NCDRC: Puri Construction Liable for Service Deficiency, Can't Demand Interest for Project Delays

June 22, 2024

The National Consumer Disputes Redressal Commission (NCDRC), presided over by Dr. Inder Jit Singh, ruled that builders cannot demand interest from buyers if the project is delayed beyond the agreed-upon timeline. The Commission found the builder liable for a deficiency in service for charging interest on an already delayed project.

BRIEF FACTS OF THE CASE

The complainants entered into a transaction with Puri Construction to purchase a flat for ₹50,98,756 plus additional charges. They received an allotment letter and signed an agreement stipulating that the builder would deliver the apartment within three years from the earnest money payment, with payments made as requested. The complainants paid ₹30,12,144 in total.

Subsequently, the complainants found that construction progress was delayed and raised concerns with the builder. Despite the delay, the builder completed construction late and began allotting apartments. The complainants offered to settle the full amount plus interest, but the builder demanded excessive interest. As a result, the complainants filed a complaint with the State Commission of Delhi.

The State Commission ruled in favor of the complainants, ordering the builder to refund ₹32,62,144 plus 12% annual interest. Dissatisfied with this decision, the builder appealed to the National Commission.

CONTENTION OF THE BUILDER

The builder contended that the State Commission failed to consider Clause 13(b) of the Buyer’s Agreement, which stipulated that possession would only be handed over upon the payment of all dues, installments, penalties, etc., by the complainant. The builder argued that in many cases, they had waived interest on delayed payments and only imposed reasonable interest for the complainant’s defaults.

The Commission also overlooked Clause 14, which specified a 36-month period for handing over possession, contingent on the complainant fulfilling all terms, including payment of dues. Sub-clause (vi) of this clause stated that if the complainant delayed payments, the handover date would be extended until full payment was made. The builder further claimed that the Commission did not consider relevant judgments, which support the builder’s right to forfeit earnest money and cancel the allotment when the allottee fails to make timely payments despite reminders.

OBSERVATION BY THE COMMISSION

The National Commission observed that the builder contended the time period for handing over possession was 39 months, contingent upon the complainants’ compliance with all terms, including the payment of installments. However, the complainants defaulted in their payments. The commission highlighted that the builder informed the complainants about an increase in the super area and subsequently raised the demand for the balance amount, offering the option to pay in lump sum or installments. When the complainants failed to comply with the payment plan, the builder notified them about cancelling the allotment.

The commission emphasized that the complainants acknowledged the outstanding amount and stated they were assured an interest waiver on some payments. It was noted that the complainants had made approximately 60% of the payment and were willing to pay the remaining balance. Despite this, the builder continued to demand additional amounts for interest, External Development Charges (EDC), and increased area costs. The commission observed that, despite a stay order by the State Commission, the builder sold the apartment to a third party at a price approximately 50% higher than the originally agreed price with the complainants.

Furthermore, the commission highlighted that the builder could not demand interest for the delay since the project itself was delayed beyond the agreed period, as indicated by the occupancy certificate date.

The National Commission upheld the State Commission’s order with a modification to the principal amount paid by the complainant. The corrected amount was Rs. 30,12,144, instead of Rs. 32,62,144 as previously stated. The commission directed the builder to pay interest based on the revised principal amount.

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.

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President Citizens Justice Forum https://citizensjusticeforum.in