"The Builder is responsible for paying compensation for Delay in completion of project and also maintenance charges till occupancy certificate is obtained : Adv. ROHiT ERANDE ©

"The Builder is responsible for paying maintenance charges till the occupancy certificate is obtained"

"Not completing the construction within the stipulated time and not handing over the premises amounts to deficiency  in  service and the builder is responsible for paying compensation for the financial and mental loss  caused to the customers" - Hon'ble National Consumer Commission.

Adv. ROHiT ERANDE ©

"It is the legal duty of the builder to hand over the flat to the Customer with occupancy certificate after completion of the construction within the stipulated period of the contract and if there is a defect in the same, it has to be termed as "deficiency in service" and for that the builder has to compensate the flat customer" 

These are the words of the National Consumer Disputes Redressal Commission in the recently delivered judgment by the Bench of Dr. SM Kantikar and Mr. Binoy Kumar's Bench in 'Madhusudan Reddy and others Vs. VDB Whitefield Development Pvt. Ltd. (Complaint Application No. 763/2020) filed on this petition.

Let us see the facts of this case in brief. 

1. The Case is from  Bengaluru. The opponent  builder in this case promises in the Agreement to complete the construction within a period of 22 months plus 6 months and to give 'legal' possession. The term  Legal possession  or Complete Possession means 'possession obtained with an occupancy certificate, and not a mere physical possession. 

2.  The Opponent builder inspite of receiving  Rs. 1.65 crore for flat consideration plus Rs. 10 lakh towards advance maintenance etc., but   the builder did not hand over the possession to the Consumer -Petitioner in time , and as many work including lift, amenities of the project remained incomplete, the complainant along with 11 other customers filed the said complaint against the builder for compensation. 

3. In the Complaint, the Builder contended that  due to alleged  domestic disputes and then Covid pandemic, the project could not be completed in time and due to these reasons, even after applying for the occupancy certificate in 2017, and the Builder further alleged that the Consumers were given full idea about these facts  from time to time. 

4. The Builder further contended that even as per the terms of the agreement, the maintenance etc all the outgoing expenses of the flat are to be paid by the Customer from the date of physical possession. and therefore on the contrary, every customers are liable to  pay Rs. 75 per sq. ft. maintenance and crores of rupees are due from customers towards maintenance and even without occupancy certificate, the builder  had to give the physical possession due to constant   pressure from customers. Further the Builder contended that  for the project maintenance,  builder also formed a company by name  VDB Property Venture Pvt. (Respondent No.3 in this case) , to which all the flat holders are expected to deposit money.

Held :

1. After hearing the arguments from both the parties,  Hon.  National Consumer Commission, relying on various earlier judgments of the Supreme Court, chided the builder.

2.  The Commission noted that even though  the agreement was signed in 2012, the physical possession was received in the year 2018 and despite this, the builder failed to get the occupancy certificate till date. Similarly, no just and cogent  reasons have been given by the builder for the 'unreasonable' delay. 

3. The commission referred to the decision of Hon.  Supreme Court of 2020 in the case of  'Wing Commander Arifur Rehman Khan vs. DLF Southern Homes' wherein their Lordships Observed that "Not completing the construction within the stipulated time and not handing over the premises amounts to deficiency  in  service and the builder is responsible for paying compensation for the financial and mental loss  caused to the customers". 

 The commission also refereed to its own earlier judgment of 2019 in the case of 'Amitav Guha vs. Emaar MGF Land Ltd' wherein it was held that "Such delay shall amount to negligence for which builder is liable" 

At what rate Interest can charged for delay ?. It held that at a maximum rate of 9% :

The commission discussed very important topic. Under the Interest Act 1978, unless  the rate of interest is agreed otherwise in the Agreement,  in all the cases, simple  interest has to be charged as per the current  maximum rate applicable on fixed deposits in a Nationalized bank. 

The commission relied upon the recent judgment of Hon. Supreme Court 'Erio Realtech Pvt. Ltd. Vs Abhishek Khanna, wherein it has been held by the Apex court that "The builder is liable to compensate for the delay in obtaining the occupancy certificate. At the same time, conflicting provisions such as the right of the builder to receive compounded interest in case of delay in payment etc. from the customer and nominal compensation in case of delay by the builder are seen in the contract. Earlier, even though we might have ordered the builder to pay interest @ 10%  to the customer , but considering the post-Covid economy, the customer will be entitled to get 9% interest from the builder." 

Thus, the National Consumer Commission in this case  asked the builder to compensate the consumer at the rate of 9% on the amount paid so far. 

The Commission also relied upon its own judgment  in the case of 'Kamal Kishore v. Supertech Limited -2016', wherein it  ruled that "Giving possession without an occupancy certificate is meaningless. Till the occupancy certificate is not obtained, the builder should bear all the maintenance costs". 

Based on this judgment,  the commission ordered the builder to get the Occupancy Certificate  within 6 weeks from this order, failing which the builder shall be liable to pay interest @ 12 % towards delay on the amount paid by them. It  also further ordered that the maintenance charges should not be taken from the customers till the occupancy certificate is received and the advance amount taken till date as maintenance should be deposited towards future maintenance.

This is an important judgment for customers which would act an oasis for them. Similarly, this judgment is an eye opener for the Builders and that they cannot take the customers for granted. 

Last, but not the least. The Disclaimer is before applying any Precedent, facts of each case have to be seen. 

With kind Regards,

Adv. ROHiT ERANDE ©

PUNE.