News: Small delay compensation may tempt builders not to complete projects, divert money: NCDRC-07.11.2017

Small delay compensation may tempt builders not to complete projects, divert money: NCDRC

NEW DELHI: Coming down heavily on meager compensation offered for project delays to the home buyers in the builder buyer agreements, the National Consumer Disputes Redressal Commission (NCDRC) has said small penalties may tempt builders not to complete the construction and divert the money collected from home buyers for other purposes.

Hearing a case filed against Emaar MGF Land, the apex consumer commission on Thursday directed the builder to pay 8% interest per annum for delay in delivery of flats to 11 home buyers in Emerald Floors project in Gurgaon, which was way higher than the maximum compensation of Rs 10 per square feet per month as per the builder buyer agreement. NCDRC also asked the builder to give possession of the completed homes by December 2018 and pay Rs 25,000 as the cost of litigation to each home buyer within three months.

"If a paltry compensation of say Rs.10/- per sq. ft. per month is awarded against a builder, it may lead to dangerous consequences since the builder may be tempted not to complete the construction and divert the money collected from the flat buyers for other purposes, in the hope that in the event of the buyer approaching a Court or a Consumer Forum, he can get away by paying a paltry compensation of Rs.10/- per sq. ft. per month to him," the consumer court said in its order.

The apex consumer court also felt that paying such a meagre compensation would always be a win win situation for a builder who is likely to pay many times more if he goes to market for arranging finances which he gets by diverting the money collected from the flat buyers to other purposes.

Terming the compensation stipulated in the builder buyer agreement as "unilateral and patently unfair", presiding member Justice VK Jain said, "Having already paid the booking amount to the builder, they (home buyers) have no option but to sign on the dotted lines, since the failure to execute the agreement unilaterally drafted by the builder and imposed upon the flat builders is likely to result in the booking amount being forfeited by the builder."

According to NCDRC, the amount which the builder has collected from the flat buyers should be treated as a cash deposit with the builder who should pay adequate interest to the flat buyer for utilising his money.

Giving a major relief to the Emaar Emerald Floors' home buyers, NCDRC has allowed the compensation payable to to be adjusted out of the additional amount, if any, payable by the home buyers to the builder, informed advocate Sushil Kaushik, who fought the case on behalf of home buyers.

"The balance amount, if any, will be paid to them while offering possession of the flats," he said. Two out of the 11 home buyers, who have already received possession of their flats, will be paid within three months.

Emaar MGF in its response said the company will examine the order and decide next course of action once the same is received. The company also said that deliveries have already started happening in Emerald Hills.

Emerald Floors group housing project is part of a 200-acre township named Emerald Hills in Sector 65 of Gurgaon, and has around 200 units.

Dubai-based Emaar Properties entered India in 2005 in partnership with MGF Development. However, it decided to end this joint venture in April last year and the process of separation is underway.