Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Prem Narain, Presiding Member, has directed the developers of “Greenopolis” to refund homebuyers their amount deposited at the interest rate of 9% p.a. and in a few complaints the bench has asked for the possession to be handed over by 30-09-2020 with the occupancy certificate and with a delayed penalty of 6% p.a. on the deposited amount.

Consumer Complaints

Allottees of the project “Greenopolis” situated in Gurgaon alleged deficiency in service on the part of Opposite parties — Three C Shelters (P) Ltd.

Original allottee booked an apartment in OP’s project for a consideration of Rs 87,16, 800/-, apartment was allotted and later the same was endorsed in favour of complainant.

OP’s failed to deliver the possession in 42 months inclusive of 6 months grace period. Till date, the complainant has paid Rs 75,96,776/- to OP’s.

Several complaints have been filed by homebuyers with regard to no delivery and possession of the apartments for which they have paid installments of a very huge amount.

Analysis and Decision

No breach of agreement by complainants | Entitled to relief under Sections 54 and 55 of the Indian Contract Act, 1872

Argument with regard to Sections 54 and 55 of the Indian Contract Act, 1872, OPs relied on the Commission’s decision in DLF Southern Town (P) Ltd. v. Dipu C. Seminal, wherein the complainant had deposited only the booking amount and no installments were paid whereas in the present complaints installment have been paid upto reasonable limit and on no progress in construction, the payment was stopped later.

Force Majeure

Defence of force majeure by OPs cannot be taken as there was no ban on construction and OPs should have put their resources and managerial skills to bring water from outside to complete the construction in time.

Joint Project

Three C Shelters (P) Ltd. pleaded for force majeure conditions for the delay and on the other hand Orris Infrastructure (P) Ltd. pleaded that Three C Shelters was responsible for delay in construction. Both of them had signed on the “Apartment buyer Agreement” and hence Commission stated that both of them were responsible for delay.

Apartment Buyer Agreement

Bench observed that the OP’s clearly have failed to complete the project and give the possession in time to the homebuyers as per the Apartment Buyer Agreement.

Hence allottees have the right to ask for a refund due to the inordinate delay which has been beyond 1 year, the possession was to be given in the year 2016.

No Forfeiture of earnest money

So far as the question of forfeiture of earnest money is concerned, it is seen that the complainants are seeking refunds as the project has been inordinately delayed. Even though the RERA, Haryana has taken a meeting to expedite the project and Three C Shelters (P) Ltd. has agreed to complete the project in phases.

Commission noted that OPs have not paid EDC and IDC to the Government and it seems that the OPs were not serious in timely completing the project. Thus, in these circumstances, there can be no question of forfeiture of earnest money.

Supreme Court in Haryana Urban Development Authority v. Diwan Singh, (2010) 14 SCC 770, observed that subsequent buyers are entitled to receive interest only after the date of endorsement in their favour.

In view of the above, Commission directed Three C Shelters to refund the amount at 9% interest per annum.

In one of the cases, Orris Infrastructure (P) Ltd. is directed to complete the construction work and handover the possession till 30-09-2020 after obtaining an occupancy certificate, and it shall pay interest of 6% p.a. on the deposited amount.

If the possession is not delivered till 30-09-2020, the complainant shall be at liberty to take a refund of the total deposited amount Rs 77,58,581/- along with interest @ 9% p.a. from the date of respective deposits till actual payment. [Sanjay Gupta v. Three C Shelter (P) Ltd., 2020 SCC OnLine NCDRC 178, decided on 20-07-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): A Single Member Bench of V.K. Jain, J., allowed an appeal filed against the order of the State Commission.

The respondent was allotted a flat in a project which was to be developed by the appellant company. The respondent paid more than 50% of the cost of the flat to the appellant on different occasions, however, he defaulted in paying one installment to the appellant. On account of failure to pay the installment after 2 reminders, the appellant cancelled respondent’s allotment and forfeited the money already received.

The main issue that arose before the Commission, in this case, was whether the appellant was justified in canceling the allotment on account of one default.

The Commission observed that the respondent had undoubtedly defaulted in making payment of an installment even though two reminders were sent to him. The respondents had not even cited any reason for their failure to make the payment or that the payment was not made for reasons beyond their control. The Commission further observed that the respondent had raised a false plea about the discount of 5% to be offered by the appellant. The appellant being a private builder required money to complete construction within time limit agreed between the parties.

The Commission held that in the facts and circumstances of the case, the appellant was justified in cancelling the allotment of the respondent and forfeiting the earnest money. However, the Commission also held that the appellant cannot deduct more than the earnest money out of the amount paid to it by the complainants. The tribunal referred to the case of DLF Ltd. v. Bhagwanti Narula, I (2015) CPJ 319(NC) and held that an amount exceeding 10% of the total price cannot be forfeited by the seller, since forfeiture beyond 10% of the sale price would be unreasonable and only the amount, which is paid at the time of concluding the contract can be said to be the earnest money. Hence the Commission allowed the appeal but it also directed the appellant to refund the money above the earnest money forfeited by it. [Prateek Realtors (P) Ltd. v. Vivek Kumar Gupta,2018 SCC OnLine NCDRC 378, order dated 08-10-2018]

Case BriefsSupreme Court

Supreme Court: Kurian Joseph, J. delivered the judgment for himself and Sanjay Kishan Kaul, J. wherein it was held that forfeiture of gratuity, under the Payment of Gratuity Act, 1972 is not automatic on dismissal from service.

