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Vibha Gupta v. Unitech Limited
Factual and Procedural Background
The complainants booked residential flats in the project "Exquisite, Nirvana Country-2, Gurgaon" from the opposite party (OP). The agreed sale consideration in the matters was over Rs. 1 crore. Allotment letters were issued and Buyers Agreements were executed; clause 4(a) of the Buyers Agreement provided that possession would be delivered within 36 months from the date of the Buyers Agreement. Possession was not delivered within the committed time and the complainants brought consumer complaints before the Commission seeking either delivery of possession, or alternatively (a) an identical ready-to-move-in apartment in a similar locality, or (b) a sum calculated at Rs. 10,000 per sq. ft. as market value. They also sought interest at 12% per annum from the committed date of possession until actual delivery of possession, and immunity from escalation in cost and enhanced service tax.
The OP admitted allotment and receipt of consideration but resisted the complaints, asserting that possession could not be delivered due to reasons beyond its control. The OP's grounds included: slump in the real estate market and scarcity of labour and raw materials; labour/material shortage due to the Commonwealth Games (October 2010); labour shortage attributed to implementation of social schemes such as NREGS and JNNURM; a stay on use of groundwater for building purposes by the Punjab & Haryana High Court (order dated 16.7.2012); restrictions under a Ministry of Environment and Forests notification dated 14.9.1999 affecting brick availability; and the need for environment clearance under a Ministry notification published on 14.9.2006.
The Commission referred to prior similar matters, including CC No. 472 of 2015 (Anil Kumar Gupta v. M/s Unitech Ltd.) and other connected decisions (e.g., CC No. 182 of 2015 decided 29.09.2016, and Cap. Gurtaj Singh Sahni v. Unitech Limited, CC No. 603 of 2014 decided 02.05.2016), in which similar defenses by the same OP had been considered and rejected. The present opinion disposes of multiple consumer complaints (enumerated in the order) and issues directions for refund/interest or completion of construction, depending on the complainants' election.
Legal Issues Presented
- Whether the OP is responsible for delay in delivering possession of the flats despite the contractual committed date under clause 4(a) of the Buyers Agreement.
- Whether the specific defenses pleaded by the OP (environmental clearance delay, prohibition on groundwater use, shortage of labour/materials due to Commonwealth Games, economic slowdown, NREGS/JNNURM impacts, and restrictions on brick manufacture) justify exemption from liability for delay.
- What reliefs and compensation are appropriate for complainants who (a) opt for refund of payments made, and (b) opt to wait for delivery of possession.
- Appropriate rates of interest and timelines for payment or completion of construction.
Arguments of the Parties
Complainants' Arguments
- They had valid allotments and Buyers Agreements guaranteeing possession within a stipulated period (36 months from the Buyers Agreement).
- Possession was not delivered by the committed date; they sought either delivery of the allotted flats or alternative remedies (ready-to-move apartment of identical size/location or market-value compensation at Rs.10,000 per sq. ft.).
- They sought interest at 12% per annum from the committed date of possession till actual delivery, and immunity from escalation in cost and enhanced service tax.
- Among the complainants, groups were split: 38 buyers preferred to wait for possession (seeking 12% p.a. interest), while 29 buyers demanded refund of the entire amount with interest at 18% p.a.
Opposite Party's (OP's) Arguments
- The OP admitted allotment and receipt of payments but asserted that delay in handing over possession was due to reasons beyond its control.
- The OP relied on multiple grounds: general slump in the real estate market causing scarcity of labour/materials; labour/material shortages due to Commonwealth Games (Oct 2010); labour shortages because of social schemes (NREGS, JNNURM); judicial stay on use of groundwater for building purposes (order dated 16.7.2012); Ministry of Environment & Forests notifications (14.9.1999 and 14.9.2006) affecting brick manufacture and requiring environmental clearances.
