CDJ Law Journals

Avm Jonnalagadda Rajendra Avsm Vsm (Retd)

By way of the present common order, we propose to dispose of 12 First Appeals preferred by the Complainants/Appellants, arising out of the common order dated 01.08.2018 passed by the State Consumer Disputes Redressal Commission, Uttar Pradesh ("State Commission") which partly allowed the complaints.

2. The details of the FAs covered in this order are as under:

S.No.	FA No.	CC No.	Complainant	OP
1	1796/2018	239/2016	Subhash Chandra Sen	HDFC Ltd. and Assotech Ltd.
2	1798/2018	241/2016	Amul Sharma	HDFC Ltd. and Assotech Ltd.
3	1799/2018	242/2016	Sachidanand Sharma	HDFC Ltd. and Assotech Ltd.
4	1800/2018	287/2016	Manish Kumar	HDFC Ltd. and Assotech Ltd.
5	1801/2018	289/2016	Ganesh Sharma	HDFC Ltd. and Assotech Ltd.
6	1802/2018	290/2016	Simranjeet Singh	HDFC Ltd. and Assotech Ltd.
7	1803/2018	291/2016	Ritesh Agarwal	HDFC Ltd. and Assotech Ltd.
8	1804/2018	292/2016	Sunil Thakur	HDFC Ltd. and Assotech Ltd.
9	1805/2018	293/2016	Prabal Pratap Singh	HDFC Ltd. and Assotech Ltd.
10	1806/2018	294/2016	Ashish Sharma	HDFC Ltd. and Assotech Ltd.
11	1807/2018	371/2016	Nikhil Srivastava	HDFC Ltd. and Assotech Ltd.
12	1809/2018	87/2016	Dhirendra Kumar	HDFC Ltd. and Assotech Ltd.

3. As per report of the Registry, there is a delay of 10 days in filing the present Appeals. In the interest of justice, the delay is condoned.

4. Since the facts and questions of law involved in all the Appeals are similar, these Appeals are being disposed of by this common Order. For ease of reference, First Appeal No. 1796/2018 is considered as the lead case, and the facts outlined below are derived from Consumer Complaint No. 239/2016.

5. For convenience, the parties in the present matter are being referred to as per the Consumer Complaint.

6. Brief facts of the case, as per the complaint, are that on 04.06.2012, the complainant booked a residential flat bearing No. F-083 admeasuring 1230 sq. ft. in Tower "F" of the project "The Nest" being developed by OP-1 at Plot No. GH-06, Crossing Republic, NH-24, Dundahera, Ghaziabad, Uttar Pradesh, vide allotment letter dated 04.06.2012. The allotment letter represented that the project had all requisite approvals, including the approval of Ghaziabad Development Authority. It was further represented to the complainant that the said project, particularly Towers "F" and "G" stood approved by OP-2 for the purpose of availing a home loan. OP-2, projecting itself as a leading non-banking financial company with pan-India presence, assured the complainant that it had carried out due diligence in respect of the statutory approvals and legal compliances of the project, including verification of approvals from the Ghaziabad Development Authority. With such assurance, OP-2 sanctioned and disbursed the home loan of Rs. 21,56,987 to OP-1 under a tripartite agreement executed between the parties. The loan was disbursed against equitable mortgage of the said flat which, according to the complainant, was accepted by OP-2 after due verification, including acknowledgment of the document titled "Permission to Mortgage" dated 09.12.2013, issued by OP-1. It was contended that the total sale consideration for the flat was Rs. 35,87,890 and of this amount, the complainant had paid a sum of Rs. 26,95,170 to OP-1 in various instalments, and that possession of the flat was assured to be delivered by 30.12.2014. It was further contended that the construction of Tower "F" stopped beyond the 16th Floor and that the construction of Tower "G" had not progressed beyond the ground floor. Whereafter, the complainant discovered that, at the time of booking of the Falt, OP-1 did not have any approval from Ghaziabad Development Authority for construction of Towers "F" and "G". According to the complainant, the conditional approval for construction of the said towers was granted by Ghaziabad Development Authority only on 18.01.2016, and the building plans were approved later on 01.02.2017, based on the assurance of OP-1 that the outstanding dues of the authority would be paid in instalments. However, upon failure of OP-1 to pay even a single instalment, the project was sealed on 26.12.2017 and remained sealed thereafter. Alleging fraud, misrepresentation, failure to obtain statutory approvals, and failure to deliver possession within the stipulated period, the complainant approached the State Commission, Lucknow, seeking appropriate reliefs against the OPs.

