State Consumer Disputes Redressal Commission
Baldeep Singh Dhillon vs Bestech India Pvt. Ltd. on 16 April, 2018
Daily Order STATE CONSUMER DISPUTES REDRESSAL COMMISSION, U.T., CHANDIGARH Complaint case No. : 334 of 2017 Date of Institution : 18.04.2017 Date of Decision : 16.04.2018 Baldeep Singh Dhillon son of Sh.Virsa Singh Dhillon, R/o #488, Block 13, Defence Officers Enclave, Sadar Patel Marg, Behind Taj Palace Hotel, New Delhi, currently residing at #35, Sector 2, Panchkula. Akshay Mankotia son of Sh.K.S. Mankotia R/o #488, Block 13, Defence Officers Enclave, Sadar Patel Marg, Behind Taj Palace Hotel, New Delhi, currently residing at #497, Int. & FS Unit, C/o 99 APO, Calcutta 904949. ...... Complainants V e r s u s Bestech Square, Industrial Square, Plot No.1, Foical Point, Phase 9, Sector 66, SAS Nagar, Mohali, through its Manager/ Authorized Signatory. .....Opposite party Complaint under Section 17 of the Consumer Protection Act, 1986 BEFORE: JUSTICE JASBIR SINGH (RETD.), PRESIDENT. MR. DEV RAJ, MEMBER.
MRS. PADMA PANDEY, MEMBER.
Argued by:- Sh.Sukaam Gupta, Advocate for the complainants. Opposite party exparte. PER PADMA PANDEY, MEMBER
The complainants have filed this complaint, seeking refund of amount of Rs.8,37,190/- paid by them, to the opposite party, as part of booking amount towards purchase of an office space bearing no.508, measuring 1175 square feet, in its project namely 'Bestech Business Towers', Sector 66, Mohali, basic sale price of which was fixed @Rs.4750/- per square feet. It was stated that, in the first instance, the complainants had purchased the said unit, so that after retirement, they are able to start some business, for earning their livelihood, however, during the period intervening, the mind of complainant no.2 changed and, as such, he decided to continue with his job, as a result whereof, they (complainants) decided to get refund of the amount deposited with the opposite party towards the said unit. It was further stated that, in the meantime, the opposite party, vide letter dated 14.02.2012 Annexure C-7, raised demand of Rs.17,70,653/-, towards remaining price of the said unit, alongwith interest accrued. However, since the complainants had changed their mind, as such, they sought refund of the amount paid vide letter dated 28.02.2012 Annexure C-8, but the opposite party, kept silent for about more than two years and, thereafter, instead of making refund of the amount paid, forfeited the same, intimation of which was given by it, vide letter dated 03.04.2014 Annexure C-9. It was further stated that the opposite party had neither executed the Buyer's Agreement nor updated the complainants, about status of the project, in question. It was further stated that the complainants approached the opposite party, many a times, requesting them to refund the entire amount paid but to no avail. It was further stated that the aforesaid acts of the opposite party amounted to deficiency in providing service and adoption of unfair trade practice, on its part. Hence this complaint.
Despite deemed service, none put in appearance on behalf of the opposite party, as a result whereof, it was proceeded against exparte, vide order dated 18.08.2017.
The complainants led evidence, in support of their case.
We have heard Counsel for the complainants and have gone through the evidence and record of the case, very carefully.
It may be stated here that, it has been very candidly admitted by the complainants, in their complaint, that it was only on account of the reason that complainant no.2 wish to continue his job, that they (complainants), vide letter dated 28.02.2012 Annexure C-8, sought refund of the amount paid to the tune of Rs.8,37,190/-, which was paid by them, to the opposite party, towards part price of the said unit. It means that the complainants themselves decided to rescind the contract. At the same time, it is also a proven fact, by way of documentary evidence on record, that the opposite party, ultimately, after a lapse of more than about two years of receiving letter dated 28.02.2012, cancelled allotment of the said unit vide letter dated 03.04.2014 Annexure C-9, after forfeiting 20% of the basic sale price from the deposited amount i.e. the entire amount of Rs.8,37,190/- stood forfeited by the opposite party.
