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Judgment
Avm J. Rajendra, Avsm, Vsm (Retd.), Member
The present First Appeal, filed under Section 19 of the Consumer Protection Act, 1986, is brought forth by J Nagi Reddy, (henceforth referred to as the "Appellant" or "Opposite Party No.3"). This Appeal challenges the Order dated 08.12.2011 passed by the State Consumer Disputes Redressal Commission, Bangalore, Karnataka, (henceforth termed as "the State Commission"), in Consumer Complaint No. 145 of 2009, wherein the complaint filed by the Complainants (Respondents No. 1 & 2 herein) was allowed.
Concurrently, the Appellant, J Nagi Reddy filed an Appeal Execution against the Execution Order dated 31.08.2018 in Execution Petition No. 18/2014 in CC No. 145/2009 filed by the Complainants/Respondents herein before the State Commission, seeking issue of a Recovery Certificate for submission to Deputy Commissioner, Bangalore for the recovery of the specified amount.
Brief facts of the case as per the Complainant are that, the Complainants/Respondent No.1&2 entered into a Construction Agreement 07.12.2005 with the Appellant/OP3 to purchase a flat for a total cost of Rs.29,50,000/-. They paid Rs.4,35,000/- initially and obtained Rs.21,65,944/ IDBI bank loan. In addition, the Complainant made payment of Rs.8,96,826/- towards EMIs from December 2005 till 2009. Thus, they paid Rs.34,97,770, which is acknowledged by OPs. The possession of the flat was to be delivered on or before 28.02.2006. A sale deed was executed in favour of Complainants on 06.01.2006. According to Complainants, the possession was not handed over, while the Appellant claimed handing over possession. Complainants later discovered that OPs did not in fact possess marketable title for the said land in question. Some members of SC and ST community had initiated legal action, that the said land could not be sold or transferred under the Karnataka Scheduled Tribes Prohibition of Transfer of Land laws.
The OPs raised several objections before the learned State Commission that the Complaint was time-barred and is bad for non-joinder/misjoinder of parties. The dispute is purely a civil dispute and does not fall within the jurisdiction of a consumer court. The Complainant failed to verify diligently the land documents before entering into the Agreement with the Opposite Parties.
The State Commission did not find merit in these contentions and observed that the cause of action persisted as long as the Complainant fulfilled the agreement by making payments. Further, the EMIs were consistently paid from the date of the agreement till 2009, in the year the Complaints were filed. The State Commission in its Order dated 08.12.2011 observed and ordered as follows:-
“16. Viewed from any angle we are of the opinion that the Complainants are able to prove the deficiency in service and unfair trade practice on the parts of OPs. There is a remote possibility of complaints getting their property from the OP due to legal hurdle. When ops did not possess the legal title marketable title, complainants are justified in seeking refund of their amount. Complainants cannot be kept waiting indefinitely till the disposal of the said litigation pending before the court. We find there is a merit in the claim made by the Complainants. As already observed by us due to the carelessness and negligence of and hostile attitude of the Ops Complainants were put to greater hardship and prejudice that too at no fault of theirs. Under such circumstances, are entitled for the relief claimed. The approach of the complainants appears to be fair and honest. Hence, they derive reliefs. Accordingly we answer point Nos. 1 and 2 and proceed to pass the following:-
….The Ops are jointly and severally directed to refund Rs.34,97,770/- to the Complainant in Complaint No. 145/2009 together with interest at the rate of 16% per Annum from February 2006 till realization and also pay a litigation cost of Rs.10,000/-…”
Aggrieved by the Impugned Order of the State Commission, the Appellant (OP No.3) filed this Appeal. Additionally, the Appellant has also filed Execution Appeal No. 205 of 2018 against Execution Application No. 18/2014 in CC No.145/ 2009, wherein the State Commission directed for issue of a recovery certificate to the District Collector and recovery of a sum of Rs.1,02,33,354/- from the Appellant and others, which is under progress.
The Respondents have not filed any reply to the present Appeal. However, they filed their written synopsis of arguments.
