Karnataka High Court

M/S Total Environment Building ... vs Mr Verghese Stephen on 11 March, 2022

Bench: S.Sujatha, Shivashankar Amarannavar

  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 11TH DAY OF MARCH, 2022

                       PRESENT

         THE HON'BLE MRS.JUSTICE S.SUJATHA

                          AND

THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR

                  RERA.A.No.7/2021

BETWEEN :
M/s TOTAL ENVIRONMENT
BUILDING SYSTEMS (P) LTD.,
HAVING OFFICE AT IMAGINE 78,
ITPL MAINROAD, EPIP ZONE,
BENGALURU-560066.
REP BY ITS MANAGING DIRECTOR                ...APPELLANT

                (BY SRI G.SRIDHAR, ADV.)

AND :
Mr. VERGHESE STEPHEN
S/O LATE C.M.STEPHEN,
AGED ABOUT 60 YEARS,
C-003, TOWER-4,
BOUGENVILLEA ADARSH PALAM RETREAT,
DEVEREBISHANHALLI,
VARTHUR HOBLI, BENGALURU-560013            ...RESPONDENT

          (BY SRI RAJKUMAR M.D., ADV. FOR C/R.)

     THIS RERA. APPEAL IS FILED UNDER SECTION 58 OF
THE   KARNATAKA    REAL   ESTATE   (REGULATION   AND
DEVELOPMENT) ACT, 2016, PRAYING TO SET ASIDE THE
IMPUGNED JUDGMENT AND ORDER DATED 23.04.2021
PASSED BY THE HON'BLE REAL ESTATE APPELLATE TRIBUNAL
IN APPEAL (K-REAT) NO.104/2020 (OLD RERA APPEAL
NO.120/2019) PRODUCED AS ANNEXURE-A AND ETC.
                              -2-



      THIS APPEAL COMING ON FOR HEARING,         THIS   DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:

                      JUDGMENT

This appeal is filed by the appellant - M/s. Total

Environment Systems [P] Ltd., challenging the order

dated 23.04.2021 passed in Appeal [K-REAT]

No.104/2020 on the file of the Karnataka Real Estate

Appellate Tribunal, Bengaluru ['Tribunal' for short]

whereby the appeal filed by the respondent herein has

been allowed in part.

2. The respondent in order to purchase a villa

in the project "After The Rain Phase-II", a project

promoted by the appellant, approached the appellant

and entered into agreement dated 10.02.2014 by paying

the entire consideration amount of Rs.5,77,00,000/-

[Rupees Five Crores Seventy Seven Lakhs Only]. Indeed,

the respondent has invested the amount from the sale

proceeds of his property. As there was no progress in

the project relating to the Phase-II, the respondent had

agreed for the allotment of an alternative Villa No.058 in

the project - After The Rain Phase-I as per the Term

Sheet dated 17.03.2016 followed by an agreement of

sale and construction dated 30.03.2017 whereby the

date for construction and completion of the Villa was

agreed as 31.12.2017. To avoid the capital gain taxes

under the Income Tax Act, 1961, the respondent has

agreed for the registration of the property pursuant to

which the appellant had executed the registered sale

deed on 19.01.2018. However, no project having

completed as agreed upon, the respondent was

constrained to file a complaint in CMP

No.190118/0001904 before the Real Estate Regulatory

Authority, Karnataka [RERA]. The said authority has

passed the order dated 18.06.2019 allowing the

complaint partly. Being aggrieved, the respondent had

preferred an appeal before the Tribunal which came to

be allowed in part as under:

"i) The appeal filed by the appellant is partly allowed.

ii) The impugned order dated 18.06.2019 in Complaint No.CMP/190118/0001904 passed by the Adjudicating Officer, RERA- 2nd Respondent is modified.

iii) The promoter-1st respondent is directed to pay delay compensation to the appellant by way of interest at the rate of 10.75% i.e., 2% above MCLR rate on a sum of Rs.5,77,00,000/- from the date of payment till the appellant takes actual possession of the villa after obtaining Occupancy certificate by the 1st respondent under Section 18 of the Act Read with Rule 16 of the Rules.

