Builder asked to provide alternative flat or return money with interest

A consumer commission has held that builders cannot invoke force majeure when their own failure to comply with regulatory requirements contributed to a project's delay

Ashok and Priya Bhatia had booked a flat in a project called Siddhi City at Kharvai Gaon in Thane District, which HUF (Hindu Undivided Family) karta Hemant Agarwal and Siddhitech Homes, through its director Neha Agarwal, were co-promoting. 

Before entering into the deal, the builders represented that they would hand over possession by December 2014. The Bhatias agreed to purchase flat no. 203 in building no. 1, having a carpet area of 493.71 sq. ft., for a total consideration of ₹10,14,000.

The builder issued an allotment letter on January 5, 2012, and the parties subsequently executed the registered agreement for sale on June 12, 2012. However, they left the date of possession blank. 

The builder failed to complete the construction within the promised timeframe, so it offered to allot identical flat no. 601 in building B as an alternative. The builder issued a fresh allotment letter dated March 17, 2015, with an assurance that it would execute a supplementary agreement for modification at its own cost. 

Despite having paid a substantial amount of ₹8,09,100, the Bhatias found that construction work had stalled indefinitely. The builder neither provided a revised date of possession nor replied to an email sent by the couple asking for possession or suitable compensation. Hence, the couple filed a complaint before the Maharashtra State Consumer Disputes Redressal Commission (Maharashtra State Commission), alleging deficiency in service and unfair trade practice. 

The co-promoters (builders) contested the case. They attributed the stoppage of construction to a stop work notice issued on May 6, 2014, by the Kulgaon-Badlapur Municipal Council (KBMC), followed by a second notice issued on May 16, 2015, due to a boundary dispute raised by the owners of the adjoining plot. Later, even though the authorities revoked the notice, the dispute went into litigation through a civil suit filed at Ulhasnagar, in which the court passed an interim order restraining the creation of any third-party rights. An appeal against this order had been pending before the Kalyan court since 2018. Subsequently, after floods in August 2020, the authorities declared the area a non-development zone. The builders claimed that their inability to give possession was due to force majeure, meaning reasons beyond their control, and not any negligence on their part. 

The Commission observed that, prior to the issuance of the stop work notice, the KBMC had sent a letter on December 4, 2013, seeking certain clarifications and explanations, but the builder had failed to respond. Hence, the Commission concluded that the builder could not invoke the force majeure clause for the stop work notice subsequently issued when its own negligence in failing to furnish the clarifications had contributed to the situation. 

The Commission also noted from the record that the builder had failed to comply with the Municipal Corporation’s requirements on time. To aggravate the matter, the builder had collected instalments for the flat even after receiving the stop work notice.

By its order dated July 31, 2016, delivered by Poonam Maharshi for the Bench along with Dr Nisha Chavan, the Commission ordered the builder either to construct and hand over possession of the originally booked flat or to provide another identical flat in the same locality, if acceptable to the Bhatias, with the builder bearing the cost of executing and registering the agreement; or to refund ₹8,09,100, along with interest at 12 per cent from the date of payment of each instalment. Additionally, the Commission awarded ₹1 lakh as compensation for mental agony and harassment and ₹25,000 towards litigation expenses. 

 

The writer is a consumer activist