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2020 (8) TMI 852

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..... r obtaining the conveyance or to indefinitely delay the execution of the Deed of Conveyance pending protracted consumer litigation. The developer in the present case has undertaken to provide a service in the nature of developing residential flats with certain amenities and remains amenable to the jurisdiction of the Consumer Fora. Consequently, we are unable to subscribe to the view of the NCDRC that flat purchasers who obtained possession or executed Deeds of Conveyance have lost their right to make a claim for compensation for the delayed handing over of the flats. Club House - HELD THAT:- Since permission of BDA has still not been received legal action is contemplated again. The developer has produced photographs depicting the amenities which have been provided within the precincts of the club house. Membership fees for the club are stated to have been received in the account of the RWA and not in the account of the developer. The position which has been stated before the court has not been disputed by counsel for the Appellants. Hence, it is found that there has been no breach by the developer of the obligation to provide a constructed facility of a club for the RWA. .....

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..... were separately included in the break-up. The parking charges were revealed to the flat buyers in the brochure. The charges recovered are in terms of the agreement - The demand of parking charges is in terms of the ABA and hence it is not possible to accede to the submission that there was a deficiency of service under this head. The dismissal of the complaint by the NCDRC was erroneous. The flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities - Appeal allowed. - Civil Appeal Nos. 6239 And 6303 of 2019 - - - Dated:- 24-8-2020 - DR. D.Y. CHANDRACHUD AND K.M. JOSEPH, JJ. JUDGMENT Dr. D.Y. Chandrachud, J. 1. The National Consumer Disputes Redressal Commission1 dismissed a consumer complaint filed by 339 flat buyers, accepting the defence of DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. that there was no deficiency of service on their part in complying with their contractual obligations and, that despite a delay in handing over the possession of the residential flats, the purchasers .....

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..... Banquet Hall Tennis Courts Cards Room Squash Courts Spa, Massage Beauty Parlour Ease, Enjoyment, Convenience. Right Next Door Convenient shopping facilities at New Town, DLF BTM EXTN Shop with ease at our convenience shopping centre, well equipped to handle your everyday needs. The shopping centre will offer an array of outlets to make your life a trouble free affair. Experience convenience at your doorstep Hope, Dreams, Future. Right Next Door Renowned Early Learning School at New Town DLF BTM EXTN. Our play school airs to care for your child in a stimulating safe, fun-filled environment. It symbolizes our conviction that nurtured roots lay the foundation of a fully grown blossomed tree. Health, Wellbeing. Assurance, Right Next Door State-of-the-art healthcare facilities at New Town DLF BTM EXTN. In these years of fast paced lives, your family's wellbeing is foremost in our minds. Our healthcare centre will better the latest in screening, diagnosis, and medical care with competent medical professionals by your side, we will make sure that you would always remain in the best of health. Comfort, Confidence, Peace of .....

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..... h had hampered the pace of construction. The date for handing over possession was extended to June 2014. A tentative Schedule for delivery was indicated under which Towers D1 and D2 would be handed over by January 2014, and Towers A3 to A6, A7, B3 and B4 would be handed over by May 2014. On 8 August 2014, the timelines for handing over possession were again extended by the developers: under the revised Schedule the flats in Towers D1 and D2 were to be handed over in August 2014, those in A1 to A-7 in February 2015, B1 to B6 in April 2015 and C1 to C4 in June 2015. On 4 May 2015, the developers issued another communication indicating the progress of the work and informed the purchasers that site visits had been initiated for the project till we receive the occupancy certificate for clusters A, B and C . This is an admission of the fact that until then the occupation certificate had not been received. The obligation to handover possession within a period of thirty-six months was not fulfilled. 6. The first batch of nine flat purchasers moved a consumer complaint before the NCDRC complaining of a breach by the developer of the obligation, contractually assumed, under the terms of .....

