You give your land for redevelopment to a builder but the latter does not honour his commitment fully, withholds the promised payments, and also fails to honour other contractual commitments when the flat is handed over to you. What options do you have then?A recent ruling by the Maharashtra Consumer Disputes Redressal Commission has addressed this issue, deciding in favour of the landowners.
What the case is about
The dispute originated in 2010, when two landowners, along with their late mother, transferred their development rights to a builder for redevelopment. They held a one-third undivided share in a property in Mumbai, and executed an Agreement to Assign for the redevelopment.Subsequently, they also entered into a Supplementary Agreement dated February 18, 2015, and an Agreement to Offer Permanent Alternate Accommodation (PAA), executed on the same date.In their complaint before the Consumer Commission, the landowners said that the builder had agreed to allot them a 1,395 sq. ft. flat in the newly constructed building, along with two car parking spaces.The agreement also required the developer to pay monetary compensation, rent for temporary alternative accommodation and a penalty if possession was delayed.In addition, the builder was responsible for executing and registering the agreement and bearing the stamp duty and registration charges for up to 1,000 sq. ft. of the allotted area.The landowners received physical possession of the flat in May 2018. However, according to an ET report quoting their complaint, the developer neither paid its agreed share of the stamp duty nor executed the registered PAA Agreement.They also alleged that the builder had not paid the enhanced compensation of Rs 88 lakh for the increased floor space index (FSI), as stipulated in the Supplementary Agreement.Other outstanding amounts included Rs 6,60,000 towards rent for temporary accommodation for the period from December 2017 to April 2018, Rs 16,50,000 as a penalty for delayed possession, and Rs 10,00,000 to reimburse the cost of raw materials they had purchased.Instead of meeting these commitments, the landowners claimed, the developer sent them a “baseless legal notice” in June 2022, demanding Rs 30,26,592 towards alleged construction expenses.
Why did the Consumer Commission rule in favour of the landowners?
Legal experts point out that the landowners were able to establish their entitlements because these had been explicitly documented in agreements executed between the parties.The developer’s failure to honour contractual commitments that were clearly set out in these documents was another important factor in the outcome, Bhargav KS, Managing Partner at K.S & B.K.S Law Associates, Bengaluru, told ET.The agreements specified the landowners’ rights to alternative accommodation, enhanced FSI compensation, rent during the transit period, compensation for delayed possession and registration. Their affidavits and correspondence provided evidence of the developer’s defaults, while the fact that possession was handed over only in May 2018 helped establish the delay in delivery.The Commission also recognised that surrendering development rights amounted to consideration for “housing services”.The Commission noted that the developer had obtained the benefits of the development rights and handed over possession of the flat in May 2018, but had failed to complete a key statutory requirement.The Commission reportedly said, “the developer blatantly ignored the statutory mandate of the Maharashtra Ownership Flats Act, 1963, by failing to register the Agreement to Offer Permanent Alternate Accommodation,”.It also found that the builder had withheld financial benefits legitimately due to the landowners. The Commission observed that the demand notices seeking Rs 30,26,592 from the landowners amounted to a clear instance of an unfair trade practice.According to the Commission, the developer’s actions reflected a serious and deliberate failure to discharge both its contractual commitments and statutory responsibilities.The matter was heard ex parte against the developer, which did not appear despite receiving notice.The Commission consequently directed the builder to execute and register the Agreement to Offer Permanent Alternate Accommodation within 60 days of receiving the order. It also instructed the developer to bear the stamp duty and registration charges for up to 1,000 sq. ft. of carpet area.The builder was further ordered to pay Rs 88 lakh as compensation for enhanced FSI, with interest at 8% from the date of default until the amount is actually recovered by the landowners. The directions also included payment of Rs 6,60,000 towards outstanding rent for temporary accommodation and Rs 16,50,000 as a penalty for delayed possession, the ET report said.In addition, the developer must reimburse Rs 10,00,000 for the raw materials purchased by the landowners. The Commission awarded a further Rs 1,00,000 as compensation for mental agony, harassment and hardship, along with Rs 50,000 towards litigation expenses.Taken together, the directions require the builder to pay the landowners more than Rs 1.22 crore, besides complying with the order to execute and register the permanent alternate accommodation agreement.