In his arguments, the learned Counsel for Appellant raised concerns about the legality of the impugned Order. He argued that, after constructing the flat as per agreement dated 07.12.2005, the possession was delivered and executed sale deed in favour of the Respondents No.1&2/Complainants on 06.01.2006. Thereafter, the Respondents alleged defects in the title of property and filed a Consumer Complaint dated 23.10.2009 after lapse of 2 years 6 months after the sale deed was executed and possession was handed over. Therefore, it cannot be termed as Consumer dispute. He cited judgment of Hon’ble Karnataka High Court dated 12.12.2018 in WP No. 45091-92/ 2012 and an order by the Deputy Commissioner dated 27.09.2012, in terms of which the title of property in question was confirmed in favor of Respondent No. 3 & 4, making them absolute owners. Hence, the primary dispute about defect in property title should not have been decided by the learned State Commission. Neither the Respondents were the consumers nor the Appellant was a service provider under section 2(1)(d) and 2(1)(o) of the Act of 1986. The Complainants deliberately concealed critical facts in respect of completion of the flat and execution of sale deed. They failed to disclose non-payment of EMIs to IDBI Bank after 2009. The State Commission, while granting relief in the form of a refund, failed to take into account the following crucial aspects:
(a) Rs. 4,35,000/- in advance paid (Self-finance).
(b) Rs.21,65,914/- Bank Loan funded for unit in question.
(c) Rs.8,89,826/- EMI paid to Bank by the Respondents.
(d) Rs.5,520/- Loan application fees.
(e) Rs. 1,15,000/- For interior work of the Apartment.
(f) Rs. 4,05,000/- Rent paid.
He further argued that the State Commission granted relief without basis by misreading the pleadings and evidence. Section 55 of Transfer of Property Act and Sections 92 to 94 of the Indian Evidence Act on sale transaction and registered sale deed were misinterpreted. A defect in the title does not fall under any of the defects outlined in Section 2(1)(f) of the Act. A flaw in title does not impact quality or purity of the goods, making this complaint non-maintainable. He relied on the following judgments: -
(a) Estate Officer and Anr Vs Charanjit Kaur -2021 SCC Online SC 686-Para-24.
(b) Kuldip Singh Karla & Ors Vs. Roshan Lal Pal & Ors. -II (1993) CPJ 170(NC)-Para6 & 7.
(c) Ganeshlal Vs Shyam-(2014) 14 SCC 773-Para-2, 5-7.
(d) Saurabh Prakash Vs. DLF Universal Ltd.-(2017) 1 SCC 228, Para-34 to 36.
(e) Pawan Kumar Hans Ltd. Vs. Union of India and Anr., (2003) 5 SCC 71-Para-9 & 10.
(f) Dilip Singh Vs. State of UP- (2010) 2 SCC 114-Para-1 & 2.
(g) Oswal Fats & Oils Ltd. Vs. Additional Commissioner – (2010) 8 SCC 660 – Para 19 to 25.
On the other hand, the learned Counsel for the Respondents/ Complainant No. 1 & 2 argued that as per Development Agreement (DA) dated 24.01.2005 and Power of Attorney (GPA), the Appellant was responsible to construct the flat. A Tripartite Agreement dated 27.12.2005 was executed amongst IDBI Bank, Appellant, and the Respondents for home loan of Rs.25 Lakhs, while the total consideration was Rs.29,50,000. Payments were made by the Respondents as per schedule. As they also incurred Rs.24,49,473 as losses and damages, they claimed a total of Rs.64,87,733 from the Appellant and Respondents 3 & 4, jointly and severally. While the Appellants admitted the execution of DA and GPA, they denied involvement in Tripartite Agreement with IDBI Bank and receiving Rs.21,56,944 directly from the bank on behalf of Respondents No. 1 & 2. Despite this denial, both the Respondents No. 1 & 2 and the Appellant executed a sale deed in favour of Respondents No. 1& 2. He further argued that a legal petition was filed by Mr. Muniswamy, son of the original grantee of the land, under Sections 4 & 5 of the Karnataka SC/ST Prohibition of Transfer of Certain Lands Act, 1978 for declaration that the sale of land to Respondents No. 3 & 4 as null and void and to restore the land back to him. Based on the order of the Asst Commissioner, the land was restored to Mr Muniswamy, indicating a legal dispute surrounding the property.
