Significant Delays Not Acceptable: NCDRC Holds Builder Liable for Service Deficiency

 

The judgment delivered on May 27, 2024, by the Hon’ble AVM J. Rajendra, AVSM VSM (Retd.), presiding member of the Consumer Protection Court, offers critical insights into the application of the Consumer Protection Act, 2019. This article aims to analyze the case involving a dispute between the complainants (appellants) and the respondent concerning the delayed possession of a flat. The analysis will focus on the legal arguments, the court’s reasoning, and the implications of the judgment.

Case Background

The appellants filed an appeal under Section 51 of the Consumer Protection Act, 2019, against the orders dated November 23, 2020, and January 19, 2021, issued by the Punjab State Consumer Disputes Redressal Commission, Chandigarh. The State Commission had previously allowed the complaint filed by the appellants. However, the appeal was delayed by 125 days, which the court decided to condone.

Key Issues Raised

The primary issues raised by the appellants included:

  1. Pecuniary Jurisdiction and Consumer Status: The respondent argued that the complaint should be dismissed due to the pecuniary jurisdiction and that the complainants were not ‘consumers’ under the Act as they allegedly purchased the flat for speculative purposes.
  2. Deficiency in Service: The appellants alleged that the respondent failed to deliver possession of the flat within the agreed timeframe, constituting a deficiency in service.
  3. Compensation and Interest: The appellants sought enhanced compensation and interest for the delay in possession, arguing mental agony and financial burden due to ongoing EMI payments.

Arguments Presented

  1. Respondent’s Arguments:
    • The respondent contended that the delay in possession was due to force majeure circumstances, including labor issues, sand shortages, and demonetization.
    • They asserted that they were actively developing the project and committed to delivering possession as per the agreement terms.
    • The respondent argued that the complainants were not entitled to enhanced compensation as the agreement stipulated arbitration for dispute resolution.
  2. Appellants’ Arguments:
    • The appellants highlighted that they had paid ₹64,27,245 towards the flat and that possession was to be delivered by July 11, 2019.
    • They emphasized that despite their substantial investment, the respondent failed to fulfill their obligation, causing financial and mental distress.
    • The appellants sought a higher interest rate on the deposited amount and additional compensation for the delay.

Court’s Analysis

  1. Delay in Possession: The court acknowledged that the respondent failed to deliver possession within the stipulated timeline. The agreed possession date was July 11, 2019, yet the possession was delayed without a valid reason. The court found the respondent liable for the delay.
  2. Force Majeure Argument: The court rejected the respondent’s force majeure argument, noting that while external factors like labor issues and sand shortages can impact construction, they do not absolve the respondent from their obligation to deliver possession. The court emphasized that the respondent had collected 97% of the total consideration and still failed to complete the project on time.
  3. Compensation and Interest: The court referred to several landmark judgments, including DLF Home Developers Ltd. vs. Capital Greens Flat Buyers Assn., to determine a reasonable quantum of interest and compensation. The court concluded that the appellants were entitled to compensation for the delay. It adjusted the interest rate and compensation based on precedents and the specifics of the case.

Judgment and Directions

The court issued the following directions:

  1. Compensation: The respondent was directed to pay the appellants compensation for the delay in possession. The compensation was calculated based on the delayed period and the invested amount.
  2. Interest: The court set an interest rate on the amount paid by the appellants, considering the ongoing financial burden due to EMI payments.
  3. Litigation Costs: The respondent was also directed to cover the litigation costs incurred by the appellants.
  4. Adjustment of Sale Consideration: The balance sale consideration payable by the appellants was adjusted against the liability of the respondent.

Implications of the Judgment

  1. Consumer Rights: The judgment reinforces the rights of consumers under the Consumer Protection Act, 2019, emphasizing that builders cannot evade liability for project delays through force majeure claims unless genuinely substantiated.
  2. Fair Trade Practices: The court highlighted that one-sided contractual terms are deemed unfair trade practices. This sets a precedent for ensuring that contracts in the real estate sector are balanced and fair to consumers.
  3. Legal Precedents: By referencing several Supreme Court judgments, the court established a framework for determining compensation and interest in cases of delayed possession, providing a guideline for future cases.

Conclusion

The judgment by the Hon’ble AVM J. Rajendra, AVSM VSM (Retd.), is a landmark decision that upholds the principles of consumer protection and fair trade practices. It sends a strong message to the real estate sector about the importance of adhering to contractual obligations and delivering projects on time. The case underscores the legal system’s role in protecting consumers’ rights and ensuring justice in commercial transactions. This judgment will likely serve as a reference point for future disputes in the real estate sector, promoting a more balanced and fair contractual environment for consumers.

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