The NCDRC has recently ruled that buyers can seek refund from the developer if the possession of the house or flat is delayed beyond one year.
Good news for homebuyers. The National Consumer Disputes Redressal Commission has recently ruled that buyers can seek refund from the developer if the possession of the house or flat is delayed beyond one year. “The allottees have right to ask for refund if the possession is inordinately delayed and particularly beyond one year,” the NCDRC ruled in the case of ‘Shalabh Nigam Vs Orris Infrastructure Pvt Ltd and Others’, adding that “in the present case, the project is not yet complete though the possession was to be given in February, 2016.”
NCDRC, New Delhi, in fact, was dealing with a situation where Shalabh Nigam, the buyer of a flat, continued to pay instalments to the developer (Orris Infrastructure) till the 7th stage, and thereafter stopped the instalments as the buyer subsequently learnt about a huge sewage drainage canal flowing through the middle of the land where the project was being developed & which was in close proximity to the apartment booked by the buyer. Also, the developer had changed the layout of the project wherein, the club house which as per the original layout plan was meant to be near the buyer’s apartment was moved to the other side of the sewage canal.
With this background, “the buyer sought refund of the amount paid which was refused by the developer, and against such refusal, the buyer sought various reliefs from NCDRC ranging from (a) directing the developer to give possession of the flat within 6 months failing which to refund the entire amount paid along with 18% rate of interest, (b) pay interest @ 12% for the period from promised date of possession to actual date of possession on the amount paid by the buyer, (c) deliver all the promised amenities and facilities promised in the agreement, and (d) compensation of Rs 12.00 lakh to cover the mental agony and litigation cost apart from other miscellaneous relief,” says Sandeep Shah, Partner, N. A Shah Associates LLP.
It is interesting to note that the buyer was paying the instalments to the land owner whereas the development agreement was signed by the developer and the land owner. The land owner was arguing that since it was not the developer, no relief can be sought from him. Further, the developers argued that as per agreement, the buyer was entitled to relief of Rs 10/- per sq feet per month for delay in possession beyond 9 months, and hence no other compensation in terms of interest could be ordered.
Also, “it was argued that the consumer forum is authorized to order compensation as per Section 14(i)(d) of the Consumer Protection Act, 1986 and the compensation has to be based on the loss or injury suffered by the buyer due to negligence of the developer. Since no case has been made out by the buyer that it has suffered any loss due to payment of any rent or any such other thing, NCDRC cannot order any compensation. The developer also argued that there was a force majeure condition since the Hon’ble High Court of Punjab and Haryana imposed had a blanket ban on the use of ground water in the region of Gurgaon and adjoining areas for the purposes of construction, resulting in delay and as per agreement in case of a force majeure condition, no interest is payable,” says Shah.
According to Shah, NCDRC, after going through the conduct of the developer and also that of the buyer, has fulfilled its part of obligation and is justified in stopping payment of the balance instalments vide its order dated 6th May 2019, wherein the developer has been directed to:
(a) complete the construction work and hand over the physical possession of the flat by 30th September 2019 after obtaining occupancy certificate;
(b) pay interest @ 6% p.a. on the amount (deposited till scheduled date of possession) from the due date of possession till the actual date of possession. For the amounts deposited after the due date of possession, the interest will be paid till actual date of possession after ignoring the first 12 months. The interest so admissible will be adjusted from the instalment due at the time of possession;
(c) If the possession of the flat is not delivered by the 30th September 2019, the buyer shall be at liberty to take refund of the total deposited amount along with interest @10% p.a. However, since the buyer had bought the flat from the secondary market, the date of deposit will be counted from the date the buyer bought the unit and not the date of deposit of the original buyer. The developer to refund the amount with interest within 6 weeks of the demand made by the buyer;
(d) lastly, if the buyer does not ask for refund, he shall be entitled to get interest @6% per annum as already ordered till possession is handed over.
Hopefully, experts believe, with such court rulings along with the implementation of RERA, where the developers cannot change the plans without approval of the buyers, and other policy changes, the real estate market in India will be as disciplined as the markets in Singapore and other developed countries.