CONSUMER AS KING
Dont let a builder flee with your interest ………Jehangir B Gai
Subject: Can interest be claimed by a flat buyer even after the amount is refunded by the builder?
Backdrop: When a builder abandons or delays a project, a consumer often asks for a refund of the amount paid. At times the builder is willing to refund the money, but without interest. The consumer is hesitant to file a complaint because he would like to secure the refund of his capital without antagonising the builder. Later, when the consumer demands the interest, the builder refuses to pay it on the ground that the contract has been voluntarily cancelled and refund accepted, so no interest can be claimed. Thus the builder pockets the interest. Is this permissible? Or can the consumer fight for the interest?
Case Study: C S Mathkar had booked a flat in a building to be constructed at Vile Parle by Buildarch. He had paid over Rs 19 lakh in instalments from December 1991 to November 1998. Yet no flat was allotted to him. In 2005, after waiting for 14 years, Mathkar asked for a refund. The builder paid only Rs 1 lakh, and failed to refund the balance amount. Letters sent by Mathkar were ignored by the builder. He then approached Mumbai Grahak Panchayat, on whose intervention the builder refunded a part of the amount.
Backdrop: When a builder abandons or delays a project, a consumer often asks for a refund of the amount paid. At times the builder is willing to refund the money, but without interest. The consumer is hesitant to file a complaint because he would like to secure the refund of his capital without antagonising the builder. Later, when the consumer demands the interest, the builder refuses to pay it on the ground that the contract has been voluntarily cancelled and refund accepted, so no interest can be claimed. Thus the builder pockets the interest. Is this permissible? Or can the consumer fight for the interest?
Case Study: C S Mathkar had booked a flat in a building to be constructed at Vile Parle by Buildarch. He had paid over Rs 19 lakh in instalments from December 1991 to November 1998. Yet no flat was allotted to him. In 2005, after waiting for 14 years, Mathkar asked for a refund. The builder paid only Rs 1 lakh, and failed to refund the balance amount. Letters sent by Mathkar were ignored by the builder. He then approached Mumbai Grahak Panchayat, on whose intervention the builder refunded a part of the amount.
Mathkar then filed a consumer complaint demanding a refund of the balance amount of about Rs 7 lakh, together with interest thereon. As soon as the complaint was filed, the builder refunded the remaining amount. So the dispute was now confined to the interest component.
A M Mascarenhas, joint secretary of Consumers Welfare Association, who argued Mathkars case, claimed that the builder had utilised the complainants money for more than 17 years, yet had deprived him of a flat, and hence interest had to be paid at the rate of 9% per annum from the date of payment of each instalment to the date of refund.
The builder contested the case, claiming that the fault lay with Mathkar who did not sign the agreement because of Vastu Shastra. The forums jurisdiction was also disputed on the ground that it was a money claim for interest; that there was no contract; and it was not a consumer dispute since the money had already been refunded. Buildarch also argued that the complaint was time-barred.
In its judgement of August 29, 2008, the forum over-ruled these objections and held that: as the builders services had been availed by paying consideration, it was a consumer forum. Also, the onus to execute the agreement was with the builder, and the failure to do was a deficiency in service. The complaint was not time-barred because the cause of action was continuing and the last instalment of refund was made in February 2008.
The forum relied on the judgement of the Supreme Court in the case of Alok Shankar Pandey v/s Union of India, wherein the principle of payment of interest has been explained by the Supreme Court, viz. that interest is not a penalty or punishment but the normal accreditation on capital. So equity demands that the principle amount must be refunded along with the interest thereon. Otherwise, the opponent will earn interest on the complainants money and will pocket it.
J S Iyer, who gave the judgement on behalf of the Bench of the Central Mumbai Forum comprising herself and President S P Mahajan, observed that Mathkar was a senior citizen who had invested his retirement money aspiring for a house which is a dream in Mumbai, and he must have gone through a lot of mental agony and torture so much that he was constrained to file a consumer complaint for redressal of his grievance. Hence he must be compensated to achieve the ends of justice. Accordingly, the builder was directed to pay interest amounting to Rs 19,33,789, plus Rs 50,000 as compensation and Rs 3,000 as costs. The forum directed that the order should be complied within four weeks, otherwise further interest would have to be paid at the rate of 18% p.a.