MRTP Commission Can Grant Compensation when loss Is Due To Monopolistic, Restrictive Trade Practice

Cause Title: B.B. Patel and Others v. DLF Universal Limited

Case Number: Civil Appeal No. 1106/2009

Quorum: Justice L. Nageswara Rao, Justice B.R. Gavai and Justice B.V. Nagarathna

Judgment Date: 25/01/2022

Counsel for the Appellant: Mr. M.L. Lahoti

Counsel for the Respondents: Mr. Pinaki Mishra

Author: Pragash B, Advocate, Madurai Bench of Madras High Court

Background of the Case

This appeal has been filed against the judgment, dated 19.01.2009, of the Monopolies and Restrictive Trade Practices Commission, New Delhi dismissing a complaint filed by the appellants under Sections 36A, 36B(a) and (d), 36D and 36E read with sections 2(i) and 2(o) of the Monopolies and Restrictive Trade Practices Act, 1969 (“MRTP Act”).

An advertisement proposing attractive schemes of payment was issued by the respondent for the sale of apartments/ flats namely, “Beverly Park-I” at Qutab Enclave Complex in Gurgaon. According to one of the schemes, possession of the flats was to be handed on payment of 40% of the cost of the flat within 2 ½ years and the balance amount to be paid within the next 7 ½ years in instalments.

On 14.01.1993, the appellants applied for allotment of 4 apartments Nos. 404A, 404B, 406A and 406B in Tower No. 4, Windsor. The appellants sought to make payment in 10 years and according to the application form, the possession was to be delivered to the appellants as “Licensees” for use and occupation on a monthly License Fee till the balance sale consideration was paid. Flats with super area of 270.35 sq. meter were allotted to the appellants. Apart from the basic sale price, External Development Charges @ Rs. 376/- per sq. meter, Construction Deposit of Rs. 21.5 per sq. meter and lumpsum security of Rs. 15,000/- were to be paid by the appellants for each flat.

The possession of the flats was to be handed over to the appellants in January 1996 but the construction is said to be commenced only in June, 1996. The appellants continued to make payments as per the schedule of payments annexed with the Apartment Buyer Agreement and for each flat to the tune of Rs. 14,62,552 was paid till 14.4.1997. On 21.04.2007, the respondent issued a Circular apologizing for the delay in construction which was due to major improvements being carried out in specifications and facilities in order to provide a better product and the delay in obtaining the Government approvals. The appellants were informed about the improvements in the project that were being introduced which included a) provision for extra lift, b) large entrance hall, c) imported marble, iv) copper pipes for plumbing, v) standby generator and vi) wooden flooring in study room.

The respondent sent a demand letter on 02.06.1997 to the appellants about the extra charges of Rs. 8,78,905 for each flat for increase in area by 9.236 sq. meters, escalation charges on material and labour, external electrification costs and firefighting measures. On 26.06.1998, the respondent informed the appellants that the completion certificate had been received from the authorities and the apartments were ready for use and occupation. The appellants were requested to pay the outstanding dues and complete the documentation work. According to the Statement of Accounts sent by the respondent, an amount of Rs. 19,88,242 was already paid and the balance due as on 31.07.1998 was Rs. 7,46,919.

In response, the appellants sent a letter dated 12.08.1998 stating that excess amount was paid and sought refund of the same. Another reminder was sent by the respondent asking the appellants to remit an amount of Rs. 8,84,287/- which was overdue. Thereafter on 19.01.1999, the respondent cancelled the Agreement as the outstanding amount was not paid. The respondent also issued cheques refunding the amounts paid for the flat by the appellants which were not encashed by the appellants.

Legal Course of Action

The appellants filed a complaint in RTPE No. 36/1999 under Sections 10(a)(i) IV, 36A, 36B(a) and (d), 36D and 36E read with sections 2(i) and 2(o) of the MRTP Act along with the Regulations framed thereunder. In the complaint, the appellants sought for an inquiry into the commission of various restrictive/ unfair/ monopolistic trade practices by the respondent and for an appropriate cease and desist order against the respondent restraining the respondent from indulging in similar restrictive/unfair/monopolistic trade practices. The cancellation of the allotment of the apartments was challenged and also the appellants sought for setting aside the extra charges levied by respondent by letter dated 02.06.1997.

The appellants also sought for a direction to the respondent to handover the possession of the apartments forthwith after appropriating the amounts already paid towards basic sale price and a direction to pay liquidated damages for the loss of rental income from 15.07.1996 along with Rs. 10,00,000/- as compensation.

The contention of the appellants relating to monopolistic practice was rejected by the Commission. In respect of a complaint of unfair trade practice due to the delay in handing over the possession of the apartments, the Commission held that there was no fixed period of 2 ½ to 3 years was agreed upon between the parties for handing over the possession. The Commission was of the view that as per the agreement, the construction and development would be in accordance with the building plan approved by the Director, Town and Country Planning, Government of Haryana and the respondent would be entitled for a reasonable extension of time for delivery of possession, in case of delay. The Commission was of the view that the allottee was entitled to issue notice to the company terminating the agreement if the respondent fail to deliver possession within the agreed time.

