The Hon’ble Supreme Court recently addressed the question of universal / unlimited applicability of the doctrine of merger while deciding appeals filed by the builder/developer of a housing project (“Builder”) against an order passed by the National Consumer Disputes Redressal Commission (“NCDRC”). The impugned order directed the Builder to refund the amount collected from the allottees of their apartments (“Allottees”) towards excess sale area and to execute supplementary correction deeds. The said order was passed in complaints filed by the Allottees before the NCDRC alleging that there was no increase in the area of the land, and relied on the decision of the NCDRC in the case of Pawan Gupta v. Experion Developers Private Limited to state that the Builder’s demand towards increase in the sale area, as held in the said case, was illegal.
Facts / Contentions raised
The Builder inter alia contended that the complaints were not maintainable due to lack of cause of action, limitation and acquiescence. It was asserted that the payments in lieu of the excess sale area were made in terms of the Apartment Buyer Agreement without any demur by the Allottees / their respective previous allottees. Further, the ‘cause of action’ (if any) arose when the demand for the increased area was raised by the Builder in 2017. These complaints, instituted in 2022, were therefore barred by Section 69 of the Consumer Protection Act, 2019 (“Act”) which mandates that a complaint can be filed within two years of the cause of action. It was further argued that the case of Pawan Gupta would have no applicability on the present case, given that the complaint therein was preferred by Pawan Gupta in his individual capacity and not in a representative capacity.
The Allottees, on the other hand, contended that the judgement of the NCDRC in Pawan Gupta had attained finality due to the fact that the appeals filed by the Builder against the said judgement were dismissed by the Apex Court, as were the review petitions filed against the said dismissal order. In view of the dismissals, it was further contended that the NCDRC’s judgement stood merged with the order of the Hon’ble Supreme Court and would be binding on the Builder in subsequent cases, including the present matter.
Law examined
To address the operability of the Pawan Gupta judgement in the present matter, the Hon’ble Supreme Court referred to decisions in Kunhayammed and Ors. v. State of Kerala & Anr. and Khoday Distilleries Limited & Ors. v. Mahadeshwara Sahakara Sakkare Karkhane Limited. The position of law developed in relation to merger by the said judgements is thus:
- Merger: Where an order passed by a court or any other authority is challenged before a superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision passed by the superior forum and it is the latter which is binding on the parties inter se the lis. The doctrine of merger is not of universal or unlimited application and will depend on the nature of jurisdiction exercised by the superior forum. For instance, in relation to the jurisdiction conferred by Article 136 of the Constitution which is divisible into two stages, the doctrine of merger is not applicable to the first stage, i.e., the discretionary jurisdiction of the Court to dispose of a petition for special leave to appeal. However, the doctrine may apply in the second stage if and when the leave to appeal is granted and the special leave petition (“SLP”) is converted into an appeal, i.e., when the Hon’ble Supreme Court is exercising its appellate jurisdiction.
The Court further clarified the distinction between the doctrine of res judicata and rule of precedents. The decisions in State of Rajasthan v. Nemi Chand Mahela & Ors. and Makhija Construction & Engg. (P) Ltd. v. Indore Development Authority & Ors. were referred to:
- Res Judicata: The doctrine operates in personam to bind parties to a lis and ensure an end to the said litigation. The correctness of the binding decision is normally immaterial. Further, the principle of res judicata has no application in cases where the judgment or order has been passed by the Court having no jurisdiction thereof or involving a pure question of law.
- Precedents: The rule operates in rem and is concerned with application of law in a similar issue between distinct cases. The law once settled is binding on all under the jurisdiction of the High Court and the Supreme Court, as the case may be. Law of binding precedents, in terms of Article 141 of the Constitution of India, has a larger connotation as it settles the principles of law which emanates from the judgment, which are then treated as binding precedents.
