Delays in acquiring approvals can’t be Force Majeure – NCDRC to IREO

Real estate projects are often launched without having necessary approvals in place. Although this is an illegal practice, it is very rampant in India. Sometimes, these approvals can delay projects by years and there have been cases where the projects were scrapped by the government authorities for various reasons.

So far, home buyers had to bear the brunt of such delayed as developers often term such delays as Force Majeure. This absolves them from paying any delay penalties on the sum collected. While some of these cases may be genuine, in most cases the developers also resort to such practice just to avoid paying delay penalties. At times, developers conceal the information related to delays in approvals and litigations around the land and project.

Plot owners of IREO FIVERIVER in Panchkula faced a similar situation. When developer could not deliver the said plots within 36 months of booking, he invoked to Force Majure to avoid paying any delay penalty. The developer claimed that there were delays in getting approvals from the Irrigation Department of Haryana, National Board of Wild Life etc, they project was delayed and it was beyond his control. The State Consumer Forum rejected this plea and ordered the refund of the amount deposited with 12% interest along with harassment cost.

Case study

Facts of the case are that project names Five River by IREO in Panchkula was delayed beyond a reasonable time. Buyers filed a case in State Commission, Haryana for the refund of their money along with 15% interest for the delay.

Builder’s defense

Builder contended that they had launched the project only after they obtained necessary wildlife clearance, forest clearance, letter of intent issued by DTCP Haryana for setting up of residential plotted colony on the additional land, airport clearance etc. They submit that on 23.03.2010, after the aforesaid clearances have been obtained, DTCP Haryana approved layout plan of the projected residential colony and granted license no. 28 of 2010 to the developer for developing plotted cum group housing colony on the subject land.

They further added that the delay caused in delivery of plots to the respective buyers was unintentional as the developer was prevented by the restrictions imposed by DTCP on carrying out earthwork or construction work without no objection from the Irrigation Department of Haryana, which no objection was granted after a span of almost two years on 20.03.2013. Therefore, in view of Force Majeure clause in Plot Buyer’s agreement, the developer cannot be said to be guilty of deficiency in service.

State Commission’s Order 

State Commission in all the complaints found the developer guilty of deficiency in service as it had failed to deliver possession of the plots within the stipulated time and allowed the respective buyers by directing the opposite party to refund the money paid by the buyers against the consideration amount to the respective buyer along with 12% interest p.a.. Besides, Rs.25,000/- was awarded as compensation and Rs.10,000/- as litigation expenses in each case.

NCDRC’s observations

It is not the case of the developer that while entering into the agreement, the developer disclosed about the restraint letter dated 16.03.2011 issued by DTCP Haryana.  Thus, it is clear that developer by concealment of material fact defrauded the buyers to execute the agreement contained Force Majeure clause, which in our considered opinion is unfair practice amounting to deficiency in service.

As the agreement containing Force Majeure clause has been executed by concealment of material fact on the part of the developer, the aforesaid agreement is not binding on the buyers.  Thus, appellant cannot take benefit of said clause.  In view of the discussion above we do not find fault with the finding of State Commission holding the developer to be guilty of deficiency in service and directed the developer to refund the money paid by the respective buyers with 12% interest besides payment of compensation and litigation expenses.

The Logical Buyer’s view

While there is no denial that at times there could be delays in obtaining approvals because of bureaucratic delays, it is the duty of the developer to inform the buyers about all such orders/delays before making any allotment is made. If they choose to conceal the infirmation, they must compensate the buyers.

We urge the Government to take necessary steps minimize the bureaucratic delays in the housing sector.

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