Builder Cannot Demand Interest For Delayed Projects: NCDRC Holds Puri Construction Liable For Deficiency In Service

Brief Facts of the Case

The complainants booked a flat with the Puri Construction/builder for a consideration of Rs.50,98,756 plus additional charges. An allotment letter was sent, and an agreement was executed. It was agreed that the builder would hand over the apartment within three years from the date of payment of earnest money, and the complainants would make payments as demanded. The complainants paid amounts totaling Rs.30,12,144. Later, the complainants found that the construction work was not as scheduled and contacted the builder about the delay. Subsequently, the builder finished construction late and started allotting apartments. The complainant expressed willingness to pay the full amount plus interest, but the builder demanded a high-interest amount. Hence, the complainants filed a complaint before the State Commission of Delhi. The State Commission allowed the complaint and directed the builder to refund Rs. 32,62,144 and interest @12% per annum. Aggrieved by the State Commission's order, the builder appealed to the National Commission.

Contentions of the Builder

The builder contended that the State Commission failed to consider Clause 13(b) of the Buyer's Agreement, which stipulated that possession shall be handed over only upon payment of all dues, installments, penalties, etc., by the complainant. In many cases, the builder waived off interest on delayed payments and only imposed reasonable interest for the complainant's default. The Commission failed to consider Clause 14, which stipulated 36 months for handing over possession subject to the complainant fulfilling all terms, including payment of dues. Sub-clause (vi) stated that in case of delay in payments by the complainant, the handover date shall be extended till payment of the entire amount. The Commission failed to consider judgments that when the allottee fails to make timely payments despite reminders, the builder can forfeit earnest money and cancel the allotment.

Observations by the National Commission

The National Commission observed that the builder contended the time period for handing over possession was 39 months, subject to the complainants complying with all terms, including payment of installments, but the complainants defaulted in payment. The commission highlighted that the builder informed the complainants about the increase in super area and raised the demand for the balance amount, giving the option to pay in lump sum or installments. The builder later informed the complainants about cancelling the allotment due to non-compliance with the payment plan. The commission emphasized that the complainants acknowledged the outstanding amount and stated they were assured of an interest waiver on some payments. The commission noted that the complainants made around 60% of the payment and were willing to pay the balance sale consideration, but the builder kept raising demands for interest, EDC, and increased area cost. The commission observed the builder sold the apartment to a third party at an escalated price of around 50% higher than the agreed price with the complainants despite the stay order by the State Commission. The commission highlighted that the builder could not demand interest for the delay as the project itself was delayed beyond the agreed period based on the occupancy certificate date.

The National Commission upheld the State Commission's order with a modification to the principal amount paid by the complainant, which was Rs.30,12,144 and not Rs.32,62,144. The commission directed the builder to pay the interest as per the principal amount.

Case Title: M/S. Puri Construction Pvt. Ltd. Vs. Gurudarshan Singh & Anr

Case Number: F.A. No. 746/2019