Consumer – Builder –Agreements are prepared in a one-sided-Delay in handing over of possession – Liable to pay interest and compensation: Consumer Protection Act, 1986.

The complainants group of matters, booked apartments with the opposite party in a complex known as ‘vistas’ which was being developed in sector 70 of Gurgaon, and they entered into individual “Buyers Agreement” with the opposite party. The possession of the apartments was agreed to be delivered to them within 36 months from the date of their respective agreements. The grievance of the complainants was that neither the possession of the apartments has been given to them nor was the construction complete though the last date stipulated in the Buyer’s Agreement for delivery of the possession to them had already expired more than 2 years ago. The complainants therefore, approached the Commission seeking delivery of the possession of the flats agreed to be sold to them or in the alternative payment of current market value of such houses. They were also seeking payment of compensation on account of loss of rental income to them with effect from the stipulated date of possession and compound interest @18% p.a. with effect from the stipulated date of possession. The complainants were also seeking compensation on account of their mental torture, agony etc.

The Commission observed that the learned counsel for the complainants stated, on instructions, that the complainants were not interested in taking refund of the money paid by them to the opposite party and they wanted to have possession of their respective flats even if the said possession was to be delivered in terms of the revised date of possession indicated in the abovereferred letter of opposite party. Thus the only question which survived for consideration in these complaints was as to what interest/compensation was to be paid to the complainants by the opposite party, till the date the possession being delivered to them.

The Hon’ble Commission observed that for the exceptional circumstances mentioned in Clause 4 of the agreement the opposite party was required to hand over the possession of the apartment to the flat buyers within 36 months from the date of signing the agreement with them. The exceptional circumstances which could justify delay in hand over the possession of the apartments were:-

(a) Lock-out
(b) Strike
(c) Slow-down
(d) Civil Commotion
(e) War, enemy action, terrorist action, earthquake or act of God and
(f) any reason or circumstance beyond the control of the developer.

The delay in handing over the possession of the apartments would also be justified if there was to be a new legislation, regulation or order suspending, stopping or delaying the construction of the complex and the apartments.

The Commission observed that neither any new legislation was enacted nor an existing rule, regulation or order was amended stopping suspending or delaying the construction of the complex in which apartments were agreed to be sold to the complainants. There was no allegation of any lock-out or strike by the labour at the site of the project. There was no allegation of any slow-down having been resorted to by the labourers of the opposite party or the contractors engaged by it at the site of the project. There was no civil commotion, war, enemy action, terrorist action, earthquake or any act of God which could have delayed the completion of the project within the time stipulated in the Buyers Agreement.

The word ‘slow down’ having been used along with the words lock-out and strike, it has to be read ejusdem generis with the words lock-out and strike and therefore, can mean only a slow down if resorted by the labourers engaged in construction of the project.

Therefore, the plea of the opposite party that the completion of the project was delayed due to non-availability of water, sand and bricks in adequate quantity was rejected.

Since the delay in construction of the apartments could not be justified by the opposite party, it was required to pay compensation to the flat buyers. The contention of the learned counsel for the opposite party was that such compensation had to be calculated @ Rs. 5/- per sq. ft. of the super built area of the apartment for the period of delay in offering the possession beyond the period indicated in clause 4 of the Buyers Agreement, the complainants having agreed to the aforesaid term while agreeing to purchase the apartments. This was also the contention of the learned counsel for the opposite party that the terms of the contract are binding on the parties and cannot be altered by a consumer forum.

The Hon’ble Commission observed that a person who, for one reason or the other, either cannot or does not want to buy a plot and raise construction of his own, has to necessarily go in for purchase of the built up flat. It is only natural and logical for him to look for an apartment in a project being developed by a big builder such as the opposite party in these complaints. Since the contracts of all the big builders contain a term for payment of a specified sum as compensation in the event of default on the part of the builder in handing over possession of the flat to the buyer and the flat compensation offered by all big builders is almost a nominal compensation being less than 0.25% of the estimated cost of construction per month, the flat buyer is left with no option but to sign the Buyer’s Agreement in the format provided by the builder. No sensible person would volunteer to accept compensation constituting about 2-3% of his investment in case of delay on the part of the contractor, when he is made to pay 18% compound interest if there is delay on his part in making payment.

Thus the commission held that a term of this nature is wholly one sided, unfair and unreasonable. The builder charges compound interest @ 18% per annum in the event of the delay on the part of the buyer in making payment to him but seeks to pay less than 3% per annum of the capital investment, in case he does not honour his part of the contract by defaulting in giving timely possession of the flat to the buyer. Such a term in the Buyer’s Agreement also encourages the builder to divert the funds collected by him for one project, to another project being undertaken by him. He thus, is able to finance a new project at the cost of the buyers of the existing project and that too at a very low cost of finance.

The complainants have specifically alleged that some of the clauses in the Buyer’s Agreement were one sided and they were made to sign already prepared documents. It is also alleged that some of the clauses contained in the Buyer’s Agreement are totally unreasonable and in favour of the opposite party only. It is further alleged that the clause providing for compensation at the nominal rate at Rs.5/- per sq. ft. of the super built up area is unjust and exploits the complainants. It is also alleged that the opposite party has been utilising the money of the complainants for its own purposes. Therefore, the commission held that the opposite party should pay adequate compensation to the complainants which would not only take care of the additional financial burden on them on account of the delay in construction of the flat but would also give some compensation to them for the harassment and mental agony which they have suffered all along and were likely to suffer atleast for some more time on account of the opposite party having not delivered the possession of the flat to them by the date stipulated in the Buyer’s Agreement.