Buyer can refuse flat if not built in time and get money back: NCC

IN A judgment with wide ramifications, the National Consumer Commission has ruled that a flat-buyer agreement was not sacrosanct, and a buyer was entitled to get his money back from the developer if he has lost interest in the property due to delay in its construction.

The apex consumer body further obligated a developer to pay extra money to compensate the buyer on account of appreciation in the land value and increase in the cost of construction, besides paying the interest on the money being refunded.

In an order released earlier this month, a bench presided over by Justice V K Jain said a flat-buyer agreement would bind the parties only when a buyer was willing to take over the possession of his property despite the delay.

This agreement invariably includes a clause that a developer would compensate a buyer in case of delay in construction. But if the buyer fails to settle the account after issuance of an offer letter, the agreement stipulates, he or she shall be bound to pay to the developer damages as holding charges.

The Commission also found fault with a clause entitling a developer to recover interest from a buyer at the rate of 24 per cent per year in case of his default in payment, saying “ it gives an unfair advantage to the seller over the buyer”.
“In our opinion, the aforesaid clause applies only in a case where construction of the flat is delayed but despite delay, the buyer accepts possession of the said flat from the seller, and, consequently, accounts have to be settled between the parties. At that stage, the buyer would pay the agreed holding charges to the seller, who will pay the agreed compensation on account of delaying the construction of the flat,” the Commission said.

It noted: “The aforesaid clause, in our opinion, would not apply to a case where the buyer, on account of the delay on the part of the seller in constructing the flat, is no more interested in the flat and wants to take refund of the amount, which he had paid to the seller.”

The Commission was adjudicating a batch of three complaints by buyers against Parsavnath Developers. The buyers had bought flats in ‘Parsvnath Palacia’ and ‘Parsvnath Privilege’ housing projects in Greater Noida in Uttar Pradesh. They sought refund of money along with adequate compensation due to delay in construction of flats. The complainants had paid 95 per cent of the total cost of their flats, booked in 2007-08.

Parsvnath countered the claims, arguing a buyer could not demand damages beyond what was stipulated in the flat-buyer agreement. It argued that as per the tripartite agreement executed between the developer, the complainants, and the banks from which the loans were taken, the banks had lien over the refund amount, in the event of cancellation or termination of the agreement.

The Commission, however, said the complainants were “entirely justified” in seeking refund since Parsvnath had failed in completing the projects either within the agreed time of 36 months or even within a reasonable time thereafter.

Source: Indian Express
Dated: 25th February 2015

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