Now the question, which falls for consideration, is, as to whether, action of the opposite party in forfeiting the amount, equal to 20% aforesaid, was justified or not. In our considered opinion, fixing 20% of basic sale price, as earnest money, and forfeiture thereof, in case of cancellation of the unit, can be said to be unreasonable and unconscionable. Since such a condition in the application form is unilateral, unreasonable and unconscionable, it can be said that by incorporating the same, the opposite party indulged into unfair trade practice. A similar question arose in DLF Ltd. Vs. Bhagwanti Narula, Revision Petition No.3860 of 2014, decided on 06.01.2015, by the National Consumer Disputes Redressal Commission, New Delhi, wherein as per the Agreement, 20% of the sale price of the premises was to collectively constitute the earnest money, which was to be forfeited, in case, the allottee made a default in payment of instalments(s) and asked for refund of the amount deposited. Such Clause came up for interpretation, before the National Commission, in the aforesaid case. The National Commission, ultimately, held as under:-
"7. .................However, the question which primarily arises for consideration in this case is as what would constitute the "earnest money" and to what extent the Petitioner Company is entitled to forfeit the same. The contention of the petitioner is that as agreed by the parties in terms of Clause 8 of the Agreement, 20% of the sale price, irrespective of the stage at which the payment was made constitutes earnest money whereas the case of the complainant as submitted during the course of arguments was that only the amount of Rs.63,469/- which was paid at the time of booking the apartment can be said to be the earnest money and only that amount could be forfeited.
8. In Maula Bux Vs. Union of India - 1969 (2) SCC 554, the Hon'ble Supreme Court quoted the following observations made by the Judicial Committee in Kunwar Chiranjit Singh Vs. Har Swarup - AIR 1926 PC 1 -
"Earnest money is part of the purchase price when the transaction goes forward; it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee".
9. In Shree Hanuman Cotton Mills & Ors. Vs. Tata Air Craft Ltd. - 1969 (3) SCC 522, the Hon'ble Supreme Court quoted the following characteristics of the earnest money -
"15.Borrows, in Words & Phrases, Vol. II, gives the characteristics of "earnest". According to the author, "An earnest must be a tangible thing. That thing must be given at the moment at which the contract is concluded, because it is something given to bind the contract, and, therefore, it must come into existence at the making or conclusion of the contract. The thing given in that way must be given by the contracting party who gives it, as an earnest or token of good faith, and as a guarantee that he will fulfil his contract, and subject to the terms that if, owing to his default, the contract goes off, it will be forfeited. If, on the other hand, the contract is fulfilled, an earnest may still serve a further purpose and operate by way of part payment."
After considering several decisions on the subject, the following principles were laid down by the Hon'ble Supreme Court regarding 'earnest':
(1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract.
(3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest".
The above referred principles were reiterated in Satish Batra Vs. Sudhir Rawal - (2013) 1 SCC 345. It would, thus, be seen that only that amount would constitute earnest money which is paid at the time of contract is concluded between the parties. Any payment made after the contract is concluded, cannot be said to be part of the earnest money. In the case before us, admittedly, only a sum of Rs.63,469/- was paid to the Petitioner Company at the time the deal was concluded between the parties. Therefore, in view of the above said referred authoritative pronouncements of the Hon'ble Supreme Court, only the aforesaid forfeited amount can constitute earnest money.
10. In Maula Bux case (Supra), the Hon'ble Supreme Court took the following view with respect to forfeiture of the earnest money -
"5. Forfeiture of earnest money under a contract for sale of property-movable or immovable-if the amount is reasonable, does not fall within s. 74. That has been decided in several cases:
Kunwar ChiranjitSingh v. Hat Swarup (t); Roshan Lal v. The Delhi Cloth and General Mills Company Ltd., Delhi (2); Muhammad Habibullah v. Muhammad Shafi (3); Bishan Chand v. Radha Kishan Das (4); These cases are easily explained, for forfeiture of a reasonable amount paid as earnest money does not amount to imposing a penalty. But if forfeiture is of the nature of penalty, s. 74 applies".
