FORCE MAJEURE AND BUILDERS IN GREATER NOIDA (WEST)
Many of the buyers might have paid from 100% to 20 % towards the basic price of their dream flat to the builder in Greater NOIDA (WEST) and have executed the buyer’s agreement. As per buyer’s agreement there would have been certain date of delivery / possession of flat which might have been agreed upon between both the parties i.e. you and builder and also certain terms and conditions including application of Force Majeure incase of builder inability to deliver the possession of the house on agreed date.Now agreed date of possession has gone and builder has not delivered my flat on the agreed date.
BUILDER HAS APPLIED FORCE MAJEURE CLAUSE.
Builder states that due to change in law/ regulations / Hon’ble Allahabad High Court / Hon’ble Supreme Court judgment declaring land acquisition by Greater Noida Development Authority illegal the construction of project could not take place. The land acquisition of Village Patwari, Shahberi and other villages were declared illegal and accordingly construction was stopped and this entire episode was unforeseeable and was not known thus the Builder seeks protection under Force Majeure Clause as agreed between the parties in buyer’s agreement.
WHETHER BUILDERS AT GREATER NOIDA WEST CAN SEEK PROTECTION UNDER FORCE MAJEURE CLAUSE? ANSWER IS NO.
HERE IS OUR DEEP ANALYSIS
As we have discussed earlier that Force Majeure clause can be applied if conditions satisfies all 3 elements:
- The cause must be inevitable and unforeseeable.
- The Cause should not be due to default of Builder
- The cause must make execution of the contract wholly impossible.
Before taking protection under Force Majeure clause, builders need to ensure following things:
- Impossibility of performance versus “material & adverse effect”
- Notice/ reporting requirements
- Duty to mitigate
- Excuse only till performance is affected
Let us analyse each of the elements required to be fulfilled before Builder can seek protection under Force Majeure Clause for not delivering the flat as per the agreed date in Buyer’s Agreement.
1. Land Acquisition declared illegal by Hon’ble Allahabad High and Supreme Court. Was this incident that builder could not complete the housing project due to lost litigation inevitable and unforeseeable?
Many of us would wonder why it could have been foreseen.
During initiation phase of the project, any ligation associated with it is seen as risk. Its outcome can be positive or negative. If litigation goes against the builder, he cannot say it was inevitable and unforeseeable and thus he is not allowed to seek protection under Force Majeure clause.
List of event at Greater Noida West, clearly shows that the Builders and Greater Noida Authority were every much aware of the on going litigations, which neither the Builders nor Greater Noida Authority ever publically disclosed about the ongoing litigations at Greater Noida West to the customers who were lured to make investments. Hence clearly it can be said that Builder were aware of the risk since year 2007 and could have easily avoided by not doing the pre-launch and also by disclosing the risk associated with it to the customers while they were making the investments.
Writ petition relating to village Yakubpur: – WRIT – C No. – 5670 of 2007 Re: Keshari Singh and Others vs. Government of U.P. And Others filed on 31.01.2007 was pending before Hon’ble Allahabad High Court for disposal before booking of flats and which was finally disposed of by Hon’ble Allahabad High Court vide order dated 21.10.2011 along with Gajraj and others Vs. State of U.P. in WRIT Petition (Civil) No. – 37443 of 2011 along with other 492 Writ Petitions restraining, the Builders from raising any construction.
Writ petitions relating to village Itehara: – WRIT – C No. – 13281 of 2010 Re: Ashok Chaudhary & Ors. Vs. State Of U.P. Thru. P.S. Industrial Devp. & Ors filed on 12.03.2010 was pending before Hon’ble Allahabad High Court for disposal before booking of flats at Greater Noida (West) and was finally disposed of by Hon’ble Allahabad High Court vide order dated 21.10.2011 along with Gajraj and others Vs. State of U.P. in WRIT Petition (Civil) No. – 37443 of 2011 and along with other 492 Writ Petitions restraining, the Builders from raising any construction.
Writ Petition relating to Shahberi:- Hon’ble High Court of Allahabad stayed any further construction in village Shahberi, Greater Noida(West) vide order dated 07.01.2010 in Re: Devendra Kumar and Others Vs. State of U.P. and Others, WRIT-C No. 500 of 2010 filed on 05.01.2010.