The learned counsel for the Respondent emphasized that the Appellants were well aware that claims and legal cases regarding the land were made by some of the original grantees, prior to the sale in their favour in January 2006. This crucial information was, however, suppressed by the Appellants. Additionally, they admitted that the Respondents No. 3 & 4 (OP No. 1 & 2) assured the Complainants that they were the absolute owners of the said land with clear marketable title without any encumbrances or litigations. However, they falsely claimed that the possession of the flat was delivered to the Complainants. The stay granted on 28.08.2012 on State Commission’s order dated 28.08.2012 was vacated on 22.08.2018. The sale deed dated 06.01.2006 involved only the proportionate undivided share in the land. Further, a construction agreement was separately executed on 07.12.2005 obligating the Appellant to deliver possession of the apartment by end 2006. This contradicted the Appellant's claim of having delivered possession through the sale deed dated 06.01.2006 itself. The Appellant failed to provide any evidence to establish that a completion certificate was issued by the local authority or any other document confirming that electricity and water connections to the apartment complex were established by 06.01.2006. There was no stay in the present Appeal and the concerned Court could proceed further as per the law. However, the Appellant and Respondents No. 3&4 absconded. Despite Non Bailable Warrants were issued by the Executing Court, they evaded arrest and despite numerous efforts and orders, the NBWs could not be executed against them.
We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by learned Counsels for both the Parties.
The primary issue for consideration is “whether the records before the learned State Commission demonstrate that the Appellant/ Builder was aware of the controversy surrounding the legality of the title of the disputed land? The matter hinges on establishing the builder's knowledge and awareness of the legal issues related to the title of the land in question. Respondents No. 1 & 2 presented dates, events, and material from the State Commission's records to support the claim that the Appellant/ Builder was indeed aware of the title controversy. The relevant details are as follows:-
(a) The Appellant/Builder at Para-5 and 16 of their version before the State Commission in Complaint No.145/ 2009 had specifically admitted that Sri M. Muniswamy, S/o late Sri. Muthappa @ Muthuga filed case No: KSCST No: 83/2004-05 under Section.4 and 5 of KSCST Act, before the Assistant Commissioner, Bangalore North Sub-Division, against Sri. Yallappa, S/o Sabhapathi, claiming that land in Sy. No.7/4, measuring 2 Acres, situated at Thuberahalli village, Varthur Hobli, Bangalore was a land granted by the then Maharaja of Mysore during 1940-41 free of cost. Hence the same has to be restored to him since he is the son of the original grantee. The Asst Commissioner ordered for restoration of the land to the legal heirs of original grantee. The Appellant and Respondents 3 and 4 had preferred appeal before Dy Commissioner. The same came to be allowed and the case was remanded to Asst. Commissioner and the matter was pending adjudication.
(b) On 28-01-2005 the said Sri. M.Muniswamy filed an IA before the said Asst Commissioner in KSCST No: 83/2004-05 for impleading Sri. MM Bhatia was the subsequent purchaser of the land bearing Sy. No.7/4 at Thuberahalli village from Sri. Yallappa. Thus, he was impleaded in KSCST No: 83/2004-05. This can be seen from the said Asst Commissioner’s remarks in the order dated 15.02.2006 passed in KSCST No: 83/2004-05 at para-2(Annexure-R and 5(a) in Complaint No. 145/2009). The Appellant filed its English translation before Karnataka High Court in WP No 14931/ 2007, which was disposed of on 30.10.2008. A copy of the High Court order dismissing the WP is also part of the record of the State Commission.
