NCDRC - compensation to the complainant company cannot be at par with that to an individual.The company is not entitled to compensation for the mental agony and harassment to which an individual is entitled

 In the Matter of Springdale Core Consultants Pvt Ltd vs. Pioneer Urban Land and Infrastructure Ltd Complaint no, Consumer case no. 349/2017 decided on 14.07.2020 before National Consumer Disputes Redressal Commission.

The Complainant company booked a residential apartment for its Directors in the Builders project on 29.11.2011. An agreement for sale dated 13.03.2012 was executed between the parties. Under the agreement, the Builder had to apply for Occupancy certificate by 04.09.2015 and obtain the OC by 04.03.2016. The builder could not obtain OC within agreed time. The Complainant filed a complaint seeking possession of the flat along with the compensation for delay in construction. Alternatively, the complainant company prayed for refund of the amount paid to the Builder. During the pendency of the complaint, the Builder obtained OC and offered possession to the complainant company vide letter dated 03.04.2019. 

Issue before NCDRC: 

(i) Whether the flat booked by the Complainant company for its Directors was booked for speculative purposes? 

(ii) Whether the Complainant company is entitled to any compensation in the form of interest for delay in possession of flat?

It placed reliance on the resolution passed by its board of directors on 14.11.2011, resolving to book flat for the residence of one of the directors of the company. Accordingly, the complainant argued that the purchase of flat was not for speculative purposes. 

Builder’s contentions: 

1. Since the complainant is a private limited company resolution may have been manufactured at a later date. 2. As per the information provided by the Registrar of companies, the business activities of the complainant company were confined to Amritsar and all the Directors were residents of Amritsar. A director was also a partner of LLP engaged in the business of Real estate. 

3. The compensation for the delay in delivery of the possession where the complainant is a company should not be at par with the compensation granted to an individual. 

4. Submitting the lease deeds, the builder showed the prevailing rentals in the project. They stated that there would be no justification for compensation higher than the prevailing rentals in the project.

5. Builder also claimed for holding charges from the complainant company.

Verdict of NCDRC: 

NCDRC directed the Builder to hand over the possession of flat to the complainant company within 8 weeks from the date of order. The court also awarded compensation to the complainant company. It rejected the Builder’s contention that the flat in question was for speculative purposes. It observed that the Director became a partner in the LLP in the year 2017 and the flat in question was booked earlier in the year 2011. Secondly, she was residing at Gurgaon and was planning to shift to Gurgaon even if she was residing at Amritsar. Therefore, it is difficult to infer that the flat was booked for speculative purposes 

The Commission relied on the decision of Vishal Malik & Anr. Vs. Pioneer Urban Land Infrastructure Ltd 1 , to direct possession of flat along with the compensation. The commission agreed with the Builder that the compensation to the complainant company cannot be at par with that to an individual. 

The company is not entitled to compensation for the mental agony and harassment to which an individual is entitled. On quantum of compensation, NCDRC stated that the prevailing rents in respect of similarly situated flats of identical specifications and size cannot be made the sole basis for grant of such compensation. Else the builder would have no incentive to complete the construction within the agreed time frame. He would know that even if he diverts the funds collected from the flat buyer to another project, he would easily compensate the buyer which would not cost him more than 3-4% of the capital employed. 

NCDRC placed reliance on the decision of Capital Greens Flat Buyer Association & Ors. Vs. DLF Universal Limited & Anr 2 to observe that the builder is not entitled to holding charges. Since the builder having received the consideration has nothing to lose by holding possession of flat except to maintain the apartment.

in the absence of any pleadings or material placed on record for award of compensation on account of mental agony, compensation ought not to have been awarded.

 In the Matter of Estate Officer vs. Real Estate Regulatory Authority, Punjab and Anr. Complaint no. Appeal No. 65 of 2019 decided on 01.07.2019 before Punjab Real Estate Appellate Tribunal

In this case, the RERA Appellate Tribunal was called upon to examine the correctness of an order of the Adjudicating Officer, vide which compensation had been awarded under Section 72 of the Act on account of two heads, viz., mental agony and litigation expenses. While passing the Order for compensation, the Adjudicating Officer had opined that since the Act did not define the term compensation, and had thought fit to draw upon the scheme of Workmen’s Compensation Act, 1923, the Motor Vehicles Act 1988 and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 for settling the claims for compensation. 

The Appellate Tribunal held:

(i) The objects and reasons in the matter of award of compensation under those enactments acts have no connection even remotely with the award of compensation under the RERA and to draw a corollary from the said enactments for considering the award of compensation was wrong and illegal;

(ii) Section 72 of the Act operates a self contained code for consideration of the factors to be taken into account while deciding the quantum of compensation. In support of this proposition, the Tribunal also relied on the previous decision in the same matter, wherein it had been concluded by reference to Section 72(d) that the factors enumerated in the said provision were not exhaustive;

(iii) that in the absence of any pleadings or material placed on record for award of compensation on account of mental agony, compensation sought not to have been awarded. It was found that in order to support the plea of compensation, only a bald statement had been made and no material was placed on record to support the case of loss suffered on account of interest paid for bank loan availed. The Tribunal also relied on Bhavnagar University vs. Palitana Sugar Mills Pvt. Ltd. 2003 (2) SCC 111, for the proposition that when a statutory authority is required to do a thing in a particular manner, the same must be done in that manner or not at all. 

The award of compensation on account of litigation expenses was upheld, while that on account of mental agony was set aside.

Karnataka Rera - No Compensation is payable for mental agony in case of breach of a contract.

 In the Matter of Suman Rupanagudi vs. Adarsh Developers Complaint no. CMP/190912/0004118 decided on 31.01.2020  before Karnataka Real Estate Regulatory Authority

Karnataka RERA tried to clear this ambiguity by placing reliance on the judgment of the Hon’ble Supreme Court of India in Ghaziabad Development Authority vs. Union of India. (2000)6 SCC113 The Hon’ble Supreme Court, while considering a case of breach of contract under Section 73 of the Indian Contract Act, 1872, held that no damages are payable for mental agony in case of breach of a contract.

In Lucknow Development Authority vs. M.K. Gupta,AIR1994 SC 787 the Hon’ble Supreme Court of India held that the liability for mental agony had been fixed not within the realms of contract but under the principles of administrative law.

In view of the same, Karnataka RERA refused to grant relief towards mental agony