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PETITIONER:

LATA CONSTRUCTION & ORS.

Vs.

RESPONDENT:

DR. RAMESHCHANDRA RAMNIKLAL SHAH AND ANR.

DATE OF JUDGMENT: 12/08/1999

BENCH:

S.Saghir Ahmad , R.P.Sethi

JUDGMENT:

S. SAGHIR AHMAD, J.

This appeal is directed against the judgment and order

dated 22nd November, 1995 passed by the National Consumer

Disputes Redressal Commission, New Delhi (for short, 'the

National Commission').

The respondents had approached the Commission with the

complaint that the appellants who were developers and had

promised, under a written agreement dated 27.1.1987, to

provide a flat to them, had failed to do so and, therefore,

they were guilty of "deficiency in service." It was

indicated in the complaint that the respondents who were, at

that time, in Libya and wanted to settle in India, had

entered into an agreement dated 27.1.1987 with M/s. Lata

Construction, the appellant No.1, which stipulated that the

appellants would develop, construct and hand over possession

of flat No. AG-2 on the ground floor with an area of 670

sq. ft. situated in a building named "Madhusudan", on Plot

No. 138, T.P.S. 11 and C.T.S. No.1166 and 1166(1) in Vile

Parle, Bombay 400057. It was indicated that the appellants

had earlier entered into a development agreement on

9.12.1985 with the owners in respect of the said property to

develop, construct and to sell flats in the proposed

building which was to be constructed on ownership basis. On

27th of January, 1987, the respondents had paid a sum of

Rs.3,38,000/- to the appellants in cash but without any

receipt and a sum of Rs.32,000/- by cheque against receipt.

The respondents also paid to the appellants on various

dates, as and when demanded by them, a further sum of Rs.

2,00,000/- against receipt. In June, 1988 when the

respondents returned from Libya, they requested the

appellants to deliver, on payment of balance amount of sale

consideration, possession of the flat to them as the

construction of the building was complete but the appellants

refused to accept the payment and deliver possession on the

plea that the building was still under construction

particularly as the electricity, plumbing, tiling and

fencing work was in progress. The appellants, however,

assured the respondents that as and when the building would

be completed in all respects, they would accept the balance

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amount of sale consideration and deliver possession to them.

In April, 1990, when the respondents again came back from

Libya on a short visit to India and visited the building,

they found that the flat was locked and outside the main

door of the flat, a name plate of "Indira Joshi" had been

put up. The respondents returned from Libya in January,

1991 and when they demanded the possession of the flat, the

appellants expressed their inability to give possession of

the flat to the respondents in compliance of the agreeement

dated 27.1.1987. The appellants, however, entered into a

fresh agreement with the respondents on 23.2.1991 agreeing

to pay to the respondents a sum of Rs. 9,51,000/- in lieu

of the flat in three instalments on or before 30.5.1991 as

under:-

1. Rs. 3,00,000/- - on or before 20.3.1991 2. Rs.

3,00,000/- - on or before 20.4.1991 3. Rs. 3,51,000/- - on

or before 30.5.1991

The respondents had entered into a fresh agreement

with the appellants without prejudice to their rights under

the earlier agreement dated 27.1.1987. Since the appellants

did not honour the commitments under both the agreements,

the respondents approached the National Commission which,

decreed the claim of the respondents for a sum of

Rs.9,51,000/- together with interest at the rate of 18% per

annum with effect from 23.2.1991 till the date of payment.

Another sum of Rs. 1,00,000/- was allowed as compensation

for pain and suffering undergone by the respondents. The

Commission also allowed a sum of Rs. 10,000/- to the

respondents as costs of the proceedings.

Learned counsel appearing on behalf of the appellants

has contended that the claim instituted by the respondents

before the Commission was beyond time inasmuch as it was

filed beyond the period of two years prescribed under

Section 24-A of the Consumer Protection Act, 1986 (for

short, 'the Act'). It is contended that since the

respondents had entered into a fresh agreement with the

appellants under which the entire amount of Rs. 9,51,000/-

had to be paid on or before 30th of May, 1991, the

respondents, if the amount was not paid, could have

instituted the claim petition before the Commission within

the period of limitation starting from 31.5.1991, and since

the claim was filed in July, 1993, it was clearly beyond

time. This plea has been negatived by the Commission on the

ground that since the right under the agreement of 1987 had

not been given up by the respondents, there was a continuing

cause of action running against the appellants and the claim

was, therefore, not beyond time.

