Case Title: M/S. Gautam Construction Company & Anr. Vs. Mubarak Masih
Case Number: F.A. No. 428/2021
A recent judgement by the National Consumer Disputes Redressal Commission (NCDRC), led by Subhash Chandra and member Sadhna Shanker, reinforced the importance of transparency in construction projects. The commission ruled that builders must provide detailed information about the construction, even if it’s not explicitly mentioned in the contract.
Here’s a simplified account of the case:
A homebuyer entered into a contract with a builder for a house construction project. The payment plan was based on construction progress. However, the homebuyer claimed that they paid Rs. 27 lakh to the builder, but the completed work was valued at only Rs. 16,77,629 based on a private assessment. Feeling cheated, the homebuyer decided to halt the construction and demanded a refund of the excess amount of Rs. 10,22,371, plus interest and compensation for mental distress and legal expenses.
The State Consumer Commission appointed a retired Chief Engineer to assess the situation. The Engineer found that less than half of the planned brickwork and RCC structure was completed, with no sanitary or electrical work done. He valued the completed work at Rs. 15,04,630 and confirmed that the construction quality was generally according to the agreed specifications.
The State Commission ruled in favor of the homebuyer, stating that he had the right to ask for bills detailing the construction progress. The builder’s refusal to provide these bills was seen as a service deficiency. The builder was ordered to refund Rs. 11,95,370 with 12% annual interest and provide Rs. 50,000 as compensation for mental distress and legal costs.
Unhappy with the State Commission’s verdict, the builder appealed to the National Commission. The builder argued that the contract was binding and the homebuyer had wrongfully terminated it. They claimed that the homebuyer still owed them Rs. 62,84,800 based on the agreed payment rate of Rs. 1600 per sq ft for the completed construction of 3928 sq ft.
During the hearing, the National Commission noted that the builder had deviated from the initial agreement. The construction was incomplete, with only the ground floor and a portion of the first floor being built, and work such as plumbing, sewerage, and electrification still pending. The builder’s claim that bills were unnecessary because of the fixed cost per sq ft was dismissed by the Commission. It insisted on the importance of transparency in construction details.
After considering the report from the local commissioner, the National Commission upheld the State Commission’s verdict but modified the interest rates based on Supreme Court rulings in Experion Developers Pvt. Ltd. vs. Sushma Ashok Shiroor and DLF Homes Panchkula Pvt. Ltd. vs D S Dhanda. These judgments underlined the need for restitutionary and compensatory interest rates and warned against imposing multiple penalties for a single default.
In conclusion, the National Commission ordered the builder to refund Rs. 10,22,371 with an annual interest rate of 9% from the date of payment and cover the legal cost of Rs. 50,000.
This case underscores the importance of transparency in construction contracts, even if it is not explicitly stated. It serves as a reminder that consumers have the right to demand detailed bills from builders, and failure to provide these can be considered a deficiency in service.
