Those delaying work can't levy escalation charges

Talagang Co-operative Group Housing Society had engaged the services of Otis Elevators to install 22 passenger electronic traction elevators at a cost of Rs 7.9 lakh each, totalling Rs 173,80,000. The contract, dated April 29, 1996, provided the work would be completed within 52 weeks, computed from the date of receipt of the order, advance payment, layout approval, and settlement of all technical details, whichever was last.

The society paid Rs 7 lakh as advance and requested Otis to start the installation. Yet, Otis ignored the request. Even after about two years, work didn't commence.

Subsequently, a meeting was held between the society's office bearers and Otis officials. A fresh schedule was prepared, with the assurance work would commence from June 1998 and four elevators would be installed every month. An additional Rs 19.63 lakh was paid to Otis. Then, Otis demanded Rs 66,835 as escalation charges for the materials for four lifts.

After commencing work, Otis sent a bill of Rs 20,48,692, which was fully paid by the society, after deducting tax. The society told the company escalation charges would not be paid unless all the 22 elevators were installed by November 1988, according to the revised schedule. The society warned it would claim compensation in case of further delay.

Though the pace of the work was slow, Otis kept demanding payments from time to time. About Rs 1.3 crore was paid to Otis but not a single lift was installed. The society wrote to Otis that possession of flats was underway and failure to have functional elevators would create hardships for flat owners. It said the progress of the work was not in keeping with the instalments being collected and asked Otis to pay 21 per cent interest for the excess amount.

Otis did not respond, forcing the society to file a consumer complaint before the National Commission in 2002. The society claimed it had already paid about Rs 1.8 crore to Otis, more than the agreed amount of Rs 1.73 crore. Yet, of the 22 lifts, only 11 had been commissioned, because of which about Rs 90 lakh had been blocked for about 12 years.

In its defence, Otis stated 11 lifts had been commissioned and blamed the society for failing to make various facilities available for installation of the elevators. It alleged this had delayed the work.

While the case was pending, Otis claimed two more lifts had been made functional but this statement turned out to be false. The commission observed despite the full payment, half the elevators were not functioning, as work has been abandoned and those functioning were overburdened, leading to frequent breakdowns. Otis said it was ready to make the remaining elevators functional, provided it was paid an additional Rs 19 lakh.

The commission said this was a clear case of deficiency in service. Otis had received the entire amount more than a decade ago, without bothering to install the remaining elevators. Therefore, the company wouldn't be entitled to any escalation charges for rise in costs.

The commission directed Otis to install the remaining 11 elevators within 90 days and, in case of a delay, pay penal costs of Rs 10,000 a day. Additionally, compensation for harassment and mental agony were awarded at Rs 50,000 a year, along with interest of nine per cent---from the date of filing the complaint till the completion of the installation of all the elevators, which would work out to about Rs 6.5 lakh (National Commission's judgment dated May 31, 2013, delivered by J M Malik for the Bench, along with member Vinay Kumar).

This landmark judgment sends a clear signal that those delaying work wouldn't be allowed to profit by levying escalation charges but would be penalised for deficiency in service.
The author is a consumer activist