Delay Compensation should be 12%, says more judges of NCDRC

Most of you may already know about the landmark judgement of “Unitech Atharva” and “Sahara Grace” where the NCDRC ordered compensation at 12% per annum for inordinate delay in delivery of the apartments. You may be wondering what makes us write another post on similar judgement? Let us decode it for you!

The judgement in this case is delivered by Hon’ble Justice Ajit Bharihoke whereas most of the past judgements pertaining to 12% delay compensation were delivered by Hon’ble Justice V.K Jain.

How does it make a difference?

So far the developer were contesting before NCDRC that various benches differ on the stand taken on the issue on compensation. While one Bench/Judge delivered in favor of homebuyers, others were not so sympathetic about it. However, now that multiple judges have agreed to the fact that 12% is the ideal compensation for delay in delivery of apartments, it is likely that any case that goes to NCDRC may result in the compensation on similar lines. The precedence set in these case shall have cascading effects to all the cases being handled in State and District Commissions.

Another important observation is that the Hon’ble Judge did not differentiate between the buyers who booked originally from developer and the ones who bought in resale.

Case Brief

Buyers booked apartments in a development project “Harmony” located in Sector 50 Nirvana Country, Gurgaon. The developer promised to deliver the apartments in 30-36 months but failed to do so. The homebuyers filed a case in NCDRC and the forum ordered a delay compensation at 12% per annum.

Buyer’s Grievances

  • Apartments were to be delivered in 30-36 months and failed to complete them on time.
  • Delivery apartments as agreed and pay delay penalty at 5/- psf with compounded interest at 24%
  • They also sought compensation for harassment and mental trauma.

Developer’s submissions

  • Recession in economy resulting in scarcity of availability of labour and raw material;
  • Commonwealth Games organised in October 2010 resulting in extreme shortage of labour in NCR region;
  • Short of labour due to implementation of social schemes like National Rural Employment Guarantee Act (NREGA) and Jawaharlal Nehru Urban Renewal Mission (JNNURM);
  • Extreme shortage of water in NCR region which was further accentuated due to orders of Punjab and Haryana High Court stopping the use of groundwater for construction activities;
  • Shortage of bricks due to restrictions imposed by Ministry of Environment and Forest on brick klins;
  • Shortage of sand due to suspension of mining activity in Aravali Hill Range.
  • Since the agreed cost of apartments in question was less than rupees one crore, the buyers could not be maintained only before the State Commission and not before the National Commission whose jurisdiction starts where the value of dispute is more than rupees one crore.

Court’s Observation

  • It is evident that despite of having promised to deliver possession of the respective apartments to the buyers within 30-36 months from the date of execution of Buyer’s Agreement and despite of having received more than 90% of the consideration amount, the developer has failed to fulfil their part of promise i.e. to deliver possession of apartments to the respective buyers. This conduct of the developer in our view amounts to deficiency in service.
  • Builder is unable to justify reasons mentioned as Force Majeure.
  • The developer has utilised the money paid by the buyers against consideration amount, the buyers are entitled to interest on the payment made by them for the period of delay as compensation instead of meagre compensation computed on the basis of clause of BBA.

Although it is not mentioned in order but it appears that the cost of the apartment along with the compensation crossed 1 Cr and hence NCDRC has jurisdiction on it.

The Order

  • Deliver possession of the respective apartments to the buyers within six months from the date of the pronouncement of this order;
  • Pay to the respective buyers compensation @ 12% p.a.
  • The interest till 31.12.2015 shall be paid to the buyers within one month from the date of the order.  Thereafter, compensation in the form of interest in terms of the order shall be paid on monthly basis by 10th day of each succeeding month;
  • Pay Rs.10,000/- (Rupees Ten Thousand only) each to the respective buyers as cost for litigation.

Copy of the order:- Unitech Harmony – NCDRC Order

Can the NCDRC interfere between the the agreements signed?

It cannot be disputed that ordinarily the parties are bound by the terms and conditions voluntarily agreed by them and the Courts are supposed to implement the contract in letter and spirit and they cannot add or subtract from the contract. The Supreme Court, however, in the matter of Bharathi Knitting Company Vs. DHL Worldwide Express JT 1996 (6) SC 254  has observed thus:

 “It is seen that when a person signs a document which contains certain contractual terms, as rightly pointed out by Mr. R.F. Nariman, learned senior counsel, that normally parties are bound by such contract; it is for the party to establish exception in a suit.  When a party to the contract disputes the binding nature of the signed document, it is for him to prove the terms in the contract or circumstances in which he came to sign the documents need to be established.  It is true, as contended by Mr. M.N. Krishnamani, that in an appropriate case the Tribunal without trenching upon acute disputed question of facts may decide the validity of the terms of the contract based upon the fact situation and may grant remedy.  But each case depends upon its own facts”.

5 thoughts on “Delay Compensation should be 12%, says more judges of NCDRC

  • December 24, 2015 at 8:44 am
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    RERA is nothing but again a LAW . Main thing depends upon the implementation of the LAW .

    UP apartment act 2010 is not being implemented so far so How can a buyer except RERA to be implemented by authorities in benefit of buyers .

    Then also buyer will need to go to consumer court only ….

    So beleive in yourself rather than a new LAW like RERA .

    Nothing is goint to change after RERA also .

  • December 24, 2015 at 8:51 am
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    That’s absolutely correct, we may just end up creating one more authority. One good thing about amendments is that they have once again introduced Consumer Forum as a alternative to seek justice. Earlier they planned that buyer can only approach the regulator and further cases to be admitted in Consumer Forums.

  • January 7, 2016 at 5:53 pm
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    LIKE THE BUILDER IS CHARGING 18% INTEREST FROM THE BUYER IN CASE OF DEFAULT IN PAYMENT TO THEM , THE COURT SHOULD ALSO AWARD ATLEAST THE SAME INTEREST TO BUYERS IN CASE OF ANY DEFAULT BY THE DEVELOPER / BUILDER IN HANING OVER POSSESSION OF FLAT AS WELL AS FACILITIES FOR WHICH HE HAS CHARGED
    .

  • January 26, 2016 at 5:03 pm
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    Exactly. Parsvnath Developers has delayed delivery of Exotica flat booked in July 2005. It is more than 10 years. There may be about 100 other buyers like us. Any one who is affected, please contact me. We should approach NCDRC to get possession and delay compensation.

  • August 2, 2016 at 2:06 pm
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    Hitendra ji who has informed you U.P apartment ownership act is not implemented, read 33826 of 2012 judgment dated 14.11.2013 of Honorable Allahabad high court.

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