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..... et it aside and direct the National Consumer Disputes Redressal Commission to treat the complaint, as amended, that has been filed, as a complaint filed on behalf of all 339 persons and to proceed on merits. It will be open for the Respondents to give their say on the merits of each of the 339 complainants. The Commission will decide the matter within a period of six months from today. The Civil Appeals are disposed of accordingly. 10. Procedural directions issued upon several impleadment applications resulted in a further order of this Court of 8 May 2019 reiterating that the complaint would be treated as having been filed on behalf of 339 persons. By its order dated 28 September 2018, which was reiterated again on 8 May 2019, this Court had laid down a peremptory time Schedule of six months for the disposal of the complaint. Eventually, on 2 July 2019, the complaint was dismissed by the NCDRC. 11. Civil Appeal No. 6239 of 2019 comprises of 83 Appellants. Civil Appeal No. 6303 of 2019 comprises of 88 Appellants. Thus, there are before this Court a total of 171 flat purchasers in the appeals. The complaint before the NCDRC, which was confined by the order of this .....

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..... have voluntarily discharged the developer. The NCDRC observed that flat buyers in Group C had taken possession without protest, without its permission and without lodging any complaint with it after taking the possession. Those in Group D who had settled their dispute during the pendency of the complaint were held to be estopped from pursuing their grievances. The NCDRC did not accept the contention of the flat buyers in Group D that that they had settled the matter under coercion and undue influence since, according to the NCDRC, no specific facts and circumstances were pleaded by such flat buyers which made them surrender their free will. The buyers in Group E who have sold their flats during the pendency of the complaint were held to have no subsisting right. The NCDRC noted that as regards Group F (complainants who had neither taken possession nor executed a conveyance), as many as 337 out of 339 flat purchasers had in fact taken possession. The NCDRC had to deal with the claims of two remaining complainants, who had accepted the delayed compensation but did not accept possession. Their complaints were dismissed. 14. The primary grounds on which compensation have been sough .....

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..... rmulated the nature of the grievances of the flat buyers in the written submissions tendered during the hearing. Mr. Prashant Bhushan, learned Counsel appearing for the Appellants has formulated his submissions under the following heads: (i) There is a gross delay ranging between two and four years in handing over possession and the flat buyers ought not to be constrained by the terms of the agreement which are one-sided and unreasonable; (ii) The execution of conveyances or settlement deeds would not operate to preclude the flat buyers from claiming compensation. The emails of the developer clearly indicate that the flat buyers were not permitted to execute conveyances or to receive possession under protest; (iii) The amenities which have been contracted for have not been provided by the developers; and (iv) The flat buyers are not liable to indemnify the developer for the demand of interest and penalty raised by the tax authorities as a result of the failure to deposit the tax on time. During the oral arguments, it was clarified that only interest has been recovered from the flat buyers. The above submissions of Mr. Prashant Bhushan have been reiterated in the .....

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..... d of coercion prior to a reply which was filed in December 2018 shortly before the final hearing; (vii) As regards the construction of facilities and amenities, a club house containing a swimming pool, gymnasium, tennis court, indoor badminton court and squash courts has been constructed and an occupation certificate has been received on 13 May 2019. The RWA is conscious of the fact that difficulties in the allotment arose as a result of the action of the Bangalore Development Authority5 which led to the filing of writ proceedings before the High Court of Karnataka both by the developer and the RWA. Even after the receipt of the occupation certificate, the developers have been corresponding with BDA for permission to hand over possession to the RWA. Other amenities including a school and health care facilities were going to be developed in the entire township comprising of 80 acres of which the complex of 27 acres was a part. The flat buyers were aware of the fact that under the terms of the ABA, the allottees have no right, title or interest in the amenities outside their residential complex and forming a part of the wider complex of 80 acres. Moreover, this issue is rendered .....

