NCDRC Decision: Builders Cannot Force Delayed Possession on Buyers

June 25, 2024

The National Consumer Disputes Redressal Commission (NCDRC), presided over by AVM J. Rajendra, ruled that builders cannot compel buyers to accept possession after significant delays. The Commission affirmed that buyers have the right to either accept the delayed possession or seek compensation.

BRIEF FACTS OF THE CASE

The complainant booked a flat with Sushma Buildtech, and a Flat Buyers Agreement was executed between the complainant and the builder. According to the agreement, possession was to be offered within 30 months (24 months plus a 6-month grace period). Despite receiving 97% of the sale price, the builder failed to deliver possession within the stipulated period. Aggrieved by this delay, the complainant filed a consumer complaint before the State Commission of Punjab seeking redressal.

The State Commission allowed the complaint and directed the builder to pay compensation for the delay in delivering possession at ₹5 per sq. ft. per month of the flat’s super area from the stipulated delivery date until possession is handed over. Additionally, the builder was ordered to pay simple interest at 6% per annum on the deposited amount of ₹54,30,226 from the stipulated date until delivery. The builder was also required to pay ₹65,000 as litigation costs and other expenses. Dissatisfied with the State Commission’s order, the complainant appealed to the National Commission.

CONTENTIONS OF THE BUILDER

The builder contended that the complaint should be dismissed on grounds of pecuniary jurisdiction, arguing that the complainants were not ‘consumers’ under the Act since they purchased the flat for speculative purposes and already owned a house. They denied any deficiency in service, stating they were actively developing the project and committed to delivering possession according to the agreement terms. The builder claimed the funds received were used for project construction and development, citing force majeure circumstances such as labor issues, sand shortages, and demonetization as reasons for the delays. On the merits, the builder asserted that the project had all necessary approvals and licenses, which the complainants had reviewed before signing the Apartment Buyer’s Agreement.

OBSERVATION BY THE COMMISSION

The commission noted that the complainants had paid Rs.64,27,245 towards the flat, supported by receipts. The agreement specified a timeline for possession, along with a grace period. Despite fulfilling these conditions and making payments, the builder failed to deliver the flat within the agreed timeframe. The complainants, who had taken a home loan from HDFC Ltd and were paying EMIs, had made a substantial investment in obtaining possession of the flat. The commission emphasized that homebuyers have the right to compensation for delays in possession or project completion.

Referring to legal precedents such as Emmar MGF Land Ltd. & Ors. vs. Amit Puri and Pioneer Urban Land & Infrastructure Ltd. vs. Govindan Raghvan, the commission highlighted that buyers can either accept delayed possession or seek a refund with compensation. The commission also pointed out that contracts with one-sided clauses favoring builders are deemed unfair trade practices under the Consumer Protection Act, citing its decision in Sivarama Sarma Jonnalagadda & Anr vs. M/s Maruthi Corporation Limited & Anr. It emphasized that invoking force majeure clauses to retain deposits while delaying possession constitutes a deficiency in service and unfair trade practice.

The central issue revolved around determining appropriate compensation for these deficiencies. The commission referred to guidelines set by the Supreme Court in DLF Homes Panchkula Pvt. Ltd. vs. D.S. Dhanda for compensation rates and emphasized that multiple compensations for a single deficiency are not permissible.

The commission underscored that homebuyers are entitled to compensation for delays in possession or project completion. Citing the case of Emmar MGF Land Ltd. & Ors. Vs. Amit Puri, the commission noted that buyers have the right to either accept the delayed possession or seek a refund with compensation. In the Supreme Court case of Pioneer Urban Land & Infrastructure Ltd. Vs. Govindan Raghvan, it was established that builders cannot force buyers to accept possession after significant delays, and buyers are entitled to refunds with interest. The commission emphasized that contracts with one-sided clauses favoring builders are considered unfair trade practices under the Consumer Protection Act.

Referencing its decision in Sivarama Sarma Jonnalagadda & Anr vs. M/s Maruthi Corporation Limited & Anr., the commission stated that complainants should not wait indefinitely for possession, and invoking force majeure clauses while retaining deposits constitutes a deficiency in service and an unfair trade practice. The main issue was determining appropriate compensation for the deficiency. The commission cited the Supreme Court’s judgments in DLF Homes Panchkula Pvt. Ltd. Vs. D.S. Dhanda, which set guidelines for compensation rates and rejected multiple compensations for a single deficiency.

The National Commission modified the State Commission’s order and directed the builder to pay simple interest at 6% on the deposited amount of ₹64,27,245 from the date the flat was due to be handed over until the possession date. Additionally, the builder was ordered to pay ₹1,00,000 to the complainants as litigation expenses.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

Human and Civil Rights Campaigner

President Citizens Justice Forum https://citizensjusticeforum.in