Contractual Precision Prevails; Lodha Crown Case Spotlights Agreement Definitions, Ncdrc Jurisdiction Scrutiny, And Supreme Court's Mandate For Refund Based On Contractual Obligations"

Case title:

Venkataraman Krishnamurthy and Anr v Lodha Crown Buildmart Pvt. Ltd.

Date of Order:

22nd February, 2024

Bench:  

Hon’ble Justice Aniruddha Bose and Justice Sanjay Kumar

Parties:

Appellants: Venkataraman Krishnamurthy and Another

Respondent: Lodha Crown Buildmart Pvt. Ltd.

SUBJECT:

In the landmark case of Venkataraman Krishnamurthy and Anr v Lodha Crown Buildmart Pvt. Ltd., the Hon’ble Supreme Court of India delivers a decisive judgment on a real estate contractual dispute, providing clarity on contractual obligations, delay compensation, and the sanctity of written agreements. The case revolves around the appellants' dissatisfaction with the National Consumer Disputes Redressal Commission (NCDRC) order, where they sought a refund for a 4BHK apartment in Lodha Evoq, Mumbai. The Court's analysis delves into crucial agreement clauses, emphasizing the importance of honoring contractual terms and underlining the consequences of breaches. The judgment serves as a significant precedent in interpreting and upholding contractual obligations in the real estate sector.

IMPORTANT PROVISIONS:

• Definitions in the Agreement: The court examined specific definitions related to possession, emphasizing "Date of Offer of Possession (for fit-outs)" and "Date of Offer of Possession" in Clauses 1.13 and 1.14.
• Clause 11 "Fit Outs and Possession": Deemed most relevant, it established conditions for possession, including grace periods, occupation certificates, and consequences for delays.
• Clause 21 "Purchaser’s Covenants": Outlined purchaser commitments, emphasizing completion of works by the "Date of Offer of Possession."

OVERVIEW:

• In this case arising from Consumer Complaint No. 35 of 2018, the appellants dissatisfied with the National Consumer Disputes Redressal Commission (NCDRC), New Delhi’s order dated 09.11.2022, sought to challenge the decision through a statutory appeal.
• The contention stems from a transaction where the appellants aimed to purchase a 4BHK apartment in the Lodha Evoq building, located at the New Cuffe Parade, Wadala, Mumbai, from the respondent company.
• An agreement to sale was executed on 29.11.2013, stipulating the sale consideration at Rs. 7,55,50,956, with a detailed specified payment schedule which was to be paid in four considerations respectively.
• Despite making substantial payments totalling up to Rs. 2,25,31,148, the appellants claimed that the respondent company failed to deliver possession by the agreed deadline of 30.06.2017, inclusive of a one-year grace period. Consequently, the appellants sought a refund of the amount paid and the compound interest at 18% p.a. compensation for harassment. Mental agony and torture suffered by them apart from the litigation costs.
• Following this, the NCDRC’s ruling directed the respondent company to deliver to apartment’s possession to the appellants within three months, ensuring compliance with the agreed specifications and amenities. A joint inspection was also mandated to address any deficiencies, with a provision for delay compensation at a simple interest rate of 6% p.a. from the original possession date until the offer of possession.
• The appellants on the other hand claimed non-receipt of the possession offer, issued a legal notice, and elected to terminate the agreement. The respondent company, however, disclaimed liability for all this leading to the initiation of legal proceedings to the NCDRC.
• The NCDRC recognized a minor delay in possession but deemed it insufficient for the appellants to cancel the agreement. If a refund was sought, the opinion allowed the respondent to deduct/forfeit earnest money. The obligation for the respondent to provide actual possession as per the agreement still stood.
• The respondent company, by a letter dated 29.11.2017 informed the appellant that their apartment was ready for possession and requested payment to be initiated. The appellants however chose to terminate the agreement and initiated legal proceedings.
• Notably, the order permitted appellants to opt for a refund within 15 days, subject to certain deductions as per the agreement, a clause that significantly underpinned the appellant’s grievance in their appeal. The appellants were dissatisfied with NCRDC’s order and hence approached the Supreme Court in the present appeal.

