Springdale Core Consultants Pvt Ltd vs. Pioneer Urban Land and Infrastructure Ltd. NCDRC, Consumer case no. 349/2017, Decided on 14th July, 2020.
Compensation for delayed possession computed solely on
the basis of rent will not be a deterrent for erring builder since such paltry
compensation would not cost him more than 3-4% of capital invested.
The
Complainant company booked a residential apartment for its Directors in the
Builders project on 29.11.2011. An agreement for sale dated 13.03.2012 was
executed between the parties.
Under the agreement, the Builder
had to apply for Occupancy certificate by 04.09.2015 and obtain the OC by
04.03.2016.
The builder could not obtain OC
within agreed time. The Complainant filed a complaint seeking possession of the
flat along with the compensation for delay in construction. Alternatively, the
complainant company prayed for refund of the amount paid to the Builder.
During the pendency of the
complaint, the Builder obtained OC and offered possession to the complainant
company vide letter dated 03.04.2019.
Issue before NCDRC:
(i)
Whether the flat booked by the Complainant company for its
Directors was booked for speculative purposes?
(ii)
Whether the Complainant company is entitled to any compensation
in the form of interest for delay in possession of flat?
Complainant’s contentions:
It placed reliance on the resolution passed
by its board of directors on 14.11.2011, resolving to book flat for the residence of one of the directors of the company. Accordingly, the complainant argued that the purchase of flat
was not for speculative purposes.
Builder’s contentions:
1.
Since the complainant is a private limited company resolution may
have been manufactured at a later date.
2.
As per the information provided by the Registrar of
companies, the business activities of the complainant company were confined to
Amritsar and all the Directors were residents of Amritsar. A director was also a partner of LLP
engaged in the business of Real estate.
3.
The compensation for the delay in delivery of the possession where
the complainant is a company should not be at par with the compensation granted
to an individual.
4.
Submitting the lease deeds, the builder showed the prevailing
rentals in the project. They stated that there would be no justification for
compensation higher than the prevailing rentals in the project.
5.
Builder also claimed for holding charges from the complainant
company.
Key Principles:
1.
Compensation to a company for delay in delivery of flat cannot be at
par with the compensation granted to an individual. Since the company would not
be entitled to compensation for mental agony and harassment to which an
individual will be entitled to.
2. The builder cannot levy holding charges on a homebuyer as it does not suffer any loss on account of a buyer taking possession at a later stage due to an ongoing litigation.
Verdict of NCDRC:
NCDRC
directed the Builder to hand over the possession of flat to the complainant
company within 8 weeks from the date of order. The court also awarded
compensation to the complainant company.
It rejected the Builder’s contention that the flat in question
was for speculative purposes. It observed that the Director
became a partner in the LLP in the year 2017 and the flat in question was
booked earlier in the year 2011. Secondly, she was residing at Gurgaon and was
planning to shift to Gurgaon even if she was residing
at Amritsar. Therefore, it is difficult to infer that the flat was booked for
speculative purposes
The
Commission relied on the decision of Vishal Malik & Anr. Vs. Pioneer Urban
Land Infrastructure Ltd[1], to
direct possession of flat along with the
compensation.
The
commission agreed with the Builder that the
compensation to the complainant company cannot be at par with that to an individual. The company is not entitled to compensation for the mental agony and
harassment to which an individual is entitled.
On quantum
of compensation, NCDRC stated that the prevailing
rents in respect of similarly situated flats
of identical specifications and size cannot be made the sole basis for grant of
such compensation. Else the builder would have
no incentive to complete the construction within the agreed time frame. He would know that even if he diverts the funds collected
from the flat buyer to another project, he would easily compensate the buyer
which would not cost him more than 3-4% of the capital employed.
NCDRC
placed reliance on the decision of Capital
Greens Flat Buyer Association & Ors. Vs. DLF Universal Limited & Anr[2] to observe
that the builder is not entitled to holding
charges. Since the builder having received the consideration has nothing to
lose by holding possession of flat except to maintain the apartment.
On
Acelegal Analysis:
The order of NCDRC will have a strong influence on other forums like
RERA. The issue of the complainant being an
“allottee” is existing under RERA too. The test laid down by NCDRC will come in
handy even under RERA.
RERA provides the quantum of compensation u/s 18 of RERA in case of
default / delay by the Builder. Such compensation is fixed at 2% plus the
Maximum Marginal lending rate. RERA does not provide for rent or mental agony
as the basis for determining the compensation. Therefore, under RERA the issue
of quantification of the compensation is rather watertight.
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