Builder didn’t inform about land litigation? refund money with 10% interest – NCDRC

In a landmark judgment that will help thousands of home buyers across India, the NCDRC ordered a developer to refund buyer’s money at 10% interest when the developer failed to inform buyer about ongoing litigation on land.

Various projects across India are either stuck or delayed because of land litigation cases. While in some cases the developer is at fault, in others it could be because of other external agencies. What makes the matter worse is the developer never inform the existing homebuyers about the ongoing litigation and continue to sell these apartments to new buyers as well.

NCDRC in the case of Emaar Hills Township, Hyderabad took a tough stand on this situation. The commission deplored the fact that the developer failed to intimate homebuyers that construction was stopped by an order of the Civil Court. Miffed by the facts of the case, the Commission ordered the developer to refund buyer’s money at 10% per annum.

Case study

The complainants are buyers of Emaar Hills Township, Hyderabad and purchased a residential flat in 2006. The apartments were to be delivered by 2011 but the developer failed to construct them even till 2014. The homebuyers realized that the developer shall not be able to finish the construction and filed a case in NCRDC seeking refund of their money.

Developer’s submissions

The developer informed the commission that that due to the embargo created by G.O. No. 9279 dated 08.10.2010 of the Government of Andhra Pradesh, registration of documents in respect of the property in question has been prohibited and vide status quo order passed by the Civil Court in OS No. 655/2010, the construction activity of the flat in question has been stalled.

Since construction was stopped by an order of the Civil Court and registration of the deeds was suspended by the Government of Andhra Pradesh, neither the buyers are entitled to terminate the agreement and claim refund nor are they liable to pay any compensation either in the form of interest or otherwise to them. The buyers must necessarily wait till the opposite parties are able to complete the construction of the flat and deliver possession to them irrespective of the time they may take for the purpose. It would be pertinent to note here that the developers were not willing to commit any particular time period for completing the construction and delivering possession to the complainants.

The order was challenged by way of CRP No. 5786/2010 filed in Andhra Pradesh High Court. Vide order dated 16.12.2010, the High Court stayed the proceedings in O.S. No. 655/2010. It would thus be seen that as on today, the order of the Civil Court directing maintenance of status quo continues to operate and consequently, the builder cannot go ahead with consideration of the flat which was the subject matter of the agreements with the buyers.

Court’s observations

We are in agreement that considering the order passed by the Civil Court on 15.12.2010, the developers could not have gone ahead with the construction of the said flat.

As per the agreement signed, the developers were required to give notice of the passing of the said order to the buyers within five days from the date of the order i.e. by 20.10.2010. By not bringing the aforesaid order to the notice of the buyers, the opposite parties committed breach of the terms of the construction agreement. As a result, the buyers are not bound by clause 28.2.5 of the construction agreement which takes away their right to claim damages against opposite parties on account of non-performance due to reasons beyond the control of the said opposite parties. In our opinion, the buyers were seriously prejudiced due to

In our opinion, the buyers were seriously prejudiced due to failure of the opposite parties, to intimate the order of the Civil Court to them.  Had such intimation been given, it would have been possible for the complainants to apply to the Civil Court to implead them in the suit and vacate the status quo order.  Therefore, in our opinion, the complainants are entitled to claim refund of the entire amount which they have paid as sale consideration to the opposite parties.

Even in case where the builder is unable to complete the construction on account of reasons beyond his control, the purchaser should be entitled to atleast take refund of the principal amount, paid by him to the builder, he not in any manner being responsible for the act which prevents the builder from completing the construction.  In such a case, the contract should be treated as frustrated in terms of Section 56 of the Contract Act since it is not known, whether the builder will at all and if so when be allowed to resume construction.  If the contract is treated as frustrated, the buyer will be entitled to refund of his money.

Since the builder failed to intimate the order of the Civil Court to the complainants within five days from the date on which the said order was passed and thereby committed breach of its contractual obligation, it should pay appropriate interest to the buyers on the entire amount deposited by them, with effect from 21.12.2010. Considering the prevailing rates of interest in the market and other facts and circumstances of the case, we are of the view that the builder who has retained without utilizing it, part of the consideration paid to it by the buyers, should pay interest on the entire amount paid by the complainants, @ 10% per annum.

The Order

Refund the entire amount of Rs.1,52,21,426/- to the buyers alongwith simple interest on that amount at the rate of 10% per annum with effect from 21.12.2010 till the date the aforesaid amount along with interest in terms of this order is paid. The complaint stands disposed of accordingly.

Order copy: Emaar Hills Township Hyderabad NCDRC Refund Order

Conclusion

In those cases where the construction is on halt or slowed down because of land litigation and the developer failed to intimate the buyers about the ongoing litigation, the buyer can demand their money back and get out of the project.

2 thoughts on “Builder didn’t inform about land litigation? refund money with 10% interest – NCDRC

  • June 8, 2016 at 5:31 pm
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    As per my understanding for resale property buyer need to do the registry as per Circle rate.. Form where i can find the exact Circle rate for a perticular locality

  • June 8, 2016 at 5:47 pm
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    Vishwajeet,

    For which area are you looking for?

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