Force Majeure, Can Builder Escape Payment of Delay Penalty?

Force Majeure  : As per English dictionary it means “unforeseeable circumstances that prevent someone from fulfilling a contract”.

However, when it comes to Indian Real Estate, “Force Majeure” is a magical ammunition available to the Builders. For them it is “The Brahmastra” used against the property buyers in the event of willful delay in construction.

Standard form of Force Majeure clause in one sided agreements:-

For the purposes of this Agreement “Force Majeure” shall mean any event or circumstance or a combination of events and circumstances, whether occurred or likely to occur, which satisfies all the following conditions:

(i) materially and adversely affects the I lousing Project and / or the performance of an obligation of the Company; and

(ii) are beyond the control of the Company.

and includes (without limitation), subject to satisfaction of the above conditions, the following events and/or circumstances:

a) war (whether declared or undeclared), invasion, armed conflict or act of for eignenemy;
b) revolution, riot, insurrection or other civil commotion, act of terrorism or sabotage;
c) strikes, industrial disputes and/or lockouts and/or interrupting supplies and services to the Project;)
d) change in governmental policy, laws (including, any statute, ordinance, rule, regulation, judgment, notification, order, decree, permission, license or approval), including but not limited to, expropriation or compulsory acquisition by any Government of any part of the Housing Projector rights therein;

In simple terms, in the event of delay in delivery of the property in time, builder can at anytime invoke force Majeure . We recently analyzed few of the recent NCDRC orders.

Builder’s excuses while  invoking Force Majeure:-

  1. Real Estate Industry is adversely affected due to local and national economic conditions.
  2. There is recession in the economy resulting in the availability of labour and raw-materials becoming scarce.
  3. Common-wealth games organised in October 2010 resulted in extreme shortage of labour in the NCR region.
  4. Shortage of labour due to implementation of social schemes like National Rural Employment Guarantee Act (NREGA) and Jawaharlal Nehru Urban Renewal Mission (JNNURM).
  5. Court stopping of use of ground water for construction activities.
  6. Shortage of bricks due to restrictions imposed by Ministry of Environment and Forest on brick klins.
  7. Shortage of sand due to mining having been suspended.
  8. Excessive monsoon in NCR region.
  9. Farmers agitations etc..

However, “Honorable National Consumer Disputes Redressal Commission (NCDRC)” have dismissed above mentioned contentions without consideration.

Recent court observations on Force Majeure:-

The exceptional circumstances which could justify delay in hand over the possession of the apartments are :-

  1. Lock-out , Strike, Slow-down, Civil Commotion.
  2. War, enemy action, terrorist action, earthquake or act of God and any reason or circumstance beyond the control of the developer.
  3. The delay in handing over the possession of the apartments could also be justified if there was to be a new legislation, regulation or order suspending, stopping or delaying the construction of the complex and the apartments.

Court further observed that:

  1. Neither any new legislation was enacted nor an existing rule, regulation or order was amended stopping suspending or delaying the construction of the complex.
  2. There is no allegation of any lock-out or strike by the labour at the site of the project.
  3. There is no allegation of any slow-down having been resorted to by the labourers of the opposite party or the contractors engaged.
  4. There was no civil commotion, war, enemy action, terrorist action, earthquake or any act of God which could have delayed the completion of the project.
  5. Courts find no merit in the plea that the completion of the project was delayed due to non-availability of water, sand and bricks in adequate quantity.

Conclusion:

Court concluded that “there is no escape from the conclusion that the delay in construction of the apartments cannot be attributed to any of the reasons mentioned in clause of the Buyers Agreement”.

We at “The Logical Buyer” suggest that individuals or the buyer’s association should not  accept above mentioned reasons by the developers for the delays. If the developer still insist on the Force Majeure , one should think of approaching the Consumer Courts.

 

7 thoughts on “Force Majeure, Can Builder Escape Payment of Delay Penalty?

  • September 22, 2015 at 11:17 pm
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    Very informative and useful

    this is the first matter i have read and liked will be reading on the reviews on property related problems.

  • September 23, 2015 at 8:28 am
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    Thank you Lalit for good words, that encourages us to bring more content.

  • October 19, 2015 at 12:06 pm
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    Extremely informative and this gives me strength to fight for my right.Thank you very much

  • September 25, 2016 at 6:07 pm
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    For how long shall we wait to ask the refund of service tax on under construction flat to see if it is chalanged in SC or issue of order by Govt of India.

  • September 25, 2016 at 6:08 pm
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    Thanks for useful information.Very informative.

  • October 1, 2016 at 8:53 am
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    There is no clarity from govt so far, it makes sense to send a notice to developer though.

  • December 18, 2018 at 8:44 pm
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    This is the first and foremost excuse of any builder today covered under the Ambit of RERA in not providing the possession on time but courts should see whether the delay is justified or not.

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