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..... d period as permitted under this Agreement, due to reasons other than those mentioned in this Agreement, then the Company agrees to pay only to the Allottee and not to anyone else, subject to the Allottee, not being in default under any terms of this Agreement compensation @ ₹ 5/- per sq. feet of the Super Area of the said apartment per month for the period of such Delay. The adjustment of such compensation shall be done only at the time of execution of the Conveyance Deed of the Said Apartment to the Allottee first named under this Agreement and not, earlier. 19. Clause 11(a) of the ABA indicates that subject to all just exceptions the developer endeavoured to complete construction within a period of thirty-six months from the date of the execution of the agreement unless hindered by force majeure conditions. Undoubtedly, the expression 'endeavour' indicates that the developer did not bind itself to an inflexible timeline of thirty-six months. But then again, the timeline of thirty-six moths was subject to just exceptions and could be excused in the event of force majeure conditions coming into operation. By the provisions of Clause 14, the developer agreed to .....

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..... tractual obligation; (iii) the failure of the developer was neither relatable to a just exception or the prevalence of force majeure conditions referable to Clause 11; and (iv) the payment of compensation to the flat buyers or at least 145 of the group of 171 represents an admission by the developer of its breach, thereby triggering a liability to pay compensation. 22. The only issue which then falls for determination is whether the flat buyers in these circumstances are constrained by the stipulation contained in Clause 14 of ABA providing compensation for delay at the rate of ₹ 5 per square feet per month. In assessing the legal position, it is necessary to record that the ABA is clearly one-sided. Where a flat purchaser pays the instalments that are due in terms of the agreement with a delay, Clause 39(a) stipulates that the developer would at its sole option and discretion waive a breach by the allottee of failing to make payments in accordance with the schedule, subject to the condition that the allottee would be charged interest at the rate of 15 per cent per month for the first ninety days and thereafter at an additional penal interest of 3 per cent per .....

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..... ble compensation cannot be foreclosed by a term of the agreement. The expression deficiency of services is defined in Section 2 (1) (g) of the CP Act 1986 as: (g) deficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service 24. A failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. There is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. The expression 'service' in Section 2(1) (o) means a service of any description which is made available to potential users including the provision of facilities in connection with (among other things) housing construction. Under Section 14(1)(e), the jurisdiction of the consumer forum extends to directing the opposite party inter alia to .....

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..... may constitute actual loss or expected loss and may extend to compensation for physical, mental or even emotional suffering, insult or injury or loss. The provisions of the Consumer Protection Act enable a consumer to claim and empower the Commission to redress any injustice done. 26. The court observed that the award of compensation has to be based on a finding of loss or injury and must correlate to it. The court observed that no hard and fast rule could be prescribed: 8...No hard-and-fast Rule can be laid down, however, a few examples would be where an allotment is made, price is received/paid but possession is not given within the period set out in the brochure. The Commission/Forum would then need to determine the loss. Loss could be determined on basis of loss of rent which could have been earned if possession was given and the premises let out or if the consumer has had to stay in rented premises then on basis of rent actually paid by him. Along with recompensing the loss the Commission/Forum may also compensate for harassment/injury, both mental and physical. Where possession has been given, one of the circumstances which must be factored in is that the purchase .....

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..... oper was subject to a grace period of twelve months followed by a termination notice of ninety days and a further period of ninety days to the developer to effect a refund. Adverting to these clauses, the court noted: 6.4. A perusal of the apartment buyer's agreement dated 8-5-2012 reveals stark incongruities between the remedies available to both the parties. For instance, Clause 6.4(ii) of the agreement entitles the Appellant builder to charge interest @18% p.a. on account of any delay in payment of instalments from the Respondent flat purchaser. Clause 6.4(iii) of the agreement entitles the Appellant builder to cancel the allotment and terminate the agreement, if any instalment remains in arrears for more than 30 days. On the other hand, as per Clause 11.5 of the agreement, if the Appellant builder fails to deliver possession of the apartment within the stipulated period, the Respondent flat purchaser has to wait for a period of 12 months after the end of the grace period, before serving a termination notice of 90 days on the Appellant builder, and even thereafter, the Appellant builder gets 90 days to refund only the actual instalment paid by the Respondent flat purchas .....