- With respect to compensation, the OP submitted that for allottees seeking possession only the agreed contractual compensation of Rs. 5 per sq. ft. (clause 4(c)(2) of Buyers Agreement) would be payable, and for those seeking refund, compensation in the form of interest at prevailing rates (around 8% per annum) would be appropriate.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CC No. 472 of 2015 — Anil Kumar Gupta v. M/s Unitech Ltd. | Consideration of identical factual matrix in the same project and rejection of similar defenses raised by the OP (noting obligation to secure environmental clearance before accepting bookings or to disclose non-availability of clearances to buyers). | The Commission relied on the view in this earlier decision to hold that the OP ought to have obtained or disclosed the need for environmental clearance before accepting bookings and could not escape liability for delay attributable to lack of such clearance. |
| CC No. 182 of 2015 and connected matters (decided 29.09.2016) | Previous rejections of the OP's pleaded grounds for delay in related matters. | The Commission treated those earlier findings as relevant precedent and reiterated that the OP's grounds had been repeatedly rejected in similar cases. |
| Cap. Gurtaj Singh Sahni v. Unitech Limited, CC No. 603 of 2014 (decided 02.05.2016) | Assessment of the impact of a prohibition on use of underground water in construction; attribution of knowledge of such prohibition to the builder at the time of entering agreements. | The Commission applied the principle that the OP knew (or ought to have known) of the prohibition and therefore could not rely on it to justify delays; the OP was expected to make alternative arrangements and disclose the possibility of delay to buyers. |
Court's Reasoning and Analysis
The Commission examined each ground advanced by the OP and addressed them using prior findings and available facts:
- Environmental-clearance delay: The Commission stated that the OP knew before accepting bookings that projects exceeding 20,000 sq.ft. built-up area would require environmental clearance under the Notification dated 14.9.2006 (approval by SEIA Committee and SEIAA). The OP should either have obtained the clearance before accepting bookings or informed buyers that construction and timelines depended on obtaining such clearance. Without such disclosure, the OP could not escape liability for delay attributable to lack of clearance.
- Prohibition on groundwater use: Relying on the analysis in Cap. Gurtaj Singh Sahni, the Commission noted that the prohibition on underground water use had been publicly notified earlier; therefore, the OP was aware of the restriction when entering into Buyers Agreements and could not rely on that prohibition to justify delay. The OP had not placed material showing attempts to obtain alternative water sources.
- Commonwealth Games plea: The Commission found this ground misplaced because the Commonwealth Games concluded in October 2010, which was prior to the allotments in this project, and therefore could not explain delays for allotments made later.
- Economic slowdown/funds shortage: The Commission rejected the economic slowdown as a ground for delay because many buyers had paid as much as 95% in advance and others had payment linked to construction progress; there was no claim that buyers defaulted on payments, so the OP could not show construction funding was unavailable due to market recession.
- Shortage of labour and materials (NREGS/JNNURM and bricks/sand): The Commission observed that the OP produced no evidence of attempts to recruit labour, to invite tenders for supply of bricks/sand, or of contractors ceasing work due to non-availability of labour/materials. The Commission found it unlikely that labor/materials were wholly unavailable in the market and rejected these grounds for excusing delay.
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Quantum of compensation and appropriate rates of interest: The Commission considered the positions of the parties (complainants seeking 12% or 18% rates; OP suggesting minimal contractual compensation or market interest ~8%). Taking into account prevailing interest rates and parity between complainants, the Commission concluded that:
- Complainants who opt for refund should receive refund of principal plus simple interest at 10% per annum (in terms of clause 4(e) of the Buyers Agreement).
- Complainants who opt to wait for possession should receive compensation in the form of interest at 8% per annum from the committed date of possession until offer of possession, together with a direction to the OP to complete construction in a time-bound manner.
- Costs and timelines: The Commission directed Rs. 10,000 per complaint as cost of litigation in each disposed matter and fixed timelines for refund payments (within three months for the refund group) and completion/compensation payment (on or before 31.12.2017 for those who chose to wait).
Holding and Implications
The Commission disposed of the listed consumer complaints with directions either for refund with interest or for completion of construction and payment of interest, together with litigation costs.
Direct rulings and consequences imposed by the Commission:
- For the group of complainants who opted for refund (listed case numbers in paragraph 8 of the opinion): the OP is directed to refund the entire principal amount received from each complainant along with simple interest at 10% per annum from the date of receipt of each payment until the date of refund. The OP must also pay Rs. 10,000 as litigation costs in each complaint. Payment is to be made within three months from the date of the order.
