Consumer protection: Buyer entitled to market value if flat is resold

The National Commission condemned the builder for creating third-party rights during litigation, thereby depriving the buyer of a permanent roof over his head

Subhash Ramjang Chourasiya booked a flat in a building to be called Sai Palace, which was to be constructed by Sai Krupa Builders at Village Goddev in Mira Road (East), located in Maharashtra’s Thane District. The building was later named Om Sai Palace.

 

An agreement was executed on August 2, 2007, which provided that Chaurasiya would be allotted flat number 602, having a builtup area of 625 sq ft, for a total consideration of Rs 7.5 lakh. The space for mentioning the date of possession was deliberately left blank.

 

Chaurasiya paid Rs 6 lakh in instalments, about 75 per cent of the total consideration, and waited for about three years for possession. However, the builder failed to deliver the flat. Consequently, Chaurasiya filed a complaint before the Maharashtra State Commission against Sai Krupa Builders and its partner Vinay Dubey. In his complaint, Chaurasiya sought possession of the flat and interest for delay.

 

During the pendency of the proceedings, the builder demanded Rs 3.5 lakh for handing over possession, which was much in excess of the balance due of Rs 1.5 lakh. Hence, Chaurasiya disputed the demand and asked the builder to accept the remaining Rs 1.5 lakh and deliver the flat. However, the builder declined and remained adamant.

 

The State Commission ordered the builder to hand over possession and also pay 9 per cent interest for delayed delivery, or alternatively pay the current market value of the flat computed according to the rates prescribed by the registration department of the Government of Maharashtra. In addition, Rs 5 lakh was awarded as compensation for mental and physical agony and Rs 50,000 as litigation costs.

 

The builder challenged the order in appeal. He pointed out that the order was improper as the flat had been sold during the pendency of the complaint. The builder argued that he was entitled to sell the flat when a purchaser defaults in making payment and that no legal impediment prohibited him from selling the flat to a third party. The builder stated that the agreement had terminated on April 8, 2010, and a refund was offered, but Chaurasiya had declined to accept it. The flat was later sold to a third party, Subhash Tilakdhari Pathak, on April 12, 2011.

 

The National Commission suggested that an attempt should be made to amicably settle the dispute. The builder offered to refund the entire consideration of Rs 6 lakh along with 8 per cent interest. Chaurasiya refused to accept this, as he would not be able to afford a similar flat within the same budget after 17 long years.

 

While deciding the dispute, the National Commission criticised the builder’s conduct of creating third-party rights in the flat during the pendency of the litigation, thereby depriving the flat purchaser of a permanent roof over his head. It concurred with the decision of the State Commission that the cancellation was unjustified, illegal, and invalid, as a registered document cannot be cancelled except through the execution of another registered document. Therefore, it held that a mere intimation of termination of agreement was absolutely illegal and void.

 

Accordingly, by its order of October 3, 2024, delivered by the Bench of Justice 

 

A P Sahi and Dr Inder Jit Singh, the National Commission dismissed the builder’s appeal and upheld the order in Chaurasiya’s favour.  

The writer is a consumer activist