The respondent, an employee of the appellant bank, was dismissed on account of proved misconduct involving moral turpitude Consequently, the respondent was issued a show-cause notice as to why the gratuity amount payable to him should not be forfeited. Subsequently, an explanation of the respondent was rejected and the gratuity was forfeited. The respondent challenged the said forfeiture before the Kerala High Court which held that the gratuity was payable. Aggrieved thus, the appellant filed the instant appeal.

The question that arose for consideration before the Supreme Court was ‘whether forfeiture of gratuity is automatic on dismissal form service?’ The Supreme Court referred to Section 4 of the Act along with its earlier judgments in Beed District Central Coop. Bank Ltd. v. State of Maharashtra, (2006) 8 SCC 514; Y.K. Singla v. PNB, (2013) 3 SCC 472 and Jaswant Singh Gill v. Bharat Coking Coal Ltd., (2007) 1 SCC 663. The Court observed that forfeiture of gratuity, either wholly and partially is permissible under  Section 6(b)(ii) only in the event that termination is on the account of riotous or disorderly conduct or any other act of violence or on account of an act constituting an offence involving moral turpitude, when he is convicted. In the present case, there was no conviction of the respondent for the misconduct which according to the bank was offence involving moral turpitude. The Court finally observed that forfeiture of gratuity is not automatic on dismissal from service, it is subject to sub-sections (5) and (6) of Section 4 of Payment of Gratuity Act. The Court found that the there was no infirmity in the order impugned. Thus, the appeal was dismissed holding it to be sans merit. [Union Bank of India v. C.G. Ajay Babu,2018 SCC OnLine SC 962, dated 14-08-2018]

Case BriefsHigh Courts

Bombay High Court: A Single Judge Bench comprising of S.C. Gupte, J. dismissed a writ petition which was filed challenging the forfeiture of payment of gratuity due to the petitioner.

The petitioner worked as a Branch Manager with the respondent Bank. He was charge-sheeted for misconduct alleging misappropriation of funds. It was alleged that a total sum of Rs. 30,000 was misappropriated by the petitioner. Accordingly, the services of the petitioner were terminated. Subsequently, the petitioner filed an application for payment of gratuity under Section 4 of Payment of Gratuity Act, 1972. Meanwhile, the respondent Bank forfeited the gratuity payable to the petitioner under Section 4(6)(b)(ii) of the Act. Petitioner’s application for payment of gratuity, mentioned hereinabove was allowed by the Controlling Authority, which order was reversed by the Appellate Authority on an appeal by the respondent Bank. Petitioner challenged the order of the Appellate Authority in the instant petition. His main contention was that for invoking Section 4(6)(b)(ii) for forfeiting gratuity, conviction of the concerned employee for any offence for the time being in force is a condition precedent.

On perusal of the said section, the High Court was of the view that contention of the petitioner was liable to be rejected. The Court opined that Section 4, read as a whole, does not lend itself any such construction as put forth by the petitioner. There was no basis for claiming that the act referred to clause (b)(ii) of the section, namely, “act which constitutes an offence involving moral turpitude”, must be proved in a criminal court of competent jurisdiction. Referring to a few decisions of the Supreme Court and other High Courts, the Hon’ble Judge held that conviction for an offence involving moral turpitude was not a condition precedent to forfeit the amount of gratuity under Section 4(6)(b)(ii). Holding thus, the Court held that the impugned order passed by the Appellate Authority does not suffer from any illegality, and thus no interference with the impugned order was called for. Accordingly, the petition was dismissed. [Laxman Balu Deualkar v. Kolhapur District Central Coop. Bank Ltd.,2018 SCC OnLine Bom 1284, decided on 14-6-2018]

Supreme Court

Supreme Court: The question before the Court was whether refund of the earnest money deposit is allowed on the ground of revocation of contract and the right to claim the earnest money/deposit is granted on the withdrawal of the bid. The case came up before the Court challenging the decision of  the Division Bench of Allahabad High Court  where it was ordered that since the case is not covered by Condition 2 of Special Conditions of Contract, the refusal of refund of the earnest money deposited was unjustified. The Supreme Court, comprising of the bench of T.S. Thakur, R.K. Agrawal and Adarsh Kumar Goel JJ., further held that the High Court committed an error while directing the refund of earnest money. Therefore, the order passed by the High Court was set aside and Writ Petition was dismissed.

The Counsel on behalf of appellant-corporation, Mr S.K. Dhingra argued that in Special Conditions of Contract, revocation of tender was by itself sufficient to call for forfeiture of the earnest money. Special Conditions of Contract only means withdrawal/cancellation/recall of the bid submitted by the bidder. In any such event the earnest money deposited by the bidder would be liable to the forfeited is the simple meaning of Condition 2. Opening of the bid or acceptance thereof in terms of Section 5 of the Contract Act, 1872 was immaterial and irrelevant. It was held that absence of any term stipulating forfeiture of

the earnest money may lead to situations where even those who do not have the capacity or intention of entering into a contract venture into the bidding process for at times extraneous reasons. The purpose of such a clause providing for forfeiture of the earnest money clearly was to see that only genuine bids are received. The Court further held that the forfeiture of earnest security in the present case in no way affected any statutory right under the Contract Act and rejected the contention that right to withdraw the bid in terms of Section 5 of the Contract Act, 1872 would entitle them to withdraw without suffering forfeiture of the earnest money even in cases where the submission and receipt of bids is itself subject to the condition that in the event of a withdrawal of the bid the earnest money stand forfeited.. National Thermal Power Corporation Ltd. v. Ashok Kumar Singh, 2015 SCC OnLine SC 120, decided on 13-2-2015