buyers would be entitled to approach a consumer forum, after a reasonable time for completion of the construction expires. A person booking a residential flat is not expected to rush to the court/consumer forum immediately on expiry of the time agreed between the parties for delivery of possession to him. He would like to give more time to the builder to enable him to complete the construction, since he knows that unless the construction is completed, he will not be able to obtain possession of the flat purchased by him. It is only when the flat buyer feels that the builder has already taken enough reasonable time but has failed to deliver the possession despite having taken adequate time, he would consider the option of approaching a court or consumer forum for a direction to the builder to complete the construction and deliver possession of the flat to him. In any case, as held by the Hon’ble Supreme Court in Meerut Development Authority Vs. M.K. Gupta, IV (2012) CPJ 12. In such a case, the buyer has a recurrent cause of action for filing a complaint for non-delivery of possession of the flat. This is more so in a case where the seller does not refuse to deliver possession to the buyer. In the case before us, at no stage, the opposite party refused to deliver possession to the complainant, he himself being in default on account of not even having started construction of the floors in which flats were sold to the complainants. Therefore, it would be difficult for us to say that the complaint in such a case would be barred by limitation.

15.    The next question which arises for our consideration in this case is as to what order would be appropriate in the facts and circumstances of the case. As noted earlier, the notices by Slum Rehabilitation Authority came to be issued to the opposite party way back in December 2005 i.e. more than ten years ago. We are informed that there has been no further construction after issued of the aforesaid notices to the opposite party. We are also informed that the aforesaid notices have not been challenged by the opposite party either before the High Court or any other Forum. The failure of the opposite party to challenge the aforesaid notice is a clear indication that he has actually made violations and deviations alleged in the said notices and that is the reason he chose not to challenge the aforesaid notices. We do not know whether the sanction for construction of floor 10 to 13 would be released to the opposite party and if so, when. Even after release of the sanction for construction of the upper floors, the opposite party would need a reasonable time to complete the construction, carry out the finishing work and obtain the requisite occupancy certificate, before possession can be delivered to the flat buyers.

16.    Considering all the facts and circumstances of the case including that the complainants are not interested in taking the refund and they are willing to wait for some more time to get possession of the flats purchased by them, the complaints are disposed of with the following directions:

(a)     The opposite party shall execute and register agreements in terms of Section 4 of Maharashtra Ownership Flats Act with the complainants within six weeks from today.

(b)     The opposite party shall, at his own cost and responsibility, obtain the requisite permission from the concerned authorities for construction of floors 10 to 13 of the building in question. For this purpose, the opposite party shall comply with all such requirements, conditions and stipulations as may have been laid down or may be laid down by the said authority in future. If so directed by the concerned authority, the opposite party shall also demolish the unauthorized construction in the buildings constructed by him, be it the Rehabilitation Building or the Sale Building. The requisite permission in terms of this direction shall be obtained within six months from today.

(c)     The opposite party shall construct floors 10 to 13, finish the building in all respects and obtain the requisite occupancy certificate and building completion certificate within three years from the date on which the approval for construction of the upper floors is released to him.

(d)     The balance consideration shall be made by the complainants in accordance with the schedule of payment available on page no. 59 of the paperbook in CC No. 219/2015.

(e)     If the opposite party fails to deliver possession as directed hereinabove, he shall, at his own cost, purchase and transfer to the complainants flats of the same or almost same size in a comparable locality, within six months of the date stipulated hereinabove and shall also pay compensation in the form of interest @ 12% per annum with effect from the date stipulated hereinabove for delivering possession to the complainants, till the date on which this order is complied in its entirety.

          We record that the learned counsel for the complainants, on instructions, has not pressed the prayer for compensation, with a view to enable the opposite party to comply with this order without bearing the burden of paying compensation to the complainants. In the facts and circumstances of the case, there shall be no order as to costs. The complaints stand disposed of accordingly.