Buyer entitled to refund in case of delay

Naveen and Deepshikha Garg had applied to Orris Infrastructure for the purchase of a flat. Upon payment of the booking deposit, the agreement for sale of the flat was executed on April 28, 2012. The couple paid a total amount of ~66,13,435 in instalments between January 3, 2012 and May 7, 2014.

The contract for the sale of the flat provided that construction would be completed within 36 months from the date of execution of the agreement. In addition, it also provided a grace period of six months. This meant that possession was to be handed over latest by May 28, 2015.

The builder failed to hand over possession within the stipulated period. The Gargs waited for over 14 months, and then filed a complaint before the Haryana State Commission on December 7, 2016. Amit Gupta, the firm’s managing director, was also made a party to the complaint. The Gargs sought a refund of the amount of ~66,13,435 paid by them along with interest, compensation and costs.

The builder contested the complaint, contending that delays had occurred due to several factors beyond its control. During the pendency of the complaint, the builder also obtained the completion and occupancy certificate on April 6, 2017, and offered to hand over possession of the flat. The Gargs refused to take possession and insisted on a refund, but the builder did not return their money. The builder argued that since the flat was ready for possession, the Gargs would be entitled to some compensation for the delay in possession, but would not have a right to cancel their booking and seek a refund.

The State Commission observed that a flat purchaser cannot be expected to wait for an indefinite or unreasonable period of time for possession of a flat. So, a builder cannot compel a flat purchaser to take delivery of a flat when possession is delayed. On the contrary, it would be the prerogative of a flat purchaser to decide whether to take possession along with compensation for delay, or opt for a refund along with interest and compensation. If the money is not refunded, it would constitute a deficiency in service and an unfair trade practice.

In its order of July 27, 2018, the State Commission ordered the builder to refund ~66,13,454 along with 11 per cent interest. It also awarded ~1 lakh toward compensation and ~21,000 as litigation cost. The State Commission gave the builder a period of two months to comply with the order, after which the interest rate would stand enhanced to 18 per cent for the period of delay.

The builder challenged this order in an appeal. The National Commission observed that the builder had a duty to plan the execution and completion of the project in a pragmatic and realistic manner before accepting any payment for the sale of flat or entering into an agreement with a flat purchaser. It also held that it is the prime responsibility of a builder to ensure possession of a flat within the agreed time period. The flat purchaser cannot be made to suffer for such lapses on the part of a builder. The Commission concluded that the expression “force majeure” or delay due to reasons beyond the control of the builder would not apply to dereliction of duty in planning and executing a project.

Accordingly, by its order of March 25, 2021 delivered by Dinesh Singh, the National Commission held that the Gargs were well within their right to refuse possession and insist upon refund along with reasonable compensation. The builder’s appeal was dismissed, and the order passed by the State Commission in the Gargs’ favour was upheld.

The National Commission concluded force majeure or delay due to reasons beyond the control of the builder would not apply to dereliction of duty