Delve into the legal intricacies surrounding compensation for delayed possession in a recent real estate case. The court’s analysis focused on consumer rights, contract law, and the nuances of compensation for delays in property possession. This case sheds light on the importance of legal clarity in real estate transactions and the rights of buyers in such situations.
Facts
- Buyers in Group E who sold flats during the complaint have no subsisting right.
- Communication issued on 8 August 2013 citing economic slowdown affecting construction pace.
- 337 out of 339 flat buyers in Group F had taken possession.
- Tentative schedule for delivery indicated for different towers in the project.
- Complaint before NCDRC now covers 171 flat purchasers.
- Grievances included delay in possession, reimbursement of charges, deficiency in amenities, electricity charges, and club house construction.
- NCDRC dismissed complaint by 339 flat buyers accepting defense of DLF Southern Homes Pvt. Ltd.
- Flat buyers who settled disputes during the complaint were estopped from pursuing grievances.
- Timelines for possession were extended multiple times by the developers.
- Initial complaint was by nine flat buyers of Westend Heights project in Bengaluru.
- NCDRC divided flat buyers into six groups based on possession and other factors.
- Force majeure clause in Apartment Buyers Agreement for construction delays.
- Construction progress behind schedule as per developers’ communications.
- Brochure advertised project amenities inducing buyers to invest.
- Complaint eventually dismissed by NCDRC in July 2019.
- Developers communicated revised timelines for possession multiple times citing progress in work.
- Occupancy certificate not received until a certain date as communicated by the developers.
- The developer passed on interest burden but not penalty on a proportionate basis in terms of clause 1.10, which was held unsustainable.
- Developer entitled to raise a demand on a proportionate basis from flat buyers for electricity charges under clause 23(b).
- NCDRC found an admitted delay by the developer, with compensation at Rs 5 per square foot for every month of delay which was deemed reasonable.
- Flat purchasers failed to prove the compensation stipulation of Rs 5 per square foot was unreasonable as they had already been provided credit at that rate.
- NCDRC observed both SCDRC and NCDRC awarded compensation under different heads for the singular default of delayed possession.
- Admitted delay in handing over flats to purchasers.
- Cost of the building could be allocated to flat buyers in terms of clause 23(b.
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Arguments
- Interest recovered from flat buyers related to BESCOM/BWSSB charges for electricity and water.
- Developer admitted initial collection of Rs. 1.50 lacs from each buyer towards charges.
- Delay in handing over possession ranging from two to four years deemed unreasonable by the flat buyers.
- Flat buyers not permitted to execute conveyances or receive possession under protest.
- Amenities contracted for not provided by the developer.
- Flat buyers not liable to indemnify developer for tax authorities’ interest and penalty due to developer’s tax payment delays.
- Initial lack of clarity on works contract tax liability resolved by a court judgment in 2013.
- Developer collected additional charges from buyers due to substantial load requirement for electricity.
- Buyers not liable to pay interest arising from developer’s tax payment delays.
- Deed of Conveyance transaction deemed as sale of immovable property, not service supply.
- Appellants contest developer’s entitlement to claim charges for amenities not provided
- Developer claims no evidence of coercion in executing conveyances or settlements
- Possession of complex handed over between four to six years ago
- NCDRC upheld collection of charges towards electricity based on ABA terms
- Developer argues flat buyers benefited from surrounding urban facilities despite lack of amenities
- Charges collected for entire New Town project, not just Westend Heights
- Developer compensated flat buyers for delays in possession
- RWA aware of allotment difficulties due to BDA actions
- Developer defends failure to construct facilities by arguing existing population cannot sustain them
- Developer offers refund for car parking charges or interest on deposits
- Exceptional reasons needed for consumer fora to award compensation beyond agreed rate for delayed possession
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Analysis
- The court observed that the orders of the State Consumer Disputes Redressal Commission (SCDRC) and National Consumer Disputes Redressal Commission (NCDRC) were held to be without merit.
- The developer’s failure to provide amenities and facilities as promised to the flat buyers was highlighted.
- The agreement between the developer and flat buyers included compensation clauses for delays, yet the delay ranged from two to four years.
- The one-sided nature of the Agreement to Build and Allocate (ABA) favored the developer in cases of delays.
- The court acknowledged the financial hardships and delays faced by flat buyers due to the developer’s non-compliance with possession timelines.
- The court emphasized the jurisdiction of consumer forums to award just and reasonable compensation despite the terms set in the agreement.
- The court found that the developer’s practice of delaying possession beyond the stipulated time warranted compensation beyond the agreed rate mentioned in the ABA.
- Communication exchanges between the developer and flat buyers indicated disputes over possession, conveyance, and amenities.
- The court criticized the developer for failing to fulfill promised amenities and facilities, despite receiving significant payments from flat buyers.
- The court also noted discrepancies in the treatment of delays when it came to penalties for flat buyers versus compensation for delays caused by the developer.
- The court considered the broader implications of delays on flat buyers, including financial burdens and deferred plans.
- Definition of taxes in the ABA is provided
- Definition of total price as exclusive of taxes
- Definition of deficiency of services as per the CP Act 1986
- Failure to provide flat within stipulated period considered as deficiency
- Developer’s case hinges on clause 14 of the ABA
- Developer’s obligation to complete construction within 36 months as per ABA clause 11(a)
- Exceptions allowed for force majeure conditions
- The Court distinguished between a simple transfer of immovable property and housing construction or building activity as a service under the CP Act 1986.
- Judgment clarified that compensation beyond the agreed rate can be awarded for delayed possession of a flat.
- In R V Prasannakumaar v. Mantri Castles Pvt Ltd, interest at a reasonable rate of 6% was justified for a two-year delay in possession.
- NCDRC correctly awarded interest at 10% per annum for delayed possession.
- Compensation through interest serves as a form of compensation for the deprivation of investment use due to possession delay.
- Consumers can seek compensation to alleviate harassment under the CP Act 1986.
- Award of compensation should be linked to a finding of loss or injury.
- ABA allowed the builder to charge 18% interest for instalment payment delays but had provisions for grace periods and refund in case of possession delay.
- Subsequent transferees cannot claim compensation for possession delays akin to original buyers.
- Brochure indicating amenities led to compensation award at 6% interest per annum.
- Flat purchasers cannot be forced to take possession after a prolonged delay, even after the grace period stated in the agreement expires.
- NCDRC based compensation on interest rates of house building loans from nationalised banks for delayed possession.
- Decision in Nahalchand Laloochand Private Limited v. Panchali Cooperative Housing Society Limited discussed compensation in light of property value increase due to possession.
- No strict rule can be set for compensation in cases where possession has been provided.
- The NCDRC’s reasoning on the facets of the case is flawed and contains errors of law.
- The dismissal of the complaint by the NCDRC was incorrect.
- Flat buyers are entitled to compensation for delayed possession and failure of the developer to provide promised amenities.
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Decision
- Save for eleven appellants who settled with the developer and three who sold their rights, compensation shall be paid at 6% simple interest per annum on amounts paid for flats from 36 months post ABA until possession offer after OC receipt.
- Compensation shall be in addition to Rs 5 per sq ft per month credited by developer during final accounts.
- Amounts due must be paid within one month of judgment, else will carry 9% interest until payment.
Case Title: WG. CDR. ARIFUR RAHMAN KHAN AND ALEYA SULTANA Vs. DLF SOUTHERN HOMES PVT. LTD. (NOW KNOWN AS BEGUR OMR HOMES PVT. LTD.) (2020 INSC 503)
Case Number: C.A. No.-006239 / 2019