7. Upon service of notice, OPs filed their written versions, wherein OP-1 admitted allotment of the subject flat in favour of the Complainant as well as the receipt of amounts deposited towards the said allotment. While denying the other averments made in the complaint. It was pleaded that OP-1 had not made any specific commitment to hand over possession within a period of 24 months and that, at the time of booking, the rules and terms of allotment had been duly explained to them. It was further stated that the delay in construction and delivery of possession, if any, was attributable to circumstances beyond the control of OP-1 and constituted force majeure. OP-1 contended that 80% of the construction work of the allotted flat had already been completed. The construction and finishing work in respect of five towers out of the total seven towers in the project had been completed and registrations were also done. The construction activities in the remaining towers were in progress. OP-2 HDFC Ltd refuted all the accusations asserted that there is no connivance between OP-2 and OP-1 and no assurance or representation was made by OP-2 regarding the project. OP-2 contended that the Tripartite Agreement clearly recorded that the developer OP-1 and the project were the independent choice of the complainants. OP-2 made no representation as to approvals or the project. The borrowers undertook to repay the loan irrespective of disputes with the developer. The Tripartite Agreement was intended to safeguard the interest of OP-2 as mortgagee and did not cast any obligation on OP-2 to undertake due diligence for the benefit of the complainants. The complainants had already booked the units and made payments to OP-1 prior to approaching OP-2 for loans, which negates any case of reliance on alleged assurances by OP-2. Further, the disbursements were made strictly as per the construction-linked payment plan and on express written instructions of the complainants, without any lump-sum or upfront disbursal. OP-2 could not be held responsible for subsequent delay, stoppage of construction or sealing of the project on account of defaults by OP-1. When once the parties consciously entered into a contract, they were strictly bound by the terms and conditions thereof and could not resile from the same.

8. The learned State Commission, vide common order dated 01.08.2018 partly allowed the complaint and directed OPs as below:

                   "The complaints are partially allowed against opposite party No.1 and dismissed against the opposite party No.2. The opposite party No l is directed to refund the total amount to all the Complainants deposited by them along with simple interest @18% from the from the date of respective deposits till the date of actual payment. The loan part will be refunded to the bank-the opposite party No.2.

                   As per terms & conditions of tripartite agreement. Each complainant will be entitled to get compensation of Rs 1,00,000/- towards mental agony and litigation cost of Rs 5000/- from the opposite party No.1. All these amounts shall be paid within a period of 60 days from the date of this Judgement and order. No order to other costs. Let the copies of this judgement and order be placed on each file and provided to all concerned as per rules."

9. Aggrieved by the State Commission order, Complainant filed FA No. 1796 of 2018 before this Commission seeking to:

                   "(A) Pass an order directing the Respondent No.1 to pay Compensation and damages of Rs.5,00,000 for mental trauma, victimization and harassment suffered by the Appellant due to wrongful disbursement of home loan by the Respondent.

                   (B) Pass an order directing the Respondent No.1 to restructure the home loan and EMI paid by the Appellant after removing the interest component from the EMI and receive only the repayment of principle amount from the appellant and restructure the EMI according to the balance principle amount removing the amount of interest.

                   (C) Pass an order declaring the EMIs paid by the Appellant till date as repayment of the principle amount only and deleting the interest amount from them and directing the Respondent No.1 to restructure the future EMIs in a manner so as to collect only the balance principle amount.

                   (D) Such an other/further reliefs which this Commission may deem fit and proper in the circumstances of the case may be passed in favor of the Appellant."

10. It is pertinent to note that, relief 'B' and 'C form the above Prayer Clause were deleted vide order of this Commission dated 06.03.2019. In FA No. 1796 of 2018, mainly the following grounds were raised:

                   A. OP-2 sanctioned and disbursed the home loan without conducting proper due diligence of the project, relying merely on the "Permission to Mortgage" issued by OP-1, without verifying statutory approvals or approved building plans of Towers "F" and "G", in breach of the Tripartite Agreement and applicable regulatory requirements.

                   B. OP-2 violated the binding guidelines of the National Housing Bank vide Circular No. NHB(ND)/DRS/POL-No-12/2006 dated 15.03.2006 by disbursing the loan without ensuring prior statutory clearances for the project, which amounted to deficiency in service under Section 2(1)(g) of the Consumer Protection Act, 1986.

                   C. OP-1 and OP-2 acted in collusion in marketing and selling the said flats by concealing the absence of approvals from Ghaziabad Development Authority, thereby misleading them and indulging in unfair trade practice under Section 2(1)(r) of the Act, 1986.D. The State Commission, having itself recorded findings regarding the negligent approach of OP-2 and lack of due diligence in relation to statutory approvals, erred in declining relief against OP 2, rendering the impugned order, to that extent, unsustainable.

                   E. The negligent acts and omissions of OP-2 caused continuing financial hardship and mental trauma to them and were compelled to service EMIs without commensurate progress in the work or likely possession, while OP 2 continued to derive interest income.