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..... and for execution of a sale deed. In addition, compensation was awarded by way of interest at the rate of 12 per cent per annum with effect from twelve months after the stipulated date under the agreement. In an appeal by the developer, the NCDRC directed that the rate of interest for a house building loan for the corresponding period in a scheduled nationalised bank would be appropriate and if a floating rate of interest was prescribed, the higher rate of interest should be taken for the computation. A sum of ₹ 1 lac per annum from the date for handing over possession to the actual date of possession was regarded as appropriate in the facts of the case. In that case under the terms of the buyer's agreements, possession was to be delivered within twenty-four months of the execution of the agreement i.e. 10 February 2013 - failing which the developer was liable to pay compensation at the rate of ₹ 10 per square foot per month for the delay. The developer contended that construction activities were delayed as a result of an injunction granted by this Court over a period of eight months and consequently sought an extension of the period for handing over possession by o .....

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..... s not a case to award special punitive damages as one of the causes for late delivery of possession was beyond the control of the Appellant. Therefore, in view of the settlement proposal submitted by the Appellant in earlier two set of appeals in respect of same project, and to settle any further controversy, the Appellant is directed as follows: i) To send a copy of the occupation certificate to the Complainants along with offer of possession. The Appellant shall also direct the Jones Lang LaSalle-the real estate maintenance agency, engaged by the Appellant to undertake such maintenance works as is necessary on account of damage due to non-occupation of the flats after construction etc. ii) It shall be open to the Complainants to seek the assistance of the maintenance agency to attend to the maintenance work which may arise on account of non-occupation or on account of natural vagaries. iii) Such maintenance work shall be completed by the Appellant within two months of the offer of possession but the payment of interest at the rate of 9 per cent per annum will be for a period of two months from the date of offer of possession in all situations. v) Since the Complai .....

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..... , warranting the invocation of the jurisdiction vested in the NCDRC to issue a direction for the removal of the deficiency in service; (iii) The triggering of an obligation to pay compensation on the existence of delay in handing over possession is admitted by the developer for, even according to it, it has adjusted compensation at the agreed rate of ₹ 5 per square foot per month to 145 out of the 171 Appellants; (iv) The agreement is manifestly one-sided: the rights provided to the developer for a default on the part of the home buyer are not placed on an equal platform with the contractual right provided to the home buyer in the case of a default by the developer; (v) There has been a gross delay on the part of the developer in completing construction ranging between two and four years. Despite successive extensions of time to deliver possession sought by the developer, possession was not delivered on time; (vi) The nature and quantum of the delay on the part of the developer are of such a nature that the measure of compensation which is provided in Clause 14 of the ABA would not provide sufficient recompense to the purchasers; and (vii) Judicial notice ough .....

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..... r reply/clarifications, that any kind of protest 'is not tenable if you wish to take possession and register the property as well. Kindly execute the affidavit as advised and proceed for further process on registering the property. By a communication dated 1 December 2016, the developer informed a flat purchaser that Your letter that you took possession and executed the documents under protest is untenable and unacceptable and the company will not be in a position to execute the conveyance deed under protest. Copies of these communications are marked as Annexures P-28, P-29, P-30 and P-31 to Civil Appeal 6239 of 2019. 34. The developer has not disputed these communications. Though these are four communications issued by the developer, the Appellants submitted that they are not isolated aberrations but fit into a pattern. The developer does not state that it was willing to offer the flat purchasers possession of their flats and the right to execute conveyance of the flats while reserving their claim for compensation for delay. On the contrary, the tenor of the communications indicates that while executing the Deeds of Conveyance, the flat buyers were informed that n .....