iv) The promoter-1st respondent is directed to pay to the appellant interest at the rate of 9% per annum on the maintenance deposit from date of deposit i.e., 27.3.2015 till the appellant takes actual possession of the premises.

v) The promoter-1st respondent is directed to pay to the appellant rentals which is restricted to 12 months in respect of lease agreement dated 1.2.2015 i.e, 44,000 X 12 (Rs.5,28,000/-) and for a period of 11 months in respect of lease agreement dated 1.2.2018 i.e., 49,775 X 11 (Rs.5,47,525/-) totaling Rs.10,75,525/-.

vi) The promoter-1st respondent is directed to handover virtual possession of the villa to the appellant and the appellant shall take possession of the same within two months from the date of occupancy certificate as per Section 19(10) of the Act;

vii) The Registrar of the Tribunal is directed to comply with Section 44(4) of the Real Estate (Regulation and Development) Act, 2016.

viii) The office is directed to return the records to the 2nd respondent.

No order as to cost."

3. Being aggrieved by the said order of the

Tribunal, the appellant has preferred this appeal.

4. Learned counsel for the appellant submitted

that the respondent had ceased to be an agreement

holder or an allottee as envisaged under the Real Estate

[Regulation and Development] Act, 2016 ['Act' for short]

upon execution and registration of the sale deed as

such the Tribunal has no jurisdiction in entertaining

the complaint filed by the respondent. Learned counsel

submitted that the respondent had entered into an

Interior Customization Supplementary Agreement [ICSA]

dated 15.05.2018 after the sale deed in terms of which

the date of possession as agreed by the parties was

extended to 31.12.2018. The Tribunal has erred in not

considering the same. The Tribunal failed to appreciate

the partial occupancy certificate issued to the

respondent. It was argued that in the construction

project consisting of different Phases and of different

units more particularly Villas, partial occupancy

certificates are issued in a phased manner. The

authority and the Tribunal has failed to recognize this

aspect in arriving at a decision on the delay factor of

handing over possession along with the occupancy

certificate. It was submitted that partial occupancy

certificate would satisfy the requirement under the Act.

Rule 4 [1] and Explanation [v] of the RERA Rules was

referred in support of the contention that the

compensation ought not to have been awarded by the

Tribunal from the date of payment till the respondent

takes actual possession of the villa after obtaining

occupancy certificate as per Section 18 of the Act read

with Rule 16 of the Rules.

5. Nextly, it was submitted that the interest

awarded by the Tribunal on the maintenance deposit

from the date of deposit i.e., 27.03.2015 is unjustifiable.

It was submitted that the maintenance contract dated

30.03.2017 contemplates that the maintenance fund

must be paid in full before the effective date. The said

maintenance amount having been received by the

appellant only on 17.03.2016 awarding interest of 9%

p.a., on the maintenance deposit from 27.03.2015 is

improper.

6. Learned counsel further submitted that the

lease deeds dated 01.02.2015 and 01.02.2018 entered

between one Mr. Balasubramaniam Chandrashekaran

and the respondent for a period of twelve months and

eleven months respectively were in operation during the

period prior to the revised virtual completion date of the

Unit as agreed in the agreement dated 15.05.2018.

Hence, payment of compensation towards rentals

arising out of the lease deeds which were prior to any

alleged delay in delivery of possession does not arise.

Thus, it was argued that the Tribunal has entertained

the complaint without application of mind. The reliefs

restricted by the adjudicating authority could not have

been expanded by the Tribunal.

7. Learned counsel referring to Section 18 of

the Act, submitted that the allottee shall be entitled to

receive the return of the amount paid by him with

interest at such rate as may be prescribed, in case the

allottee wishes to withdraw from the project. However,

where an allottee does not intend to withdraw from the

project, he shall be paid by the promoter interest for

every month of delay till the handing over of the

possession. But the compensation awarded by the

Tribunal in this regard is contrary to this provision.

8. Learned counsel for the respondent

supporting the impugned order submitted that no

actual possession of the villa has been given till date.

