RERA UPDATE | BOMBAY HIGH COURT CLARIFIES THAT REAL ESTATE DEVELOPERS CANNOT RELY ON ‘FORCE MAJEURE’ CLAUSE TO DENY INTEREST TO HOMEBUYERS
The Bombay High Court recently in case of ‘Westin Developers Pvt Ltd. v. Raymond Alexis Nunes’ held that a real estate developer cannot rely on the usual ‘force majeure’ clauses to deny interest on delayed possession to homebuyers. This update analyses the said case.
BACKGROUND OF THE CASE:
- Raymond Alexis Nunes (Homebuyer) had purchased a flat in the project known as ‘Joanita Villa’ promoted by Westin Developers Private Limited (Developer). The parties had agreed that the Developer would handover possession of the flat on or before 30 June 2017.
- The Developer defaulted in handing over possession. Accordingly, the Homebuyer filed a Complaint before the Maharashtra Real Estate Regulatory Authority Tribunal (MahaRERA) for handing over possession of the flat along with interest for the delay. The Developer disputed the claim of the Homebuyer and argued that the delay in handing over possession of the flat was caused on the part of the competent authority namely Municipal Corporation of Greater Mumbai (MCGM) in granting the Developer the commencement certificate on time. The Developer argued that the delay in obtaining the commencement certificate was beyond its control and hence was covered under the force majeure clause in the agreement for sale.
- MahaRERA held that the Developer could not blame the MCGM for the incomplete work pending in the project and stated that the reasons cited by the Developer were not covered under the force majeure clause mentioned in the agreement. MahaRERA further held that the Developer had not provided any plausible reasons for the delay in handing over possession to the Homebuyer and directed the Developer to pay interest to the Homebuyer from 1 January 2018, giving the Developer six months extension as by way of a grace period.
- Being aggrieved by the order of MahaRERA, the Homebuyer filed an appeal before the Maharashtra Real Estate Regulatory Authority Appellate Tribunal (Appellate Tribunal) challenging the grace period granted to the Developer in payment of interest. The Appellate Tribunal allowed the appeal and held that there was no specific clause in the agreement, entitling Developer to any grace period of six months. The Appellate Tribunal directed the Developer to pay interest to the Homebuyer from 1 July 2017, which was the date agreed by the Developer to handover possession in the agreement till the actual date of possession.
- The Developer preferred an appeal before the Bombay High Court against the order of the Appellate Tribunal.
- The Developer submitted before the Bombay High Court that the agreement contained a clause that the possession date was subject to any cause beyond the control of the Developer including any order by Central or Local Authorities which included delay in issuance of the completion or occupation certificate by these authorities. The Developer stated that this fact was not considered neither by MahaRERA nor Appellate Tribunal.
THE BOMBAY HIGH COURT HELD:
- It was noted that the clause referred and relied upon by the Developer was nothing but a force majeure clause where the Developer could not be faulted for any delay in delivery of possession, if the delay is caused by any reason beyond the Developers control. Further the Bombay High Court held that a simple force majeure clause in the agreement does not provide for or entitle the Developer to any grace period and that the Developer has to make out a case that the delay caused in handing over of possession was due to factors referred to in the force majeure clause.
- The Bombay High Court further considering the facts of the case stated that it was apparent from the record that the MahaRERA and Appellate Tribunal were not impressed by any of the reasons submitted by the Developer towards the justification for the delay.
- Before dismissing the appeal the Bombay High Court held that the grace period of six months granted by the MahaRERA was nothing but an ad-hoc measure and was rightly not accepted by the Appellate Tribunal.
MHCO Comment: This judgment provides much needed clarification to the interpretation of the clause ‘Force Majeure’ and it is a welcome precedent to all homebuyers who are generally denied of interest on the delayed possession by the Developers on account of a standard Force Majeure clause in their respective purchase agreements.
This update was released on 05 Jan 2021.
Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
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