No OC, no excuse: National consumer body orders Lucknow builder to refund Rs 21 lakh, pay damages to flat buyers

NCDRC presiding member AVM J Rajendra (Retd) and member Justice Anoop Kumar Mendiratta issued the order on May 12.

“It is a settled principle that a mere issuance of an offer of possession does not absolve the builder unless the unit is complete in all respects and is supported by requisite statutory approvals, including OC (occupancy certificate),” the National Consumer Disputes Redressal Commission (NCDRC) said on May 12.

The consumer body rejected the developer’s contention that there was no deficiency in service because possession had been offered before the contractual deadline.

Flat booked in 2017

The complainants had applied for allotment of a flat in December 2017 after being approached by the developer’s marketing officials.

Following payment of Rs 5 lakh, flat number 703 in Tower-2 of the project was allotted to them in January 2018. A formal agreement for sale was executed on July 10, 2018.

The agreed sale consideration for the apartment was Rs 1,13,68,681 under a construction-linked payment plan. Under the agreement, possession was to be offered on or before November 30, 2022, along with completion and occupancy certificates.

The buyers told the consumer commission that they ultimately paid Rs 1,34,98,422.11, including TDS and additional charges, which they claimed exceeded the agreed consideration by Rs 21,29,741.11. They alleged that despite an offer of possession being issued on April 5, 2022, the project lacked promised amenities and was incomplete.

They further challenged the builder’s September 16, 2022, cancellation of the allotment and forfeiture of Rs 29,49,933, alleging that the cancellation was arbitrary and was later informally admitted by company officials to have been issued in error.

State panel granted broad relief

The UP State Consumer Disputes Redressal Commission had allowed the complaint in June 2024 and directed the developer to hand over physical possession of the flat along with occupancy and completion certificates.

It had also ordered payment of 10 per cent interest on the deposited amount, refund of the excess amount with interest, Rs 10 lakh compensation for mental agony and unfair trade practice, and litigation costs of Rs 50,000.

Challenging the order before the national consumer commission, the developer argued that it had already fulfilled its obligations by obtaining a completion certificate on January 7, 2022, and offering possession before the contractual deadline.

It also claimed the buyers had defaulted in making payments and that the cancellation was lawful under the agreement.

The company further argued that the dispute ought to have been adjudicated under the Real Estate Regulatory Authority (RERA) framework and that the complainants were investors rather than consumers.

NCDRC rejects objections on jurisdiction

• The national consumer commission rejected the contention that consumer fora lacked jurisdiction merely because the project was registered under RERA.
• Referring to settled law, the bench held that remedies available under the Consumer Protection Act are in addition to those under other statutes, including RERA.
• The commission also dismissed the builder’s claim that the complainants were investors, observing that no documentary material had been produced to show that the flat was booked for speculative or commercial purposes.
• On pecuniary jurisdiction, the NCDRC relied on the Supreme Court’s ruling in Rutu Mihir Panchal v Union of India and held that jurisdiction under the Consumer Protection Act, 2019, is to be determined based on the “value of goods or services paid as consideration” and not on the relief claimed in the complaint.
• Since the amount paid fell between Rs 50 lakh and Rs 2 crore, the state consumer commission was competent to entertain the dispute, it ruled.

Cancellation, forfeiture unjustified

• The national commission found that the builder’s conduct after cancellation undermined its own stand.
• It noted that despite cancelling the allotment in September 2022, the developer continued to raise financial demands and engage in transactions with the complainants, indicating that the cancellation was “neither bona fide nor final”.
• The commission further held that the forfeiture of nearly Rs 29.5 lakh appeared unjustified because the buyers had already paid a substantial portion of the consideration, and there was nothing on record to show that the developer had suffered losses corresponding to the forfeited amount.

Compensation modified

• While upholding the directions for possession, refund and interest, the national consumer commission modified the compensation component granted by the state consumer commission.
• The national commission observed that the state commission had effectively awarded “multiple compensations for singular deficiency” by directing payment of both interest and separate compensation of Rs 10 lakh.
• Relying on the Supreme Court’s judgment in DLF Homes Panchkula Private Limited v D S Dhanda, it set aside the separate compensation award.
• The national consumer commission ordered the developer to hand over possession of the flat with occupancy and completion certificates within 30 days, unless already delivered.
• It further directed payment of simple interest at 6 per cent per annum on Rs 1,13,68,681 from the due date of possession till the date of offer of possession with occupancy certificate.
• The commission also directed a refund of Rs 21,29,741.11 charged in excess, along with 9 per cent interest from the date of deposit till refund, and upheld litigation costs of Rs 50,000.