Builder Dictatorship

November 14, 2014 - Uncategorized


Property buyers are no more to be taken for granted. That seems to be the writing on the wall. More and more victims of builders’ caprices are now approaching consumer courts, representing their cases and, what’s more, winning them too! And after the Supreme Court judgment that has empowered consumer courts to handle complaints against both private and public building agencies, such cases are bound to swell. Once-sided agreements, unnecessary delays in completing the projects, shoddy construction and reluctance in refunding money when the buyer decides to pull out of a soured deal….These are just some aspects that are now very much a part of even the “cleaner” real estate deals involving respectable names in the business. But investors are no longer prepared to take them lying down. More and more property buyers are now approaching adjudicating agencies and fighting it out. However, construction giants unperturbed by the plethora of cases pending against them have employed lawyers and set up legal cells so that they can continue with their job of promising to build apartment houses on non-existent or disputed land. Emboldened by their success in fleecing people, some builders are even contemplating making public issues. Apart from the cases filed against the well-known construction giants like the Ansals, Unitech, Pushpa Builders, DLF, Aggarwals and Jainas, there are hundreds of cases pending against DDA, GDA and LDA (Lucknow development Authority) etc.

In Lucknow development authority v/s Garima Shukla the Supreme Court hauled up the former for delay in giving possession of the house to the latter. The LDA is a statutory body and is at par with private builder In its ruling the Supreme Court showed the greatest concern to protect the common man from powerful authorities, including the government.

In another case M/s Ansal housing construction Co.Ltd. v/s Nitin Saxena, when a special leave petition was filed by the builder in the Supreme Court, the Supreme Court refused to strike down the verdict of the National Commission which had favoured the complainant. The beauty of the case is that from State Commission to Supreme Court, complainant, Author Nitin Saxena argues his case without engaging a lawyer, and won the battle within a year.

 In case of Punjab Urban Planning and Development authority Vs, Karam Singh the Apex forum observed that the non-delivery of possession of an allotted plot within a reasonable time was a deficiency on the part of the petitioner. In the case in hand, the PUDA has failed to deliver possession of plot, because of certain reasons, and the NCDRC observed that the consumer is not concerned with the reasons. The apex forum directed the PUDA to allot another plot of the same size in a development plot in a different area, to the consumer charging the same price, if not the consumer is entitled to interest on the deposited amount @18% per annum. Similarly in Vice Chairman, DDA Vs. R.K.Ajbani and also inK.Saxena Vs. Ghaziabad Development Authority, directed the respective public authorities not to charge higher price from the consumers who were allotted alternative plots, because of some problem in allotting the plat originally allotted to them. Taking further the legal principles the Apex forum in GDA Vs. Krishna Kumarji observed that where for any reason the land development authority/builder has failed to allot the plot of land promised to him, inspite of the fact that he had paid the full price as per schedule, then the consumer is entitled to an alternative plot without payment of any additional money towards the cost of the new plot. In the case of Chief Administrator, PUDA Vs. Mrs.Shabnam Virk, the NCDRC, interfered in the area of “Pricing”, or “price escalation” which the courts generally do not interfere and observed that if there are sufficient reasons consumer forums should not hesitate to interfere. In the instant case, the complainant was allotted a House on 27/03/1996 at tentative cost of Rs. 6.3 lac and tentative date for handling over possession was given as April 1997. The PUDA has given possession of the House in August 1998 and the cost of the house was given as Rs. 7.44 lac. The District forum has awarded damages for delayed possession. The matter reached National Forum and the NCDRC examined the reasons for price escalation. The reason given out for price escalation was that the “land rate” of Rs.1200 per sq.yd. at the time of advertisement in August 1995 was revised by Finance Committee to Rs.2700 per sq.yd. on July 1997. The apex forum after examining the relevant papers observed that the mere use of word “tentative” in the brochure is not a sufficient ground to charge more from the consumer, and the Commission also observed that in the instant case land was acquired long back and there is no record to show that the PUDA has incurred additional financial burden because of price revision. With that observation the National Commission upheld the State Commission order and directed PUDA to charge the original price of Rs. 6.3 from the original complainant. The Commission, regarding delay in handling over of possession, observed that in the instant case there is no delay since the possession was tentatively fixed in April 1997, and actually given in August 1998, which is reasonable by any standards.

