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‘A first’ — why consumer court sentenced MD, directors of Parsvnath Developers to 3-yr jail

The case centres on a housing project — Parsavnath Privilege Project at Greater Noida — that was launched in September 2007 but has yet to be completed.

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Mumbai: The National Consumer Disputes Redressal Commission (NCDRC) on 3 February sentenced the managing director and directors of real estate firm Parsvnath Developers to three years’ imprisonment for not complying with its 2019 direction and failing to issue refunds to home buyers.

The bench said the developer has time until 10 February to deposit the amount, saying the warrant of arrests will not be executed till then.

However, the real estate developer escaped the jail term after the Supreme Court on 9 February gave it three more months to comply with the NCDRC order. The top court also ordered no coercive action against the directors and managing director of Parsvnath until then.

The Supreme Court refused to modify the NCDRC’s 2019 verdict upholding the right of the buyers to get a refund since the developer failed to deliver possession of the flat within the promised time of 36 months or a reasonable time period, and pay a 12 per cent interest from the date of deposit of the amount.

The NCDRC order is related to a housing project launched by the real estate developer in 2007 in Greater Noida that is yet to be completed.

This is the first time that a consumer redressal forum sentenced a real estate company’s director and managing director to jail for flouting its orders under the consumer protection law, said lawyer Sukham Ahluwalia, who argued the case for flat buyers.

The 3 February order came after an execution petition filed by six flat buyers.
Ahluwalia said Parsvnath owes Rs 1.55 crore to each homebuyer, including the interest amount.

“So far, only the top court took a harsh stance against builders who were sent to jail, but those cases were not under the consumer law. They were either in a criminal case registered against them or when a developer approached seeking SC protection from insolvency proceedings,” Ahluwalia said.

However, senior advocate Sachin Dutta, who is representing Parsvnath in the case, told ThePrint that the company never questioned the NCDRC’s verdict and that its primary challenge was the 12 per cent interest levied on it, which it had to pay to the buyers from the date they deposited the money.

“Even before the top court we never opposed the NCDRC verdict. We had limited arguments to make, which were only on the quantum of interest. When the top court refused to give us indulgence, we agreed to pay the full amount within the next three months,” Dutta said.

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The housing project and NCDRC order

The housing project — Parsavnath Privilege Project at Greater Noida — was launched in September 2007. The following year, buyers entered into an agreement with the company for a total consideration ranging between Rs 50 lakh and 65 lakh for each flat. The developer had then said that the buyers will get possession of their homes within 36 months from the date of commencement of construction.

However, in June 2010, Parsvnath issued a letter stating the construction of the project would be completed by March 2012. In case of a delay, it said, the homebuyers would be duly compensated by way of penalty in keeping with the Flat-Buyer Agreement.

The buyers claim the developers had constructed only the superstructure and were not ready to build the entire flat in accordance with the agreement.

Six petitioners approached the NCDRC in February 2015, seeking refund as well as compensation under the consumer law.

On 5 April 2019, the NCDRC concluded that since the real estate developer could not complete the project either within 36 months or a reasonable time thereafter, and it was nowhere near completion even on the day of the order, the buyers were justified in seeking a refund along with accrued interest.

The refund included 12 per cent interest, along with Rs 25,000 as the cost of litigation – to be paid within three months of the order.

Even though Parsvnath filed an appeal against the NCDRC order, it did not secure a stay over it. This means the developer was under obligation to pay the amount in compliance with the apex consumer forum’s order.

However, since the company did not honour the NCDRC’s directions, the buyers filed an execution petition before the forum on 2 December 2020. The petitioners argued that Parsvnath had not fulfilled its undertaking to follow the commission’s directions.

The NCDRC issued a notice to Parsvnath on 6 January this year. On 15 January, Parsvnath said it would comply with the order by 3 February. On that day, however, the counsel sought an adjournment on the ground that the company’s appeal against the 2019 verdict was likely to come up for hearing in the Supreme Court in the next few days.

Upset over the non-compliance, a bench presided over by Justice Deepa Sharma noted: “I have given thoughtful consideration to the rival contentions. It is a decree against the judgment debtor (JD) Parsvnath Developers. The JD has failed to comply with the decree despite getting several opportunities.

They have not honoured their own undertakings and it seems that the special leave petition has been filed in the Supreme Court with the sole intention to delay the payment of decretal amount. Moreover, there is no stay of the execution.”

Relief for flat buyers

For the flat buyers, many of whom are senior citizens and retired Army officers, the NCDRC and top court orders come as a relief.

Brig. Rakesh Dir (Retd), one of the petitioners, said, “We are just hopeful and at the mercy of the courts and the developers. One can only hope good sense prevails. It is not the quantum of punishment but rather the certainty of it, that makes people fear the consequences of law. We have had to face some financial difficulties due to the loans taken from banks as well as other personal reasons, we will only know it is not in vain after three months.”

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