Builder has to pay compensation if project is delayed

Building projects are often delayed due to disputes between a builder, land owner and developer. Builders try to term these as force majeure, which means due to circumstances beyond their control, to avoid being held liable for deficiency in service. In a recent ruling, the National Commission has held that such disputes cannot be termed force majeure, and a consumer would be entitled to claim a refund along with interest and compensation when the builder is unable to complete the housing project in time. However, a builder can neither unilaterally extend the date of possession nor insist on allotting alternate flat or plot to escape refunding the amount.
Case Study: Shahin Mulla wanted to purchase a residential unit in “Amar Prem”, a housing project in Goa, to be developed by Utopia Projects. The entire consideration of Rs 30 lakh was paid in two instalments of Rs 15 lakh each.
The agreement for construction and sale was executed thereafter on February 24, 2012. It stipulated that possession would be given by September 2013, but the builder would be entitled to a grace period of four months, i.e. till January 2014.
When Mulla visited the site in August 2013, she found that even the foundation had not been laid. She got a legal notice issued to the builder, which was ignored. So she filed a complaint before the Goa State Commission.
The builder contested the complaint, explaining that they had been assigned development rights by RPC Builders and Developers, who had later committed various breaches and were also demanding extra payment for the property. As a result of the dispute, work could not commence. The builder termed the dispute as force majeure and not due to any wilful default. Utopia Projects also pointed out that the complaint was premature as it had been filed prior to January 2014, which was the date of possession inclusive of the grace period.
The state commission observed that the agreement provided that in case of any delay beyond the grace period, the builder would pay the purchaser a monthly compensation at Rs 50 per sq.ft. The defence of force majeure cannot be invoked as the agreement had not been terminated due to inability to perform it.
The state commission concluded that there was deficiency in service and ordered the builder to refund the amount of Rs 30 lakh along with 5% interest from the date of payment of each instalment till the extended date of possession. For the delay, the commission directed payment of a monthly compensation of Rs 50 per sq. ft. from February 1, 2014 till the date of payment. For mental agony, a further amount of Rs 1 lakh was awarded, which would carry 9% interest if not paid within 30 days.

Utopia Projects appealed to the National Commission, contending that the company had formulated a revised schedule, but Mulla was not willing to accept it. In its judgment of April 1, 2015 delivered by M Shreesha for the Bench along with Justice DK Jain and Vinay Kumar, the National Commission held that a consumer is not concerned with the internal disputes between the landowner, developer or contractor. A builder cannot take shelter by wrongly terming internal disputes as force majeure. It ruled that Mulla was well within her rights to demand possession within the stipulated time or else seek a refund along with compensation. Accordingly, the National Commission rejected the builder’s appeal, holding that the state commission had rightly allowed Mulla’s claim.

 Conclusion: The consumer has the right to refund along with compensation when a builder delays possession beyond the agreed time.