- For the group of complainants who opted to wait for possession (listed case numbers in paragraph 9 of the opinion): the OP is directed to complete construction, obtain requisite occupancy certificates, and offer possession to those complainants on or before 31.12.2017. The OP must pay compensation in the form of interest at 8% per annum on amounts paid by complainants from the committed date of possession until the date possession is offered; additionally, the OP must pay Rs. 10,000 as litigation costs in each complaint. Compensation and completion are to be done on or before 31.12.2017.
The opinion does not purport to lay down any broader legal principle beyond the application to these and closely related matters; the decision produces direct effects on the parties (refunds, interest, costs, or completion deadlines) as specified. The Commission relied on prior decisions involving the same OP and project to reject the OP's defenses and to determine appropriate relief; the opinion does not state that it sets a new precedent beyond applying those earlier conclusions to the present complaints.
JUSTICE V.K. JAIN (ORAL)
1. The complainants in these matters booked residential flats with the OP in a project namely Exquisite, Nirvana Country-2, Gurgaon. The sale consideration in all the cases was agreed at more than Rs.1 Crore and allotment letters were issued, allotting different flats to the complainants, for the said agreed consideration. The allotment was followed by Buyers Agreements executed between the parties. As per clause 4(a) of the Buyers Agreement, the possession was proposed to be delivered within a period of 36 months from the date of the said agreement. The possession having not been delivered, the complainants are before this Commission seeking possession of the apartment allotted to them or in the alternative, a direction to the OP to provide ready to move in apartment of identical size in a similar locality or a sum calculated at Rs.10,000/- per sq. ft. of the area of the flat, that according to the complainants being market value of similar houses. They are also seeking interest @ 12% per annum from the committed date of possession till the date on which the possession is actually delivered to them besides immunity from escalation in cost and enhanced service tax.
2. The complaints have been resisted by the OP on several grounds though it has admitted allotment of the flat to the complainants as well as receipt of the consideration from them. It has been alleged in the written version filed by the OP that the possession of the flats could not be handed over to the complainants on account of reasons beyond its control. The following according to the OP, were the reasons on account of which the possession could not be offered to the complainants:
i. There was slump in the real estate market, because of overall economic conditions, as a result of which the supply of labour and raw-material became scarce.
ii. There was shortage of labour and the building material due to Common Wealth Games held in October 2010.
iii. There was shortage of labour due to implementation of social schemes such as National Rural Employment Guarantee Scheme (NREGS) and Jawahar Lal Nehru National Urban Renewal Mission (JNNURM)
iv. The use of ground water for building purposes was stayed by Punjab & Haryana High Court vide its order dated 16.7.2012.
v. Restrictions were placed by Ministry of Environment and Forests vide Notification dated 14.9.1999 which resulted in the reduction in availability of bricks in the market since manufacture of clay bricks was stopped within a radius of 50 km from Coal and Ignite based Thermal Power Plants without mixing at least 25% of ash with soil.
vi. The Ministry of Environment & Forest had issued a notification in terms of the National Environment Policy approved by the Government on 18.05.2006 requiring environment clearance. The said notification was published on 14.09.2006.
3. In CC No. 472 of 2015 Anil Kumar Gupta Vs. M/s Unitech Ltd., this Commission had the occasion to consider a similar complaint in respect of a residential flat booked in the same project
i.e. Exquisite Nirvana Country-2, Gurgaon. The complainant in that case was issued allotment letter dated 27.10.2010 and as per clause 4(a) of the Buyers Agreement executed between him and the OP, possession was to be delivered by 11.11.2013. The aforesaid complaint was resisted by the OP on identical grounds. Rejecting the resistance to the complaint, this Commission inter-alia observed and held as under:
4. All the above referred grounds have repeatedly been rejected by this Commission in a number of cases including CC No. 182 of 2015 and connected matters decided on 29.09.2016. The following view taken in the aforesaid matters is relevant for the purpose of deciding this complaint:
6. As regards the delay in obtaining the environmental clearance, the opposite party knew before accepting booking from the complainants and allotting a flat to them that since the size of the project was more than 20,000 sq.ft. of built up area, environmental clearance in terms of the Notification dated 14.9.2006 would be necessary and the said clearance would be given only after the project was approved by State Environment Impact Assessment Committee and then by State Level Environment Impact Assessment Authority. It was, therefore, necessary for the opposite party to either obtain the requisite environmental clearance before accepting the booking or at least inform the buyers that the construction would commence only after obtaining the requisite environmental clearance which they were yet to receive. This is particularly necessary in a case where the builder is promising delivery of the apartment in a time-bound manner linked with the date of the Buyers Agreement and not with the date on which the construction actually commences after obtaining all the requisite clearances. If such a disclosure is made to the buyer and still he chooses to make a booking knowing fully well that the builder may not be held responsible for the delay to this extent it is attributable solely to the concerned environmental authority, it will not be possible to hold the builder responsible for the delay in the aforesaid extent.
