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Puneet Malhotra v. Parsvnath Developers Ltd.
Factual and Procedural Background
The complaints concern a dispute between complainants and a private builder (the opposite party) regarding delayed construction and refund of amounts paid by the complainants. Despite having paid almost the entire sale consideration, the complainants have not received the shelters they sought to acquire. The delay has spanned approximately 7-8 years, during which the value of land and construction costs have significantly increased. The complainants sought refund along with interest due to the abnormal delay in completion by the opposite party.
Legal Issues Presented
- Whether interest should be awarded at the current rate as per the Interest Act, 1978, or at a higher rate due to the delay and increased costs.
- Whether the private builder (opposite party) should refund the amounts paid by complainants along with interest for the delay in construction.
- Whether compensation should be granted separately in addition to interest for the complainants.
- Whether the opposite party can deduct any amounts already reimbursed to the complainants from the gross liability.
Arguments of the Parties
Opposite Party's Arguments
- Relied on Supreme Court decisions in State of Rajasthan & Anr. Vs. Ferro Concrete Construction Pvt. Ltd., State of Haryana & Ors. Vs. S.L. Arora & Co., and Sree Kamatchi Ammam Constructions Vs. The Divisional Railway Manager (Works), Palghat & Ors.
- Contended that these precedents do not support grant of interest by a Consumer Forum in cases where refund is ordered due to delay in construction.
- Implied that interest should be awarded only at the current rate under the Interest Act, 1978.
Complainants' Arguments
- Despite paying nearly the entire sale consideration, they have not received possession of accommodation after 7-8 years.
- Due to steep increases in land value and construction costs, mere refund of principal amount is insufficient.
- Interest at 18% per annum is justified to compensate for delay, including appreciation and cost escalation.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Interest Act, 1978 | Whether interest should be awarded at the current rate or higher in cases of delay | Court rejected the contention that interest should be only at the current rate; upheld payment at 18% per annum in gross delay cases |
| State of Rajasthan & Anr. Vs. Ferro Concrete Construction Pvt. Ltd. (2009) 12 SCC 1 | Referenced by opposite party to oppose interest award by Consumer Forum | Court found this precedent inapplicable as it did not concern interest granted by Consumer Forum for refund due to delay |
| State of Haryana & Ors. Vs. S.L. Arora & Co. (2010) 3 SCC 690 | Referenced by opposite party to oppose interest award by Consumer Forum | Held inapplicable for the facts concerning Consumer Forum interest award on refund for delay |
| Sree Kamatchi Ammam Constructions Vs. The Divisional Railway Manager (Works), Palghat & Ors. (2010) 8 SCC 767 | Referenced by opposite party to oppose interest award by Consumer Forum | Not applicable to Consumer Forum interest grant on refund for abnormal delay |
Court's Reasoning and Analysis
The Court analyzed the nature and extent of delay in construction—approximately 7-8 years—and the consequent escalation in land value and construction costs. It noted that the opposite party is a private builder who would typically charge interest at 24% per annum for delayed payments, unlike Development Authorities which charge lower rates. The Court rejected the argument based on the Interest Act, 1978, that interest should only be at the current rate, citing Supreme Court precedent upholding higher interest rates (18% per annum) in cases of gross delay.
The Court found the cited Supreme Court decisions by the opposite party inapplicable as they did not address interest awarded by Consumer Forums for refund due to abnormal delay. Considering the facts and the substantial delay, the Court concluded that interest at 18% per annum, inclusive of 8% for appreciation and cost escalation and 10% as interest, was justified.
The Court also allowed the opposite party to deduct any amounts reimbursed to complainants with interest at 18% per annum from the gross liability. It declined to award separate compensation beyond the interest granted, reasoning that the 18% interest already includes compensation.
Holding and Implications
The complaints are disposed of with a direction to the opposite party to refund the amounts deposited by the complainants along with interest at 18% per annum from the date of deposit until refund.
The refund shall be made within four months from the date of the order, failing which the complainants may seek execution of the order in accordance with law. The opposite party may deduct any previously reimbursed amounts along with interest from the total liability. No separate compensation or litigation costs are awarded to the complainants beyond the interest granted.
The decision directly affects the parties by mandating refund with substantial interest but does not establish a new precedent beyond reaffirming the applicability of higher interest rates in cases of abnormal delay and refund ordered by Consumer Forums.
the escalation in the cost of construction will not be as much as in a case where the delay is of five years or more. The Honble Supreme Court however, rejected the contention that interest should be awarded only at the current rate of interest in terms of the provision of the Interest Act, 1978. Thus, the Honble Apex Court clearly upheld payment of interest even at the rate of 18% per annum in a case where the facts are gross. As noted earlier, the interest ought to be at a higher rate in a case where the delay is for five years or more.
12. In the case before us, the opposite party is a private builder and not a Development Authority. Had they delayed the payment, the opposite party would have charged interest from the complainants @ 24% per annum. The Development Authorities do not charge interest from its allottees at such a high rate. Moreover, the delay in the aforesaid cases is more than five years and this is not the case of the opposite party that the construction is already complete or is even nearing completion. The opposite party has already taken almost entire sale consideration from the complainants. However, despite making almost entire payment, the complainants have not been able to get the shelters they had sought to acquire and considering the steep increase in the value of land and the cost of construction in last 7-8 years, it is not possible for them to acquire another similar accommodation even after adding the amount of interest @ 18% per annum to the amount they had deposited with the opposite party. Therefore, the facts of these cases are really gross and justify grant of interest @ 18% per annum, inclusive of appreciation in the value of land and increase in the cost of construction in last about 7-8 years.
13. The learned counsel for the opposite party has also referred to decisions of the Honble Supreme Court in State of Rajasthan & Anr. Vs. Ferro Concrete Construction Pvt. Ltd. (2009) 12SCC 1, State of Haryana & Ors. Vs. S.L. Arora & Co. (2010) 3 SCC 690 and Sree Kamatchi Ammam Constructions Vs. The Divisional Railway Manager (Works), Palghat & However, in none of these cases, the Court was concerned with grant ofOrs. (2010) 8 SCC 767. interest by a Consumer Forum in a case where refund to the buyer is ordered on account of the abnormal delay on the part of the seller in completing the construction. Therefore, none of these judgments would really apply to the complaints before this Commission.
14. For the reasons stated hereinabove, the complaints are disposed of with a direction to the opposite party to refund the amount which the complainants had deposited with it, along with interest on the said amount @ 18% per annum from the date the deposit was made till the date the refund is made. This comprises 8% per annum on account of appreciation in the land value and increase in the cost of construction and 10% on account of interest. However, considering that compensation is included in grant of interest @ 18% per annum, we do not grant any separate compensation to the complainants over and above interest @ 18% per annum.
15. It has come in the pleadings of the parties that in some cases, the opposite party reimbursed a part of the EMIs paid by the complainants. In those cases, the opposite party shall be entitled to deduct from their gross liability computed in terms of this order, the amount reimbursed by it along with interest on that amount @ 18% per annum from the date it was reimbursed till the date of payment in terms of this order is made. Considering that, we are granting interest to the complainants @ 18% per annum, we do not propose to award any cost of litigation to them. The payment in terms of this order shall be made by the opposite party within four months from today, failing which the complainants shall be entitled to seek execution of this order in accordance with law. The complaints stand disposed of accordingly. ......................J
V.K. JAIN PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER
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