M/S. FORTUNE INFRASTRUCTURE (NOW KNOWN AS M/S. HICON INFRASTRUCTURE) & ANR. versus TREVOR D’LIMA & ORS.

Citation: [2018] 3 S.C.R. 273 · Decided: 12-03-2018 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Case Partly allowed

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Judgment (excerpt)

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M/S. FORTUNE INFRASTRUCTURE
(NOW KNOWN AS M/S. HICON INFRASTRUCTURE) & ANR.
v.
  TREVOR D’LIMA & ORS.
   (Civil Appeal Nos. 3533-3534 of 2017)
MARCH 12, 2018
[N. V. RAMANA AND S. ABDUL NAZEER, JJ.]
Consumer Protection Act, 1986 :
Complaint against developer of housing project – By the
purchaser of a flat in the project – Alleging deficiency in service
and unfair trade practices for not having delivered the flat –
National Consumer Disputes Redressal Commission allowed the
complaint and directed the developers to refund the amount paid
by the complainants and also to pay compensation and cost of
litigation – On appeal, held: Contractual damages are usually
awarded to compensate an injured party to a breach of contract
for the loss of his bargain – This rule is more qualified when it
comes to real estate sector – Onus is on the seller to show his bona
fides and best efforts in discharging the obligation – Mere
unwillingness to carry out the duty could constitute bad faith
sufficient for purchaser to claim damages – In the facts of the present
case there is deficiency of service on part of the developer, which
entitles the complainant to damages/compensation – Generally
damages become due on the date when the breach of contract takes
place and assessed by the reference to the time of breach –
However, the rule is flexible which needs to be assessed in the facts
and circumstances of individual case – In the facts of the present
case the damage need not be determined from the date of breach of
contract – The compensation granted by the National Commission
has surpassed the actual-loss based damages and has entered the
domain of gain-based remedy – Since the damages for the
contractual breach is compensatory, damages awarded should not
be excessive – Court needs to take a balanced approach so as to
ensure right compensation – Therefore compensation of
Rs. 3,65,46,000/- granted by National Commission is reduced to
Rs. 2,27,20,000/-  –  Compensation.
  [2018]  3 S.C.R. 273
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SUPREME COURT REPORTS
[2018] 3 S.C.R.
Damages for commercial contracts – Under the Act –
Determination of – Held: Under Consumer Protection Act damages
for commercial contracts, need to be determined as per Contract
Act – Contract Act, 1872 .
Partly allowing the appeals, the Court
HELD : 1. The contractual damages are usually awarded to
compensate an injured party to a breach of contract for the loss
of his bargain. This rule is more qualified when it comes to the
real estate sector. If the seller wants to limit their liability for
breach of contract under the aforesaid rule, they have to portray
that they have performed their obligation in a prudent manner.
The onus is on the seller to show his best efforts and bona fides
in discharging the obligation. Even in the absence of fraud, mere
unwillingness to carry out the duty could constitute bad faith
sufficient for the purchaser to claim damages. [Paras 11 and
12][280-F-H; 281-A]
2. Whenever the builder has refused to perform the
contract without valid justification, the buyer is entitled for
compensation as he has been deprived of price escalation of the
flat. Every breach of contract gives rise to an action for damages.
Such amount of damages must be proved with reasonable
certainty. [Para 19] [283-D]
3. Even under the Consumer Protection Act, 1986, the
damages for commercial contracts need to be determined as per
the Contract Act. [Para 16] [282-A]
4.  In the facts and circumstances of the present case, there
is deficiency of service on the part of the appellants, which
entitles the complainant to damages/compensation. The
appellants did not give any valid reasons as to why they
transferred the property to a third party, despite their
contractual  obligation to the respondents (complainants). The
obligation was on the appellants to show that he was unable to
transfer the property to the respondent. Moreover, a person
cannot be made to wait indefinitely for the possession of the flats
allotted to them and they are entitled to seek the refund of the
amount paid by them, along with compensation. Although there
was no delivery period stipulated in the agreement, a reasonable
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time has to be taken into consideration. [Paras 14 and 15] [281-
D-F]
5. The damages become due on the date when the breach
of contract takes place, and are normally assessed by  reference
to the time of breach. The aforesaid rule is based on the principle
that the injured p

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