Scrapped project or delay in project Clearances, pay penalty at 18% – NCDRC

It has been observed that builders sell the apartments to home buyers even before they have clear title of the land. In other cases, even if they have the clear title of the land, project does not start for months. Most of the time the excuse is that the delay was because of the delay on approval of building / layout plan or other clearances from relevant authorities. Builders often refuse to pay the delay compensation for such delay periods. Sometimes these delay runs into years. Builder also played time barred / limitation card which was struck down by the court.

National Consumer Disputes Redressal Commission (NCDRC) however have put this argument to the rest and held the developer responsible for not obtaining approvals before selling the apartments. The commission observed that:

As regards the delay in approval of the building plans, we have no information as to when the said building plans were approved by GNIDA, but in our opinion, the developer ought not to have accepted money and entered into agreement with the buyers without approval of the building plans by GNIDA.  If the developer chose to accept money from the flat buyers and enter into agreements, undertaking to give possession within a particular time frame, without having possession of the land and without approval of the building plans, it is only itself to blame for a situation in which the construction got delayed on account of the delay in approval of building plans and physical delivery of the land to it on the spot.

Case study

Buyer booked an apartment in Unitech CAPELLA, Sector-MU of Greater Noida. The developer failed to deliver the possession of the flat by the stipulated date. Later, the developer offered apartments in alternate projects. Buyer filed complaint seeking refund of the amount along with interest on that amount @ 18% per annum. The delay in execution was mostly because of delayed approval of layout plans and clear land title. The Commission ordered refund of entire amount with 18% interest.

Buyer’s Grievance

  • Price of the flat was agreed at ₹57,96,116/- and the we paid a total sum ₹55,49,812/- to the builder.
  • Possession of the flat should be handed over to us within 40 months of the Agreement.
  • We seek refund of the aforesaid amount of ₹55,49,812/- along with ₹64,93,279/- as interest on that amount @ 18% per annum computed w.e.f. 03.12.2007 and compensation for mental pain, harassment etc. quantified at ₹50,00,000/-.

Developer’s Arguments

  • Land was allotted to us  by Greater Noida Industrial Development Authority in Sector MU of Greater Noida on 15.09.2006 but  actual physical possession could not be handed over to the developer due to agitation by local farmers.
  • Due to global meltdown and local market dynamics in real estate industry, the investment value in this project underwent a sea-change and the project therefore got belated due to circumstances beyond the control of the developer .
  • The amount paid by the buyers was less than ₹1 Crore, this Commission does not have pecuniary jurisdiction to entertain this complaint.

Court’s Observations

  • We find no substance in the plea that the construction of the project was delayed on account of agitation by the farmers.
  • Builder has placed on record a copy of the possession certificate dated 29.01.2007 whereby the possession of a plot of land measuring 404172.36 sq. mtrs. bearing no.GH-01 in Sec-MU was taken over by it on 29.01.2007.  In view of the aforesaid document, it would be difficult for us to accept the contention that actual possession on the site was not taken over by the builder.  Had that been the position, the possession letter would not have been executed by the developer .
  • We are unable to appreciate how the developer could possibly to have accepted money from the buyers and executed agreement with them without having physical possession on the site.
  • We are unable to appreciate how the developer could accept money from the flat buyers and enter into agreement with them without getting the building plans approved.
  • As far as the flat buyers is concerned, considering the commitment made to them by the builder, they were justified in believing that the possession of flat would be delivered to them on or before the last date stipulated in the agreement in this regard.
  • Aggregate of the amount paid by the buyers and compensation in the form of simple interest @ 18% per annum on that amount comes to more than ₹1 Crore.  Therefore this Commission does possess the requisite pecuniary jurisdiction.

The Order

  • The developer  is directed 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

Copy of the order: Unitech CAPELLA – NCDRC Judgement

Brave enough to read more? Read about observation on limitation and buyers being NRI. 

Discussion on limitation or time barred

The developer argued that the complaint was time barred.  The contention of the developer in this regard is that since last payment was made on 17.01.2008, the complaint could have been filed latest by 17.01.2010. Section 24-A of the Consumer Protection Act, to the extent it is relevant, provides that the complaint shall not be admitted unless it is filed within two years from the date on which the cause of action has arisen.  The term ‘cause of action’ has not been defined in the Act but it is generally understood to mean the whole set of facts which the party will have to prove, in order to succeed in his claim.

Vide email dated August 19, 2011 sent to the buyer, the developer offered to provide a unit in Habitat and Verve in Greater Noida and he was requested to come to their office for selection of unit and pricing.  Vide email dated 14.05.2013, the developer again informed the buyers that they had units in Unihomes Phase 3 in Sec-113 Noida and in Unihomes Phase 2, Sec-117.  He was asked to go through the website and provide his preference.  He was told that he would be provided the unit in the project selected by him.  The aforesaid emails constitute an acknowledgement of liability, within the meaning of Section 18 of Limitation Act and therefore a fresh period of limitation starts from the date on which the aforesaid acknowledgments were made.

Observations on NRIs

As regards the plea that the complaint has not been instituted by competent person, I find no merit in the plea taken by the developer.  The complaint has been instituted by Shri Naresh Kumar as Special Attorney of the buyers Shri Yogesh Sharma and Smt. Kusum Sharma, who are permanent residents of USA.  The aforesaid power of attorney has been authenticated by Public Notary namely Rebecca Joy Melin of USA on 01.03.2014.  She certified that Yogesh Sharma and Kusum Sharma subscribed to the instrument and acknowledged to her that they had executed the same.  Thus, the Power of Attorney by Shri Yogesh Sharma and Smt. Kusum Sharma in favour of Shri Naresh Kumar, who appears to be the brother of Shri Yogesh Sharma and brother in law of Smt Kusum Sharma has been duly authenticated by a Public Notary.

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