No TDS on interest paid as compensation

Nexgen Infracon failed to given possession of flats to its buyers, so they approached the National Commission with individual complaints.

In the lead case filed by Anil Kumar Jain, the builder had issued an allotment letter on September 18, 2013, stating that the total price of the flat with a super built-up area of 3,430 sq ft would be Rs 1,61,27,631. It also noted that endeavour would be made to give possession by February 1, 2016, or latest by December 31, 2016 and if delayed further, a monthly compensation of Rs 5/sq ft would be paid by the builder.

The builder kept demanding money without adhering to the payment schedule linked to the progress of construction. The date for completion of the project was extended to June 30, 2019.

The builder contested the case, terming the purchasers as speculators who had booked the flats for making gains, and questioned the maintainability of the complaint. The builder claimed that the project was delayed as the National Green Tribunal had put an embargo on extracting underground water for construction. The builder argued that the allotment letter merely stated that endeavour would be made to give possession, which could not be termed to be a firm commitment. The National Commission observed that the builder had received full payment but had defaulted in giving possession of the flats. It rejected the contention that the buyers were speculators, noting that builder had failed to substantiate this.

On merits, the Commission noted that using the term “endeavour” would not help unless the builder proves that delay is due to reasons beyond his control. In the absence of any justifiable cause, an extension of the date of completion would established deficiency in service. The defence about the restriction on extracting groundwater was rejected. The builder opposed the purchaser's demand for the return of their money as the agreement did not contain any clause for backing out and seeking a refund. The National Commission relied on a Supreme Court decision in Pioneer Urban Land & Infrastructure versus Govindan Raghavan where it was held that the terms of a purchase agreement would not be binding if it is shown that the flat purchasers had no option but to sign on the dotted line of the contract framed by the builder. The Commission concluded that denial of refund would constitute an unfair trade practice. Similarly, placing reliance on the Supreme Court's judgement in Kolkata West International City versus Devasis Rudra, it held that it would be unreasonable to make a buyer wait indefinitely for possession. 

Accordingly, by its order of December 23, 2019, delivered by Justice R K Agrawal, the National Commission ordered the builder to refund the entire amount along with 12 per cent interest from the date of payment of each instalment. One month was granted for compliance; else the interest rate would stand enhanced to 14 per cent. The Commission warned the builder not the deduct tax at source on the interest as it was awarded as a form of compensation. Additionally, costs of Rs  10,000 were also awarded.

The author is a consumer activist