The National Consumer Disputes Redressal Commission (NCDRC) has ordered that builders can no longer hide behind the clause in the builder-buyer agreement to pay just Rs 5 per sqft per month as compensation for delay in handing over flats for “unreasonable” period and that the homebuyers have the option to seek higher compensation after taking possession of the property or seek refund of the amount paid. The compensation would also be in addition to the refund amount with interest.
Most of the buyer-builder agreements have this compensation clause of “Rs 5 per sq feet” for delay in completion, which put consumers in a disadvantageous position vis-a-vis builders.
“The compensation for delay (Rs 5 per sqft per month) cannot be for an unreasonably protracted period or indefinite; at best it can be for a short period that would appear to be reasonable and would be acceptable as such to a reasonable man... To say that possession can be delayed indefinitely or unreasonably and a token compensation for delay can be paid indefinitely or for an unreasonably protracted period is erroneous. Indefinite or unreasonable delay with token compensation for delay cannot continue forever without limit (such situation would be absurd),” a bench of Dr S M Kantikar and Dinesh Singh of NCDRC said while pronouncing order against Emaar MGF.
The commission directed the builder to pay Rs 5 lakh compensation to one Govid Paul of Punjab over and above the refund amount for inordinate delay in handing over a flat. It imposed Rs 50,000 litigation cost on the builder as well.
Paul had signed an agreement with Emaar MGF in September 2011 for a property, which was to be handed over in 36 months. After a delay of about 20 months, Paul approached the state consumer commission of Chandigarh seeking refund of his payment and compensation for the delay. The commission ordered refund of Rs 38.9 lakh at 15% interest compounded quarterly and Rs Rs 3 lakh compensation. It directed the builder to pay Rs 25,000 to the flat buyer as cost of litigation.
The builder challenged the order in the NCDRC. The national commission observed that the builder did not offer possession even 23 months after the matter reached the state consumer commission and “such delay in offering possession cannot be said to be reasonable or normal”.
The national commission said the consumer has the fundamental option to obtain possession of the unit and in addition seek just compensation under the Consumer Protection Act for unreasonable delay. He has the other option to claim refund of the principal amount; interest thereon; compensation; and cost of litigation.