Learned counsel submitted that there is no concept of

partial occupancy certificate under the Act. The so

called partial occupancy certificate produced at

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Annexure-C dated 17.12.2019 does not depict Villa

No.058, the property number disclosed in the

registered sale deed dated 19.01.2018. Inviting the

attention of the Court to the judgment of this

Court in the case of Bangalore Housing Development

and Investments V/s. Bruhat Bangalore

Mahanagara Palike, rep., by its Commissioner and

Others [ILR 2014 KAR 2863], it was submitted that

a partial occupancy certificate can be granted to a

part of the building in terms of BBMP Bye-laws 5.7.

Maintenance amount having been deposited on

27.03.2015, the respondent is entitled to interest at

9% p.a., on the maintenance deposit from the date

of the deposit i.e., 27.03.2015. It was further

submitted that the compensation awarded towards

rentals is in terms of the lease agreements. The

appellant having failed to handover the actual

physical/virtual possession of the property to the

respondent, after investing huge amounts, he was

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forced to stay in the rental premises. Hence, no

exception can be found with the order of the Tribunal in

awarding compensation in this regard. Learned counsel

has placed reliance on the judgment of the Hon'ble Apex

Court in the case of Wing Commander Arifur Rahman

Khan and Aleya Sultana and Others V/s. DLF

Southern Homes Private Limited [Now Known as

Begur OMR Homes Private Limited] and Others

[(2020)16 SCC 512] in support of his contention that

the respondent-purchaser has not lost his right to make

a claim for compensation for the delay in handing over

of the villa subsequent to the execution of the registered

sale deed by the appellant in his favour. Thus, the

learned counsel sought for the dismissal of the appeal.

9. We have carefully considered the rival

submissions of the learned counsel appearing for the

parties and perused the material on record.

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10. The points that arise for our consideration

are:

1. Whether an allottee as defined in Section 2[b] of the RERA Act is precluded from claiming compensation for delay in handing over the possession after execution of the registered sale deed in his favour under Section 18[1] of the Act i.e., for the period after execution of the sale deed?

2. Whether the respondent is entitled for interest at 9% p.a., on the maintenance deposit from the date of deposit i.e., 27.03.2015 till he takes actual possession of the premises?

3. Whether the respondent is entitled to the rentals as claimed and awarded by the Tribunal in terms of the lease agreement dated 01.02.2015 and 01.02.2018?

4. Whether the order of the Tribunal is justifiable?

Re. Point No.1:

11. Under the Scheme of the Act, the promoter

has to execute a registered conveyance deed in favour of

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the allottee along with the undivided proportionate title

in the common areas to the association of the allottees

or the competent authority, as the case may be, and

hand over the physical possession of the plot,

apartment or building, as the case may be, to the

allottees in terms of Section 17[1] of the Act. As per

Sub-Section [2] of Section 17, after obtaining the

completion certificate and handing over physical

possession to the allottees in terms of Sub-section [1], it

shall be the responsibility of the promoter to handover

the necessary documents and plans, including common

areas, to the association of the allottees or the

competent authority, as per the local laws. If the

promoter fails to complete or if unable to give

possession of an apartment, plot or building [a] in

accordance with the terms of the agreement or, as the

case may be, duly completed by the date specified

therein; or [b] due to discontinuance of his business as

a developer on account of suspension or revocation of

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the registration under the Act or for any other reason,

the promoter shall be liable to return the amount

received by him in respect of that apartment, plot,

building as the case may be, with interest in case the

allottee wishes to withdraw from the project, in terms of

Section 18 of the Act. However, in terms of the proviso

therein, if the allottee does not withdraw from the

project, the promoter is liable to pay interest for every

month of delay till the handing over the possession as

the case may be, as prescribed. In terms of Section 16,

rate of interest payable by the promoter shall be the

State Bank of India highest marginal cost of lending rate

plus 2% i.e., 10.75% in the present case which is not in

dispute.

12. 'Allottee' is defined under Section 2[d] of the

Act as under:

"2(d) "Allottee" in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may

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be, has been allotted, sold whether as freehold or leasehold or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent."

