Builders Liable to Pay Higher Compensation to Buyers If Project Delays: NCDRC

Chandigarh has always enjoyed a celebrity status in the country and all aspiring for quality living are glued to the city like paparazzi. Resultingly, areas around UT Chandigarh has witnessed heavy growth in housing and construction projects.

But, we all know the timeline these builders follow to transfer the possession and how often it is unashemedly and without remorse postponed for months and years. For one or the other excuse, they keep letting their clients drag their heels in their offices. And, demonetisation is the new addition in the long list of their excuses.

Now, no excuse or rationale is going to stand good in the court of law. As per the recent National Consumer Disputes Redressal Commission (NCDRC) judgment A builder has to pay a higher rate of interest when he defaults in handing over possession on time.’

The demeaning clause in the builders’ agreement which either absolves them of the liability to pay interest, or stipulates payment of measly interest if they delay the project is finally going to hold no merit.

The Landmark Case that Brought About the Judgment

The judgment came through a case between Dr. Ambuj Choudhary and Omaxe Builders. 

The story is like any other middle-class person in the city who waits years for his home to be transferred to him.

  • Dr Ambuj Choudhary had booked a flat in aproject called Omaxe Parkwoods in Himachal Pradesh which was being constructed by Omaxe Builders. He did his part by giving timely installments, but the builder failed to stick to its commitment of transferring possession in 18 months.
  • Aggrieved, he filed a complaint before the Chandigarh State Commission (as agreement was signed here), alleging that
  1. the builder had made false promises through misleading advertisements.
  2.  sought refund of the amount paid by him with 18% interest, rent for alternative accommodation, etc.
  • On its part, Omaxe maintained that
  1. construction was in full swing and possession would be given in due course and
  2. blamed Choudhary for failing to make timely payment of installments.
  • The State Commission considered the evidence and ordered
  1. the builder to refund the amount received for the flat with 6% interest.
  2. And, for the delay, monthly compensation at the rate of Rs 5 per sqft of super built-up area was also awarded as per terms of agreement.
  3. Further, compensation of Rs 1 lakh and litigation costs of Rs 20,000 were also awarded.
  • This order was challenged in appeal, where the builder wanted the order to be set aside while Choudhary wanted the interest rate enhanced to 18%.
  • The National Commission concluded that
  1. acceptance of money in the absence of a clear schedule in place for construction and handing over possession would constitute a deficiency in service.
  2. It rejected the builder’s contention that Choudhary was to be blamed for not paying instalments in time, observing that a flat purchaser cannot be faulted when the builder has delayed construction.
  3. The National Commission observed that interest at 6% was payable if delay was due to circumstances beyond the builder’s control.
  4. As there was no such evidence, the flat buyer would be entitled to a higher interest rate. The Commission also held that Choudhary would be entitled to get his refund with 18% interest.

Definitely a silver lining for buyers who are long waiting for their flats and properties.