National Consumer Forum orders refund at 18% for long delays

Few days back we analysed a recent judgement where court had directed the builder to pay higher compensation at the rate of 12% to the flat buyers. You can read more about it here : NCDRC awards 12% delay compensation

While above case fits well for the buyers who can foresee the deliveries of their apartments in near future. For those whose project is completely stuck and abandoned by builder, there is yet another landmark from “National Consumer Disputes Redressal Commission (NCDRC)”. On August 14, 2015, Justice V.K. Jain announced that buyers money should be refunded at 18% per annum from the date of deposit till the date of payment.

What makes this cases interesting is even though the apartment cost was below 1 Crore as statutory requirement to file case in NCDRC, court admitted the complaint and allowed individual’s flat cost to be calculated at prevailing market rates and also consider cost escalation.

edit[16/11/15]: Supreme Court Uphold the NCDRC Order. The SC said they do not find any anomaly in the NCDRC Judgement and buyers are entitled to get the refund at 18% pa. Copy of SC order can be found here: Unitech Supreme Court Order dated 11-12-15

The Logical Buyer will try to simplify the complex judgement  of NCDRC in buyer’s friendly language.

Case Highlights: 

Unitech launched a project known as Unitech Habitat, Greater Noida in July 2006. Builder promised to deliver the flats in 6 months time period to the complainant (it appears complainant booked at late stage and not 2006). However, builder failed to deliver the apartments within time frame agreed upon in the allotment letter.

Home Buyer’s Grievances:

  • Buyers alleged that they have paid 95% to the builder as per payment plan.
  • Project by itself is nowhere near completion.
  • Buyers seek refund of the amount paid by them along with interest at the rate of 18% per annum.

Builder’s Defence:

  • Amount paid by the complainants being less than Rs.1,00,00,000/- in each case, this Commission lacks pecuniary jurisdiction to entertain the complaints.
  • As per BBA, builder is required to pay only the holding charges calculated at Rs.5/- per sq. ft. per month of the super area for the period of delay in offering delivery
  • Delay is attributable to Force Majeure Clause which, inter alia,  include recession in the economy, affecting the availability of the resources such as labour and raw material etc.
  • Major disruption in the construction activity of the builder due to massive agitation and strikes by farmers whose lands were acquired by NOIDA.
  • environmental clearances and the procedure for obtaining such clearances led to delay in construction schedule.

Court’s Observations: 

  • Builder claims that interest claimed by the complainants cannot be termed as compensation and if the interest component is excluded, the pecuniary value of the complaint does not exceed Rs.1,00,00,000/- except in one case. [For better understanding, this argument is explained in detail at the end of article.]
  • The complainants in our opinion cannot be compelled to accept the aforesaid alternative flats, after nine year of their having booked the flats with the opposite party.
  • Refund of the principal amount along with interest at the rate of 10% per annum, such an offer in our view would constitute an unfair trade practice considering that as per the agreement between the parties the flat buyers were required to pay interest at the rate of 18% per annum compounded quarterly in the event of default.
  • It is a matter of common knowledge that, there has been substantial appreciation in the land value in Greater Noida, since 2006.  This can be verified even from a comparison of the Circle rates of land in Greater Noida in the year 2006, with the circle rates of land in 2015, which is an information available in public domain.
  • It can also not be disputed that there has been steep increase in the cost of construction in last about nine years.  Therefore, if the complainants have to purchase today the built up flats of the same size and specifications and in the same locality, the cost may not be less than the price agreed to be paid by the complainants to the opposite party, and interest thereon at the rate of 18% per annum.
  • The complainants are also entitled to suitable compensation for the mental agony and harassment undergone by them in last about nine years, awaiting a roof over their head, and making numerous calls and visits to the office of the opposite party.
  • So called agitation of the farmers took place in Noida Extension, whereas the project in dispute is located in Greater Noida. Several builders including the Unitech itself had completed and delivered other projects in the same locality which clearly shows that there was no impact of agitations at the project site.

