SUPREME COURT HOLDS SUBSEQUENT PURCHASER HAS SAME RIGHTS AS ORIGINAL ALLOTTEE

 

The #SupremeCourt has in a recent case of M/s Laureate Buildwell Pvt. Ltd. vs. Charanjeet Singh passed an Order 22-07-2021, where the Apex Court decided upon the issue of #nature and #relief of an #originalallottee and a #subsequentpurchaser of a #flat that is yet to be completed by a #builder.

 

In this case, Ms. Madhabi Venkatraman (Original Allottee) applied for allotment of a residential flat No. 7013 admeasuring 4545 sq. ft., in Nectarine Tower “PARX LAUREATE” at Sector- 108, Expressway, Noida (Flat) on 29-08-2012. The Flat was under construction by the builder, M/s Laureate Buildwell Pvt. Ltd. (Builder). The Original Allottee paid the registration amount of Rs. 7,00,000/- and further deposit of Rs. 32,33,657/- out of the total sale consideration of Rs. 2,47,29,405/- for the said Flat. Thereafter, the Builder issued an Allotment Letter dated 16-10-2012, which stated that the possession of the new Flat would be handed over to the Original Allottee within 36 months of the issue of Allotment Letter, i.e. on or before 15-10-2015. Thereafter, the Original Allottee made payment of the first 7 instalments to the tune of Rs. 1,55,89,329/- to the Builder (Paid Amount). However, when the Original Allottee observed the slow pace of construction of the Flat in February 2015, she decided to sell the Flat to a third party.

 

One, Mr. Charanjeet Singh, approached the Original Allottee and expressed interest to purchase the Flat (Subsequent Purchaser). Both parties agreed that (a) the Subsequent Purchaser would pay an advance of Rs. 1,00,000/- to the Original Allottee and the balance money out of the Paid Amount would be payable to the Original Allottee on or before 15-10-2015; (b) the Subsequent Purchaser is liable to pay the outstanding instalments payable to the Builder after transfer of Flat to him; and (c) the possession of flat would be delivered by October 2015, etc.

 

Thereafter, the Original Allottee paid for further two instalments to the tune of Rs. 21,68,694/- to the Builder. However, the Subsequent Purchaser did not make any further payments to the Original Allottee, as the possession was not delivered by October 2015. Upon assurance that the possession would be delivered by June 2016, the Subsequent Purchaser entered into an Agreement to Sell dated 17-02-2016 with the Original Allottee and made payment of Rs. 1,85,00,000/- towards full and final settlement in respect of the Original Allottee.

 

Thereafter, the Original Allottee requested the Builder to transfer the Flat in favor of the Subsequent Purchaser on 02-04-2016 and thereby, submitted an Undertaking to this effect. Thus, the Builder issued an Endorsement Letter dated 09-04-2016 to the Subsequent Purchaser and confirmed receipt of payment of Rs. 1,93,70,883/-. However, the Subsequent Purchaser soon found out that the delivery of possession would not be completed until the end of 2017. Hence, the Subsequent Purchaser sought refund of Rs. 1,93,70,883/- with 24% interest and thereby, issued a Legal Notice dated 08-03-2017 to the Builder. Ignoring the same, the Builder demanded for payment of further instalments. When the Subsequent Purchaser refused to pay the instalments, the Builder threatened to cancel the deal and forfeit the amounts already paid.

 

Aggrieved, the Subsequent Purchaser approached the National Consumer Dispute Redressal Commission (NCDRC) seeking directions to the Builder to refund Rs. 1,93,70,883/- with 24% interest along with compensation and costs, etc. The Builder pleaded that as there was a complete slowdown in the construction of projects in NOIDA, which is beyond the control of the parties, the construction of the Flat got delayed. Further, that the rights of a subsequent purchaser are not the same as an original allottee on the ground that at the time of subsequent purchase or re-allotment, the Subsequent Purchaser was aware about the slow market conditions and by agreeing to execute the Agreement to Sell and later, the Endorsement Letter dated 09-04-2016, the Subsequent Purchaser had accepted the potential delay in construction.

 

The NCDRC vide Order dated 29-05-2019 held that a flat purchaser cannot be made to wait indefinitely for seeking possession. Even in the instant case, though the promised date of delivery was way back in the year 2015, even as on date, the tower is far from completion. Hence, the NCDRC directed the Builder to refund the amount so far deposited at 10 % interest till date of realisation. Aggrieved by the NCDRC Order dated 29-05-2019, the Appellant-Builder filed an Appeal before the Supreme Court.

 

The Apex Court made the following observations in this case:

 

1) That at times, original allottees seek funding from banks/financial institutions to finance their flat by mortgaging the property, etc. In some cases, they have to start repaying instalments towards loan and interest after a certain period of time, even before the flats are ready. So, if real estate projects are allowed to be prolonged for an indefinite period, it would have serious economic repercussions upon such original allottees. Hence, at times, the original allottees prefer to look for purchasers who are ready to step into their shoes. In such cases, the subsequent purchasers take over the obligations of the original allottee including payment of balance instalments. Thus, subsequent purchasers are also deemed to be consumers under Section 2 (7) of the Consumer Protection Act 2019.

 

2) That in this case, upon issue of the Endorsement Letter dated 09-04-2016 by the Appellant-Builder, the Subsequent Purchaser (Respondent) stepped into the shoes of the Original Allottee and became entitled to the same treatment, rights and relief that the Original Allottee would have been entitled to.

 

3) Thus, the Respondent is also eligible for timely delivery of possession of Flat by the Appellant-Builder, failing which, the Respondent is entitled to claim refund from the Builder.

 

4) That in the Agreement to Sell and the Endorsement Letter dated 09-04-2016 it was agreed that the Builder would give timely delivery of possession of Flat to the Respondent. However, the Builder has not been able to even obtain the occupancy certificate as on the date of filing of the Appeal.

 

Thus, the Supreme Court upheld the NCDRC Order dated 29-05-2019 and directed the Appellant-Builder to refund the principal amounts along with 9% interest to the Respondent in the interest of justice.

 

 

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer