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It would certainly have been encouraging news for many of the Co-operative Housing Societies in Mumbai desiring for Self-Redevelopment rather than falling prey to scandalous and reprehensible acts of Builders in the area of redevelopment. However, it is pitiable for the city’s first Self-Redevelopment Project, The Ganesh Nagar ‘D’ Co-Operative Housing Society, a slum near the Arthur Road Jail at Mahalaxmi, Mumbai which has now been blocked for seven years due to suspected fraud in the Transfer of Development Rights (TDR).

In order to ease the stretched cash flows and improve the overall viability, a Self-Help Approach for redevelopment of their property was decided wherein each member would contribute a specific amount towards the construction cost with the understanding that any surpluses arising out of sale area at the end of the project shall be shared equally. Accordingly, a unanimously acceptable framework and suitable financial plans were finally agreed upon by all the slum residents in their General Body Meeting.

A total of 390 residents had taken it zealously and enthusiastically upon themselves to redevelop their Society with guidance from the Slum Rehabilitation Society (SRS) and they managed to raise a Corpus Fund of Rs. 27 Lakhs from among themselves to redevelop a plot of 3,800 Sq. Meters by constructing three seven-storied buildings. They planned to raise another Rs. 5 Crores through sale of the Society’s admissible TDR of the plot.

At the time when this ambitious project began, the Society laid down certain specific rules for the Redevelopment Contractor that it would make the payment only after three floors of the first building were constructed. The strategy of the Society was to sell those flats to meet the Contractors’ various bills.

It is said that good things don’t last too long. An alleged fraud and financial malfeasance in the self-helped project committed by Society’s Chairman and Secretary and their malignant acts not only left the Members juggling their time between attending the Court and Police Stations but has also pushed back the date of completion of the Dream Project indefinitely.

The Members of the Society were shocked when they found out that the Chairman and the Secretary, the key perpetrators of the alleged scam involving Crores of Rupees, sold the TDR at a rate much lower than the prevalent rate in the market. They even sold the same TDR to three different people through forged documents. It was an almost Rs. 5 Crores fraud as alleged by the former Treasurer of the Society who is fighting a legal battle and dealing with various complaints filed at the Agripada police station against him by the dishonest and scandalous Chairman And Secretary who themselves were already reeling under corrupt practices, alleged that the accused had been obstructing the redevelopment process.

The Members of the Society alleged that the Secretary and the Chairman have been stonewalling the process to let some Developer to take over the project and to get kickbacks in return. However, the Chairman of the Society brushed aside all allegations against him. He claimed that construction work has been stuck due to lack of liquidity. Over the allegations levelled against him and the Secretary of the Society, he retaliated that it’s those Members who have already received a house are nailing the coffin of Redevelopment Project and that not only has the SRS turned hostile, but the sale of TDR has also been blocked. The Chairman is now staging the need to bring the Developer to sort out the financial problem.

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Developers play vital role in redevelopment of housing societies. Currently, the redevelopment mania of residential properties is booming in full swing and one finds in Mumbai that compound wall of every third property of a society is covered with tins as number of small time Developers and real estate companies has joined the battle in an effort to grab a share of this fast rewarding pastry.

There is also likelihood of delay in completion of such projects under redevelopment followed by numerous complaints from the buyers when flats are not delivered in time by Developers as documented in agreement.

There are numerous causes that contribute for delay such as late government approvals, getting the completion certificate after a long wait, financial crunch, bagging more and more projects beyond the capacity, fund diversion, constitutional changes in company, increase in creditors, labour problems, lack of effective monitoring of the projects, mounting-up of unsold flats and shops, blockage of funds, frequent amendments in govt. policies, raw material delays, cement and steel procurement in irregular manner, manpower delay, adverse market reports of Developer to list a few.

According to industry watchers, most of the Developers face project delays. About 85-90 per cent projects are delayed in some way or the other and at times lot of the delays are not in the Developer’s control. The delays on account of various reasons do affect the overall budget of a Developer, increases the construction and storage cost and hit the brand image and future of the company. Of course, it has a direct impact on end-users as well.

