23 Laureate Buildwell (P) Ltd. vs. Charanjeet Singh 2021 SCC OnLine SC 479 (SC) Date of order: 22nd July, 2021 Bench: U.U. Lalit J, Hemant Gupta J and S. Ravindra Bhat J
Consumer protection – Consumer – Real estate – Subsequent purchaser from original allottee – Same rights against builder [Consumer Protection Act, 1986, S. 2]
FACTS
One Ms Madhabi Venkatraman, the original allottee, applied for allotment of a residential flat. According to the allotment letter, the possession of the flat was to be handed over within 36 months. Upon noticing the slow construction, the original allottee decided to sell the flat. The purchaser (respondent) who was in search of a residential flat was approached by the original allottee through a broker. He was assured that the possession of the flat would be delivered on time and he agreed to purchase the flat. The purchaser alleged that possession was not delivered as promised in the allotment letter. The original allottee requested the builder (appellant) to transfer the flat in favour of the respondent.
The respondent was informed that possession of the said flat could not be delivered till the end of year 2017. After this, the purchaser sought for refund of the amount paid from the builder. On refusal of the payment of instalment, the officials of the builder threatened the purchaser with cancellation and forfeiture of the amounts paid. In these circumstances, the appellant approached the National Consumer Disputes Redressal Commission (NCDRC).
The NCDRC allowed a refund with 10% interest and imposed cost on the respondent. The respondent is in appeal against the said order.
HELD
The original allottee had approached the builder, informing him that the purchaser had stepped into her shoes and would continue with the obligations and was therefore entitled to possession. Subsequently, the builder endorsed and even required the purchaser to execute the letter of undertaking, which he did. Thereby, the builder acknowledged that the rights and entitlements of the original allottee were assumed by the purchaser and also confirmed his own obligations to the new purchaser (the consumer).
The definition of ‘consumer’ under the Act is very wide and it includes beneficiaries who can take benefit of the insurance availed by the insured. If one also considers the broad objective of the Consumer Protection Act, it is to provide for better protection of the interests of consumers. Therefore, a subsequent purchaser of a flat has the same rights as the original allottee.
24 Dena Bank vs. C. Shivakumar Reddy Civil Appeal No. 1650 of 2020 (SC) Date of order: 4th August, 2021 Bench: Indira Banerjee J and V. Ramasubramanian J
Additional documents – Insolvency application – Can be admitted later [Insolvency and Bankruptcy Code, 2016, S. 7]
FACTS
The bank sanctioned a term loan to the Corporate Debtor which was to be repaid in 24 quarterly instalments. Upon failure on the part of the Corporate Debtor to repay, the Bank initiated proceedings under Insolvency and Bankruptcy Code (IBC) before the National Company Law Tribunal (NCLT).
During the IBC proceedings, on two occasions the bank filed applications to place new documents on record. Both the applications were allowed. Pursuant thereto, the NCLT passed an order admitting the application of the bank.
The Corporate Debtor challenged the order before the NCLAT and succeeded. Aggrieved by the order of the NCLAT, the bank approached the Supreme Court.
HELD
The Supreme Court, inter alia, held that on a careful reading of the provisions of the IBC, and in particular the provisions of section 7(2) to (5) read with the 2016 Adjudicating Authority Rules, there is no bar to the filing of documents at any time until a final order either admitting or dismissing the application has been passed. The time stipulation of 14 days in section 7(4) to ascertain the existence of a default is apparently directory and not mandatory. The proviso inserted by an amendment with effect from 28th December, 2019 provides that if the Adjudicating Authority has not ascertained the default and passed an order under sub-section (5) of section 7 of the IBC within the aforesaid time, it shall record its reasons in writing for the same. No other penalty is stipulated.
Furthermore, the proviso to section 7(5)(b) of the IBC obliges the Adjudicating Authority to give notice to an applicant to rectify the defect in its application within seven days of receipt of such notice from the Adjudicating Authority, before rejecting its application under Clause (b) of sub-section (5) of section 7 of the IBC. When the Adjudicating Authority calls upon the applicant to cure some defect, that defect has to be rectified within seven days. There is no penalty prescribed for inability to cure the defects in an application within seven days from the date of receipt of notice, and in an appropriate case the Adjudicating Authority may accept the cured application even after the expiry of seven days to meet the ends of justice.
