SC directs IREO Grace Realtech to refund buyers' money with 9% interest

SC directs IREO Grace Realtech to refund buyers’ money with 9% interest

NEW DELHI: The Supreme Court (SC) of India on Monday ordered IREO Grace Realtech to refund buyers of phase 2 its project -The Corridors with 9% simple interest while directed phase 1 buyers to take possesion of their flats offering them compensation for the project delay as well.

The builder had filed an appeal under Section 23 of the Consumer Protection Act 1986 against the National Consumer Disputes Redressal Commission (NCDRC) decision which ordered them to refund the amount deposited by apartment buyers of The Corridors situated in Sector 67-A, Gurugram.

NCDRC had held that since the developer had failed to deliver possession of the allotted flats to the buyers, it amounted to deficiency in service, and the complainants were entitled to refund of the amount alongwith appropriate compensation.

Haryana RERA while hearing a plea of another buyer of the same project had said the developer was liable to pay interest of 10.75% per annum on the amount deposited by the complainant, upto the date when the possession was offered. However, keeping in view the status of the project, and the interest of other allottees, the authority was of the view that refund cannot be allowed at this stage. Hence, the developer was directed to handover possession of the apartment by June 2020.

Consequently, NCDRC also made other judgements in favour of buyers ordering builder to refund money with interest.

IREO Grace Realtech hence moved the apex court against all the cases. Several home buyers had also filed separate pleas against the builder in the apex court which were heard together.

|| The Department of Town and Country Planning (DTCP) granted a license to Precision Realtors Blue Planet Infra Developers and Madeira Conbuild for developing a group housing colony comprising of 1,356 apartments. Subsequently, the license for construction was transferred to IREO Grace Realtech.

The developer opened booking for the apartments in 2013. It however received Fire NOC in 2014. (according to the pleas filed in the court) ||

The buyers, represented by advocates Piyush Singh and Aditya Parolia of PSP Legal, said that possession was to be handed over within a period of 42 months from the date of approval of the building plans, with a grace period of 180 days, which expired in 2017. The project is still delayed even if we assuming that the date for possession would begin in 2014 and end in 2018. The OC is yet not obtained for phase II of the project.

The grant of Fire NOC was not a pre-condition for commencement of construction work. In fact, the developer had started the construction before the grant of Fire NOC. The developer had also sought payment of the first three instalments prior to receiving the Fire NOC.

In its plea, the builder said that the period of 42 months for handing over possession would commence only after the conditions mentioned in the building plans were fulfilled. Since the fire safety approval was obtained in Novermber 2014, the period of 42 months would commence from this date. Further, the developer had not taken any instalment prior to Fire NOC was granted. In any event, the apartment buyer is being paid delay compensation for the period of delay which has occurred during the course of construction.

The builder also submitted that some of the buyers are defaulters since they had paid only between 30 to 40% of the total consideration. Despite this, the developer had made an alternate offer of similar units in the completed towers in Phase 1 of the project where the occupation certificate had been granted.

It also contended that the decision of the RERA must be given primacy over the NCDRC. By July 2017, the construction of Phase I of the project had been completed, which comprised of Towers A6 – A10, B1 – B4, and C3 – C7, for which the OC was issued in May 2019 and an offer of possession was made to the apartment buyers.

With respect to the remaining Towers in Cluster-A comprising of buildings A1 to A5; Cluster-B comprising of buildings B5 to B8; and, Cluster-C comprising of buildings C8 to C11, the application for grant of part Occupation Certificate was submitted on September 2019, which is pending approval.

After hearing both parties, the apex court held that the 42 months’ period of the agreement for handing over possession of the apartments would be required to be computed from the date on which Fire NOC was issued, and not from the date of the building plans being sanctioned.

The bench comprising of Justice Indu Malhotra, Justice D.Y.Chandrachud and Justice Indira Banerjee further said that the terms of the builder-buyer agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice and the developer cannot compel the buyers to be bound by the one-sided contractual terms contained in it.

The court then categorised buyers into two categories:

Apartment Buyers whose allotments fall in Phase 1 of the project comprised in Towers A6 to A10, B1 to B4, and C3 to C7, where the Developer has been granted occupation certificate, and offer of possession has been made
Apartment Buyers whose allotments fall in Phase 2 of the project, where the allotments are in Towers A1 to A5, B5 to B8, C8 to C11, where the Occupation Certificate has not been granted so far

The apex court said that first category buyers are obligated to take possession of the apartments, since the construction was completed. The developer is however obligated to pay delay compensation for the period of delay which has occurred from November 2018 till the date of offer of possession was made to the allottees.

For the second category the court said that although the developer has made an alternate offer of allotment of apartments in Phase 1 of the project, the allottees cannot be made to wait indefinitely for possession of the apartments allotted to them, nor can they be bound to take the apartments in Phase 1 of the project.

The SC held that they are entitled to refund of the entire amount deposited by them with 9% simple interest per annum from November 2018 till the date of payment of the entire amount. The refund will be paid within a period of three months from the date of this judgment. If there is any further delay, the Developer will be liable to pay default at 12% simple interest per annum.

The developer shall not deduct the earnest money of 20% from the principal amount, or any other amount, on account of the various defaults committed by the developer, including the delay of over seven months in obtaining the Fire NOC.