NCDRC delivers landmark judgement against Unitech, orders compensation for delay

[dheerajjain]

Times of India, June 2, 2015

Consumer court says 'unfair' builder contracts not binding

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GURGAON: In an observation that may have far-reaching impact, the National Consumer Disputes Redressal Commission (NCDRC) on Monday rejected the arguments of a real estate company that provisions mutually agreed upon in a builder-buyer agreement (BBA) are sacrosanct.

The apex consumer court was hearing an array of cases filed by 26 buyers who, in 2009-10, had invested in Unitech's Vistas project in Sector 70. Possession of flats was not handed over by December 2012 as promised, not an uncommon problem in the realty sector. Forty buyers then moved NCDRC in November 2014. Of them, cases of 26 complainants were listed for their final hearing on Monday, after a series of hearings over the past six months. The commission's verdict, though, is still reserved.

"The agreement clearly mentions the developer would pay 1.8% of the amount paid as penalty, in case of delay in handing over flats. When the same agreement was signed by each buyer, the court doesn't have jurisdiction to surpass that," said advocate Sunil Goel, who represented Unitech.

But the NCDRC rejected the argument on grounds that any unfair trade practice can be challenged by it, even if there is a prior agreement between the parties. "When the buyer is made to pay 18% penalty for default, is it fair on the developer's part to pay a mere 1.8%?" said Justice V K Jain, who heard the matter.

The judge also told Unitech's counsel that a 15% penalty can be levied on the firm during the interim period — from the promised date of delivery to the actual delivery date — but the lawyer pleaded inability to take an impromptu decision. Following this, the commission postponed the final verdict.

Unitech's counsel cited several factors like slowdown in economy, shortage in availability of labour and scarcity of raw materials, all of which were dismissed by the NCDRC. "When the company has already collected over 90% of the cost, why is it affected by the state of the economy? Most delays happen because developers transfer money collected in lieu of one project into another. This is a very common practice," said Justice Jain.

"As of now, the judgment is reserved. We can't rejoice until NCDRC gives its final decision. We're hopeful of a positive outcome, though," said Sushil Kaushik, advocate for the petitioners.

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NCDRC orders Unitech to pay compensation for delivery delay; likely to set precedent for others

The National Consumer Disputes Redressal Commission's directive to Unitech to pay compensation at 12% per annum for delaying delivery of apartments to buyers in one of its Gurgaon projects is likely to become a precedent in cases filed by several other homebuyers' associations across the country, experts said.

More than half of the real estate projects across the country are currently delayed by over 12 months, of which about 25% are delayed by over 36 months, according to property research firm Liases Foras.

"This judgment will impact all cases where buyers are looking for possession of their flats," said advocate Sushil Kaushik, who fought the case on behalf of buyers of Unitech Vistas in Sector 70 of Gurgaon. "People are now aware that they can take on a builder and get reprieve from courts."

A group of about 100 other buyers in the Unitech Vistas project is moving to file similar cases against the builder in the NCDRC. Most of these people had bought homes in the project in 2009 and the agreement with the builder said they would get delivery of their homes by February 2013. But they are still waiting. "Many people were scared earlier but now with this judgment, they have got a ray of home. We will file cases against Unitech soon," said Piyush Gupta, a telecom professional who is leading the group.

Multiple options for appeal have opened up for buyers in the past few years. Apart from the consumer forums, buyers in the past have approached the Competition Commission of India as well and got favourable orders against builders such as DLF. CCI had slapped a fine of Rs 630 crore on DLF in 2011.

Vaibhav Gaggar, partner at law firm Gaggar & Associates, which represented the Belaire and Park Place buyers' associations against DLF at the CCI, said the NCRDC's order is a shot in the arm for consumers and the activism movement that is gaining ground. "Builders will have to be very, very wary now," he said.

In its order, the NCDRC on Monday said Unitech will compensate buyers at 12% per annum for delay in delivery of apartments. The builder-buyer agreement says buyers will get 1.8% per annum for any delay. The order came in the case filed by 30 homebuyers in Unitech's Vistas project. Unitech has now given a new deadline for delivering the apartments and the court said that in case of any further delay, the builder will have to compensate at 18% per annum. The judgement also says that buyers in this Unitech project will be protected against the increase in service tax from June 1 as their project was officially to be delivered in 2013.

A spokesman for Unitech said the company has not yet received a copy of the order and will not comment. A similar case had been filed by a group of 18 buyers in Emaar MGF's Emerald Hills project in Sector 65 of Gurgaon on the Golf Course Extension Road, where apartments were to be delivered by August 2013 and were delayed. One of the buyers, Sumit Agarwal, who works with a technology firm, said 18 of them have filed a case and the next date of hearing is in July with the same judge, Justice VK Jain, who had given the order against Unitech.

"We are hoping for a similar judgment as this order has set a precedent of sorts," said Agarwal. Another 20 people from the same project said they will file similar cases against the developer soon. Priyanka Sharma, an IT professional working in Bengaluru, said such judgments bring back consumer confidence in the absence of aregulatory body that can penalise builders. She is waiting for the delivery of her apartment in DLF Westend Heights New Town located in Akshayanagar in Bengaluru. The project has been delayed by about three years now.

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Extract from NCDRC Case No. CC/427/2014, download the complete order below

(a) The opposite party shall deliver possession of the respective flats of the complainants to them on or before the last date stipulated in its letter dated 27.05.2015;

(b) The opposite party shall pay to (i) the original allottees and (ii) to those who acquired the allotment by way of repurchase, within one year of the date of the initial Agreement of their respective flats, compensation in the form of simple interest at the rate of 12% per annum with effect from 36 months from the date of the initial Agreement till the date possession is delivered to them. The interest payable till 31.08.2015 shall be paid by 10.09.2015, in three equal instalments, by the 10th of each month i.e. by 10th July, 2015, 10th August, 2015 and 10th September, 2015. Thereafter, compensation in the form of interest, in terms of this order, shall be paid on monthly basis by the 10th of each succeeding month.

(c) Such of the complainants, who acquired allotment of the flat by way of repurchase more than one year after the date of the initial allotment of their respective flats, shall be paid compensation by way of simple interest at the rate of 12% per annum, with effect from 36 months from the date of repurchase by them, till possession is delivered to them. They will also be paid compensation at the rate of Rs.5/- per square foot of the super area of their respective flat for the period between 36 months from the date of the initial Buyers Agreement of their respective flats and 36 months from the date of repurchase of the flat by them.

(d) The increase in service tax with effect from 01.06.2015 shall be borne by the opposite party, in all these cases.

(e) If the opposite party fails to deliver possession by the last date stipulated in its letter dated 27.05.2015, it shall pay compensation to all the complainants in the form of simple interest at the rate of 18% per annum, for each day there is delay, beyond the date stipulated in the said letter dated 27.05.2015, in delivering possession to the complainants.

(f) The opposite party shall pay Rs.5,000/- as the cost of litigation in each complaint.