The National Consumer Disputes Redressal Commission (NCDRC) has held that real estate builders cannot take recourse to the Force Majeure provision for delay in delivering projects and that homebuyers cannot be made to wait indefinitely for possession of their units.
In a case involving two buyers who had paid around Rs 5.68 crore each for 5,514 sq.ft apartments in a project by Pioneer Urban Land and Infrastructure Ltd located in Sector 62, Gurgaon, the NCDRC has ruled that the delay of the project by the builder appears to be “delaying tactics veiled as ‘Force Majeure’ conditions and seem to be an attempt to wriggle out of its contractual obligations,” the order said.
The two buyers had booked the luxury units in 2012 for which possession was promised by March 2016 but possession was not handed over until 2018-19 despite the payments being made. The grievance of the buyers was that despite receiving more than 90 percent of the total consideration, the builder had failed to hand over possession of the flats within the promised time period and even possession in the near future seemed unlikely.
The court has directed the builder to refund the amount deposited by the builder along with compensation in the form of simple interest at 9 percent per annum from the date of each payment till the date of payment by the builder who will have to comply with the order within two months from the date of the order. There shall be no order as to costs, the order said.
“Even after receiving substantial amount, the builder had failed to hand over possession of the flat within the promised time period…A person cannot be made to wait indefinitely for the possession of the flats allotted to him/her. The buyers are, therefore, entitled to seek the refund of the amount paid along with compensation,” it said.
During the course of hearings, the builder had initially objected to the maintainability of the complaint in the consumer forum, saying that the buyer was an investor who had booked the unit for resale purpose and making profit. The builder later, while admitting delay in delivering possession of the flats, had stated that the delay was purely beyond their control and that the time stipulated for delivering possession of the flats in the Apartment Buyer’s Agreement was only tentative.
The builder had argued that the main reason for delay in handing over possession of the apartment was that some customers had defaulted on payments, in spite of repeated demands and notices issued by them.
It was also submitted that obtaining various licences, approvals, sanctions, and permits contributed to the delay. Dispute with the constructing agencies employed by the builder was also responsible for the delay. It was also submitted that the construction of big projects such as the Commonwealth Games Village, led to shortage of labour in the NCR region and that there was shortage of water in the NCR region which came within the ambit of the Force Majeure clause of the agreement.
The consumer court bench was of the view that the buyers had made substantial payment towards their flats and cannot be penalised if the builder could not collect payments from other flat buyers. Moreover, if only some customers failed to make payments in time, the builder is not expected to delay the entire project.
The bench was of the view that neither any new legislation was enacted nor an existing rule, regulation or order was issued stopping/suspending or delaying construction.
“There was no evidence of any lock-out or strike by the labour at the site of the project. There was no civil commotion, war, enemy action, terrorist action, earthquake or any act of God which could have delayed the construction of the project. The Opposite Party merely narrated a set of events and obstacles which are routinely faced by project developers. The Opposite Party failed to prove that there was any unforeseen and unexpected event which prevented the completion of the Project within the stipulated time period,” the order said.
Force Majeure is a contractual provision in terms of which a party is entitled to suspend the performance of the contract or is entirely excused from its performance, of course, upon the occurrence of specified events beyond a party's control. The basis of this doctrine is to save the performing party from consequences of breach arising from an event over which it has no control. It is, therefore, an exception for breach of contract.
The crucial elements that need to be satisfied for an event to qualify as a Force Majeure are: it should be an “unforeseen” event; its occurrence could not have been prevented, and there should be a direct link between the occurrence of the event and consequent impossibility to perform under the contract.
“Time and again frivolous claims are raised by builders. Buyers invest their hard-earned money to book houses but builders delay the projects inordinately and cite irrational reasons for the delay. It should also be noted that builders commit delivery dates that are often impossible to adhere to merely to collect money from buyers,” advocate Aditya Parolia of PSP Legal told Moneycontrol.
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