                   F. It is well settled legal position by this Commission in M/s Maytas Properties Ltd. v. Bharati Khurana & Ors., OP 2, as the financing institution in a builder-linked project, was duty-bound to exercise due care in disbursement of loan amounts and could not be absolved of liability for losses occasioned by release of funds, contrary to the tripartite arrangement and without progress of construction.

11. The learned counsel for the complainant reiterated the facts of the case and argued that State Commission, despite recording deficiency in service and unfair trade practice on the part of OP-2 (HDFC Ltd.) in sanctioning and disbursing the home loan, in violation of National Housing Bank guidelines, erroneously denied relief against OP-2. He asserted that the complainant had booked Flat No. F-083 in Tower "F" of OP 1's project "The Nest" on 04.06.2012, paid substantial amounts, and OP-2 disbursed the loan on the assurance that Towers "F" and "G" were duly approved. Whereas, the requisite approvals, including those of the GDA, were not in place. The loan having been disbursed on the basis of a misleading "Permission to Mortgage" issued by OP-1, without due verification by OP-2, amounted to negligent and reckless conduct of OP-2 in connivance with OP-1. When OP-1 failed to deliver possession within the assured 24 months under Clause 19, the Complainants were compelled to seek refund against OP-1 and compensation against OP-2 for negligent disbursal. Since the building plans for Towers "F" & "G" received only conditional approval on 18.01.2016 and final approval on 01.02.2017, the project lacked statutory approvals at the time of loan sanction and disbursal in 2013. OP-2 committed breach of regulatory duty under the National Housing Bank guidelines dated 15.03.2006. He relied on Clause 10 of the Tripartite Agreement to argue that while OP-1 was obliged to furnish all project documents and keep OP-2 informed of progress. Further, while OP-2 was correspondingly duty bound to demand and verify the approved building plans prior to disbursal, it failed to do so. He pointed that OP-2, in its affidavit in the present Appeal, admitted that the building plans of Tower "F" were approved only on 14.10.2016 (up to 16 floors) and 09.01.2017 (for higher floors). For Tower "G" the approval was issued only on 09.01.2017, thereby establishing that at the time of sanction of the loan in 2013 the project lacked approved plans. He assailed the affidavit of OP-2 as non-compliant with this Commission's directions dated 02.08.2019 requiring disclosure of sanction and release guidelines and due diligence undertaken. He argued that the Complainant was constrained to service substantial EMIs since 2013 without possession, resulting in financial hardship. He relied on the decision of this Commission in M/s Maytas Properties Ltd. v. Bharati Khurana & Ors. (FA No. 327 of 2012) to contend that banks and housing finance companies are under a duty to act with due care and caution while disbursing builder-linked home loans and cannot escape liability when loans are disbursed contrary to the terms of the tripartite agreement and without ensuring lawful progress of construction. The learned counsel sought that the appeal be allowed and appropriate relief, including compensation for deficiency in service and unfair trade practice on the part of OP 2, be granted in favour of the Complainants.

12. The Complainant/Appellant confirmed vide order dated 11.02.2026 that they seek to pursue the complaint only against OP-2 and clarified that they have no grievance against OP-1 i.e. Asotech Builders at this stage. Thus, no submissions are on record for OP-1.

13. The learned counsel for OP-2 argued that pursuant to the order dated 17.03.2023 passed by the NCLT, Mumbai Bench, HDFC Ltd. stood amalgamated with HDFC Bank Ltd with effect from 01.07.2023, HDFC Bank Ltd had become the successor-in-interest and proper party to the proceedings. She asserted the learned State Commission rightly dismissed the complaint against OP-2 while granting relief against OP-1, having found no connivance between OP-2 and OP-1 and no assurance or representation by OP-2 regarding the project, and that the complainants failed to establish any deficiency in service or unfair trade practice on the part of OP-2. The learned counsel argued that the Tripartite Agreement clearly recorded that the developer and the project were of the independent choice of the complainants, that OP-2 had made no representation as to approvals or the project, and that the borrowers had undertaken to repay the loan irrespective of disputes with the developer. Clause 10 of the Tripartite Agreement was intended to safeguard the interest of OP-2 as mortgagee and did not cast any obligation on OP-2 to undertake due diligence for the benefit of the complainants. It was further asserted that the complainants had already booked their respective units and made payments to OP-1 prior to approaching OP-2 for loans, thereby negating any case of reliance on alleged assurances by OP-2, and that in any event the doctrine of caveat emptor obliged the buyers to satisfy themselves as to the credentials of the builder and the existence of requisite approvals. He argued that the "Permission to Mortgage" letters were issued by OP-1 and any incorrect representation therein was attributable solely to OP-1, and OP-2 could not be held liable. The learned counsel asserted that all disbursements were made strictly in accordance with the construction-linked payment plans and on express written instructions of the complainants, without any lump-sum or upfront disbursal. OP-2 could not be held responsible for subsequent delay, stoppage of construction or sealing of the project on account of defaults attributable to OP-1. She argued that once parties consciously entered into a contract, they were strictly bound by the terms and conditions thereof and could not resile from the same. Reliance in this regard was placed on the judgment of the Hon'ble Supreme Court in Bharathi Knitting Company v. DHL Worldwide Express, 1996 SCC OnLine SC 78 and Venkatraman Krishnamurthy & Anr. Vs Lodha Crown Buildmart Pvt. Ltd. (2024) 4 Supreme Court Cases 230. Distinguishing the decision in M/s Maytas Properties Ltd. v. Bharati Khurana & Ors. She argued that, unlike in the said case where the entire loan was released upfront contrary to the tripartite arrangement, OP-2 had made only stage-wise disbursements linked to construction progress. The learned counsel argued that the NHB Circular dated 16.03.2006 was inapplicable to retail home loans disbursed to the individual buyers and pertained to cases where housing finance companies financed construction projects of builders, and that the reference to "borrower" therein being to the builder and not to individual home buyers. She sought that the findings of the State Commission warranted no interference and that the appeals were an attempt to avoid contractual obligations under the Tripartite Agreement, and that the same deserved to be dismissed as devoid of merit.

