Unfair trade practices by Indian Real Estate Companies BY Mr. Jehangir B Gai

Unfair trade practices by Indian Real Estate Companies
BY Mr. Jehangir B Gai

Naren and Sudha Sheth booked a residential flat in a housing-cum-commercial project known as Lodha Luzuria at Thane, being constructed by Sri Sainath Enterprises, belonging to the Lodha Group.

The price of the flat, measuring 1,118 square feet carpet area on the second floor, was Rs 1.04 crore.

Out of the agreed consideration, Seths paid Rs 1.02 crore in instalments from September 27, 2010, to November 2, 2010. The remaining amount of Rs 2.6 lakh was to be paid at the time of possession.

To pay for the purchase of this flat, Seths had to break their fixed deposits, losing Rs 3 lakh towards interest and other charges.

The builder avoided executing the agreement for sale. No heed was paid to the correspondence made by the Seths in this regard. On December 22, 2010, the builder demanded an additional sum of Rs 3.96 lakh for car parking.

The Seths questioned this demand. Since no heed was paid to their e-mail, they had a legal notice issued.

In response, the builder's representative informed them that they would have to pay for parking, else execute an indemnity bond that they did not want the facility and would not park their vehicle in the premises. Seth's e-mail protest was ignored.

In January 2011, the builder sent a letter for executing an interim agreement, and telephonically threatened the Seths that the flat allotted to them would be cancelled if they failed to sign on the dotted line.

The Seths finally filed a complaint before the National Commission.

The builder contested the complaint. According to the builder, the complaint was not maintainable as the Seths had several properties and they were investors, not consumers.

The Seths were blamed for non-compliance with the terms and conditions set out in the application form for allotment of the flat, due to which the allotment was cancelled and an amount of Rs. 91.66 lakh had been refunded. The flat was later sold to another buyer, Monish Jain, through a registered agreement.

The Commission considered Seth's clarification that they owned only two small flats, which were inadequate for their family that comprised themselves and their 3 daughters.

The Commission accepted this explanation, and held the complaint to be maintainable.

The Commission observed the concept of an interim agreement was completely illegal, arbitrary and unacceptable. It also observed that the allotment letter set out the schedule of payment for the flat, along with two parking places.

There was no reference to any additional amount payable towards car parking. Yet, the builder attempted to deprive the Seths of the car parking through execution of an interim agreement, where parking space was stated as "nil".

Besides this, the Commission observed that most of the clauses of the interim agreement were arbitrary and against the interests of the flat purchasers.

The interim agreement was silent in respect of completion of the project and execution of conveyance deed.

It also provided for payment of advance maintenance charges for two years, which was in contravention of MOFA which mandates that a society must be formed within four months.

The Commission indicted the builder for his arbitrary, high-handed and capricious character.

However, the subsequent buyer, Monesh Jain, could not be ousted as he was a bonafide purchaser and could not be made to suffer.

The Commission noted that even though Seths had paid Rs. 1.02 crore, the builder had issued refund cheques for Rs. 91.66 lakh, and no interest was paid even though the money was lying with them for five years.

The Commission condemned the builder for pulling a fast one over the Seths and making havoc with the hard-earned money. Accordingly, by its order of May 5, 2016, delivered by Justice J M Malik for the bench with S M Kantikar, the Commission ordered Shree Sainath Enterprises to refund the entire amount of Rs. 1.02 crore, along with annual interest at 18% from the date of its deposit.

Additionally, Rs. 1 lakh was awarded as compensation to be paid within 90 days and pay 9% interest if delayed.

The author is a consumer activist

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