Transparency Regarding Construction Details Mandatory: NCDRC Holds Gautam Construction Company Liable For Deficiency In Service

Brief Facts of the Case

The complainant entered into a contract with the builder for the construction of a house, and payments were to be made based on the progress of the construction. The complainant approached the State Commission, alleging that he had paid Rs.27 lakh to the builder, whereas the work completed was valued at Rs.16,77,629 based on a private assessment. The complainant stopped the work and sought a refund of the excess amount of Rs.10,22,371, along with interest, compensation for mental agony, harassment, and litigation expenses. The State Commission appointed a retired Chief Engineer as a Local Commissioner, who reported that only 45 to 50% of the brickwork and RCC structure had been completed, with no sanitary or electrical work being done. The estimated cost of the completed work was Rs.15,04,630, and the construction quality was broadly as per specifications. The State Commission held that the complainant was justified in seeking bills from the builders for the work done, and the builder's denial to provide these bills amounted to a deficiency in service, even though the agreement did not explicitly state this obligation. The State Commission directed the builder to refund Rs.11,95,370 with 12% per annum interest and Rs.50,000 in compensation for mental agony, harassment, and litigation costs. Aggrieved by the State Commission's order, the builder filed an appeal to the National Commission

Contentions of the Builder

The builder contended that the parties were bound by the contract and that the complainant wrongly terminated the contract and sought a refund of Rs.10,22,371 based on a third-party assessment. The builder argued that the contract stipulated a payment rate of Rs.1600 per sq ft and that since the construction of 3928 sq ft had been completed, the complainant owed the builder Rs.62,84,800.

Observations by the Commission

The Commission highlighted that the builder accepted the deviation from the construction agreement, with only the ground floor and part of the first floor being built and unfinished works such as plumbing, sewerage, and electrification. The builder argued that since the cost per sq ft was fixed at Rs.1600, there was no need to provide expenditure details or bills. However, the State Commission ruled that transparency regarding construction details was reasonable, and the complainant's request for these details was justified. Considering the nature of the construction, the State Commission found the builder's calculation of completed work costs unreliable. The Commission observed that based on the report of the Local Commissioner, a shortfall of Rs.10,32,371 against the received Rs.27 lakh was deemed reasonable. Regarding the interest rates awarded by the State Commission, the National Commission referenced the Supreme Court's judgments in Experion Developers Pvt. Ltd. vs. Sushma Ashok Shiroor and DLF Homes Panchkula Pvt. Ltd. vs D S Dhanda. These judgments emphasized restitutionary and compensatory interest rates and cautioned against multiple penalties for singular defaults. As a result, the commission modified the interest rates accordingly.

The National Commission affirmed the State Commission's order with directions/modifications. It directed the builder to refund the sum of Rs.10,22,371 with interest @ 9% per annum from the payment date, along with the litigation cost of Rs. 50,000.

Case Title: M/S. Gautam Construction Company & Anr. Vs. Mubarak Masih

Case Number: F.A. No. 428/2021