2020 (12) TMI 1400 - SC - Indian Laws

Force majeure defense - Substantial delay on the part of the developer in handing over possession of the apartments which were contracted to be sold - recovery of parking and club charges by the developer - compensation for delay in handing over possession of the flats. Force majeure defence - HELD THAT - A developer in the position of the Appellant would be conscious of these delays and cannot set this up as a defence to a claim for compensation where a delay has been occasioned beyond the contractually agreed period for handing over possession. As regards the stop work orders, there is a finding of fact that these were occasioned by a succession of fatal accidents which took place at the site and as a result of the failure of the Appellant to follow safety instructions. This is a pure finding of fact. There is no error of law or fact. Hence, there are no substance in the force majeure defence. Compensation on account of delay - HELD THAT - It is true that in the present case, the contractual rate of Rs. 10 per square foot per month is double the rate fixed in the agreements in the above case. On the other hand, the Court must be conscious of the fact that the situation in the real estate market in Delhi is very distinct from that in Bengaluru both in terms of rentals and land values. This has not been disputed. The flat buyers had to suffer on account of a substantial delay on the part of the Appellants. In such a situation, they cannot be constrained to the compensation of Rs. 10 per square foot provided by the agreements for flat purchase. However, having regard to all the facts and circumstances, the compensation on account of delay should be brought down from 7% to 6%. Moreover, the amount, if any, which has been paid in terms of the contractual rate shall be adjusted while computing the balance due and payable in terms of the judgment. Appeal allowed in part.

Summary

Issues:
- Force majeure defense raised by the developer
- Compensation for delay in handing over possession
- Refund of parking and club charges
- Evaluation of contractual compensation rate
- Distinction in compensation rates between cases
- Judicial guidance on compensation for delay
- Specific directions issued by the NCDRC
- Modifications made by the Supreme Court in the judgment

Force Majeure Defense:
The developer contended that force majeure conditions, such as delays in building plan approvals and stop work orders due to fatal accidents, hindered timely project completion. However, the NCDRC rejected this defense after evaluating the circumstances, emphasizing that delays in building plan approvals were common in construction projects and that stop work orders were a result of safety failures by the developer. The Supreme Court found no merit in the force majeure defense, upholding the NCDRC's decision.

Compensation for Delay:
Regarding compensation for delay, the NCDRC directed the developer to pay simple interest at 7% per annum for the delayed possession of flats. The Supreme Court, guided by established principles, reduced the compensation rate to 6% per annum due to the substantial delay experienced by flat buyers. The Court emphasized that genuine flat buyers seeking a home should not be deprived of compensation, even if exit options with interest were offered, as possession remains a priority for them.

Refund of Parking and Club Charges:
The NCDRC had directed the refund of parking and club charges with interest, but the Supreme Court set aside this direction in line with a previous judgment related to a different project by the same developer. The Court clarified that the refund of these charges would not be applicable based on the specific circumstances and legal precedents.

Evaluation of Contractual Compensation Rate:
A comparison was drawn between the contractual compensation rates in different cases, with the Supreme Court considering the distinct real estate market conditions in Delhi and Bengaluru. The Court adjusted the compensation rate to 6% per annum, taking into account the higher contractual rate of Rs. 10 per square foot in the present case.

Judicial Guidance on Compensation for Delay:
The judgment emphasized that compensation for delay should be fair and adequate, considering the specific circumstances of each case. The Court highlighted the importance of providing just recompense to genuine flat buyers facing project delays, irrespective of exit offers made by the developer.

Specific Directions by NCDRC and Modifications by Supreme Court:
The NCDRC had issued specific directions, including entitlement to additional demands, early payment rebates, and execution of conveyance deeds. The Supreme Court partially allowed the appeals by modifying the compensation rate for delay and setting aside the refund of parking and club charges. The Court upheld the NCDRC's directions with the mentioned modifications, emphasizing compliance within a specified timeframe.