The Commission concluded that since there was no misrepresentation made by the respondent and there was no material produced by the appellants under duress or fraudulent representation, delay in handing over possession of the apartments to the appellants did not amount to an unfair trade practice. The Commission also held that the demand and collection of extra cost was in terms of the agreement and some instalments towards extra cost have been paid by the appellants. As the details for the demand of the extra charges was given by the respondent, it cannot be said that there was any concealment on their part. The Commission further took note of the fact that the cost of escalation beyond the contract period was absorbed by the respondent. Ultimately, the Commission concluded that the appellants failed to substantiate the allegation of unfair trade practice on the ground of imposing extra charges.

Findings and Observations

The Honourable Apex Court has compared the provisions, procedure and mechanisms followed in the Monopolies and Restrictive Trade Practices Act, 1969 with the Consumer Protection Act, 1986 to understand better the concepts of unfair trade practices and negligence in service. (Paras 11 and 12)

In so far as unfair trade practice with reference to the delay in handing over possession is concerned, the relevant clauses in the Apartment Buyer Agreement which are clauses 16, 18 and 21 (d) must be considered. According to Clause 16, the company is entitled for reasonable extension of time for delivery of possession of the premises, in case, possession could not be delivered within 2 ½ to 3 years from the date of booking. The reasons for which a reasonable extension of time is available are elaborated in clause 16. (Para 17)

The amount of earnest money and other amounts paid by the allottees shall then be refunded by the company. According to clause 21 (d), the company shall endeavour to hand over the possession of premises to the apartment allottee as a licensee on monthly license basis on completion of payment of 40% of the sale price and other charges as per clause 21 (d). (Para 17)

There is no doubt that there has been a delay in completion of the project beyond three years. However, the appellants did not issue any notice for termination of the agreement. On the other hand, notices issued by the appellants on 24.02.1998, 22.04.1998 and 12.08.1998 related to demand of extra costs. The appellants did not, at any point of time, make a grievance relating to delay in handing over of possession of the apartment. The main relief in the complaint filed by the appellants is to declare the termination of the ABA by the respondent as void. A further direction was sought for handing over the apartments without any payments towards the remaining principal amount and extra charges along with damages and compensation. (Para 17)

The Court also observed with the clause giving space for the extension of time in case of delay, the time is not made the essence of the contract. Moreover, there was no intention on the part of the appellants to insist on time being the essence of the contract as they did not terminate the ABA due to delay in handing over the possession of the apartments which they could have in accordance with clause 18 of ABA (Para 19). The Honourable Supreme Court, on comparison with the five ingredients to constitute an offence of unfair trade practice as per Colgate Palmolive Case, was of the considered view that there has been no misrepresentation made by the respondent amounting to an unfair trade practice for the delay in handing over possession of the apartments (Para 20).

With respect to the allegation of Extra charges demanded by the Respondent, the Honourable Apex Court held that

“……It is pertinent to note that the cost towards escalation of material and labour after the 30.03.1996 was not included in the demand. Even the additional cost incurred due to revision in the schedule was born by the respondent. There is no dispute that appellants had paid initial instalments towards extra charges. The respondent had also duly informed the appellants of the details of the extra cost being incurred. We are not in agreement with the contention of the appellants that imposition of extra charges is a calculated and pre-planned design of the respondent. We are convinced that there is no misrepresentation made by the respondent and, therefore, we reject the allegation of unfair trade practice.” (Para 21)

There is an averment in para 16 of the complaint that ABA is an unconscionable contract opposed to public policy as a consumer has no bargaining power and is an easy victim of unfair trade practice. There is no reference to any clause of the ABA, in particular, to substantiate the allegation. On the other hand, the appellants repeatedly refer to the allegation of delay in handing over possession and imposition of extra charges apart from non-refund of interest on the amounts paid by them. The appellants are not entitled to any relief on this count as we have already approved the order of MRTP by holding that there is no unfair trade practice on the part of the respondent. The compensation sought by the appellants cannot be granted as Section 12B of MRTP Act empowers the Commission to grant compensation only when any loss or damage is caused to a consumer as a result of a monopolistic, restrictive or unfair trade practice. As the appellants have failed to prove unfair trade practice on the part of the respondent, they are not entitled to any compensation. (Para 24)

For the foregoing reasons, the appeal is disposed of with a direction to the appellants to pay Rs. 25,00,000/- (Rupees Twenty-Five Lakhs Only) for each flat within a period of four weeks from today and the respondent shall handover possession of the flats to the appellants within a week from the date of payment. (Para 27)

View/Download Judgment: B.B. Patel and Others v. DLF Universal Limited

Cases Discussed

1. M/S Lakhanpal National Limited v. MRTP Commission and Another, (1989) 3 SCC 251.

2. M/S Philips Medical System (Cleveland) v. Indian MRI Diagnostic and Research Limited, (2008) 10 SCC 227.

3. Rajasthan Housing Board v. Parvati Devi, (2000) 6 SCC 104.

4. Bangalore Development Authority v. Syndicate Bank, (2007) 6 SCC 711.

5. Colgate Palmolive (India) Ltd. V. MRTP Commission and Others, (2003) 1 SCC 129.

6. Central Inland Water Transport Corporation Limited and Another v. Brojo Nath Ganguly and Another, (1986) 3 SCC 156.

7. Pioneer Urban Land and Infrastructure Limited v. Govindan Raghavan, (2019) 5 SCC 725.

8. Wing Commander Arifur Rahman Khan and Aleya Sultana and others v. DLF Southern Homes Private Limited, (2020) 16 SCC 512.

9. Ireo Grace Realtech Private Limited v. Abhishek Khanna and Others, (2021) 3 SCC 241.