SUPREME COURT REITERATES THAT AN APPEAL DISMISSAL WITHOUT EXPLANATION CAN NOT BE CONSIDERED AS A PRECEDENT

A Three Judge Bench of the Supreme Court comprising of Justice Sanjiv Khanna, Bela M. Trivedi, and Ujjal Bhuyan passed a Judgment dated 18-08-2023 in the matter of Civil Appeal No. 1434/2023, Experion Developers Private Limited Vs. Himanshu Dewan, Sonali Dewan, and Others reiterated that the merger principle[1] cannot be applicable universally but varies based on superior court jurisdiction and subject matter.

FACTS:

1) That present Appeal has been filed before the Supreme Court by one, Experion Developers Private Limited (Appellant) against Himanshu Dewan, Sonali Dewan, and Others (Respondents), challenging the decision of the Hon’ble National Consumer Disputes Redressal Commission (NCDRC) that the direction to the Appellant for the refund to the Respondents of the amount collected towards excess sale area, and to execute supplementary correction deeds within six weeks from the date of the Order in Consumer Case No 34 of 2022, vide Order dated 16.01.2023.

2) That the Appellant, who is a developer, agreed to develop and construct apartments in a housing project called “Windchants” located in Gurgaon, Haryana. The Respondents in this case are the individuals who were assigned or later purchased these apartments. Their contractual agreements were based on the “Apartment Buyer Agreement. Whereas in Clause 8 of the agreement pertains to the “Changes and Variations in The Sale Area”. The relevant part of Clause 8.6(ii) and Clause 8.7 read: –[2]

The expression “Sale Area” as defined in Clause 1(xlviii), reads: –[3]

3) Accordingly, the Appellant informed the Respondents and other Allottees of the increase in their Apartment’s Sale Area through a message on 27.04.2017 and requested an additional payment due to the increased area. Thereafter, the Respondents and their predecessors made payments without any objections from December 2017 to August 2018. In response, the Appellant issued conveyance deeds between April 2018 and September 2019.

4) Thereafter, the Respondents filed a consumer Complaint before the National Commission (Consumer Case No. 34/2022) on 25.02.2022. They sought a refund for the extra sale area they had paid for, claiming that there was no real increase in the carpet or built-up area. To support their argument, they cited a previous ruling by the National Commission in the case of Pawan Gupta v. Experion Developers Private Limited dated 26.08.2020.

5) Subsequently, the Appellant strongly defended himself by questioning the validity of the consumer complaint and argued that the Complaint exceeded the two-year limitation period stated in Section 69 of the Act. They claimed that the ‘cause of action’ occurred on 27.04.2017, which was the same day the request for an expanded area was made. Thus, to support their assertion that there had been an increase in the sale area, they provided architects’ certificates, reports, and affidavits.

6) Then, the Respondents claimed that the COVID-19 Pandemic caused the suspension of the limitation period from 15.03.2020, to 28.02.2022, as directed by the Supreme Court. They expressed concerns about the justification provided by the Appellant in regards to the increased sales area and questioned the credibility of the ‘architects’ reports.

7) Hence, the National Commission favored the Respondents. They instructed the Appellant to reimburse the payments made by the Respondents for the expanded sales area and also required the signing of supplementary/correction deeds. The National Commission’s reasoning behind this verdict was that the increase was deemed unwarranted.

NCDRC

a) That the NCDRC disagreed with the opinion on the ‘continuing cause of action’ until 26.08.2020, emphasizing that the determination of the limitation issue should be based on Section 69 of the Consumer Protection Act, 1986. Section 69 specifies a two-year limitation period for filing a complaint starting from the date on which the ’cause of action’ occurs. According to the NCDRC, the ’cause of action’ includes every essential fact required to support a claimant’s right to seek judgment. They also clarified that the ’cause of action’ is considered complete when it gives the aggrieved party the right to approach the court/forum.

b) Further, the NCDRC also took into account the exclusion of a specific time period due to the COVID-19 pandemic, spanning from 15.03.2020 to 28.02.2022, based on directives issued by this Court. This exclusion was considered when calculating the limitation period, ensuring that the impact of the pandemic was duly recognized.

c) Thereafter, the NCDRC considered that customers who made payments without protest and accepted conveyance deeds may not be able to claim a refund or assert service deficiencies later on. This emphasizes the significance of examining the behavior and actions of all involved parties.

d) Hence, the National Commission favored the Respondents. They instructed the Appellant to reimburse the payments made by the Respondents for the expanded sales area and also required the signing of supplementary/correction deeds. The Commission’s reasoning behind this verdict was that the increase was deemed unwarranted.

SUPREME COURT:

Aggrieved by the Order dated 16.01.2023 of the NCDRC in Consumer Complaint No. 34/2022, the Appellant filed Civil Appeal No. 1434 / 2023 before the Hon’ble Supreme Court. The Apex Court, vide Order dated 18.08.2023, made the following observations:

I) That, the Hon’ble Supreme Court discussed the concept of a ‘cause of action.’ The Court stressed that a cause of action includes all the necessary facts and circumstances to establish a claim or the right to seek judgment in a legal dispute. Furthermore, the cause of action becomes complete when it grants the aggrieved party the right to approach a court or forum for relief.