A perusal of the agreement dated 23rd of February,

1991 would show that it was specifically stipulated therein

that the rights under the agreement dated 27th of January,

1987 would remain uneffected. It was for this reason that

in the claim petition filed before the Commission, it was

clearly mentioned that their rights under the agreement

dated 27th of January, 1987 as also those under the

agreement dated 23rd of February, 1991 may be enforced. It

was also specifically mentioned in the second agreement that

the first agreement of 1987 would be treated as terminated

only on full payment of the stipulated amount of

Rs.9,51,000/- to the respondents. Since the rights under

the agreement of 1987 had not been given up and the

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appellants were constantly under an obligation to provide a

flat to the respondents and deliver possession thereof to

them, the Commission rightly treated "cause of action" to be

a "continuing cause of action" and came to the right

conclusion that the claim was not beyond time.

Moreover, under the terms of the agreement dated 23rd

of February, 1991, it was stipulated that if the entire

amount of Rs.9,51,000/- was not paid by 30th May, 1991, the

whole of the amount would become payable at once and it

would be open to the respondents to claim payment of full

amount together with interest after giving seven days'

notice to the appellants. It was further stipulated that in

case of default, the amount already paid by the appellants

shall stand forfeited. Since the whole of the amount had

not been paid to the respondents who could recover the whole

of the amount together with interest from the appellant on

giving seven days' notice, the rights under the old

agreement did not come to an end and they could legally

claim specific performance of that agreement for a flat

being provided to them. Their claim was, therefore, not

barred by time.

It was next contended that the agreement dated

27.1.1987 having been substituted by a fresh agreement dated

23.2.1991, under which the respondents themselves had agreed

to receive Rs.9,51,000/- as compensation for the flat not

having been provided to them under the earlier agreement,

they could only approach the civil court for recovery of

that amount but could not legally institute the claim

petition before the Commission for compensation on the

ground of "deficiency in service."

This plea has been rejected by the National Commission

by placing reliance upon the decision of this Court in

Lucknow Development Authority v. M.M. Gupta (1994) 1 SCC

243.

We have already held above that the rights under the

earlier agreement of 1987 were kept alive even after the

second agreement. The rights under the first agreement had

not been given up and there was no substitution of the

earlier agreement in its entirety by the new agreement.

We may, at this stage, refer to the provisions of

Section 62 of the Indian Contract Act which provides as

under :

"If the parties to a contract agree to substitute a

new contract for it, or to rescind or alter it, the original

contract need not be performed." This provision contains the

principle of "Novation" of contract.

One of the essential requirements of `Novation'; as

contemplated by Section 62, is that there should be complete

substitution of a new contract in place of the old. It is

in that situation that the original contract need not be

performed. Substitution of a new contract in place of the

old contract which would have the effect of rescinding or

completely altering the terms of the original contract, has

to be by agreement between the parties. A substituted

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contract should rescind or alter or extinguish the previous

contract. But if the terms of the two contracts are

inconsistent and they cannot stand together, the subsequent

contract cannot be said to be in substitution of the earlier

contract.

In the instant case, the rights under the original

contract were not given up as it was specifically provided

in the subsequent contract that the rights under the old

contract shall stand extinguished only on payment of the

entire amount of Rs.9,51,000/-. Since the amount was not

paid by the appellants as stipulated by the subsequent

contract, the rights under the original contract were still

available to the respondents and he could legally claim

enforcement of those rights. Obviously, under the original

contract, the appellants were under an obligation to provide

a flat to the respondents. This right would come to an end

only when the appellants had, in pursuance of the subsequent

contract, paid the entire amount of Rs.9,51,000/- to the

respondents. Since they had not done so, the respondents

could legally invoke the provisions of the earlier contract

and claim before the Commission that there was "deficiency

in service" on the part of the appellants.

We may also point out that the appellants had filed

only a written statement before the Commission but had not

produced any evidence in support of their pleas. Even an

affidavit in support of what they had stated in the written

statement was not filed before the Commission. Their case,

thus was not supported by any evidence and the Commission,

in the facts and circumstances of the case, was justified in

decreeing the claim of the respondents.

Learned counsel for the parties have stated before us

that in terms of the judgment passed by the Commission, the

entire amount due from the appellants has already been paid

to the respondents including interest at the rate of 18 per

cent per annum on the principal amount of Rs.9,51,000/-.

That being so, we are not prepared to entertain the plea of

the appellants that the decree passed by the Commission in

respect of Rs.1 lakh as compensation on account of the pain

and suffering undergone by the respondents may be reversed.

We find no merit in the appeal and the same is

accordingly dismissed with no order as to costs.