India: Delayed Possession! Beware, Builder's Loss Not Buyer's

Last Updated: 25 August 2017
Article by Curare Legal

Lately cases of unreasonable delay in handing over possession to the Buyers/ Purchasers have been on a steep rise. The Buyers are left in the lurch after investing substantial money when the Builder does not abide by their own Builder Buyer Agreement and handover the possession within the stipulated time.

But are such buyers remediless? The answer is a clear NO, especially with such cases on the rise and our Consumer Forums passing much needed stinging Orders against such Builders.

What is most importantly required is awareness, as to what has to be done in such cases. The Consumer Protection Act protects such Consumers who fall prey to such situations.

Who is a Consumer under the Consumer Protection Act?

As per Section 2 (1) (d) of the Act,

(d) "consumer" means any person who,—

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) 12 [hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who 12 [hires or avails of] the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person 13 [but does not include a person who avails of such services for any commercial purpose];

It is clear from the first part of the definition (which is the matter of concern in the Article) in the Act itself that any person who buys any goods for consideration, is a consumer, however, it would not include any person who obtains any such goods for resale or for commercial purposes.

In order to understand the liability of the Builder in cases of delayed possession, it is pertinent to also understand the meaning of the terms Deficiency and Complaint under the Consumer Protection Act.

As per Section 2 (1) (g) of the Consumer Protection Act

"..(g) "deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;.."

It is important to note that the Section 2 (1) (g) clears the scope of the Consumer Protection Act and it's applicability on cases such as the ones being discussed in the present Article i.e., Deficiency means any fault,... inadequacy... in the manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;... (emphasis added)

It has been held in Smt. Ramala Roy vs. Rabindra Nath Sen 1994 (I) CPR 66,

"...If somebody does not perform his part of contract, it amounts to deficiency in service..."

The Scope of filing a Complaint under the Consumer Protection Act is clear under Section 2 (1) (c) of the said Act

"(c) "complaint" means any allegation in writing made by a complainant that—

5 [(i) an unfair trade practice or a restrictive trade practice has been adopted by 6 [any trader or service provider];]

(ii) 7 [the goods bought by him or agreed to be bought by him] suffer from one or more defects;

(iii) 8 [the services hired or availed of or agreed to be hired or availed of by him] suffer from deficiency in any respect;

9 [(iv) a trader or the service provider, as the case may be, has charged for the goods or for the services mentioned in the complaint, a price in excess of the price—

(a) fixed by or under any law for the time being in force;

(b) displayed on the goods or any package containing such goods;

(c) displayed on the price list exhibited by him by or under any law for the time being in force;

(d) agreed between the parties;]

10 [(v) goods which will be hazardous to life and safety when used are being offered for sale to the public,"

A case of Delayed possession is clearly covered under unfair trade practice.

Unfair Trade Practice has been defined under Section 2(1) (r) of the said Act as follows:

"[(r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:—

(1) the practice of making any statement, whether orally or in writing or by visible representation which,—

(i) falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;

(ii) falsely represents that the services are of a particular standard, quality or grade;

(iii) falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;

(iv) represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;

(v) represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;

(vi) makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;

(vii) gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof:"

The Hon'ble National Commission in a case of Delayed Possession had held the following:

"It can hardly be disputed that a term of this nature is wholly one sided, unfair and unreasonable. The builder charges compound interest @ 18% per annum in the event of the delay on the part of the buyer in making payment to him but seeks to pay less than 3% per annum of the capital investment, in case he does not honour his part of the contract by defaulting in giving timely possession of the flat to the buyer. Such a term in the Buyer's Agreement also encourages the builder to divert the funds collected by him for one project, to another project being undertaken by him. He thus, is able to finance a new project at the cost of the buyers of the existing project and that too at a very low cost of finance. If the builder is to take loan from Banks or Financial Institutions, it will have to pay the interest which the Banks and Financial Institutions charge on term loan or cash credit facilities etc. The interest being charged by the Banks and Financial Institutions for financing projects of the builders is many times more than the nominal compensation which the builder would pay to the flat buyers in the form of flat compensation. In fact, the opposite party has not even claimed that the entire amount recovered by it from the flat buyers was spent on this very project. This gives credence to the allegation of the complainants that their money has been used elsewhere. Such a practice, in my view, constitutes unfair trade practice within the meaning of Section 2(r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practice for the purpose of selling the product of the builder. Though, such a practice does not specifically fall under any of the Clauses of Section 2(r) (1) of the Act that would be immaterial considering that the unfair trades, methods and practices enumerated in Section 2(r) (1) of the Act are inclusive and not exhaustive, as would be evident from the use of word "including" before the words "any of the following practices". Shri Pradeep Narula & Anr., vs M/S Granite Gate Properties Pvt. Consumer Complaint No. 315 of 2014

"...6. It is evident from the impugned order that the complainant/appellant after having been kept waiting for more than 6 years expecting delivery of possession of the plot and seeing that the infrastructural facilities like roads, sewerage lines, water supply, etc. were not in place, the complainant demanded back the amount deposited. It is also apparent that the plan was sanctioned only in the year 2000. Obviously the money was used in developing other blocks. Reasonable period of 2 years had already expired. One may also consider that it is not a matter of development of plot and raising construction thereon. It relates to only developing plots for the purpose of allotment and by ensuring that the infrastructure is in place....

  1. In the case in hand, possession was never offered/delivered and there was delay over 3 years. In such circumstances, the respondent is directed to pay interest @ 18% p.a. from the date of each deposit till payment..." H.C. Malhotra And Ors. vs Ansal Buildwell Ltd. 3 (2006) CPJ 22 NC

There are plethora of Judgments on the issue of delayed possession in favour of Buyers/ Consumers. Essentially, what is to be borne in mind is the Complainant should be a Bona fide Buyer aggrieved by the deficiency in service of the Builder/ Respondent in not performing its part of the contractual obligation and adopting to unfair trade practise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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