In Rajasthan Housing Board Vs. Shali Bhargava the National Consumer Disputes Redressal Commission observed that any delay in handling over possession of a plot or a house or a flat amounts to deficiency in service as laid under the Consumer Protection Act 1986 and the consumers are entitled to compensation. From the above it is also clear that the consumer courts are not awarding compensation as a matter of routine, but examining the factual basis on case to case basis before deciding whether the delay is actual or not. One should not forget that the builders or authorities in order to attract consumers generally publish a tight schedule, which is difficult to follow, and courts are also courts are certainly interfering. It is not proper to think that the consumer courts always support complainants. In PUDA Vs. Lambher Singh, the NCDRC observed that PUDA is entitled to impose excess charge for any delay in payment of installments beyond stipulated date. In the instant case the complainant had two options either to pay in installments or to pay the whole amount, ‘lump sum’ within in 60 days of the issue of allotment letter and get 10% rebate on the total cost. But the allotment letter does not carry any date to calculate the time limit, which was later clarified by PUDA. The complainant deposited installments after the expire of limitation. The Apex forum observed that delay in payment of installments due non mentioning of date on the allotment letter is not justified reason and the action of the public land development authority (PUDA) in imposing excess charge is justified. The consumers should always play their role as per schedule, and should not allow others to point out the omissions. The aforesaid decisions will certainly go a long way in protecting the rights of the consumers, from unfair practices followed by the land development authorities. The state Consumer Dispute Redressal Commission has ordered a Pune-based builder to pay a home buyer Rs 45 lakh for failing to give possession of a flat the buyer had purchased for Rs 6.5 lakh in 2001. The commission also reprimanded the builder for selling the same flat to another buyer. The commission stated that it is just to compensate the buyer with an amount matching the existing market price.

This is an ideal case to show how builders and developers exploit the consumers, it observed. In 2001,Prashant Kulkarni booked a flat for Rs 6.5 lakh in a building which was to be constructed by Vijay Wagh. Since possession was not given on time ,Wagh demanded Rs 6.9 lakh against the original amount. In 2005,the district consumer forum directed Wagh to hand over the possession. Wagh then moved the state commission in Mumbai. Waghs counsel argued that he had not handed over the flat as Kulkarni had failed to pay the remaining amount. He also contended that the flat had been sold to a third party after termination of the agreement. The commission also observed that Wagh did not give Kulkarni the 15-day notice as was decided in the agreement between the two.

In an another important issue, related to common areas flat purchasers need not shell out extra money from their savings to buy parking spaces, both open and closed, from property developers at the time of sale. “Open-to-sky” areas or “stilted” (covered) portions of their flat complexes, usable as parking spaces, cannot be sold separately by flat builders/promoters/developers as “garage”, the Supreme Court has ruled. These spaces are part of the “common areas” in flat complexes and not “saleable independently as a flat or along with a flat”, the court said in a judgment.
The verdict sets a precedent even as the apex court took note thatbuilders/promoters/developers were “indulging in malpractices in the sale and transfer of flats and the flat purchasers were being exploited”. The judgment delivered by a bench of Justices R M Lodha and A K Patnaik comes in the backdrop of interpreting the legislative intent behind enacting the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1969.

Other important issues to check


1. Charges on open area is illegal- Hon’ble Supreme Court itself in a 2010 verdict where it was clearly held that any open spaces usable as parking cannot be sold separately as they are common areas. Ironically, consumers across the country forced to pay open area, like open parking etc.

2. Delay in Handing Over The Possession- One of the most commonly reported issues, with innumerable consumer forum verdicts against it–delay in handing over the possession of the houses continues to be the proverbial thorn in real estate consumers’ lives. The wait for the consumer can sometimes be as long as 6 Years, and even then it takes a harsh consumer forum verdict to ensure the handover. Is it allowed? Answer is No, As, consumer forums across country have been relentlessly taking a stance against such delays.

The builder-buyer agreements have penalty clauses but they are not mandatory. The fiscal implications of delay have not gone unnoticed and Maharashtra State Commission in a landmark verdict clearly noted the insufficiency of the 9% interest rate that the builder was liable to pay on the refunded amount and the fact that the consumer in question has invested their lifetimes’ savings when they invested in flat and at the existing rates, it would be impossible for them buy a flat, even with the refunded amount. The result is often exorbitant compensations and interest rates granted by consumer forums in cases that come before them.

3 False promises by builder Many consumers cribbing about the layout and designs being different from what was promised or shown in the brochure. What is worst is when the this habit of denying the promised extends to denial of basic amenities, leaving a bunch of frustrated consumers in its wake- with houses that leak, doors that creak and windows that rattle. sale of common areas In such matters consumer forums has delivered excellent judgments in favors of consumer.  

NITIN SAXENA: Writer is a Recipient of National Award

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