13. The issue whether the purchaser ceases to

be an allottee subsequent to the execution of the sale

deed is no more res integra in view of the judgment of

the Hon'ble Apex Court in the case of Wing

Commander Arifur Rahman Khan and Aleya

Sultana and Others supra, wherein the Hon'ble Apex

Court having regard to the flat purchasers as observed

thus:

"40. The flat purchasers invested hard earned money. It is only reasonable to presume that the next logical step is for the purchaser to perfect the title to the premises which have been allotted under the terms of the ABA. But the submission of the developer

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is that the purchaser forsakes the remedy before the consumer forum by seeking a Deed of Conveyance. To accept such a construction would lead to an absurd consequence of requiring the purchaser either to abandon a just claim as a condition for obtaining the conveyance or to indefinitely delay the execution of the Deed of Conveyance pending protracted consumer litigation.

41. It has been urged by the learned counsel of the developer that a consequence of the execution of the Deed of Conveyance in the present case is that the same ceases to be a transaction in the nature of "supply of services" covered under the CP Act 1986 and becomes a mere sale of immovable property which is not amenable to the jurisdiction of Consumer Fora. In Narne Construction (P) Ltd. v. Union of India [(2012) 5 SCC 359], this Court distinguished between a simple transfer of a piece of immovable property and housing construction or building activity carried out by a private or statutory body falling in the category of "service‟ within the

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meaning of Section 2 (1) (o) of the CP Act 1986. This Court held that:

"8. Having regard to the nature of transaction between the appellant Company and its customers involved much more than a simple transfer of a piece of immovable property it is clear the same constitutes "service" within the meaning of the Act. It was not the case that the appellant Company was selling the given property with all its advantages and/or disadvantages on "as is where is" basis, as was the position in State [UT of Chandigarh] v. Amarjeet Singh [(2009) 4 SCC 660]. It is a case where a clear-cut assurance was made to the purchasers as to the nature and extent of development that would be carried out by the appellant Company as a part of package under which a sale of fully developed plots with assured facilities was made in favour of the purchasers for valuable consideration. To the extent the transfer of site with developments in the manner and to the

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extent indicated earlier was a part of the transaction, the appellant Company has indeed undertaken to provide a service. Any deficiency or defect in such service would make it accountable before the competent Consumer Forum at the instance of consumers like the respondents."

The developer in the present case has undertaken to provide a service in the nature of developing residential flats with certain amenities and remains amenable to the jurisdiction of the Consumer Fora. Consequently, we are unable to subscribe to the view of the NCDRC that flat purchasers who obtained possession or executed Deeds of Conveyance have lost their right to make a claim for compensation for the delayed handing over of the flats."

14. Thus, it is clear that execution of the

registered sale deed by the promoter - appellant on

19.01.2018 which indeed was made pursuant to the

request made by the respondent to get the benefit of the

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capital gains under the Income Tax Act, 1961 would not

take away the rights of an allottee as defined under

Section 2[b] of the Act to claim compensation under

Section 18 of the Act. It is evident that the respondent

has not withdrawn from the project. Thus, the proviso

to Section 18 would be applicable wherein the

compensation would be the interest for every month

delay till the handing over of the possession at 10.75%.

The Adjudicating Authority indeed had awarded the

compensation at 10.75% p.a., on the total amount paid

by the respondent commencing from 01.01.2018 till

18.01.2019 and Rs.1,00,000/- per month as delay

compensation from 19.01.2018 till the possession is

delivered officially after obtaining the occupancy

certificate. This order of the adjudicating authority has

been modified by the Tribunal in allowing the appeal in

part directing the appellant to pay the compensation for

the delay by way of interest at the rate of 10.75% i.e.,

2% above MCLR Rate on a sum of Rs.5,77,00,000/-

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from the date of payment till the respondent takes

actual possession of the villa after obtaining occupancy

certificate by the appellant under Section 18 of the Act

read with Rule 16 of the Rules. In terms of the

agreement entered into between the parties, the

appellant had agreed to hand over the constructed

building with the occupancy certificate as per Section

18 of the Act on or before 31.12.2017. In such

circumstances, the respondent is entitled to

compensation by way of interest for every month of

delay from the date of the commencing of the delay i.e.,

01.01.2018 till handing over the possession. Hence, in

our considered view, the order of the Tribunal in

allowing the compensation by way of interest at 10.5%

from the date of the payment is not sustainable.