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..... . This Court held that: 8. Having regard to the nature of transaction between the Appellant Company and its customers involved much more than a simple transfer of a piece of immovable property it is clear the same constitutes service within the meaning of the Act. It was not the case that the Appellant Company was selling the given property with all its advantages and/or disadvantages on as is where is basis, as was the position in UT Chandigarh Admn. v. Amarjeet Singh. It is a case where a clear-cut assurance was made to the purchasers as to the nature and extent of development that would be carried out by the Appellant Company as a part of package under which a sale of fully developed plots with assured facilities was made in favour of the purchasers for valuable consideration. To the extent the transfer of site with developments in the manner and to the extent indicated earlier was a part of the transaction, the Appellant Company has indeed undertaken to provide a service. Any deficiency or defect in such service would make it accountable before the competent Consumer Forum at the instance of consumers like the Respondents. The developer in the present case has undert .....

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..... ce was not stipulated as the essence of the contract and the original allottees had accepted the delay. Even if the three Appellants who had transferred their interest in the apartments had continued to agitate on the issue of delay of possession, we are not inclined to accept the submission that the subsequent transferees can step into the shoes of the original buyer for the purpose of benefiting from this order. The subsequent transferees in spite of being aware of the delay in delivery of possession the flats, had purchased the interest in the apartments from the original buyers. Further, it cannot be said that the subsequent transferees suffered any agony and harassment comparable to that of the first buyers, as a result of the delay in the delivery of possession in order to be entitled to compensation. Amenities 39. The brochure that was issued by the developers spoke of a Distinctive DLF Living while advertising the project, which was described as DLF Westend Heights , New Town. This was described as the premier choice for Bangalore living...a premium residential enclave featuring spacious apartments with a rich selection of amenities. Westend Heights at New Town w .....

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..... , an occupation certificate was received on 13 May 2019. The developer has stated that it has been following up with BDA to permit them to hand over possession and management of the club to the RWA. Since permission of BDA has still not been received legal action is contemplated again. The developer has produced photographs depicting the amenities which have been provided within the precincts of the club house. Membership fees for the club are stated to have been received in the account of the RWA and not in the account of the developer. The position which has been stated before the court as elucidated above has not been disputed by counsel for the Appellants. Hence, we find that there has been no breach by the developer of the obligation to provide a constructed facility of a club for the RWA. Other amenities 41. As regards the other amenities, the defence of the developer is that these were to be developed as an integral element of the entire township of 80 acres of which the project admeasuring 27 acres (comprised in Westend Heights) was a part. The ABA stipulates that allottees of the complex have no right, title and interest in respect of the amenities or facilities outs .....

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..... ide the area of 27 acres begs the question as to whether there was a breach of a clear representation which was held out to the flat purchasers by the developer. A deficiency Under Section 2(1)(g) means a fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance. This may be required to be maintained under law or may be undertaken to be performed in pursuance of a contract or otherwise in relation to any service. The builder invited prospective flat purchasers to invest in the project of Westend Heights on the basis of a clear representation that the surrounding area of New Town situated on 80 acres was being developed to provide a wide range of amenities including a shopping centre, health care facilities and an early learning school. The developer has failed to provide these amenities. In the reply, the developer has stated that: It is stated that School, Commercial Complex and Health clinic are part of the facility which will be provided upon the completion of the Whole New Town project as these facilities, with existing population cannot sustain these facilities. Every matter has to be adjudicated in light of its own facts and circumsta .....

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..... held out by the developer cannot be dismissed as chaff. True, in a situation such as the present it may be difficult for the court to quantify the exact nature of the compensation that should be provided to the flat buyers. The general appreciation in land values results in an increase in the value of the investment made by the buyers. Difficulties in determining the measure of compensation cannot however dilute the liability to pay. A developer who has breached a clear representation which has been made to the buyers of the amenities which will be provided to them should be held accountable to the process of law. To allow the developer to escape their obligation would put a premium on false assurances and representations made to the flat purchasers. Hence, in factoring in the compensation which should be provided to the flat buyers who are concerned in the present batch of appeals, we would necessarily have to bear this issue in mind. Tax 44. The ABA contained specific provisions in regard to the payment of taxes. Clause 1.3 of the ABA provided: 1.3 The Allottee shall make the payment of the Total price as per the payment plan set out in annexure-III of this Agreemen .....