It would thus be seen that only a 'reasonable amount' can be forfeited as earnest money in the event of default on the part of the purchaser and it is not permissible in law to forfeit any amount beyond a reasonable amount, unless it is shown that the person forfeiting the said amount had actually suffered loss to the extent of the amount forfeited by him. In our opinion, 20% of the sale price cannot be said to be a reasonable amount which the Petitioner Company could have forfeited on account of default on the part of the complainant unless it can show it had only suffered loss to the extent the amount was forfeited by it. In our opinion, in absence of evidence of actual loss, forfeiture of any amount exceeding 10% of the sale price cannot be said to be a reasonable amount.
11. It was contended by the learned Counsel for the Petitioner Company that since the complainant had specifically agreed to deliver 20% of the sale price as earnest money, the forfeiture to the extent of 20% of the sale price cannot be said to be unreasonable, the same being inconsonance with the terms agreed between the parties. This was also his contention that so long as the Petitioner Company was acting as per the terms and conditions agreed between the parties, it cannot be said to be deficient in rendering services to the complainant. We, however, find ourselves unable to accept the aforesaid contention, since, in our view, forfeiture of the amount which cannot be shown to be a reasonable amount would be contrary to the very concept of forfeiture of the earnest money. If we accept the aforesaid contention, an unreasonable person, in a given case may insert a clause in Buyers Agreement whereby say 50% or even 75% of the sale price is to be treated as earnest money and in the event of default on the part of the Buyer; he may seek to forfeit 50% of the sale price as earnest money. An Agreement for forfeiting more than 10% of the sale price, in our view, would be invalid since it would be contrary to the established legal principle that only a reasonable amount can be forfeited in the event of default on the part of the Buyer. In Bharathi Knitting Company Vs.DHL Worldwide Express Courier Division of Airfreight Ltd.- (1996) 4 SCC 704, the Hon'ble Supreme Court accepted the contention that in an appropriate case, the Consumer Forum without trenching upon acute disputed question of facts may decide the validity of the terms of the contract based upon the fact situation and may grant relief, though, each case depends upon its own facts".
Similar view was reiterated by the Hon'ble National Commission, in Shri Harjinder S. Kang Vs. . M/s Emaar MGF Land Ltd., Consumer Case No. 482 of 2014, decided on 04 Jul 2016. In our considered opinion, since ultimately, the National Commission, in the aforesaid cases, held that the amount exceeding 10% of the total sale price, could not be forfeited, by the seller, relying upon, what has been held above, in DLF Ltd `s and Shri Harjinder S. Kang case s (supra), in our considered opinion, such a clause contained in the application form, providing for forfeiting more than 10% of the sale consideration, being unreasonable and unconscionable, amounted to unfair trade practice. Therefore, the opposite party is only entitled to forfeit 10% of the basic sale price of the unit and not 20% of the same.
It is therefore held that if 10% of the sale consideration could be forfeited, the amount of such forfeiture shall come to Rs.5,58,125/- (i.e. Rs.55,81,250/- being the sale price, minus (-) 10% of the same). The complainants are, thus, entitled to the refund of amount, to the tune of Rs.2,79,065/- [i.e. Rs.8,37,190/- (amount paid) minus (-) Rs.5,58,125/- being 10% of the price of Rs.55,81,250/-]. By not refunding this amount (Rs.2,79,065/-), within a period of one month from 28.02.2012, when the complainants sought cancellation of the unit, and utilizing the same, even till today, the opposite party is certainly deficient, in rendering service, thereby causing financial loss to them.