One more contributory factor is that at any point in time, there is a 50 to 60 per cent shortfall in unskilled manpower in the construction market. Civil contractors executing projects have so much on their plate that managing different projects is becoming more and more difficult. The ultimate result of such delays takes a toll of buyers whose dreams are shattered even after shelling out lakhs of rupees to buy a small house.

The end solution for any buyer is the Court of Law. Even before the Real Estate Regulator is formed, Consumer Courts are now taking the lead in establishing the best examples for the delay in delivery of flats to the harassed buyers. On recurrent cases of Developers taking more than the agreed time they promise in agreement to deliver flats to the buyers, the Consumer Courts are coming down on the side of the buyers.

Let us examine a recent judgment by Maharashtra State Consumer Disputes Redressal Commission which has a wider impact for victims of delays in a similar situation. The recent judgement puts the onus of delay beyond reasonable limits on the Developers and relieves the buyers the risk of being cheated and duped by Developers when they go back on their promise.

The Maharashtra State Consumer Disputes Redressal Commission, in a judgement on September 13, 2013, gave a landmark decision in favour of one of the buyers who had booked a flat in December 2008 in Kalyan, an extended suburb of Mumbai and paid approximately Rs. 19 lakhs to the Developer. The flat was supposed to be delivered by September 2010. The project was in limbo for years. Construction had not begun. The flat buyer waited until the end of 2011. Eventually, he filed a complaint with the MSCDR Commission.

In his complaint, the flat buyer alleged negligence on the part of the Developer in not handing over possession by the promised date. He asked for delivery of the flat, additional charges for the mental harassment he was put through, and the interest payment as per the agreement. In his complaint, the flat buyer also provided documentary proof of the current market value of the flat from a govt. approved valuer. However, the Developer admitted receiving full payment for the flat and argued that construction would begin “as soon as possible” after getting requisite permissions.

The MSCDR Commission called this case as the fittest example as to how the Developers exploit the innocent buyers and ordered the Developer to pay the current market value of a flat with the same specification in the same locality, which would be around Rs. 60 lakhs, in case the flat was not delivered within three months. In addition, the MSCDR Commission also directed the Developer to pay to the buyer, Rs. 3 lakhs as compensation for mental harassment and Rs 30,000/- for legal charges.

In its judgement, the MSCDR Commission quoted a marked judgement from the Supreme Court which held that “while quantifying the damages, Consumer Forums are required to make an attempt to serve ends of justice, so that compensation is awarded in an established case which not only serves the purpose of re-compensating the individual, but which also at the same time, aims to bring about a qualitative change in the attitude of the service provider” In the referred case, the Developer was considered as “service provider”.

According to the recognized lawyer representing the buyer, compensating him at the current market value has certainly delivered a required justice. It is distressing to state here that in earlier judgements of Consumer Forums, the buyers were merely granted a paltry amount of interest on the principal amount paid to the Developers. In reality, no amount of interest is enough, considering the ever rising real estate rates. But with compensation like this, a buyer can at least consider buying a house in the same area.

Consumer Forums across the country are lined up with similar complaints against Developers. But as this judgement shows, such wilful default on the part of Developers would now entail a heavy price.

We quote an example, a modus operandi of the Developers as to how they betray the flat buyers. Let us take a study case of a flat admeasuring say 1,000 sq. ft area in 2007 in Borivali, Mumbai. The going rate then was Rs. 6,000/- per sq. ft. The agreement states that the possession of the flat shall be handed over in March 2010. The Developer, however, does not hand over the keys until March 2013 as the construction work is not complete. When the buyer asks reasons for the delay, he is presented with an option: take back the Rs. 60 lakhs paid from 2007 to 2010.

The buyer has two choices then. One, he may wait indefinitely for the project to complete as he has already exhausted his funds. Two, he can take Rs. 60 lakhs back and look for other options. However, this is also not possible as the rates in the said area have by that time doubled and he will get a far smaller flat for the same price at that locality. The betrayed buyer in this case has lost on both the fronts i.e. flat and the time. The Developer will sell the same flat to another buyer at the current market value say Rs 12,000/- per sq. ft and would make Rs 1.2 crore, an extra profit of Rs. 60 lakhs.

