Stalled project: Buyer can pause payments

The National Commission said instalments are linked to the progress of construction. The question of raising any demand didn't arise when there was no progress in construction

Sarita Mishra had booked a flat in Divyam Heights in Andheri, Mumbai, which was to be jointly developed by two promoters: Harsh Constructions and Siddhivinayak Developers. According to the registered agreement for sale dated February 15, 2006, the cost of the flat was Rs 18,04,820. The agreement stipulated that possession would be handed over in June 2008. The builders were entitled to two extensions of six months each and, further, until June 2010 for obtaining the Occupancy Certificate.
 

Mishra paid Rs 2,07,554 to each of the two promoters, totalling Rs 4,15,108. When the builders failed to deliver possession within the promised time, she approached the Consumers Welfare Association, which filed a consumer complaint before the Maharashtra State Commission.
 

The builders contested the case, attributing the delay to force majeure (meaning circumstances beyond their control) due to public interest litigation. They also accused Mishra of failing to pay the subsequent instalments. The builders said they would refund Mishra’s money since they had not obtained permissions from the municipal corporation. The State Commission upheld the complaint and ordered the builders to accept the remaining amount of Rs 13,89,712 and hand over possession within three months. Alternatively, they could pay Mishra Rs 42,70,523—the escalated cost of buying another flat. The State Commission also granted a compensation of Rs 1 lakh and Rs 25,000 as litigation costs.

The builders challenged this order in appeal and attempted to justify not handing over possession. Relying on a demand letter, they blamed Mishra for failing to pay.
 

The National Commission asked the builders to produce the High Court order that prevented them from carrying out construction work. This compelled them to admit there was no such stay. The Commission noted that the builders’ statements were self-contradictory: they claimed construction couldn’t proceed due to public interest litigation but accused Mishra of defaulting on payment of instalments. The Commission said instalments are linked to the progress of construction. The question of raising any demand did not arise when there was no progress.
 

The Commission referred to the judgement dated September 21, 2021, delivered by the Supreme Court in Sivarama Sarma Jonnalagadda & Anr versus Maruthi Corporation Ltd & Anr where it was held that a consumer cannot be made to wait indefinitely for possession by invoking the force majeure clause while retaining the amount deposited for the flat. The Commission concluded that the builders’ conduct amounted to both deficiency of service and unfair trade practice.
 

By its order of September 4, 2023, delivered by Retired Vice Air Marshal J. Rajendra for the Bench along with Justice Sudip Ahluwalia, the National Commission modified the State Commission’s order. It ordered the builder to accept the balance amount of Rs 13,89,712, hand over possession of the flat, and execute the sale deed within one month. Alternatively, the builder would have to refund the deposit of Rs 4,15,108 within two months along with 9 per cent interest from February 12, 2006. If delayed, the interest rate would increase to 12 per cent per annum. Additionally, Rs 2 lakh was awarded for misleading the consumer, along with Rs 25,000 towards costs.


The writer is a consumer activist