22
Apr2019

Homebuyers to seek refund on delayed Allotment of 1 year by the Builder. Possible?

Over the past couple of years a plethora of cases have emerged against builders who have failed to deliver Apartments and Shop cum Office Units to Buyers. Hence, Buyers look for exhaustive remedies to either get a refund or get delivery of possession. The remedies available to the buyers are either filing an application under section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) as the amount raised from a buyer who has been referred to as an allottee for the purpose of a real estate project has been given the status of financial debt vide IBC (Second Amendment) Act, 2018 which has inserted the explanation to Section 5 Clause 8 (f) and hence, a person to whom financial debt is owed is a financial creditor under Section 5 Clause 7 under IBC, however, this amendment is under consideration before the Supreme Court of India, or file a consumer complaint against the builder under the Consumer Protection Act, 1986. In case the buyer takes the latter route then he can ask for refund from the builder if the delivery of the said project has been delayed by a period of 1 year. In an earlier case decided by the Supreme Court of India, it was held that a homebuyer cannot wait indefinitely for possession and that a period of seven years is what is beyond what is reasonable.[1]

Now, in a decision by the National Consumer Disputes Redressal Commission (“NCDRC”)it has been held that if the possession of the flat was not delivered by the builder and a year has passed since then the buyer can claim refund of the amount deposited by him.[2] In the present case the buyer was not delivered possession of his apartment on the time as was stipulated in the Buyer Agreement and also the plan of the project changed significantly due to which the buyer asked the builder for refund of the amount which the builder refused. Subsequently, the buyer moved the NCDRC.

The Complainant’s contention in the said case was that the terms of the buyer agreement entered into between the parties were biased and one sided in favour of the builder as the builder charges compound interest @ 18% per annum in the event of the delay on the part of the complainant in making payment to him but seeks to pay less than 3% per annum of the capital investment, in case he does not honor his part of the contract. By defaulting in giving timely possession of the flat to the buyer which was upheld by the NCDRC and held that the compensation paid to the complainant is not limited to that stipulated in the Buyer Agreement and has to be based upon the loss suffered by the complainant due to the deficiency in services rendered by the Builder.

 

The contention of the opposite parties that the complainant failed to fulfill his part of the Agreement by applying Section 54 and 55 of the Indian Contract Act, 1852 was negative by the NCDRC as in the cases mentioned by them the parties had not paid the amount required to be paid for the project and in the present case the Complainant has made the payments till the 7th installment and stopped payment as there was no progress in the project. Also, The OPs have not been able to complete the project in time and deliver the possession to the complainant in time as per the Buyer Agreement. It is now clearly established that the complainant has right to ask for refund if the possession is inordinately delayed and particularly beyond one year.

 

The Court hence, partly allowed the complaint and ordered the Opposite parties to deliver possession of the Apartment by the date in the Agreement and pay interest @ 6% p.a. from the due date of possession to the actual date of possession on the amount deposited by the Complainant and in case the possession of the apartment is not delivered then the complainant will be entitled to refund of the deposited amount with interest @ 10% p.a.This order by the NCDRC is a landmark in favour of buyers who have suffered due to the builders diverting the funds collected for construction for other purposes.

Our Corporate Professional Team is ever willing to provide assistance on any issue concerning GST, Insolvency and Bankruptcy Law, Business Model Advisory in India and Abroad, Customs Law, Corporate & Commercial Advisory, IPRs. Secretarial Compliances, Agreement Drafting & Negotiations etc. you may write us on connect@legallands.com, contact@legale-services.com

[1] Kolkata West International City Pvt. Ltd. v. DevasisRudra, CIVIL APPEAL NO. 3182 OF 2019

[2]Shalabh Nigam v. Orris infrastructure Pvt. Ltd, CC. No. 1702 of 2016

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