(c) As stated by the Appellant, he entered into a joint development agreement with Respondent 3 & 4 on 24.01.2005 and the Respondent No.3 & 4 have also executed a registered GPA dated 24.01.2005 authorizing the Appellant to develop residential apartments on Site No.13, Khata No: 1/13, New Khata No: 326/7/4/13, Sy.No.7/4, Varthur Hobli, Bangalore and sell to prospective purchasers. This fact is not in dispute.
(d) On 07.12.2005 the Appellant executed a construction agreement in favour of Respondent No.1 & 2 assuring that the Flat shall be complete by 28.02.2006.
(e) On 27.12.2005 the Appellant and the Respondents No. 1 & 2 entered into a Tripartite Agreement with IDBI Bank as the Respondent 1 and 2 opted for loan facility.
(f) On 06.01.2006 the Appellant executed a sale deed in favour of Respondent No.1 & 2 for the flat and undivided share in the land. As per which the land at Sy.No.7/4 measuring 2 Acres at Thuberahalli village Bangalore belonged to Sri. Muttaga S/o Late Sri. Yellappa of the two Acres Sri. Muttaga conveyed 1 Acre in favour of Sri Yellappa on 02.09.1965 vide sale deed document No: 3593/65-66 and the remaining 1 Acre was also sold to Sri. Yellappa vide sale deed on 27.10.1969. Sri. Yellappa got the said 2 Acres converted from Agricultural to Non-agricultural purposes vide Memo No: B.DIS.ALN.SR (S) 77/90-91 dated 05.06.1991. Further, the said Sri. Yellappa and his two children executed a registered GPA along with Agreement to Sell in favour of Sri. Suresh Bhatia. The said Sri Suresh Bhatia sold portion of the said property marked as Site No.13 measuring 3005 Sq Ft to Smt. Urmila Patel and Smt. Neela Patel vide registered sale deed dated 04.02.1993. the said Smt Neela Patel executed a registered release deed on 31.08.2002 in favour of Smt. Urmila Patel, who in turn executed a gift deed on 31.08.2002 in favour of her husband Sri. Hasmukh Patel. He thereafter executed registered sale deed dated 11.10.2002 in favour of Respondent No.3 & 4 with whom the Appellant herein entered into a joint development agreement.
(g) On 15.02.2006 the said Asst. Commissioner ordered restoring entire 2 Acres in Sy.No.7/4 at Thuberahalli village, Varthur Hobli in favour of Sri. M. Muniswamy. The Appellant admitted it in Para-5 of his version before the learned State Commission.
(h) On 28.02.2006 the Respondent 3 & 4 filed an Appeal before Special Deputy Commissioner in KSCST vide Appeal No:132/2005-06 challenging Assistant Commissioner’s order restoring the entire 2 Acres of land in Sy.No.7/4, Thuberahalli village in favour of Sri. M. Muniswamy. Copy of this Appeal filed before the State Commission shows that the Appellants were aware of the litigation wrt the property in question.
(i) On 18.03.2006 the Appellant had also preferred an Appeal before Spl Dy Commissioner in KSCST challenging the order passed by Assistant Commissioner, Bangalore North Sub-Division in KSCST 83/2004-05 restoring the entire 2 Acres of the said land in favour of the said Sri. M. Muniswamy.
(j) On 04.04.2007 the Special Dy Commissioner passed a combined order in KSCST Appeal No: 132/2005-06 and No:141/2005-06 along with other Appeals, setting aside the order of the said Asst Commissioner and remanded the matter back to the Asst Commissioner for fresh inquiry as per law.
(k) During the year 2009 the Respondents 1 & 2 who were still paying the EMIs and waiting for possession of the Flat got to know that there are several rounds of litigations and the title of Respondents 3 & 4 and Appellant about the said land was in dispute. Thus, the Appellant was unable to complete the project. Despite being aware of the litigations, Appellant kept them in dark. As they concluded that the Appellant will not be able to complete the project soon, filed a complaint before the State Commission on 23.10.2009 seeking refund of amount paid and compensation. This was contested by the Appellant and Respondent 3 and 4, admitting about the litigations and denying the delay in completion of project.
