Whenever you book a flat or a plot, one of the first things that you are told is that if you cancel the booking, you will lose a certain percentage of the money deposited. Now that condition may hold good if you just changed your mind and cancelled the contract. Of course, even here, the amount to be deducted as penalty has to be reasonable and the conditions pertaining to cancellation, fair. Or else, it can be challenged, but that is an issue that I will not go into now.
On the other hand, there could be situations where the builder does not fulfil his part of the contract (or keep to the promises made). For example, he may not hand over the flat within the stipulated time, or the quality or even the location of the flat may not be what was promised. In such situations, suppose the consumer decides to cancel the contract and asks for a refund, the builder cannot point to the terms of the contract and say that he is not bound to pay back the entire amount.
Well, in a recent order, the highest court in the country has drawn this clear distinction and held that a builder cannot refuse to pay interest on the refund, if such a refund is being sought on account of deficient service rendered by the builder, or on account of an unfair trade practise perpetrated by him. This principle is applicable not only to real estate developers in the private and the public sector, but also to house building cooperative societies.
In this case, K.Velayudhan had become a member of the South Western Railway House Building Cooperative Society and paid a deposit of Rs 2.4 lakh towards a plot. However, when the society did not develop the layout and allot the plot within the promised time, Velayudhan decided to opt out. He, therefore, asked the society to refund the money paid by him, along with interest calculated for the period the money was lying with the society.
The society refunded the amount, but refused to pay any interest on it on the ground that there was no such agreement with the members of the society. Besides, it was an organisation that worked on the principle of `no-profit, no loss' and, therefore, there was no provision for payment of interest on advance deposits made by members.
Rejecting these contentions and upholding the verdict of the lower courts awarding an interest of 10 per cent on the advance deposit paid by the complainant, the national consumer disputes redressal commission pointed out that this was not a case of the consumer changing his mind about the plot and asking for a refund.
The demand for a refund had arisen out of the deficiency in the service provided by the society in that it had failed to develop the land, carve out the layouts and allot the plots as promised. So in such a situation, the complainant was entitled to payment of interest on the amount deposited by him, the commission said (The secretary, South Western Railway House Building Cooperative Society vs K.Velayudhan, RP No 454 of 2011, decided on 24-2-2011).
This order of the apex court should help many people placed in similar situations. Of course, in its landmark judgment in the case of the Lucknow Development Authority vs MK Gupta (CA No 6237 of 1990 decided on 5-11-1993), the Supreme Court had made it clear: "When possession of property is not delivered within the stipulated period, the delay so caused is denial of service." A consumer who is a victim of such delay is entitled to compensation.
Subsequently, in several cases, the national consumer disputes redressal commission also clarified that a builder who does not stick to his side of the contract, cannot demand that the consumer to abide by it. Now the latest order strengthens further, the rights of people in such situations.
Source: The Tribune
On the other hand, there could be situations where the builder does not fulfil his part of the contract (or keep to the promises made). For example, he may not hand over the flat within the stipulated time, or the quality or even the location of the flat may not be what was promised. In such situations, suppose the consumer decides to cancel the contract and asks for a refund, the builder cannot point to the terms of the contract and say that he is not bound to pay back the entire amount.
Well, in a recent order, the highest court in the country has drawn this clear distinction and held that a builder cannot refuse to pay interest on the refund, if such a refund is being sought on account of deficient service rendered by the builder, or on account of an unfair trade practise perpetrated by him. This principle is applicable not only to real estate developers in the private and the public sector, but also to house building cooperative societies.
In this case, K.Velayudhan had become a member of the South Western Railway House Building Cooperative Society and paid a deposit of Rs 2.4 lakh towards a plot. However, when the society did not develop the layout and allot the plot within the promised time, Velayudhan decided to opt out. He, therefore, asked the society to refund the money paid by him, along with interest calculated for the period the money was lying with the society.
The society refunded the amount, but refused to pay any interest on it on the ground that there was no such agreement with the members of the society. Besides, it was an organisation that worked on the principle of `no-profit, no loss' and, therefore, there was no provision for payment of interest on advance deposits made by members.
Rejecting these contentions and upholding the verdict of the lower courts awarding an interest of 10 per cent on the advance deposit paid by the complainant, the national consumer disputes redressal commission pointed out that this was not a case of the consumer changing his mind about the plot and asking for a refund.
The demand for a refund had arisen out of the deficiency in the service provided by the society in that it had failed to develop the land, carve out the layouts and allot the plots as promised. So in such a situation, the complainant was entitled to payment of interest on the amount deposited by him, the commission said (The secretary, South Western Railway House Building Cooperative Society vs K.Velayudhan, RP No 454 of 2011, decided on 24-2-2011).
This order of the apex court should help many people placed in similar situations. Of course, in its landmark judgment in the case of the Lucknow Development Authority vs MK Gupta (CA No 6237 of 1990 decided on 5-11-1993), the Supreme Court had made it clear: "When possession of property is not delivered within the stipulated period, the delay so caused is denial of service." A consumer who is a victim of such delay is entitled to compensation.
Subsequently, in several cases, the national consumer disputes redressal commission also clarified that a builder who does not stick to his side of the contract, cannot demand that the consumer to abide by it. Now the latest order strengthens further, the rights of people in such situations.
Source: The Tribune
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