Accordingly, we modify the same.

Re. Point No.2:

15. Clause 12 of the maintenance agreement

entered into between the parties no doubt would not

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depict the rate of interest at 9% p.a., on the

maintenance deposit, awarding interest at 9% p.a., from

the date of deposit i.e., 27.03.2015 till the appellant

takes physical possession of the building would not be

construed as arbitrary. The appellant is not disputing

the award of interest at 9% p.a., on the maintenance

deposit but the argument is that the liability of interest

would arise only from 17.03.2016 as per the Term Sheet

agreement and not from 27.03.2015. This arguments

deserves to be negated for the reason that admittedly

the maintenance deposit was made on 27.03.2015. The

Term Sheet agreement made on 17.03.2016 was due to

non progress of the project "After the Rain Phase-II". It

cannot be presumed that the maintenance amount was

paid on 17.03.2016 in terms of the Term Sheet

Agreement when actually it was received on

27.03.2015. Maintenance deposit could be collected

only from the date of handing over possession of the

Villa in terms of Section 18 of the Act. As could be seen

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from the records, even today the subject Villa is not

handed over in terms of the Act and is not in habitable

condition as required/agreed between the parties.

Hence, we answer point No.2 in the Affirmative.

Re. Point No.3:

16. We find considerable force in the arguments

advanced by the learned counsel appearing for the

appellant in this regard inasmuch as the compensation

towards the rentals relating to the lease agreement

dated 01.02.2015 certainly was prior to the alleged

delay in delivery of possession. Lease agreement dated

01.02.2018 was not established as required under law.

The Tribunal having come to the conclusion that the

respondent has failed to prove the documents in the

manner prescribed by law cannot rely upon the said

documents to award rentals to the respondents. In our

considered view, the Tribunal should have refrained in

awarding rentals in the absence of, any such clause in

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the contract entered into between the parties and

substantial material to prove the same. Hence we

answer this point in the Affirmative.

Re. Point No.4:

17. In the case of Bangalore Housing

Development and Investments supra, the Writ Court

has observed thus:

"10. If the building is partly constructed, then an Occupancy Certificate in terms of Bye-Law 5.6 cannot be granted. However, a POC can be granted to a part of the building, in terms of Bye-Law-5.7, which reads as follows.

"5.7 Occupancy or letting of the new buildings.- No person shall occupy or allow any other person to occupy any new building or part of a new building for any purpose whatsoever until occupancy certificate to such buildings or part thereof has been granted by an officer authorized to give such certificate, if in his opinion in every respect the building is completed according to

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the sanctioned plans and fit for the use for which it is erected. The Authority may in exceptional cases (after recording reasons) allow partial occupancy for different floors of a building."

11. Bye-law-5.7 postulates various requirements. The first is that no person shall occupy or let-in any other person to the building or part thereof, until an Occupancy Certificate to such a building or part thereof has been granted. Therefore, until and unless an Occupancy Certificate is granted, no building or part of it, can be occupied. Secondly, the grant of Occupancy Certificate shall be only after the opinion of the officer is to the effect that in every respect, the building or part thereof is complete, according to the plan sanction and that it is fit for use for which it was erected."

18. We find no reasons to differ from the same.

Hence, even POC should be in terms of the BBMP Bye-

law 5.7 and the property number has to be disclosed as

per the registered sale deed as Villa No.058. Thus, as

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discussed in the preceding paragraphs, the impugned

order requires modification to the extent discussed

above.

19. For the reasons aforesaid, we pass the

following:

ORDER

i] The appeal is allowed in part.

ii] The order dated 23.04.2021 passed in

appeal No.(K-REAT) 104/2020 (old RERA

appeal No.120/2019) of the Karnataka Real

Estate Appellate Tribunal, Bengaluru

impugned herein is modified.

iii] The promoter-appellant is directed to pay the

compensation to the respondent by way of

interest @ 10.75% i.e. 2% above the MCLR

rate on a sum of Rs.5,77,00,000/- from

01.01.2018 till respondent takes actual