(l) On 02.05.2011 the said Asst Commissioner held that there is a gross violation of provisions of KSCST (Prohibition of Certain Lands) Act, 1978 and all sale deeds executed from 1965 to 1995 are held invalid as per Section.5 of Karnataka SC & ST (Prohibition of Certain Lands) Act, 1978. He ordered for confiscation of entire land by the Govt, release from all encumbrances and directed Tahsildar, Bangalore East to take its immediate possession, occupation and restore as per rules to legal representative of original grantee Sri Muthuga.
(m) On 08.12.2011 the State Commission, considered the cancellation of all the earlier sale deeds which makes the subsequent contracts void-ab-initio and unenforceable and ordered to refund the amount along with interest.
In view of the above discussions and the facts emerged, it is clear that as on the date when the Appellant had entered into the subject agreement dated 07.12.2005 with the Complainant, there was a dispute about the title of the land in question, which the Appellant and respondent No. 3 & 4 are aware and did not notify the Complainant. Further, in terms of Para 8 of the Agreement dated 07.12.2005, in any case, the possession of the property was to be delivered by February, 2006. However, the Sale Deed executed between the Parties on 06.01.2006 without physical possession of the Flat in question as evidently the Sale Deed was required to be Mortgaged with IDBI Bank for releasing of payments to Appellant (the Builder). On the other hand, in terms of (b) and (c) of the Sale Deed executed between the Parties on 06.01.2006, it was stated by the Appellant that there was no dispute in respect of the property in question. Therefore, as on the date of execution of the Agreement, the title of property was under dispute and the Appellant was aware and, however, did not notify the Complainants. On the other hand, asserted in the Sale Deed that the said property was free from and dispute and litigation. Therefore, there was unfair trade practice and deficiency in service by the Appellant.
In view of the above, notwithstanding the subsequent developments in the litigations in respect of the property in question, the finding of the learned State commission is based on facts and appropriate
As regards the rate of interest applicable and the scope for payment of compensation in such matters, the Hon’ble Supreme Court in Experion Developers Pvt. Ltd. Vs. Sushma Ashok Shiroor, in Civil Appeal No.6044 of 2019 decided on 7.4.2022 has held that:-
“We are of the opinion that for the interest payable on the amount deposited to be restitutionary and also compensatory, interest has to be paid from the date of the deposit of the amounts. The Commission in the Order impugned has granted interest from the date of last deposit. We find that this does not amount to restitution. Following the decision in DLF Homes Panchkula Pvt. Ltd. Vs. DS Dhanda and in modification of the direction issued by the Commission, we direct that the interest on the refund shall be payable from the dates of deposit. Therefore, the Appeal filed by purchaser deserves to be partly allowed. The interest shall be payable from the dates of such deposits.
At the same time, we are of the opinion that the interest of 9% granted by the Commission is fair and just.”
Considering the above facts, the Appeal is disposed of with modification of the order passed by the learned State Commission, Karnataka in CC 145/2009 dated 08.12.2011 as under:
A. The Opposite Parties are jointly and severally directed to refund Rs.34,97,770/- to the Complainant in Complaint No. 145/2009 together with interest at the rate of 9% per Annum from the date of deposit till realization, within a period of one month. In the event of delay beyond one month, the interest applicable shall be 12% for such period beyond one month till the realization of the entire amount due.
B. The Opposite Parties are jointly and severally directed to also pay a litigation cost of Rs.30,000.
It is also made clear that, after the compliance of this order, the Appellant/ OPs shall have no liability as regards repayment of loan granted by the IDBI in respect of the flat in question to the Complainant/Respondent.
As the First Appeal No.63 of 2012 has been disposed of with the above observations, the Appeal Execution No.205/2018 is also disposed of accordingly.
All pending Applications, if any, are disposed of accordingly.
The Registry is directed to release the Statutory deposit amount, if any, in favour of the Appellant on compliance of the above order.