Case Note & Summary
The appeal arises from a consumer complaint filed by Respondent No. 2 (a flat buyer) against M/s. Parasvanath Developers Pvt. Ltd. (Developer) and Chandigarh Housing Board (CHB) before the National Consumer Disputes Redressal Commission. The Complainant had applied for a five-bedroom apartment in a project developed by the Developer on land allotted by CHB, paying Rs. 1,03,31,250 towards the total price. A tripartite flat buyer agreement was executed on 23.04.2008, which stipulated that construction would be completed within 36 months from the signing of the Development Agreement (06.10.2006). When the Developer failed to commence construction, the Complainant sought a refund. The National Commission, by order dated 11.05.2016, directed the Developer and CHB to pay the principal sum of Rs. 1,03,31,250 with interest at 10% p.a., Rs. 1,00,000 for mental harassment, and Rs. 1,00,000 for litigation costs, apportioned in the ratio of 70:30 between the Developer and CHB. CHB appealed to the Supreme Court, contesting its liability for mental harassment and litigation costs and the enhancement of interest from 9% to 10%. The Supreme Court examined the terms of the Tripartite Agreement, particularly Clause 9(c) which provides for compensation at Rs. 107.60 per sq metre per month for delayed possession, and Clause 9(d) which deals with refund with interest at 9% p.a. The Court also considered the arbitration award dated 09.01.2015, which found both the Developer and CHB in breach and apportioned liability in the ratio of 70:30. The Supreme Court held that the amounts awarded for mental harassment and litigation costs are not covered by Clause 9(c) and thus the apportionment of 70:30 is correct. However, the Court found no justification for enhancing the interest rate from 9% to 10% and reduced it to 9% p.a. The appeal was partly allowed, modifying the impugned order only to the extent of the interest rate.
Headnote
A) Consumer Law - Compensation - Clause 9(c) of Tripartite Agreement - The compensation of Rs. 107.60 per sq metre per month under Clause 9(c) is a specific contractual remedy for delayed possession and does not cover mental harassment or litigation costs. The National Commission's award of Rs. 1,00,000 for mental harassment and Rs. 1,00,000 for litigation costs is separate and not governed by Clause 9(c). (Paras 9-10)
B) Consumer Law - Apportionment of Liability - Arbitration Award - The arbitrator's award dated 09.01.2015 apportioned liability between Developer and CHB in the ratio of 70:30 for refund, interest, or compensation. This ratio applies to the amounts awarded for mental harassment and litigation costs as they are part of the overall compensation. (Paras 3.6, 10)
C) Consumer Law - Interest Rate - Enhancement from 9% to 10% - The National Commission enhanced the interest rate from 9% p.a. to 10% p.a. without providing reasons. The Supreme Court held that the rate should remain at 9% p.a. as per Clause 9(d) of the Tripartite Agreement and the earlier interim orders. (Paras 3.5, 11)
Issue of Consideration
(a) Whether the National Commission was right in directing payment towards mental harassment and litigation costs in the ratio of 70:30, or whether such amount falls within the purview of compensation under Clause 9(c) of the Tripartite Agreement so as to be paid solely by the Developer. (b) Whether the interest rate awarded on the principal sum was rightly increased from 9% p.a. to 10% p.a.
Final Decision
The appeal is partly allowed. The impugned order of the National Commission is modified to the extent that the interest payable on the principal sum of Rs. 1,03,31,250 shall be at the rate of 9% p.a. instead of 10% p.a. The rest of the order, including the apportionment of liability for mental harassment and litigation costs in the ratio of 70:30, is upheld.
Law Points
- Consumer Protection Act
- 1986
- Section 21
- Tripartite Agreement
- Clause 9(c)
- Clause 9(d)
- Compensation
- Mental Harassment
- Litigation Costs
- Interest Rate
- Apportionment of Liability
- Arbitration Award
Case Details
2019 LawText (SC) (12) 76
Civil Appeal No. 10748 of 2016
M/s. Parasvanath Developers Pvt. Ltd. & Anr
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Nature of Litigation
Civil appeal against the order of the National Consumer Disputes Redressal Commission in a consumer complaint seeking refund of deposit with interest and compensation for mental harassment and litigation costs.