14. We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned counsels for both the parties.

15. The main issues to be determined in the present case is whether while sanctioning and disbursing the home loan in respect of the subject flats, OP-2 failed to exercise due diligence while sanctioning and releasing the loan, in the absence of requisite statutory approvals and approved building plans for Towers "F" and "G"? And whether such failure, if any, amounted to deficiency in service and unfair trade practice warranting interference with the impugned order?

16. We have carefully considered the pleadings, including the findings recorded by the State Commission. The State Commission noted that OP-1 had lured the allottees by showing the layout of the project and misrepresenting that all sanctions and approvals were in place, although sanction of layout did not amount to approval of the building plans of individual towers. Under the GDA bye-laws, no construction could lawfully be raised without prior approval of the building plans. The State Commission found that only five out of seven towers were completed. Tower "G" received approval only on 18.01.2016 despite possession having been promised on earlier dates and the construction had not progressed beyond the ground floor. The incomplete construction of Towers "F" and "G" stood established beyond doubt, with no force majeure circumstances to justify the delay, thereby constituting deficiency in service and unfair trade practice on the part of OP 1. At the same time, it is a matter of record that the complainants availed housing loans under individual loan agreements and were thus bound to service EMIs. There is nothing on record to establish any connivance between OP-1 and OP-2. While greater due diligence on the part of OP-2 could have avoided the situation, in the absence of the complainants themselves exercising reasonable care and circumspection, no case is made out against the Bank OP-2 for any connivance, deficiency in service or unfair trade practice. While the complainant alleged that the building plans of Tower "F" were approved only on 14.10.2016 (up to 16 floors) and on 09.01.2017 (for higher floors), and that the building plans of Tower "G" were approved only on 09.01.2017 and the home loan in question had been sanctioned and disbursed in the year 2013, it is also a matter of record that the complainant had already booked the flats with OP-1 and made initial payments and produced the documents required for hypothecation for obtaining home loan from OP-2 Bank. It is based on the complainants' proposals and records submitted, the loans were granted. Having failed to exercise the degree of care and circumspection necessary, in the absence of any connivance being established, the complainants cannot make OP-2 Bank liable for the lapses of OP-1. OP-2 Bank evidently acted as a lender and disbursed the amounts on the express instructions of the Complainant and in terms of the Tripartite Agreement. Each instalment was released only on the basis of specific approval of the complainants. Therefore, the distinction sought to be drawn by OP-2 from the decision in M/s Maytas Properties Ltd. v. Bharati Khurana & Ors is tenable.

17. In view of the foregoing, and after due consideration of the entire facts and circumstances of the case, there is nothing on record that has been brought out to reasonably establish that OP-2 failed to exercise the degree of due diligence expected of a housing finance company while sanctioning and disbursing the home loan in 2013 to the complainants in respect of Towers "F" and "G" and warranting interference in the order of the learned State Commission in CC No. 239 of 2016 dated 01.08.2016.

18. Consequently, FA No. 1796 of 2018, FA No. 1798 of 2018, FA No. 1799 of 2018, FA No. 1800 of 2018, FA No. 1801 of 2018, FA No. 1802 of 2018, FA No. 1803 of 2018, FA No. 1804 of 2018, FA No. 1805 of 2018, FA No. 1806 of 2018, FA No. 1807 of 2018, and FA No. 1809 of 2018 are Dismissed.

19. Considering the facts and circumstances of the case, there shall be no order as to costs.

20. All pending applications, if any, are also disposed of accordingly.

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