Inspite having knowledge of on-going litigations instituted by farmers, many builders pre-launched their residential project and collected booking amount from the customers.
That the interim stay order on construction against builders in Greater Noida (West) continued vide Hon’ble High court of Allahabad orders dated 28.01.2010, 04.05.2010, 11.08.2010, 07.09.2010, 13.09.2010, 04.10.2010, 16.11.2010, 01.12.2010, 12.01.2011, 05.04.2011 and 06.04.2011 in Re: Devendra Kumar and Others Vs. State of U.P. and Others, WRIT-C No. 500 of 2010 and other 31 connected similar WRIT Petitions.
Hon’ble High Court of Allahabad vide order dated 12.05.2011 in Re: Devendra Kumar and Others Vs. State of U.P. and Others, WRIT-C No. 500 of 2010 quashed the land acquisition of land in village Shahberi thereby effecting the residential project which was pre-launched by the Builders.
The judgment of the Hon’ble Allahabad High Court dated 12.05.2011 was challenged by Greater Noida Industrial Authority in Hon’ble Supreme Court of India, but Hon’ble Supreme Court of India vide its judgement dated 06.07.2011 in Re: Greater Noida Industrial Development Authority Vs. Devendra Kumar & Ors, SLP(C) No. 16366/201, upheld the decision of Hon’ble High Court thereby holding land acquisition illegal and also directed, builders to refund the money of the buyers with reasonable interest
2. The Cause should not be due to default of Builder. In plain words is builder at default? Answer : Yes
Why: Because Builders were very much aware of the on going risk due to litigation between farmers, Greater Noida Authority and Builders (who were also the party in those litigations). They could have avoided the pre-launch and also could have made the customer’s aware of the potential risk due to ongoing litigations in future.
3. Did the cause made execution of the contract wholly impossible?
Only one condition out of three is met and hence Force Majeure cannot be applied by builder due to not fulfilment of the contract / buyer’s agreement.
FINAL CONCLUSION: FORCE MAJEURE CANNOT BE APPLIED BY ANY BUILDER IN GREATER NOIDA WEST DUE TO REASONS GIVEN BELOW. IF THEY ARE DOING IT OPPOSE RELIGIOUSLY AND MOVE TO CONSUMER COURT DEMANDING INTEREST ON YOUR AMOUNT KEPT WITH THEM, COMEPNSATION FOR UNFARE TRADE PRACTICES AND LEGAL COST.
Because the risk/ cause / pending litigation as mentioned at Hon’ble Allahabad High Court was mala fide and deliberately not disclosed to clients while booking the flat and also while signing the flat buyer’s agreement and also in the agreement itself.
Because the risk/cause was very much known in advance, foreseeable and builder could have been easily avoided by not opening the booking / signing buyer’s agreement till the litigation matter was settled by the courts
Because after Hon’ble Allahabad High Court in Re: Devendra Kumar and Others Vs. State of U.P. and Others, WRIT-C No. 500 of 2010, vide judgement dated 12.05.2011 quashed the land acquisitions in Greater Noida (West) which effected reality project, builders miserably failed to officially intimate their clients and also failed to have mutually cancelled the flat buyers’ agreement by refunding the money with reasonable interest.
Because Hon’ble Supreme Court of India vide its order dated 06.07.2011 in Re: Greater Noida Industrial Development Authority Vs. Devendra Kumar & Ors, SLP(C) No. 16366/201, upheld the decision of Hon’ble High Court thereby holding the land acquisition illegal and also directed the builders to refund the money of the buyers with reasonable interest. The builders miserably failed to intimate their clients and thereby failed to give them the option of refunding their money with reasonable interest.
Because no effort / communication by way of letter/ notice etc was made by builders to mitigate the risk after the land acquisition was held illegal by the Hon’ble Courts.
Because builder failed to communicate the factum of stoppage of planned construction of project after receiving the full amount of cost of flat and compensatory relief for the same.
Assumption of the builders that their client’s knows about the entire episode by way of media or news paper, and as such has made no official communicate is wholly irrelevant and calls for deficiency in services on their part for which they deserve penalty and has to compensate the buyers.
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