• Interest demand by builder on payments not mentioned in agreement


I purchased a flat in March-2011 and immediately paid my contribution of 20% of total cost. I planned to take the loan for remaining 80% and informed builder about the same (I have the proof of this communication in emails).

They sold me the flat on 15th floor, even though they did not have the Commencement Certificate (CC) for 15th floor. They started the construction as they received CC for lower floors and sent me the demand letters for installments (and kept adding the interest at 24% on delays). I responded to these demands saying bank can not disburse the payment until builder has the CC for 15th floor (these communications are available with me in emails). 

Builder received the CC for 15th floor in April-2013. Immediately after the CC was received, the agreement was executed and bank disbursed the payment for all the demands raised until then. I requested builder to remove the interest amount from demand letters mentioning the reason for delay was because bank can not disburse until CC was available. Upon my request, builder removed the interest amount from demand letters sent after April-2013. All demand letters subsequent to April-2013, mentioned "interest till date" as zero. (all the communications were via email and available with me).

However, it is time for possession now and in the last demand letter before possession, builder has added huge interest (10.5 lakhs) mentioning the delays on installments demanded while CC was not available (between March-2011 and April-2013). 

I looked at the registered agreement, and as per the payment schedule in agreement, I was not supposed to pay until registration date (except for initial 20%). Following is how payment schedule looks like in registered agreement:

Purchaser to make the payments as under:
(1) Rs. 100,000 (10% as earnest money Dt. 31.03.11)
(2) Rs. 90,000 (10% on or before execution of Agreement / Dt. 08.04.11)
(3) Rs. 500,000 (5% on starting the work of Basement Slab / Dt. 17.05.11)
(4) Rs. 500,000 (5% on starting the work of constructing plinth / Dt. 24.06.11)
(5) Rs. 80,000 (3% on or before casting of 1st slab of the podium / Dt. 30.07.11)
(6) Rs. - (3% on or before casting of 2nd slab of the podium / Dt. -)
(7) Rs. - (2% on or before casting of 1st slab / Dt. -)
Line numbers (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) --- similar to line (7) for casting of 2nd Slab to 13th Slab ---
(20) Rs. 5,000,000 (2% on or before casting of 14th slab / Dt. immediate after registration)
(21) (22) (23) subsequent milestones and amounts

Basically, for line numbers 1 to 5, amounts and actual payment dates are mentioned. For line numbers 6 to 19, no amounts or dates are mentioned. It just has dashes for Rs. and Dt. Line number 20 mentions 50 lakhs (which is total of installments for slabs from line number 6 to 19) and date as "immediate after registration".

But, now they are asking me to pay the interest, for milestone demands sent against line number 6 to 19 during which CC was not available and it was not even mentioned to be paid in the agreement. Builders argument is "if builder had the CC on time, you would have paid interest to the bank. So, you should pay that saved interest to the builder" (I have this in email from builder). They are also saying if you try to go through legal route, it will take lot of time to resolve the case, so I should rather negotiate with them and settle with lower amount.

Builder's legal team is suggesting to read registered agreement along with booking memo. Booking memo mentions the payment schedule as per the construction milestones. However, my understanding is booking memo is not legally enforceable and we should go by the terms and conditions in registered agreement

Please advise me on the following:

1) Am I legally liable to pay this interest demanded by builder? I have made all the payments as per the registered agreement
2) Could the builder legally sell the flat to me on 15th floor, even though they did not have the CC for that floor?
3) If I go through legal route, how long will it take to settle the case?
4) Builder raised this demand for interest 2 months ago, and we are going through several arguments and negotiations. This is extremely stressful for me, which is affecting my work and health. Can I sue builder for harassment, for loss of rent/delay in possession and for legal expenses
5) How strong is my case if I go through legal route?
6) Any other advise / suggestions on how to handle this

Thanks in advance for guidance.
Asked 2 years ago in Property Law from Mumbai, Maharashtra
1) you are not liable to pay interest as demanded by builder 

2)if you file complaint before consumer forum it may take 2 years to be disposed of 

3)you can in your complaint seek compensation for mental trauma you have undergone and claim costs 

4) terms of agreement have to be gone into in detail . but it appears you have good case on merits 

5)  All demand letters subsequent to April-2013, mentioned "interest till date" as zero.under circumstances builder cannot seek to demand Rs 10 lakhs from you as interest . builder cannot seek to recover as per booking memo .term of regd agreement are sacrosanct
Ajay Sethi
Advocate, Mumbai
33627 Answers
1855 Consultations

5.0 on 5.0

1. No. Under no circumstances, you are liable to pay interest to the builder,

2. No. The builder can not legally sell any flat without receiving complition certificate in connection with the said flat,

3. Your matter will be dealt with by your local District Consumer Dispute Redressal Forum & in Barasat, West Bengal consumer cases dealt by me are disposed of within 8 months from the date of filing. However, disposal period may widely vary from forum to Forum depending upon the worl load,

4. You can initially pay the amount under protest (or refuse to pay) and file a complaint case before the above Forum alleging deficiency in service and unfair business practice claiming refund of the said interest paid (if paid), interest, damage for harassment & cost,

5. You have strong merit in your case.
Krishna Kishore Ganguly
Advocate, Kolkata
14876 Answers
351 Consultations

5.0 on 5.0

1. No.
3. Depending upon work load, period for disposal vary from forum to forum.
4.Yes, you can claim compensation for harassment, loss of rent/delay in possession and for legal expenses etc.
5. On the basis of your narration, it seems quite strong.
6.serve a legal notice through a lawyer then file case.Better consult a local lawyer who could advise after examining all documents and correspondences.
S.P. Srivastava
Advocate, New Delhi
703 Answers
13 Consultations

4.8 on 5.0

1. By no stretch of the imagination you are liable to pay the interest to the builder. The demand of interest raised by the builder is arbitrary and illegal. 

2. The flat could not have been sold prior to the completion certificate being granted. Had the sale been made before the CC it could have been set aside by the court.

3. It may take up to a year. A lot depends on factors such as the pendency of case sin the courts, etc.

4. You can file a case on the basis of deficiency of service against the builder in the consumer forum and demand damages along with interest and costs. The court can order him to deliver the possession forthwith.  

5. You are on the right side of the law.
Ashish Davessar
Advocate, Jaipur
20750 Answers
549 Consultations

5.0 on 5.0

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