Rejection of Building Plans Not Force Majeure For Delayed Possession Interest: Bombay High Court
The Bombay High Court on 23 October held that rejection of building plans by a planning authority does not constitute a force majeure event absolving a real estate promoter of liability to pay interest for delayed possession. Further, that interest for delayed possession can be awarded through summary judgment without a full trial or oral evidence, unlike compensation, which may require evidentiary adjudication.
Justice Sandeep V. Marne partly allowed an application filed by DNM Trustee Services Private Limited against Victoria Enterprises Limited, directing the developer to pay simple interest at 9% per annum on Rs. 5.51 crore for a delay of nearly 12 years in handing over two commercial units in Mumbai. The Bench observed:
“In any case, it is the duty of the promoter to get the plans sanctioned and to construct the building accordingly. If the promoter submits faulty plans and invites rejection, the allottee cannot be made to suffer. Thus, rejection of plan by the Planning Authority does not constitute a force majeure event.”
The dispute arose from a registered Agreement for Sale dated 2 February 2008, under which Victoria Enterprises agreed to sell Units 503 and 504 in the Pittie Chambers building near the Bandra-Kurla Complex in Mumbai.
The purchasers paid the entire consideration of Rs. 5.51 crore, and the developer promised possession by 31 March 2008. The units were subsequently transferred through family arrangements to the Lalwani Family Trust, represented by DNM Trustee Services.
However, construction remained incomplete, and the developer obtained a partial occupancy certificate only on 24 July 2019. Victoria Enterprises eventually handed over possession on 15 February 2020, resulting in a delay of 11 years, 10 months and 15 days.
DNM Trustee Services approached the High Court under Order XIII-A of the Code of Civil Procedure, 1908, seeking summary judgment for interest at 12% per annum on the consideration paid, along with completion of the common amenities.
It argued that Victoria Enterprises was liable to pay interest for delayed possession under the sale agreement and Section 18 of the Real Estate (Regulation and Development) Act, 2016 (RERA). It also contended that the developer's force majeure defence was unsupported by evidence.
Victoria Enterprises argued that municipal rejection of building plans had caused delays beyond its control. It also challenged the trust's right to sue, contended that Section 79 of RERA barred civil court jurisdiction, and maintained that the claims required a full trial.
Rejecting the force majeure defence, the Court noted that Victoria Enterprises had produced no documentary evidence to establish that the municipal authority had rejected its building plans. It also held that subsequent transfers within the purchasers' family could not extinguish their contractual rights. It observed:
“Defendant No.1 cannot be permitted to escape the liability to pay interest just because the family was reconstructed during this time gap of 12 years"
Distinguishing interest from compensation, the Bench held that circumstances explaining the developer's delay might be relevant to a claim for compensation but would not excuse its liability to pay interest for delayed possession. It observed:
“The mitigating circumstances, if any, in favour of the promoter are relevant for deciding the issue awarding compensation, which is distinct and different from awarding interest.”
Further, Justice Marne clarified that while claims for compensation may require an evidentiary hearing, claims for interest on the amount paid for the period of delayed possession can be decided without a full trial or oral evidence.
Applying the requirements for summary judgment, the Bench held that Victoria Enterprises had no real prospect of successfully defending the interest claim and that no compelling reason existed to require an oral trial.
It also rejected the developer's objection to civil court jurisdiction under Section 79 of RERA, holding that Victoria Enterprises could not rely on the provision to challenge the Court's jurisdiction when it had not registered the project under RERA.
Accordingly, the High Court directed Victoria Enterprises to pay simple interest at 9% per annum on Rs. 5.51 crore from 31 March 2008 to 15 February 2020, applying the contractually agreed rate instead of the 12% claimed. It declined to grant summary judgment on the incomplete common amenities, holding that the issue required an evidentiary trial.
Appearances for petitioner (DNM Trustee Services Private Limited): Advocates Viraj Parikh, Parag Kabadi, Anshita Sethi and Vishal Tiwari, instructed by DSK Legal.
Appearances for respondent (Victoria Enterprises Limited): Advocate Manish N. Jain, instructed by S.M. Jain Associates.