The Judgement:

Builder to refund the amount paid to it by the buyers, along with compensation in the form of simple interest on that amount, at the rate of 18% per annum from the date of deposit till the date of payment. The payment shall be made within six weeks from today.

edit[16/11/15]: Supreme Court Uphold the NCDRC Order. The SC said they do not find any anomaly in the NCDRC Judgement and buyers are entitled to get refund at 18% pa.

NCDRC Jurisdiction clarification for property value below 1 Crores : 

The first question which arises for our consideration in these cases is as to whether this Commission possesses the requisite pecuniary jurisdiction to entertain these complaints. Section 11(1) of the Consumer Protection Act read with Section 21 of the Consumer Protection Act to the extent it is relevant provides that this Commission shall have jurisdiction to entertain complaints where the value of the goods or services and compensation if any claimed exceeds Rs.1,00,00,000/-. The contention of the learned counsel for the opposite party is that interest claimed by the complainants cannot be termed as compensation and if the interest component is excluded, the pecuniary value of the complaint does not exceed Rs.1,00,00,000/- except in one case. The learned counsel for the complainants on the other hand contended that the interest which they have claimed along with refund of the principal sum even if not so described specifically, is by way of compensation only, since the opposite party has been deficient in rendering services to the complainants by not delivering possession of the flats on or before the time agreed in this regard.

In our view, the interest claimed by the flat buyers in such a case does not represent only the interest on the capital borrowed or contributed by them but also includes compensation on account of appreciation in the land value and increase in the cost of construction in the meanwhile.

There has been steep appreciation in the market value of the land and cost of construction of the residential flats in Greater Noida in last about 7-10 years and consequently the complainants cannot hope to get a comparable flat at the same price which the opposite party had agreed to charge from them. In fact it would be difficult to get a similar accommodation, even at the agreed price plus simple interest thereon at the rate of 18% per annum. Therefore, the payment of interest to the flat buyers in such a case is not only on account of loss of income by way of interest but also on account of loss of the opportunity which the complainants had to acquire a residential flat at a particular price.

Full copy of judgement can be downloaded from here: NCDRC Judgement – Unitech Habitat – Refund at 18 Percent

“The Logical Buyer” suggest that for those projects which are stuck for long time, instead of praying for the construction to start, buyers must exercise their rights and approach Consumer Forums for higher compensations.

Share and spread the awareness.

7 thoughts on “National Consumer Forum orders refund at 18% for long delays

  • August 16, 2015 at 10:51 am
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    Good effort by Logical buyer to explain it in lay mans language

  • November 17, 2015 at 7:23 pm
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    parties name in Supreme Court or the appeal no would be helpful in downloading the judgment. please consider this.

  • December 17, 2015 at 12:25 pm
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    I have a similar case with JAYPEE GROUP where I had booked Studios Apartment in 2012-13 but no work has even been started out there. On writing several mails to the company, NO RESPONSE is received whether they will give refund or flat and by when?

    What should be done in this regard. Its a reputed group but playing with public hard earned money.

    Thanks!
    Harsh Juneja

  • December 17, 2015 at 1:14 pm
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    Harsh,

    Best of to try and find out other buyers who are affected just like you. Use social media to look for others. If you are not able to find, start by sending legal notice to the developer.

  • December 19, 2015 at 6:26 am
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    Hi Harsh I too booked in 2012 and Nov 2015 was the last month for handover of the apartment. My repeated visits and mails to the JAYPEE group in futile. Can we touchabse on yourlamha@gmail.com and take it forward together

  • January 10, 2016 at 9:26 pm
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    Good Efforts at explaining the position in a language that could be understood by many. Thanks for the article and look forward to many such articles from your website.

    Can you please give the full citation of of Supreme Court Reference so that it could be useful to many of us. Was the matter dismissed “in lime” or heard and a judgement passed in a Division Bench.

    With best wishes,

    R.Jambunathan

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