In some cases, where the buyers are able to exert some pressure, the Developers pay about 10 to 12 per cent interest on the amount refunded. However, the dirty trick played by the Developers is that the interest is calculated from the probable date of possession mentioned in the agreement till the date of refund. The Developers happily pay that interest as it was only for 2-3 years while they used the buyer’s money for 6 years without interest. On the other hand, this interest was not substantial for the buyer to match the current market value of another flat in the vicinity.

In India, sale agreements are usually prepared by the Developers. The usual agreement for a standard under-construction project would usually indicate 3-4 years as the time-frame for completion. The buyer is bound to arrange the fund within this period while the Developer is bound to keep his side of the deal and hand over the keys on the mentioned delivery date. The innocent buyer being not the law-savvy does not know that there is no penalty clause mentioned in the agreement in case the Developer fails to deliver the flat in time. 

There are several examples of buyers caught in similar circumstances. If the property value is up to Rs. 20 lakhs, the complaint can be filed with a District Consumer Forum. For value of property between Rs. 20 lakhs and Rs. 1 crore, the complaint can be filed with the State Commission and for value above Rs. 1 crore, the complaint can be filed with the National Consumer Disputes Redressal Commission at New Delhi.

 

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Press Release: New Delhi, 20.01.2012

The Central Bureau of Investigation Mumbai has filed a charge sheet against an Additional Commissioner of Income Tax (an IRS Officer of 1992 Batch); her husband (a Chemical Engineer & a businessman of Mumbai) and an Asst. Commissioner of Income Tax in a bribery case of Rs.Two crores.

This Case was registered by the CBI in April, 2010 on the allegation of demand of bribe of Rs.2 crores by an Addl. Commissioner of Income Tax at Thane (Maharashtra). It was alleged that Income Tax Department, Thane had conducted survey of a private firm engaged in construction business.

The survey team was headed by the then Asst. Commissioner of Income Tax, Thane. While the survey was in progress, the then Addl. Commissioner visited the Office of the private firm and one of the partners of said firm was threatened that the survey action will be converted into a search operation unless a bribe amount of Rs.2 crores was not paid to her.

She also instructed the Assistant Commissioner to prepare fake documents so that a particular amount was arrived at as undisclosed income. Accordingly, fake documents were prepared by the Assistant Commissioner on the spot.  Later on the amount was reduced to Rs. 1.5 crore. The CBI arrested the Additional Commissioner and her husband while accepting the said bribe amount Rs 1.5 crores from the complainant.

Further investigation led to tracing of two more lockers of Addl. Commissioner of Income Tax and her husband, apart from one locker whose keys were found during searches.  The operation of the two lockers at IDBI Bank, Mumbai led to recovery of Rs.84 lakh in cash and jewellery worth lakhs of rupees besides documents of three properties. 

A total cash amount of Rs. 1.30 crores, apart from the bribe of Rs. 1.5 crores was recovered from the possession of Additional Commissioner.  Later, the then Assistant Commissioner of Income Tax Circle-3, Thane (Mumbai) was also arrested on 19.04.2010. Investigation further revealed that the then Asstt. Commissioner of Income Tax received Rs.10 lakhs as bribe amount on 29th March, 2010 which was part of Rs. Two Crores bribe demanded by Additional Commissioner of Income Tax Circle-3, Thane (Mumbai).

Searches were also conducted at her residential premises in Mumbai which yielded cash of Rs.6 lakhs, 3 plots at Panvel, 3 plots at Nagpur and one house at Andheri (Mumbai).

 

After thorough investigation, Mumbai, branch of CBI has filed a charge sheet against the three accused persons in the Designated Court.      

 

The public is reminded that the above findings of the CBI are not the final proof of the guilt of the accused. Under the Indian Law, the accused are presumed to be innocent till their guilt is finally established after a fair trial.

 

Source Courtesy: http://cbi.nic.in/pressreleases/pr_2012-01-20-2.php

 

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