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..... llottee with Application The Allottee has paid a sum of ₹ 3,00,000/- (₹ 3 Lakhs only) alongwith the Application, the receipt of which the Company doth hereby acknowledge and the Allottee agrees to pay the remaining price of the Said Apartment as prescribed in Schedule of payments (Annexure-III) attached with this Agreement along with all other charges, Taxes, securities etc. as mentioned in this Agreement and as per the demand raised by the Company in accordance with the Agreement. The ABA contains the definition of taxes in the following terms: Taxes shall mean any and all taxes payable by the Company/LOC and/or its contractors, suppliers, consultants, etc. by way of value added tax (VAT), state sales tax, central sales tax, works contract tax, service tax, cess, levies and educational cess and any other taxes levies, charges by whatever name called levied and collected by Government Agency in connection with Development/construction of the Said Apartment/Said Building/Said Complex. The expression total price is also defined in the ABA so as to be exclusive inter alia of taxes. 45. The two certificates of the Chartered Accountant issued on 26 July 20 .....

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..... er towards BESCOM/BWSSB charges for electricity and water are admitted. Subsequently, invoking Clause 23(b) of the ABA, the developer collected two lacs from each buyer towards additional electricity charges. The Appellants contest the entitlement of the developer to claim these charges. Clause 23(b) of the ABA is in the following terms: 23. (b) Payments and other charges for bulk supply of electrical energy If Company or the Maintenance Agency decides to apply for and thereafter receives permission from BESCOM or from any other body/commission/regulator/licensing authority constituted by the Government of Karnataka for such purpose, to receive and distribute bulk supply of electrical energy in the Said Project/Said Complex then the Allottee undertakes to pay on demand to the Company proportionate share as may be determined by the Company of all payments and charges paid/payable by the Company or the Maintenance Agency to BESCOM...The proportionate share of cost incurred by the Company for creating infrastructure like HT feeder, EHT sub stations etc shall also be payable by the Allottee on demand. 49. According to the developer, initially an electricity connection was .....

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..... V substation will ensure better quality uninterrupted power supply as compared with the previously planned scheme of 11KV' feeders. 50. Mr. R. Balasubramanian, learned Senior Counsel contends that Clause 23(b) relates to receiving and distributing the bulk supply of electrical energy to the said project/said complex which is defined as project under the name and style of New Town DLF BTM Extension . According to the submission, the charges have been collected for the entire New Town project and not for Westend Heights alone. In this context it has also been submitted that distribution of electricity is governed by the KERC Regulations 2006. While planning the project, the developer calculated the cost of the 66/11 KV sub-station and collected charges from each of the 1830 buyers. Hence, it has been submitted that there was no requirement of additional bulk supply of electricity for the nineteen hundred buyers. In this context, the formulation in the written submissions is extracted below: (under) Regulation 3.02 (e) of KERC (Conditions of Supply of Electricity by the Distribution Licensee) Regulations 2004, it is mandatory to set up 66 KV supply line/KV substation if .....

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..... t in DLF Limited v. Manmohan Lowe (2014) 12 SCC 231. The demand of parking charges is in terms of the ABA and hence it is not possible to accede to the submission that there was a deficiency of service under this head. 55. For the above reasons we have come to the conclusion that the dismissal of the complaint by the NCDRC was erroneous. The flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities. The reasoning of the NCDRC on these facets suffers from a clear perversity and patent errors of law which have been noticed in the earlier part of this judgment. Allowing the appeals in part, we set aside the impugned judgment and order of the NCDRC dated 2 July 2019 dismissing the consumer complaint. While doing so, we issue the following directions: (i) Save and except for eleven Appellants who entered into specific settlements with the developer and three Appellants who have sold their right, title and interest under the ABA, the first and second Respondents shall, as a measure of compensation, pay an amount calculated at the rate .....

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