ISSUES RAISED:

• Whether the respondent failed to deliver possession by the agreed deadline, leading the appellants to claim a refund and compensation for harassment.
• Whether the Part Occupancy Certificate validly fulfilled the possession conditions outlined in the agreement, giving rise to a dispute?
• Whether NCRDC acted within its jurisdiction and was it justified in granting a conditional refund option?

JUDGEMENT ANALYSIS:

Before arriving at a decision, the Hon’ble Court first analysed the agreement executed between the parties.

• Definitions in the Agreement: the Agreement includes specific definitions related to the possession of the property. Notably, the ‘Date of Offer of Possession (for fits-outs)’ is defined in Clauses 1.13 to be the date on which the notice for readiness of the Unit for fit-outs to be issued by the respondent company plus 15 days and 1.14 “Date of Offer of Possession” is to be the date on which occupation certificate is issued respectively.
• Clause 11 “Fit Outs and Possession”- The court deemed this clause to be the most relevant to the present case which established the conditions for the delivery of possession. It specified that the respondent company must provide for the unit of fit-outs within a stipulated time frame, subject to the purchaser meeting certain conditions and making necessary payment.Possession, the occupation certificate is crucial in determining the final possession The company is granted a grace period of one year beyond the initial deadline for the date, and the company is entitled to an extension under certain circumstances outlined in Clause 11.5.If there happens to be a delay in possession, the company must inform the purchaser of a revised date. The purchaser has the option to continue with the agreement or terminate it within 90 days of the grace period’s expiry.The consequences of termination include the company refunding the total consideration amount or part thereof in installments with interest.
• Clause 21 Purchaser’s Covenants- It outlines the commitments of the purchaser. It emphasizes that the works in the unit should be complete by the Date of the Offer of Possession, allowing the purchaser to carry out interior works.
• The court meticulously examined the contractual framework, emphasizing the significance of honouring written agreements and their prescribed consequences for breaches. It underscored the specific dates laid out in the agreement of possession and elucidated the repercussions outlined in Clause 11.3 in case of delays.
• The court invoked legal principles from judicial precedents. Notably, it referenced the constitutional bench decision in General Assurance Society Ltd vs. Chandumull Jain and another ( AIR 1966 SC 1644), highlighting that courts are duty-bound to interpret the expressed words of a contract rather than create a new contract.
• The court also cited Rajasthan State Industrial Development & Investment Corporation vs. Diamond & Gem Development Corporation Ltd. (2013) 5 SCC 470, reiterating that contracts, as products of agreements between parties, must be interpreted based on the actual meaning of the words contained therein.
• Recent decisions like Shree Ambica Medical Stores vs. Surat People's Coop. Bank Ltd. (2020) 13 SCC 564 and GMR Warora Energy Ltd. vs. Central Electricity Regulatory Commission (2023) 10 SCC 401 were cited, emphasizing that courts should refrain from substituting their own understanding of commercial terms if the terms are explicitly expressed in the contract.
• The court held that the NCDRC had exceeded its jurisdiction by disregarding the binding terms of the agreement and introducing its subjective logic to determine the parties' future actions, particularly those of the appellants.

CONCLUSION:

In light of the analysis, the court set aside the NCDRC's order and allowed Consumer Complaint No. 35 of 2018. The court directed the respondent company to refund the deposited amount of ₹2,25,31,148 in twelve equal monthly installments. This decision was in accordance with the interest rate stipulated in the agreement, set at 12% per annum. The court specified that the first installment should be paid on April 5, 2024, with subsequent installments due on the fifth of each calendar month thereafter until the total amount is repaid. The court affirmed the appellants' right to terminate the agreement, as provided in Clause 11.3, and determined that the parties would bear their own costs in this matter