5. As regards the alleged non-availability of ground water on account of the use of ground water in building activities, having been stayed by the Punjab and Haryana High Court, the following view taken by this Commission in Cap. Gurtaj Singh Sahni Vs. Unitech Limited, Consumer Complaint No.603 of 2014 and connected matters, decided on 2.5.2016 is pertinent:-
6. The next question which arises for consideration is the quantum of compensation which should be paid to the complainants for the delay in completion of the villas. As far as the prohibition on use of underground water in construction is concerned, the learned counsel for the complainant has drawn my attention to the order dated 21.08.2012 passed by a Divisional Bench of Punjab & Haryana High Court in Civil Writ Petition No. 20032 of 2008 wherein the High Court noted that the public notice issued under Section-5(3) of the Environment Protection Act, 1986 was published in the newspaper on 26.12.2000. It further shows that the said notice had imposed a complete ban upon the use of underground water in the construction without prior approval of the competent authority. It was noted by the High Court that despite publication of the aforesaid notice, the builders continued to use underground water for construction purposes. If there was a complete ban on use of underground water for construction and the said prohibition was notified on 26.12.2000, the opposite party must have taken into account, the impact of the said prohibition while entering into Buyers Agreements with the complainants. Therefore, it is not open to the opposite party to rely upon the said prohibition in order to justify the delay in construction of the villas sold to the complainants. The opposite party knew at the time of entering into agreements with the complainants that it will not be able to use underground water for construction of the villas and therefore, will have to make alternative arrangements from authorized sources for making the water available for the said construction. Therefore, the aforesaid prohibition on use of the underground water for construction purpose does not justify the delay in completion of the construction. In any case, no material has been placed by the opposite party on record to show that efforts were made by it during the relevant period to procure water from alternative sources but it was unable to obtain the water from the said sources. More importantly, in the Buyers Agreement executed between the parties, it was not disclosed to the buyers that since no underground water can be used for construction purpose, the developer will have to arrange water from alternative sources and in case it is not able to arrange water, the construction would be delayed and in that case, it will not be held responsible for the delay in completion of the construction.
6. As regards the alleged shortage of labour and building material on account of Commonwealth Games, the plea taken by the opposite party is wholly misplaced since the said games were over in October 2010 much before the allotment in this project was made to the complainant.
7. As regards the alleged economic slowdown and consequent recession in the real estate market, the same cannot be a valid ground for delaying the possession of the flats to the complainant since some of the buyers made advance payment of almost 95% of the sale consideration whereas the other buyers were to make payment linked with the progress of construction and this is not the case of the opposite party that they had defaulted in performing their contractual obligations as regards the payment of the sale consideration. Therefore, it cannot be said, as far as this project is concerned, that the construction was delayed on account of funds not being available with the opposite party.
8. As regards the alleged shortage of labour due to NREGS and Jawahar Lal Nehru National Urban Renewal Mission, there is no evidence of the opposite party having attempted to recruit labour and having not found the requisite labour available in the market. Ordinarily such big builders operate by giving contracts/sub-contracts to third parties. There is no evidence of the opposite party having not been able to get any contractor/sub-contractor on account of non-availability of labour and/or building material in the market. Moreover, this is not the case of the opposite party that no construction activity took place in Gurgaon in the last 5 years or so. Had the labour and/or building material not been available in the market, the problem would have been faced not only by the opposite party but by all other builders as well as the individuals who were seeking to construct houses in this area. Therefore, I find no merit in the aforesaid plea taken by the opposite party.
