FLEXIBLE NORM FOR DAMAGES

Source: The Hitavada      Date: 19 Mar 2018 11:07:39


In the judgement of the case - M/s Fortune Infrastructure (now M/s Hicons Infrastructure) and Another v. Trevor D’Lima & Others, delivered on March 12, 2018, Justice N. V. Ramana and Justice S. Abdul Nazeer, at the Supreme Court, have, while deciding two appeals against the impugned orders passed by the National Consumer Disputes Redressal Commission (NCDRC) on September 8, 2016 and November 3, 2016, pointed out the settled law by now, that where a party sustains loss by reason of a breach of contract, the damages are to be granted so as to place the suffering party in the same position as if the contract had been performed.

In the light of this, the damages other than consequential loss have to be measured at the time of the breach. However, the aforesaid rule is flexible, which needs to be assessed in facts and circumstances of individual case. In this case, the respondents tried to execute the agreement and sought for conveyance of the property through the NCDRC. In these circumstances, the Court noted that, even in the first appeal, offers were being made on behalf of appellants to convey alternative properties, which were refused as being insufficient. Therefore, in facts and circumstances of this case, the damage need not be determined from the date of breach of contract.

In these two appeals, impugned orders passed by the NCDRC on September 8 and November 3, 2016 in a Consumer Complaint 636/2015 and Review Application 273/2016 in the same Consumer Complaint were challenged. In this case, the appellants launched a residential housing project in the year 2011, by name ‘Hicons Onyx’ , renamed as Fortune Residency, which was re-development of Mohammadi House. The respondents booked a flat bearing No. 202, 2nd Floor in ‘A’ wing, admeasuring 828.40 sq ft with one unit of parking space. The total consideration for the flat was Rs. 1,93,00,000/-. It was alleged by the appellants, that due to increase in the cost beyond what was expected, they transferred the project to another company being M/s Zoy Shelcon Pvt. Ltd. It is to be noted that the respondents have paid a sale consideration of Rs. 1,87,00,000/-.

In the year 2015, aggrieved by the fact that appellants were not willing to deliver the flat to them, the respondents approached NCDRC through a consumer complaint number No. 636/2015 with prayers :

a. To hold and declare the opposite parties to be guilty of deficiency in service and unfair trade practices as per the provisions of the Consumer Protection Act, 1986.

b. To direct the opposite parties to comply with their statutory obligations and to execute and register the Agreement for Sale with the complainants in respect of the flat No. 202 booked by them in the building Fortune Residency in Bandra (West), Mumbai.

c. To direct the opposite parties to complete the construction of the building and to hand over to the complainants vacant and peaceful possession of the said flat on receiving the balance amount of consideration of Rs. 6,00,000/- from the complainants or ALTERNATIVELY to hand over to the complainants any other flat of the same size, quality and specifications with one car parking in the same building or in the same locality of this building.

d. To direct the respondents, jointly and severally pay to the complainants Rs. 5,00,000/- towards compensation for the inconvenience and mental agony suffered by the complainants due to the enormous delay in construction of the building, negligence and deficiency in service of the respondents.

e. To direct the respondents jointly and severally to pay to the complainants the sum of Rs. 1,00,000/- being the legal and other incidental expenses incurred by the complainants.

The NCDRC has allowed the complaint and directed the appellants:

1. To refund the amount of Rs. 1,87,00,000/- which they had received from the complainants, within six weeks from the day of the impugned judgement;

2. The appellants were further directed to pay a sum of Rs. 3,65,46,000/- as compensation and Rs. 10,000/- as cost of litigation to the complainants within the same period;

3. The amount was ordered to be paid with 10 per cent per annum from the date of the order till the actual date of payment.

Even the review against that order was dismissed by the NCDRC on November 3, 2016. Thereafter the appellants moved the Supreme Court against the order passed by the NCDRC. Even though the appellants raised a factual issue concerning the non-payment of part-consideration, according to the Court, it was not necessary to go into this aspect, as the NCDRC has given a categorical finding that Rs. 1,87,00,000/- have been paid by the respondent-complainants. The Court has been of the opinion that excessive reliance on executed sale deeds in the nearby vicinity, may not be appropriate, as the present property is a redevelopment of an earlier property. The Court’s attention was drawn to the fact that usually the real estate rates for re-developed properties are on the lower side instead of green-field projects.

In the opinion of the Court, the claim of the respondent-complainants as granted by the NCDRC seems to surpass the actual loss-based damages and enter the domain of gain-based remedy. Although the Court does not recognise any a priori limitations on such claim, but at the same time it does not think that it would be appropriate to grant such damages in this case. There is no dispute about the fact that damages for the contractual breach is generally compensatory arising out of the breach. Therefore, the damages awarded should not be excessive and a court/tribunal needs to take a balanced approach so as to ensure right compensation.

Taking into consideration factual aspects involved in the case and on considering the rival lawyers’ submissions the Court deemed it appropriate, just, and reasonable that the market rate be fixed at Rs. 50,000/- per sq ft as the reference rate for determination of market price prevailing in the vicinity of the disputed property. Hence, the estimated market price would be Rs. 4,14,20,000/- instead of Rs. 5,38,46,000/- as granted by the NCDRC. However, the Court did not see any reason to interfere in respect of the compensation granted for the parking space.

Therefore, the Court directed the appellants:

a. To refund the amount of Rs. 1,87,00,000/- which they had received from the complainants.

b. To pay a sum of Rs. 2,27,20,000/- as compensation to the complainants.

c. To pay a sum of Rs. 20,00,000/- as compensation for one unit of parking lot.

d. The appellants shall also pay Rs. 10,000/- as the cost of litigation to the complainants.

e. The aforesaid amount is required to be paid within six weeks from the day of this order. If the payment is not made in terms of this order within the stipulated time, it shall carry interest at 9 per cent per annum from the date of this order.

On February 23, 2017, while issuing notice, the Apex-Court had directed the appellants to deposit Rs. 2,50,00,000/- before NCDRC as a condition precedent for hearing this case. Later, the Court was informed that as on May 31, 2017, the appellants had deposited that amount before NCDRC. In light of that intimation, the Supreme Court allowed the appeals in part to the extent indicated in the judgement.