NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
R.K. Agrawal, President
Harsh Verma and Anr. – Complainants
versus
M/s. IREO Grace Realtech Private Limited and Ors. – Opp. Parties
Consumer Case No.2434 of 2018
Decided on 4.10.2021

IMPORTANT POINTS
(1) Delay in obtained permits cannot be claimed as Force Majeure defense
(2) Unjust agreement in favor of builder cannot be upheld
(3) COVID-19 can be claimed as a Force Majeure defense

Headnote:

(A) Consumer Protection Act, 1986 – Section 21(a)(i)[Section 58(1)(a) –Consumer Protection Act, 2019] – Complaint before NCDRC in matters exceeding valuation of Rs. 1 Crore – Complainant booked a flat in Opp. Party’s flat scheme – Flat was promised to be delivered in 42 months – Construction delayed due to delay in obtaining fire permits – Further delay caused by COVID-19 - Flat area changed by developer – Complainant stopped paying installments due to delay in providing possession as flat permit not provided by Municipal authorities – Complainant asked for refund – Builder imposed 20% penalty for delay in installments as per agreement - Possession not granted – Complaint filed before NCDRC for deficiency in service and unfair trade practice

(B) Consumer Protection Act, 1986 – Section 2(1)(r) – Unfair Trade Practice – Flat agreement providing meager compensation for delay in providing possession and imposing huge cost for delay in paying installments held unjust and one-sided

(C) Consumer Protection Act, 1986 – Section 2(1)(g) - Deficiency in service – Force Majeure defense claimed for delay in construction held to be partly valid in lieu of COVID-19 – Delay in getting fire permits not condoned - Onus on OP to get to requisite permits before offering flats - Agreement declared one-sided and unjust promising just Rs. 7.5/sq. feet as compensation – NCDRC awarded refund within 3 months along with 9% simple interest calculated from the day of promised possession.

Held: The Hon’ble Supreme Court dealt with all the contentions raised by the Opposite Party Developer and disposed off these Civil Appeals vide their Judgment dated 11.01.2021 in the case “Ireo Grace Realtech Pvt. Ltd. vs. Abhishek Khanna & Ors.” [Civil Appeal No. 5785 / 2019 & other connected Appeals].The Hon’ble Supreme Court had held that 27.11.2018 would be the relevant date for offer of possession by observing as under:-

“On 27.11.2014, the Director, Haryana Fire Service granted approval to the Fire Fighting Scheme subject to the conditions mentioned therein. The computation of the period for handing over possession would be computed from this date. The Commitment Period of 42 months plus the Grace Period of 6 months from 27.11.2014, would be 27.11.2018, as being the relevant date for offer of possession.”

Hon’ble Supreme Court also held that the Agreement is one-sided and the Opposite Party Developer cannot compel the Apartment Buyer to be bound by the one-sided contractual terms contained in the Apartment Buyer’s Agreement by observing as under :-

“We are of the view that the incorporation of such one-sided and unreasonable clauses in the Apartment Buyer’s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act. Even under the 1986 Act, the powers of the consumer fora were in no manner constrained to declare a contractual term as unfair or one-sided as an incident of the power to discontinue unfair or restrictive trade practices. An ‘unfair contract’ has been defined under the 2019 Act, and powers have been conferred on the State Consumer Fora and the National Commission to declare contractual terms which are unfair, as null and void. This is a statutory recognition of a power which was implicit under the 1986 Act.

In view of the above, we hold that the Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer’s Agreement”

10. Hon’ble Supreme Court on the issue “Whether the Apartment Buyers are entitled to terminate the Agreement, or refund of the amount deposited with Delay Compensation” held as under:-

“In the present case, the allottees before this Court in the present batch of appeals, can be categorised into two categories:-

i) Apartment Buyers whose allotments fall in Phase 1 of the project comprised in Towers A6 to A10, B1 to B4, and C3 to C7, where the Developer has been granted occupation certificate, and offer of possession has been made, are enlisted in Chart A;

ii) Apartment Buyers whose allotments fall in Phase 2 of the project, where the allotments are in Towers A1 to A5, B5 to B8, C8 to C11, where the Occupation Certificate has not been granted so far, are set out in Chart B below.

