The Haryana Real Estate Appellate Tribunal Dismisses The Claim Of The Builder Based On The 'Force Majeure' Clause

In its recent decision, the Haryana Real Estate Appellate Tribunal (HREAT or the Tribunal) comprising Justice Rajan Gupta (Chairman) and Anil Kumar Gupta (Technical Member) rejected the appellant's (“Promoter”) claim based on the “Force Majeure” clause. The Tribunal ruled that the COVID-19 pandemic occurred after the date by which the allottees were supposed to receive possession of the flat. Facts and Background Respondent (“Allotees”) in this case purchased a unit in the “Cosmos Express 99” project located in Gurugram. The Allottees were supposed to receive the possession of the flat by 27.06.2017. However, there was a notable delay of three years, four months, and twenty-two days in the handover of possession. In response to the promoter's delay in delivering possession, the complainant lodged a formal complaint with the Gurugram Authority in 2019. The primary prayer was to grant possession and impose delay possession charges (DPC). The Authority ruled in favour of the Allottee, instructing the Promoter to pay interest at the prescribed rate of 9.30% per annum for each month of delay. Aggrieved with the Authority's order, the appellant (promoter) filed an appeal before this Tribunal, invoking Section 43(5) of the Real Estate (Regulation and Development) Act, 2016. Section 43 of Real Estate (Regulation and Development) Act : Establishment of Real Estate Appellate Tribunal (5) " Any person aggrieved by any direction or decision, or order made by the Authority or by an adjudicating officer under this Act may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter”. Submission by Appellant The delay in the handling over the possession occurred due to force majeure conditions prevailing due to onset of covid-19 pandemic. Authority's calculation of interest at 9.30% per annum is erroneous and incorrect and, the Appellant was not given ample opportunity to present their case before the Authority. Submission by Respondent That the ample opportunity was granted to the appellant-promoter to appear before the Authority for reply to the complaint and for the purpose of rebuttal. Despite opportunities, the appellant-promoter failed to appear before the Authority. Appellant-Promoter was always aware of the pendency of the matter before the Authority. Also, no such benefit of “Force Majeure” can be claimed by the Appellant as per the law. REAT Verdict Tribunal on the defence of “Force Majeure” used by Appellant-Promoter noted that the scheduled possession date for the unit as per the agreement was 27th June 2017, whereas the Govt of India acknowledged the spread of the Covid-19 pandemic in March 2020, well after the deemed date of delivery of the unit. Tribunal also noted that the appellant-promoter has not provided the details regarding the construction stage at the time of spread of the pandemic and its impact on the project's progress. Also, the appellant has not substantiated its claim with supporting evidence, failing to demonstrate how force majeure conditions due to the Covid-19 pandemic, even if they occurred, significantly impeded the project's progress. Tribunal held that "we are not inclined to grant relief to the appellant-promoter based on the alleged delay due to force majeure caused by the Covid-19 pandemic." Tribunal also observed that the Authority had issued notice of the complaint to the respondent-promoter (in this case "appellant") by speed post as well as through email. Despite communication, respondent-promoter failed to appear and file reply to the complaint. The Authority, thus, proceeded to decide the complaint ex-parte. Tribunal further noted that the notice (issued on 08.01.2020) explicitly stated that if the appellant-promoter fails to respond within the specified timeframe, their defence would be liable to be struck off, and the proceedings would be ex-parte. The Tribunal also addressed the appellant's concern, emphasizing that the interest granted by the Authority had been incorrectly and erroneously calculated at 9.30%, deviating from the highest Marginal Cost of Funds-Based Lending Rate (MCLR) offered by the State Bank of India (SBI) on the date of the Authority's order. Upon examining the interest award by the Authority, the Tribunal referred to the SBI's highest MCLR prevailing on the date of order, which was 7.30% . The Authority, in accordance with Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017, incorporated an additional 2%, resulting in an awarded interest rate of 9.3% per annum. After a thorough examination of Rule 15, the Tribunal affirmed the interest rate determined by the Authority. Rule 15 of Haryana Real Estate (Regulation and Development) Rules: Interest Payable by Promoter and Allottee “ An allottee shall be compensated by the promoter for loss or damage sustained due to the...

The Haryana Real Estate Appellate Tribunal Dismisses The Claim Of The Builder Based On The 'Force Majeure' Clause

Aryan Raj

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The Haryana Real Estate Appellate Tribunal Dismisses The Claim Of The Builder Based On The 'Force Majeure' Clause

Aryan Raj

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