Remedy Sought
The appellant (CHB) sought to set aside the direction to pay 30% of the amounts awarded for mental harassment and litigation costs, and to reduce the interest rate from 10% p.a. to 9% p.a.
Filing Reason
The appellant (CHB) contended that the National Commission wrongly saddled it with liability for mental harassment and litigation costs, which should be borne solely by the Developer under Clause 9(c) of the Tripartite Agreement, and that the enhancement of interest rate from 9% to 10% was unjustified.
Previous Decisions
The National Commission, by order dated 11.05.2016, directed the Developer and CHB to pay the principal sum of Rs. 1,03,31,250 with interest at 10% p.a., Rs. 1,00,000 for mental harassment, and Rs. 1,00,000 for litigation costs, apportioned in the ratio of 70:30. Earlier, an interim order dated 05.03.2013 in a similar matter directed payment of compensation under Clause 9(c) subject to arbitration outcome. The arbitration award dated 09.01.2015 apportioned liability between Developer and CHB in the ratio of 70:30. A 3-judge Bench of the Supreme Court on 21.04.2015 dismissed an SLP against the interim order.
Issues
Whether the National Commission was right in directing payment towards mental harassment and litigation costs in the ratio of 70:30, or whether such amount falls within the purview of compensation under Clause 9(c) of the Tripartite Agreement so as to be paid solely by the Developer.
Whether the interest rate awarded on the principal sum was rightly increased from 9% p.a. to 10% p.a.
Submissions/Arguments
Appellant (CHB): The impugned order wrongly saddles CHB with liability for mental harassment and litigation costs, which are in the nature of compensation under Clause 9(c) and should be borne solely by the Developer. A revocation deed dated 04.02.2015 transferred all third-party liabilities to the Developer. The interest rate enhancement from 9% to 10% was without reasons.
Respondent No. 1 (Developer): The arbitration award apportioned liability 70:30, and the interim orders of the National Commission and Supreme Court affirmed this ratio. Clause 9(c) compensation is different from the amounts awarded for mental harassment and litigation costs.
Respondent No. 2 (Complainant): The amounts awarded are general lump sum amounts, not compensation under Clause 9(c). The inter se dispute between CHB and Developer should not affect the Complainant's right to receive compensation.
Ratio Decidendi
The compensation under Clause 9(c) of the Tripartite Agreement is a specific contractual remedy for delayed possession and does not cover mental harassment or litigation costs. Therefore, the apportionment of such amounts in the ratio of 70:30 as per the arbitration award is correct. However, the interest rate should remain at 9% p.a. as per Clause 9(d) and the earlier interim orders, as the National Commission did not provide reasons for enhancement.
Judgment Excerpts
Clause 9(c) of the Tripartite Agreement provides that the buyer shall be entitled to receive from the developer compensation @ Rs.107.60 per Sq. Mtrs. per month and to no other compensation of any kind.
The arbitrator found that the non-completion of the project was a result of breaches committed by both, the Developer and CHB, and directed that any amount payable on account of refund of price, interest, or compensation would be borne in the ratio of 70:30.
The National Commission enhanced the interest rate from 9% p.a. to 10% p.a. without giving any reasons for the same.
Procedural History
The Complainant filed Consumer Complaint No. 19 of 2011 before the National Commission on 24.02.2011. The National Commission passed an interim order on 05.03.2013 in a similar matter. Arbitration proceedings between CHB and Developer resulted in an award on 09.01.2015. A 3-judge Bench of the Supreme Court dismissed an SLP on 21.04.2015. The National Commission disposed of the complaint on 11.05.2016. CHB filed the present appeal before the Supreme Court.
Acts & Sections
- Consumer Protection Act, 1986: Section 21