………..

Chart A allottees (i) We are of the view that allottees at Serial Nos. 1 and 2 in Chart A are obligated to take possession of the apartments, since the construction was completed, and possession offered on 28.06.2019, after the issuance of Occupation Certificate on 31.05.2019. The Developer is however obligated to pay Delay Compensation for the period of delay which has occurred from 27.11.2018 till the date of offer of possession was made to the allottees.

……..

Chart B allottees

(i) Insofar as the allottees in Chart B are concerned, they have paid part consideration, in most cases up to the 4th instalment till 2017, when they found that there was no progress being made in respect of the Towers in which the apartments had been allotted to them. It is an admitted position that Occupation Certificate for Towers A1, A2, A3, B7, C9 and C11, in which the allotments have been made for this category has not been issued by the Municipal Corporation

The apartments have not been ready for allotment even as on 30.06.2020, as per the date fixed before the RERA Authority.

(ii) The allottees submitted that they were facing great hardship since they had obtained loans from Banks for purchasing these apartments, and were paying high rates of interest. In 2017, when they realised that there was no construction activity in progress, they were constrained to file consumer complaints before the National Commission, and then discontinued payment of further instalments.

(iii) The Developer made an alternate offer of allotment of apartments in Phase 1 of the project. The allottees are however not bound to accept the same because of the inordinate delay in completing the construction of the Towers where units were allotted to them. The Occupation Certificate is not available even as on date, which clearly amounts to deficiency of service. The allottees cannot be made to wait indefinitely for possession of the apartments allotted to them, nor can they be bound to take the apartments in Phase 1 of the project. The allottees have submitted that they have taken loans, and are paying high rates of interest to the tune of 7.9% etc. to the Banks.

Consequently, we hold that the allottees in Chart B are entitled to refund of the entire amount deposited by them.

(iv) In so far as award of compensation by payment of Interest is concerned, clause 13.4 of the Apartment Buyer’s Agreement provides that the Developer shall be liable to pay the allottee compensation calculated @ Rs. 7.5 per sq. ft. of the Super Area for every month of delay, after the end of the Grace Period. The compensation will be payable only for a period of 12 months.

The Apartment Buyers in their Complaint filed before the National Commission made a prayer for refund of the amount deposited alongwith Interest @ 20% p.a. compounding quarterly till its realisation. The Apartment Buyers, in their submissions have stated that they have obtained home loans on which Interest @ 7.90% p.a. is being paid, even as on date. We have considered the rival submissions made by both the parties. The Delay Compensation specified in the Apartment Buyer’s Agreement of Rs. 7.5 per sq. ft. which translates to 0.9% to 1% p.a. on the amount deposited by the Apartment Buyer cannot be accepted as being adequate compensation for the delay in the construction of the project. At the same time, we cannot accept the claim of the Apartment Buyers for payment of compound interest @ 20% p.a., which has no nexus with the commercial realities of the prevailing market.

We have also taken into consideration that in Subodh Pawar v. IREO Grace, this Court recorded the statement of the Counsel for the Developer that the amount would be refunded with Interest @ 10% p.a. A similar order was passed in the case of IREO v. Surendra Arora. However, the Order in these cases were passed prior to the out-break of the pandemic.

We are cognizant of the prevailing market conditions as a result of Covid–19 Pandemic, which have greatly impacted the construction industry.

In these circumstances, it is necessary to balance the competing interest of both parties. We think it would be in the interests of justice and fairplay that the amounts deposited by the Apartment Buyers is refunded with Interest @ 9% S.I. per annum from 27.11.2018 till the date of payment of the entire amount.

The refund will be paid within a period of three months from the date of this judgment. If there is any further delay, the Developer will be liable to pay default interest @ 12% S.I. p.a. (v) The Developer shall not deduct the Earnest Money of 20% from the principal amount, or any other amount as mentioned in Clause 21.3 of the Agreement, on account of the various defaults committed by the Developer, including the delay of over 7 months in obtaining the Fire NOC.”

Result: Complainant awarded refund with interest