The next question, that falls for consideration, is, as to whether, the complainants are entitled to refund of the said amount of Rs.2,79,065/- with interest. It may be stated here, that 'Interest' in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, 'interest' is understood to mean the amount, which one has contracted to pay for use of borrowed money. In whatever category 'interest' in a particular case may be put, it is a consideration, paid either for the use of money, or for forbearance in demanding it, after it has fallen due, and, thus, it is a charge for the use or forbearance of money. In this sense, it is a compensation allowed by law or fixed by the parties, or permitted by custom or usage, for use of money, belonging to another, or for the delay in paying money after it has become payable. The interest is granted, for improper and illegal retention of the amount deposited by the complainants, with the opposite party, for a long time. In the present case, despite the fact that the complainants sought refund of amount paid, vide letter dated 28.02.2012, yet, the opposite party, took a long time, and ultimately cancelled the allotment vide letter dated 03.04.2014 and that too after forfeiting amount equal to 20% of the basic sale price of the unit i.e. the entire amount deposited stood forfeited. The amount of Rs.2,79,065/- was and is being utilized by the opposite party for the last more than six years, by investing the same in their building activities, without rendering any service to the complainants. Once it has been held above that the opposite party is entitled to forfeit 10% of the basic sale price, as such, the complainants stood penalized, by invoking the forfeiture Clause. The complainants, thus, cannot be penalized twice, by disallowing interest to them, at a reasonable rate, on the amount to which they are entitled. The equities are required to be balanced, by not enriching one party, at the cost of other. For the financial loss, which the complainants suffered, interest @ 12% P.A., on the amount of Rs.2,79,065/-, if granted, could be said to be just, fair and reasonable. Thus, in our considered opinion, the complainants are entitled to the refund of Rs.2,79,065/- calculated, in the manner, referred to above, alongwith interest @12% P.A., from the respective dates of deposit.
The next question, that falls for consideration, is, as to whether, the complainants are entitled to compensation, or not. It may be stated here, that according to Section 14(d) of the Act, the Consumer Foras can grant compensation, to the complainant. The word 'compensation' is again of very wide connotation. It has not been defined, in the Act. According to the dictionary, it means compensating or being compensated, thing given as recompense. In legal sense, it may constitute actual loss or expected loss and may extend to physical, mental or even emotional suffering, insult or injury or loss. Therefore, when the Consumer Foras have been vested with the Jurisdiction to award value of the goods or services and compensation, it has to be construed widely enabling the Consumer Foras, to determine compensation, for any loss or damage suffered by the consumers, which in law is otherwise, the wide meaning of 'compensation'. The provision, in our considered opinion, enables the consumers to claim and empowers the Consumer Foras to redress any injustice done to the complainants. The Commission or the Forum in the Act, is, thus, entitled to award not only the value of the goods or services, but also to compensate the consumers, for injustice suffered by them. Similar principle of law was laid down, in Ghaziabad Development Authority v. Balbir Singh, II (2004) CPJ 12 (SC)=III (2004) SLT 161=(2004) 5 SCC 65. In the instant case, it has been held above that the opposite party was required of, to make refund of the amount of Rs.2,79,065/-, within a period of one month or so, after receiving letter dated 28.02.2012, but it failed to do so, thereby causing mental agony, physical harassment and injustice to the complainants. On account of this act of the opposite party, the complainants were dragged into unnecessary litigation. The complainants, are, thus, entitled to compensation, to the tune of Rs.50,000/-, on account of this reason.
No other point, was urged, by the Counsel for the complainants.
For the reasons recorded above, this complaint is partly accepted, with costs, and the opposite party is held liable and directed in the following manner:-
To refund the amount of Rs.2,79,065/- [i.e. Rs.8,37,190/- (amount paid) minus (-) Rs.5,58,125/- being 10% of the price of Rs.55,81,250/-] to the complainants, alongwith interest @12% per annum, from the respective dates of deposits onwards.
To pay compensation, in the sum of Rs.50,000/- for causing mental agony, physical harassment and injustice, to the complainants, by not refunding the amount of Rs.2,79,065/-.
To pay cost of litigation, to the tune of Rs.25,000/-, to the complainants.
The payment of awarded amount, in the manner referred to above, at sr.nos.(i) to (iii), shall be made, within a period of 30 days from the date of receipt of a certified copy of this order, failing which, the amount mentioned at sr.no.(i) shall further carry penal interest @15% p.a. instead of @12%, in the manner, referred to therein, from the date of default and interest @12% p.a., on the amounts mentioned at sr.nos.(ii) and (iii), from the date of filing of this complaint, till realization.
Certified Copies of this order be sent to the parties, free of charge.
The file be consigned to Record Room, after completion.
Pronounced.
16.04.2018 Sd/-
[JUSTICE JASBIR SINGH (RETD.)] PRESIDENT Sd/-
(DEV RAJ) MEMBER Sd/-
(PADMA PANDEY) MEMBER Rg.