Therefore, there is no bar in law to the amendment of pleadings in an application u/s 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with the application u/s 7 of the IBC in Form-1. In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that the Adjudicating Authority committed any illegality or error in permitting the appellant bank to file additional documents.
25 South Eastern Coalfields Ltd. vs. S. Kumar’s Associates AKM (JV) 2021 SCC OnLine SC 486 Date of order: 23rd July, 2021 Bench: Sanjay Kishan Kaul J and Hemant Gupta J
Letter of intent – No binding relation – Forfeit the bid security amount [Indian Contract Act, 1872, S. 3, S. 7]
FACTS
In June, 2009, South Eastern Coalfields Ltd. (the appellant) floated a tender. The respondent was the successful bidder amongst others. A Letter of Intent (LOI) was issued by the appellant awarding the contract for a total work of Rs. 387.4 lakhs.
The respondent, in pursuance of the LOI, mobilised resources at the site. The respondent apparently faced difficulties soon thereafter as the truck-mounted drill machine employed by it suffered a major breakdown. The work, thus, had to be suspended for reasons beyond the control of the respondent. The endeavour to rectify the position or arrange alternative machinery did not work out and the purchase of new machines was expected only after about three months.
The contractual relationship apparently deteriorated. The appellants issued a letter alleging breach of terms of contract and the applicable rules and regulations by the respondent. The appellant further asked the respondent to show cause as to why penal action be not initiated for – (a) termination of work; (b) blacklisting of the respondent company; and (c) award of execution of work to another contractor at the cost and risk of the respondent. Subsequently, the final termination of work was carried out vide letter dated 15th April, 2010.
The respondent filed a writ petition under Articles 226 and 227 of the Constitution of India seeking quashing of the termination letter dated 15th April, 2010. The Division Bench of the Chhattisgarh High Court opined that there was no subsisting contract inter se the parties to attract the general terms and conditions as applicable to the contract.
The appellant filed a Special Leave Petition against the said order.
HELD
None of the mandates was fulfilled except that the respondent mobilised the equipment at the site; the handing over of the site and the date of commencement of the work was also fixed. The respondent, thus, neither submitted the Performance Security Deposit nor signed the Integrity Pact. Consequently, the work order was also not issued nor was the contract executed. Thus, the moot point would be whether mobilisation at the site by the respondent would amount to a concluding contract inter se the parties. The answer to the same would be in the negative. Therefore, all that the appellants can do is to forfeit the bid security amount.
26 Edelweiss Asset Reconstruction Co. Ltd. vs. TRO and Ors. WP(L) No. 7964 of 2021 Date of order: 28th July, 2021 Bench: S.P. Deshmukh J and Abhay Ahuja J
Recovery of dues – Priority of debtor – Secured creditor would have priority over Government dues [SARFAESI Act, 2002, S. 13(2)]
FACTS
The petitioner, as assignee of right, title and interest of the credit facilities to one Classic Diamonds (India) Ltd. (the borrower, now in liquidation) purporting to have a superior secured and prior charge in time over the attached properties, having commenced proceedings under the SARFAESI / Securitisation Act by issue of notices under sections 13(2) and 13(4) and having taken possession of one of the attached properties (as will be described hereinafter), is aggrieved by the order of attachment dated 17th January, 2013 passed by the respondent, i.e., the Tax Recovery Officer (TRO), seeking recovery of income tax dues of the borrower.
The moot issue arising herein is whether the secured debt assigned in favour of the petitioner has a priority over Government dues / tax dues.
HELD
Relying on the decision of the Supreme Court in the case of Bombay Stock Exchange vs. V.S. Kandalagaokar (2015) 2 SCC 1 and the decision in the case of State Bank of India vs. State of Maharashtra and Ors. (2020) SCC OnLine Bom 4190, the Court held that the charge of the secured creditor would have priority over the Government dues under the Income-tax Act. There is no provision in the IT Act which provides for any paramountcy of the dues of the IT Department over secured debt.
