6% Interest on Deposits Deemed Fair Compensation for Delay in Property Possession, Rules NCDR

Published on: June 02, 2024 22:46 IST

In a major ruling, bench of Justice Ram Surat Maurya and member Bhartakumar Pandya at the National Consumer Disputes Redressal Commission (NCDRC) has stated that a 6% interest on deposits is fair compensation for delays in handing over property possession.

Case Summary:

The complainants entered into an agreement with Shri Sainath Construction to purchase a flat, including two parking spaces, for Rs. 9,202,716, to be paid in installments. They secured a housing loan from the State Bank of India and made full payments, including additional charges from the developer. The agreement stipulated possession within six months, failing which the developer was to compensate with 12% annual interest on the amount paid. Despite paying the service tax and seeking updates on construction and possession dates, the complainants faced delays. They requested compensation for the delay, but the developer attributed the delay to various issues and offered to calculate interest upon possession.

After continuous demands and insufficient clarity from the developer, the complainants filed a primary petition with the NCDRC.

The developer claimed that the flat was ready for possession and that they had obtained an occupancy certificate. They offered possession to the complainants, who allegedly refused for various reasons. The developer also offered alternative accommodation and rent, which was declined by the complainants. The developer attributed delays to factors beyond their control, such as issues with the electricity department, civil suits, demolition of illegal structures, faulty materials, and unavailability of construction materials.

The developer denied overcharging and argued that all charges, including taxes, were as per the agreement. They also contended that the complainants were not consumers as the flat was booked for commercial purposes.

Commission’s Observations:

After reviewing the pleas and records, the Commission noted that as per Clause 22 of the agreement, possession was to be handed over by January 2011, with a permissible six-month extension for force majeure, making the new deadline July 2011. The developer admitted obtaining the occupancy certificate in June 2015, rendering the possession offer of March 2015 invalid. The Commission pointed out that the developer expressed willingness to hand over possession in August 2015, ending their liability for the delay on that date.

The Commission referred to Supreme Court cases Wing Commander Arifur Rahman Khan vs. DLF Southern Homes Private Limited (2020) and DLF Home Developers Private Limited vs. Capital Greens Flat Buyers Association (2021), which established that 6% interest on deposits for the delayed period is fair compensation.

Regarding the overpayment issue, the developer mentioned that several cheques totaling Rs. 680,453, dated April 2015, had expired and were not encashed. The Commission found that the complainants failed to provide proof of encashment, negating any refund of the extra amount. The request for MVAT refund was also denied as MVAT is a statutory charge.

On maintenance, the developer alleged the flat was booked for commercial purposes but provided no evidence. They argued that the contract enforcement complaint was unsuitable for the consumer forum and should be addressed in civil court. However, the Commission cited the Supreme Court’s decision in CCI Chambers Coop. vs. Development Credit Bank Ltd (10/11/2010), which states that the necessity for evidence or the investigation of facts and law does not bar a forum from hearing a complaint under the Act.

The Commission partially allowed the complaint, imposing a fine of Rs. 50,000. It directed the developer to hand over possession of the flat to the complainants within two months, with compensation at 6% interest for the delay.

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