II) That, the Apex Court examined the issue of the limitation period for filing a Complaint. It noted that Section 69 of the Consumer Protection Act, 1986, specifies a two-year limitation period for filing a Complaint, starting from the date the cause of action arises.

III) Thus, the Court acknowledged the impact of the COVID-19 pandemic, the Court recognized the need to exclude a specific period (from 15.03.2020 to 28.02.2022) from the calculation of the limitation period, as directed by the court.

IV) Thereafter, the Apex Court considered arguments related to ‘estoppel and acquiescence’ and suggested that if consumers had made payments without protest and had accepted conveyance deeds, they might be estopped from later claiming a refund or alleging a deficiency of service. The Apex Court while considering these argument cited previous legal cases to emphasize that executing a conveyance deed does not necessarily prevent consumers from pursuing claims for compensation in cases of delayed possession.

V) Further, The Bench discussed the doctrine of merger, highlighting distinctions between cases where the Supreme Court exercises appellate power (leading to merger) and where it refuses special leave to appeal (no merger). It also discussed that a speaking order with reasons has implications beyond mere dismissal.

VI) Further the Bench held that in the case of the Pawan Gupta v. Experion Developers Private Limited (NCDRC), Consumer Case No. 285 of 2018, Judgment dated 26.08.2020 the Court held that its earlier order dismissing the appeal in that case would operate as res judicata in that specific case but would not establish a binding precedent for other cases. The Court emphasized that the dismissal of the appeal in Pawan Gupta’s case was based on the evidence presented by the builder, which was found insufficient to justify the demand for additional payment due to an increase in the sale area. In contrast, the Appellant in the present case provided documents and evidence to support their claim of an actual increase in the sale area, and the Respondents did not effectively counter this evidence. Therefore, the Court concluded that the Order in Pawan Gupta’s case should not be considered a binding precedent and that the National Commission should examine the merits of the Appellant’s contentions regarding the increase in the sale area.

VII) Hence the Bench emphasized that the dismissal of the Appeal in Pawan Gupta’s case without recorded reasons would not attract Article 141 of the Indian Constitution, as no binding legal precedent was established.

CONCLUSION:

Based on the aforementioned observation, the Supreme Court allowed the Appeal and discussed important legal concepts like ’cause of action,’ limitation periods, estoppel, and the doctrine of merger. Hence, the Court clarified the difference between Res Judicata and the Law of Precedents, stressing the importance of following judgments. Therefore the Bench decided to send the matter back to the National Consumer Disputes Redressal Commission (NCDRC) for further examination based on these principles.

 

Sakshi Raghuvanshi

Legal Associate

The Indian Lawyer

 

[1] The principle underlying the doctrine of merger is that once an appellate court has passed a decision then the judgment of the trial court will merge in the judgment of the appellate court and it will cease to have jurisdiction to amend its own judgment, decree or proceedings.

[2] “8.6 While every attempt shall be made to adhere to the Sale Area, in case any changes result in any revision in the Sale Area, the Company shall advise the Buyer in writing along with the commensurate increase/decrease in Total Sale Consideration based, however, upon the BSP as agreed herein. Subject otherwise to the terms and conditions of this Agreement, a maximum of 10% variation in the Sale Area and the commensurate variation in the Total Sale Consideration is agreed to be acceptable to the Buyer and the Buyer undertakes to be bound by such increase/decrease in the Sale Area and the commensurate increase/decrease in the Total Sale Consideration. For any increase/decrease in the Sale Area, the payment for the same shall be required to be adjusted at the time of Notice of Possession or immediately in case of any transfer of the apartment before the Notice of Possession or as otherwise advised by the Company.

8.7 If any of the Changes leads to any change in sale area of the apartment in excess of Ten Percent (10%) of the Sale Area mentioned herein at any time prior to the execution of the Conveyance Deed for the Apartment and such variation is unacceptable to Buyer, all attempts shall be made by the Company to offer an alternate apartment of a sale area similar to the Sale Area of the Apartment within a maximum of 10% variation in the Sale area within the Group Housing Colony subject to availability. If such alternate apartment is available, the applicable Total Sale Consideration for such alternate apartment shall be payable/refundable, as the case may be, for the sale area of the alternate apartment at the BSP mentioned herein and there shall be no claim against the Company in respect of the Apartment nor shall otherwise be raised by the Buyer in this regard at any time.”

[3] “1. (xlviii) – ‘Sale Area’ shall include the covered area, inclusive of areas enclosed by the periphery walls, balconies/ decks, area under the columns and wails half of the area of walls common with other premises, cupboads, projections/ledges, area utilized for the common services and facilities provided viz. areas in/under staircases, circulation areas, walls atriums, stilts, lift shafts and lobbies, lift machine rooms, service shafts, passages/ corridors, refuge areas, common washrooms/toilets, mails rooms, all electrical plumbing and fire shafts, community facilities, common service rooms, security rooms, sewage treatment plants, underground and overhead water storage tanks, DG/panel room, terrace gardens, air handling units, pantries and any other areas which have been paid for or are constructed by the Company for common use, but shall exclude the areas under the following:-

a) Sites for retail shops and other commercial areas in the Project.

b) Amenities such as schools, medical centre/dispensary, creche, other health centers and the like.

c) Dwelling units for the economically weaker sections as prescribed under Applicable Laws.

d) Car Parking Spaces”