9. As regards the alleged shortage of bricks and sand, there is no evidence of the opposite party having invited tenders for supply of bricks and sand and the said material having not been available in the market. Moreover, there is no evidence of any sub-contractor/contractor of the opposite party having stopped the work awarded to him on account of non-availability of labour and/or building material in the market. It is possible that the wages of the laour and the cost of the building material may have gone up with the passage of time but it would be difficult to accept that neither the required labor nor the building material in sufficient quantity was available in the open market.
4. The learned counsel appearing for the complainants states on instructions from the complainant that as many as 38 flat buyers are not interested in taking refund of the amount paid by them to the OP and would prefer to wait till the OP, pursuant to the direction of this Commission, completes the construction and offers possession of the flats to them. He further states that the aforesaid 38 complainants insist upon payment of compensation in the form of interest @ 12% per annum from the committed date of possession.
5. The learned counsel for the complainants also states that as many as 29 complainants do not want to wait any more, they being fed up with the conduct of the OP and want refund of the entire amount paid by them alongwith interest @ 18% per annum.
6. The learned counsel for the OP, on the other hand submits that in case of the allottees who are seeking possession of the flats, only the agreed compensation of Rs.5/- per sq. ft. is payable in terms of clause 4(c)(2) of the Buyers Agreement and in the case of the allottees who are seeking refund, compensation in the form of interest at the prevalent interest rate which is about 8% per annum at best would be payable.
7. Taking into consideration the current interest rate scenario in the country and also on the principal of parity, I am of the considered view that such of the allottees who want to take refund of the amount paid by them to the OP should be refunded the said amount alongwith compensation in the form of simple interest @ 10% per annum in terms of clause 4(e) of the Buyers Agreement. In the case of the allottees who want to wait for the possession of the flats allotted to them, considering the prevailing interest rates in the market, compensation in the form of interest @ 8% per annum from the committed date of possession, on the amount paid by them to the OP would be appropriate alongwith a direction to the OP to complete the construction of the flats in a time bound manner.
8. For the reasons stated hereinabove, CC Nos. 1104/2015, 1106/2015, 1108/2015, 1109/2015, 1113/2015, 1118/2015, 1119/2015, 1122/2015, 1123/2015, 1126/2015, 1130/2015, 1135/2015, 1137/2015, 1138/2015, 1140/2015 to 1142/2015, 1144/2015, 1145/2015, 1265/2015, 955/2016 to 960/2016, 962/2016 and 963/2016 are disposed of with the following directions:
(i) The OP shall refund the entire principal amount received from the complainant in respect of the flat allotted to him along with compensation in the form of simple interest @ 10% per annum from the date of receipt of each payment till the date on which the entire amount payable to the complainant along with compensation in the form of interest in terms of this order is refunded.
(ii) The OP shall also pay Rs.10,000/- as the cost of litigation in each complaint.
(iii) The payment in terms of this order shall be made within three months from today.
9. CC Nos. 1100/2015 to 1103/2015, 1105/2015, 1107/2015, 1110/2015 to 1112/2015, 1114/2015 to 1117/2015, 1120/2015, 1121/2015, 1124/2015, 1125/2015, 1127/2015 to 1129/2015, 1131/2015 to 1134/2015, 1136/2015, 1139/2015, 1143/2015, 1146/2015 to 1150/2015, 1263/2015, 1264/2015 and 594/2016 to 597/2016 are disposed of with the following directions:
(i) The OP shall complete the construction of the flats allotted to the aforesaid complainants in all respects, obtain the requisite occupancy certificate and offer possession to the complainants, on or before 31.12.2017.
(ii) The OP shall also pay compensation in the form of interest @ 8% per annum on the amount paid to it by the complainants, from the committed date of possession till the date on which the possession of the flat is offered to them, in terms of this order.
(iii) The OP shall also pay a sum of Rs.10,000/- as cost of litigation in each complaint.
(iv) The compensation in terms of this order shall be paid on or before 31.12.2017. ......................J
V.K. JAIN PRESIDING MEMBER
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