From ET Realty
When a project is abandoned by the builder, can the flat purchaser insist on a refund of the amount paid by him? Or would the builder be entitled to insist that the customer should opt for another flat in some other project? In a recent judgment dated January 4, the National Commission’s Bench of Justice J M Malik and Dr S M Kantikar, has held that the flat purchaser would have the right to get his money back along with interest and compensation.
Case Study: Reshma Bhagat and her son Tarun sold a plot of land owned by them in Bangalore. The money had to be invested to avoid capital gains tax, so they booked a flat in Delhi in a project called Napolean I, undertaken by Supertech Ltd. The flat was a 7-star luxurious 4BHK apartment with servants quarters in Czar Suites, admeasuring 2,490 sq ft super built up area, costing Rs 73,84,300.
The allotment letter stated that possession would be given latest by December 2009. In case of delay, the builder had agreed to compensate the flat purchaser by paying damages at the rate of 5% per sq ft per month for a period of 12 months. An agreement was also executed.
Till September 2008, the Bhagats had paid Rs 63,99,727, nearly 87% of the agreed amount. When they went in March 2009 to inspect the progress of work, they found that no construction was being carried out. They recorded this in a letter, followed by two reminders. The builder responded, saying possession would be given by October 2010 and he would pay compensation for the delay as per the agreement. The Bhagats claimed that the agreed compensation for delayed possession was too low, and demanded penal interest at a rate equal to banks levying on corporate houses for loans advanced. The builder later admitted he had not constructed any 4 BHK flats in Napoleon I project, and instead offered a similar flat at another location. This was not acceptable to the Bhagats, who sought a refund of the entire money paid by them, along with interest. As the builder refused to comply , they filed a complaint before the National Commission, claiming a refund of their money along with interest, compensation and costs, totalling about Rs 1.4 crore.
The builder contested the complaint. He questioned the jurisdiction of the National Commission. The builder also claimed the Bhagats were investors and not bonafide purchasers. The builder argued that the agreement provided that he would be entitled to offer an alternative flat, but the Bhagats had not accepted this offer.
The failure to construct Napolean I project was due to circumstances beyond its control, so it would be incorrect to consider the delay as a deficiency in service.
The National Commission overruled all the objections. It held the complaint to be maintainable as jurisdiction would have to be determined according to the value of the reliefs claimed, which was Rs 1.4 crore.Regarding offer of alternative flats, the commission held that nobody could force a consumer to accept another flat. Such a clause in the agreement would be arbitrary and un-enforceable. The builder alsofailed to produce any evidence to show why the project had been delayed.
Accordingly , the commission directed the builder to refund the entire amount of Rs 63,99,727 along with interest at 18% pa from the date of payment till refund.
Impact: A builder cannot compel the flat purchaser to opt for any other flat in lieu of the one agreed to be sold. The customer would have the right to get a refund of his money, along with suitable compensation.