A division bench of the Honourable Supreme Court of India in Venkatraman Krishnamurthy and Ors. versus Lodha Crown Buildmart Private Limited¹ heard a statutory appeal against the decision of the National Consumer Dispute Redressal Commission in a complaint brought before it by the Appellants a group of home buyers against the Respondent a company involved in the construction and sale of residential apartments in Mumbai. The dispute arose out of the delay in handing over possession of the apartment unit by the Respondent as per the terms of the Agreement to Sell and the Appellant’s desire to terminate the contract. The NCDRC had originally sought to resolve the dispute by reframing the terms of the Agreement to Sell between the parties and establishing new timelines for delivery of the flat and compensation for termination. The Supreme Court set aside the decision of the NCDRC and held that the NCDRC had erred in going beyond the terms of the contract and allowed the Appellant to terminate the Agreement to Sell as per the original terms of the Agreement.

The Supreme Court in its ruling explored the nature of the contract between the two parties and the important covenants relative to the facts of the case. The Court explored a cantina of judgements to determine the scope of interference by a court of law in the interpretation of a contract between two parties.

Facts
The Appellants were desirous to purchase an apartment in the proposed project advertised by the Respondent. Accordingly an Agreement to Sell was executed between the parties on 29.11.2013 wherein the Appellant agreed to purchase the apartment for a certain sum of money a part of which was to be paid in four instalments as ‘application money’ and the balance amount was to be paid within 15 days of receipt of the date of possession i.e. date of receipt of Occupation Certificate. The Agreement to Sell further allowed for a period of one year after the agreed upon date of possession date as grace period for delivery of possession. The essential terms of the contract for the purpose of the case at hand are produced in brief as below :

The Respondent was able to procure only a Part OC by 08.06.2017 from TCPD MHADA with conditions being that the Respondent was to complete unfinished internal works before applying for a full OC and before handing over complete possession of the units.

The Respondent had called upon the Appellant to make payment of the balance consideration on grounds that OC had been obtained, additionally the Respondent had asked the Appellant to pay additional amounts for GST.

The Appellants had issued a notice of termination to the Respondent however, the Respondent refused the same stating that the OC had been acquired and therefore the Appellant was obliged to make payment of the balance consideration.

The Appellants alleging that the Respondent did not provide possession of the unit (for fit outs) even after the expiration of the grace period, approached the Consumer forum and lodged a complaint for termination of the agreement.

NCDRC’S Approach
The NCDRC after hearing the complaint of the Appellant passed a rather binary order whereby the NCDRC provided revised timelines for the Respondent to carry out its obligations and deliver possession of the unit for fit out purposes to the Appellant. However the Appellant was aggrieved by the alternative option provided by the NCDRC order according to which the Appellant would be able to terminate the contract however the money paid in earnest as security deposit would be forfeit.

The NCDRC in the case at hand diverged from the original terms of the Agreement to Sell wherein as per clause 11.3, upon termination arising out of the failure of the Respondent to deliver possession of the unit for fit outs in the agreed upon time, the Respondent was obligated to return the consideration amount in full in 12 monthly instalments through post - dated cheques. The NCDRC in its order held : “In case the Complainants does not wish to take possession of the unit in question now, for whatsoever reasons, and wishes to seek a refund, as prayed for, he shall make a specific request in this regard, in writing, to the OP within 15 days of this order. In such a situation OP shall be entitled to deductions/forfeiture of earnest money as per provisions of the agreement. OP shall, on receipt of such written request for refund the amount paid by the Complainants after making deductions towards forfeiture of earnest money, as per provisions of the agreement, within two months from the date of request from the complainants.”

Decision of the Supreme Court
On the breach of contract by the Respondent

The Supreme Court observed that the Respondent was required to obtain the Occupation Certificate as per clause 11.1 and 11.2 of the Agreement to Sell. The Court observed that the it was not the case of the Respondent that the Appellant had delayed any of the initial payments as per the schedule. Further the Respondent had not submitted any evidence to claim additional delay under clause 11.5 of the contract.

The Court further observed that upon a bare perusal of the certificate obtained by the Respondent from MHADA, it was clear that the certificate was a conditional Part OC that required the Respondent to complete the interior work of the building before receiving a complete OC or handing over physical possession of the premises for habitation. The Court dismissed the Respondent’s argument that issuance of Part OC can be construed to mean that the Respondent had completed its obligations under the Agreement to Sell. The Court further observed that as per clause 1.13 and 1.14 the Date of Possession (for fit outs) is the same as the date on which OC is obtained, therefore as the OC was not obtained within the one year grace period, the Respondent was in clear breach of the Agreement and the Appellant was well within its rights to issue a legal notice for termination.

The Court further observed that the Respondent’s actions were mala fide as despite multiple requests of the Appellants to share part OC the Respondents did not do so, further upon request of the wife of the Appellant to visit the apartment unit on 14.06.2017 the same was not shown and the Appellants were told that the unit will only be available for viewing after August 2017.

On the decision of the NCDRC
The Supreme Court held that the date of offer of possession under clause 1.14 was linked to issuance of the OC and was different from merely providing the date of delivery for possession for fit outs and the consequences of the delay were clearly stated in the Agreement to Sell. The right of election given under the Agreement allowed the Appellants to either continue or to terminate the Agreement within ninety days of expiry of grace period and the same was absolute. The Court stated that “it was not open to the NCDRC to apply its own standards and conclude that, though there was delay in handing over possession of the apartment, such delay was not unreasonable enough to warrant cancellation of the Agreement. It was not for the NCDRC to rewrite the terms and conditions of the contract between the parties and apply its own subjective criteria to determine the course of action to be adopted by either of them.”

The Supreme Court referred to the Constitution Bench decision in General Assurance Society Limited vs Chandmull Jain and Another²wherein it was observed that “in interpreting documents relating to a contract of insurance, the duty of the Court is to interpret the words in which the contract is expressed by the parties because it is not for the Court to make a new contract, however reasonable, if the parties have not made it themselves.” The Court reiterated it stance in GMR Warora Energy Limited versus Central Electricity Regulatory Commission³ wherein it was observed that “Courts cannot substitute their own view of the presumed understanding of commercial terms by the parties, if the terms are explicitly expressed. It was held that the explicit terms of a contract are always the final word with regard to the intention of the parties.”

The Court observed that the Respondent’s claim that the Applicant had accepted the new date of delivery merely through correspondence did not amount to waiving of the Appellants right to termination. The Court held that mere correspondence between the parties prior to expiry of grace period with regards to delay in the date of possession does not amount to novation of the contract between the parties.

Conclusion
The Supreme Court concluded without hesitation that the NCDRC had overstepped its power and jurisdiction in ignoring the binding covenants in the Agreement and in introducing its own logic and rationale to decide as to what the future course of action of the parties and more particularly the Appellants should be. As the Appellants were intent on terminating the Agreement the Supreme Court allowed the same and set aside the order of the NCDRC.

By - Parshva Shah