The various categories of scenarios that emerge and their resultant effects are summarized below:
| S.No. | Scenario | Outcome |
|---|---|---|
| 1. | Non-speaking order refusing leave to appeal | No merger or res judicata |
| 2. | Speaking order refusing leave to appeal | No merger or res judicata; any declaration of law in such order would fall within the scope of Article 141 of the Constitution an shall act as precedent for all Courts; anything stated in such order, other than a declaration of law, would bind the parties thereto as well as subordinate courts in subsequent proceedings, by way of judicial discipline. |
| 3. | Leave granted – Appeal dismissed by a non-speaking order | Merger and res judicata applicable. No precedential value. |
| 4. | Leave granted – Appeal dismissed by a speaking order | Merger and res judicata applicable; any declaration of law in such order would fall within the scope of Article 141 of the Constitution an shall act as precedent for all Courts. |
Upon examining the Pawan Gupta judgement, the Court observed that the order dismissing the appeals, was a non-reasoned order, i.e., falling in the third category. It was observed, that while the said order would operate as res judicata in the facts of the specific case, the same would not have a binding effect of a precedent on the present matter:
“36. Thus, we are clearly of the view that the order of this Court dismissing the appeal in the case of Pawan Gupta (supra) cannot be read as a precedent and applied to the cases in hand. In fact, precedents cannot decide questions of fact. The decision in the case of Pawan Gupta (supra) was based on evidence adduced by the appellant/builder/developer, which in the said case was not found to be sufficient and cogent to justify and substantiate the demand raised in view of the increased sale area. No doubt, the architect’s certificate and report dated 23.09.2020 was filed before this Court as additional documents, but a non-reasoned order passed by this Court dismissing the case cannot be read as accepting and considering the additional evidence, or as rejecting justification and reasons given therein for claiming additional/increased sale area… Therefore, the order passed by this Court dismissing the appeal in the case of Pawan Gupta (supra) is confined to the facts of the said case, including the evidence led by the parties before the National Commission. The National Commission was therefore required to consider and examine the contentions of the appellant and not overrule the same on the grounds of the principle of res judicata and on the rule of binding precedent, which do not apply.
On maintainability
To address the Builder’s contention on maintainability of the complaints, the Apex Court emphasized ‘cause of action’ as being the “foundation of the claim [and] refers to the entire set or bundle of facts necessary and material to prove in order to get a judgment.” It was further clarified that the cause of action is complete when the ingredients constituting it provide the aggrieved party with the right to invoke jurisdiction of the court/forum. The Hon’ble Court observed that, in view of the execution of the sale deeds that went on till 2020, the complaints of the Allottees could not be barred by limitation under Section 69 of the Act. It was further observed that consumer forums have the power to condone the delay beyond 2 years when there was sufficient cause. However, the Hon’ble Court held erroneous the NCDRC’s finding as to a ‘continuing cause of action’ till the date of the Pawan Gupta judgement being passed. It further clarified that cause of action “is not dependant on a decision in another case by an allottee raising a similar issue.”
In view of the above, the Hon’ble Supreme Court set aside the impugned judgement passed by the NCDRC and remanded the matter to be considered afresh on the aspect of acquiescence and whether the Builder has been able to substantiate the claim for the increase in the sale area, while clarifying that the observations pertaining to limitation have attained finality.
Author’s take
While referring to some landmark judgements on the subject, the Hon’ble Supreme Court has attempted to provide a one-stop shop for understanding the legal principles of merger, res judicata, and precedents by means of the present judgement. It has reaffirmed the position that a non-speaking order dismissing a statutory appeal and / or a SLP converted into an appeal, will not have the binding effect of a precedent on parties outside the lis.
However, the law on the stage of disposal of a SLP appears to be nuanced. While it is made plain that the effect of a non-speaking order of dismissal of a SLP cannot be taken as acceptance of the reasons or the ratio of the judgment under challenge, it is also an acknowledged legal practice that a subsequent SLP does not lie when the earlier one was dismissed at the threshold.
Perhaps some clarity can be acquired by referring to the case of Sudhakar Baburao Nangnure v. Noreshwar Raghunathan Shende & Ors. [2019 SCC Online SC 326] wherein a SLP was dismissed as withdrawn and an observation was made that the Hon’ble Court “had not considered the matter on merits.” The Petitioner thereafter went on to file a review of the original judgement before the Hon’ble Bombay High Court, upon dismissal of which, he returned to the Apex Court in SLPs challenging the original judgement and the judgement rejecting the review petition. The Apex Court, giving a liberal interpretation to the observation contained in the order, construed the same to be a grant of specific liberty to approach the Supreme Court in case the Review Petitions were not entertained by the High Court. It was held that “[t]o take any other view would effectively deny access to justice to the appellant…To adopt a construction which would deprive the appellant of the remedy of moving this Court after the decision of the High Court in review would lead to an egregious failure of justice. Such a construction must be eschewed.”
It would thus be appropriate to infer that dismissal of a SLP by a non-speaking order, does not oust alternative remedies, including a subsequent SLP where the earlier one was dismissed under certain circumstances as the one detailed above.
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Disclaimer
The views expressed are of the author alone and should not be taken as legal opinion or view of the firm. Readers are advised to exercise their discretion.
