Builder Fails To Deliver Flat In Time, Karnataka RERA Orders Refund To Homebuyer

Background Facts

The homebuyers (Complainants) booked a flat in the builder's (Respondent no 1) project named Shriram Greenfield Phase - 2 for a total sale price of Rs. 51,19,700. On 15.06.2019, they signed a agreement for sale with the builder and paid Rs. 22,93,626 in instalments towards the total amount. Additionally, the homebuyers entered into a tripartite agreement with L&T Housing Finance Limited and builder for a housing loan.

According to the agreement, the builder was supposed to deliver possession of the flat by 31.03.2021, with a grace period of Six months. However, only five floors of the project were completed by 2018.

When the homebuyers visited the project site, they found no progress in construction and observed several other issues with the development. As a result, the homebuyers decided to exit the project and filed a complaint before the Authority, seeking a refund of the amount paid with interest.

Contentions of Builder

The builder contended that the homebuyers are entitled to only Rs. 3,06,919 plus interest, which is the amount they paid towards the flat. The builder will repay the financial institution Rs. 19,86,707, the amount disbursed from the housing loan. The builder also contended that they are not liable to pay any interest on the amounts received from the financial institution, as they have already paid the interest and will repay the principal amount due to the termination of the agreement.

Observation and direction by Authority

The Authority rejected the contentions made by the builder that the homebuyers are only entitled to receive their own contribution with interest and that the amount disbursed by the financial institution would be repaid by the builder to the financial institution.

The Authority relied on the Supreme Court decision in M/s Newtech Promoters and Builder Pvt. Ltd vs. State of Uttar Pradesh & Ors, wherein it was held that if the Promoter fails to give possession of the apartment, plot, or building within the time stipulated under the terms of the agreement, then the Allottees' right under the Act to seek a refund or claim interest for delay is unconditional and absolute, regardless of unforeseen events or stay orders of the Court/Tribunal.

Furthermore, the Authority observed that as per Section 18 of the RERA, if the Homebuyer wishes to withdraw from the project, the builder is liable, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, or building, as the case may be, with interest at such rate as may be prescribed in this behalf, including compensation in the manner provided under the act. Therefore, as per Section 18(1) of the Act, the builder is liable to return the amount received along with interest and compensation if the builder fails to complete or provide possession of an apartment or plot in accordance with the sale agreement.

Therefore, the Authority directed the builder to refund Rs. 34,08,420/- with interest to the homebuyers within 60 days.

Case – Loknath Nayak & another Versus Supervision Towers Private Limited

Citation - COMPLAINT NO - CMP/220706/0009723