Builder can't sell flat until case is resolved

A builder in Punjab delayed issuing the allotment letter but was quick to cancel the booking after issuing the demand letter

Colonel B S Goraya approached Taneja Developers & Infrastructure Limited (TDIL) for the purchase of a flat. The latter quoted a price of Rs 17,37,500. Goraya paid Rs 3,56,188 on July 16, 2005, as booking amount. He also paid several instalments subsequently, amounting to Rs 9,01,250 altogether. The allotment letter was issued on December 19, 2008.

Goraya, along with Jiwandeep Ghai, had also booked a commercial unit with the same builder, for which they had paid Rs 17.5 lakh. Since there was no progress in construction, they sought a refund. The builder ignored their request.

The builder demanded further instalments for the residential unit which  Goraya did not pay as he wanted the amount paid for the commercial unit to be refunded. He wished to use that money to pay for the residential unit.

The builder termed the non-payment as a default and sent a letter on October 12, 2009, cancelling the allotment of the residential unit. Goraya then approached the Punjab State Commission. The builder contested the case, reiterating that cancellation was justified since there was a payment default.

The State Commission considered the two transactions as being independent of each other. However, since non-payment was not due to wilful default, the Commission directed Goraya to pay the balance amount within two months, or along with 18 per cent interest in case of delay, and ordered the builder to hand over possession within a year of receiving the payment. It also ordered the builder to pay Rs 1 lakh as compensation and Rs 20,000 as cost.

The builder challenged this order in appeal, arguing that Goraya was not a consumer as he had also booked three residential units in the names of his family members with another builder. Also, since Goraya had not paid the balance amount, the unit had been sold. He could no longer claim possession and would be merely entitled to refund with interest.

The National Commission observed that the flats booked in the name of various members of Goraya's family and the HUF had no bearing on the dispute. The complaint was held to be maintainable as there was no evidence that Goraya was trading in plots or flats.

The National Commission observed that instalments were demanded even prior the to the issuance of the allotment letter. It also noted that the builder took over three years after accepting the booking amount to issue the allotment letter, but hastily cancelled the allotment for default in payment within just two months of issuing the demand letter. It also castigated the builder for not giving the refund once Goraya cancelled the booking in the commercial project. The National Commission concurred with the State Commission that the builder's conduct was unfair and unreasonable.

Since the State Commission had allowed Goraya to pay the balance amount within two months or with 18 per cent interest without specifying any time limit, the National Commission held that the builder had no right to create a third-party interest in the residential unit and was required to keep it reserved till the final outcome of the case. Since Goraya had not challenged the order, the National Commission granted him three months' time to deposit the balance amount along with 18 per cent interest and claim possession. If the amount was not paid within the stipulated period, the builder would be liable to refund the entire amount along with 9 per cent interest from the date of payment of each instalment.

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The writer is a consumer activist