Sunday, February 17, 2019

Redevelopment Agreement Flaws - Article 2


2. Permissible Reasons for Delay in Project

It is a normal practice in the contracts to allow the delays under the reasons generalised as `Force Majeure’ (French word meaning `Superior Force’), which meant to be arising out of the events beyond control of the performer, making performance impossible, impracticable, illegal or inadvisable. These provisions cover the reasons such as, natural disasters (floods, earthquakes, storms, hurricanes etc.) which were used to be referred as `act of God’, as well as man-made disasters such as war, civil commotion, fire damage etc. But mentioning of `Force Majeure’ as the permissible reason can attract claims under many other reasons, since meaning of terms impracticable, inadvisable & even impossible can be interpreted in multiple ways. Hence it is required to be more specific by meticulously listing the reasons instead of mentioning word `Force Majeure’.

The reasons permitted for granting reasonable extension of time under the MahaRERA, are the reasons, where completion of building shall be delayed on account of (i)war, civil commotion or act of God; (ii)any notice, order, rule, notification of the Government and/or other public or competent authority.

The redevelopment projects where saleable area exceeds 500sqmt or 8 apartments the RERA (Real Estate (Regulation & Development) Act, in Maharashtra it is called `MahaRERA’) shall be applicable, except where the Society plans self-redevelopment & not intending to sale area exceeding 500sqmt or 8 apartments or where the building for rehabilitation component is separated from saleable component. The project where RERA is applicable, the redevelopment agreement has to mention same reasons, although provisions should be made that the exercise of rescheduling the construction schedule & asking to deposit the post-dated cheques for extended period at the time of granting extension shall be performed as described in previous blog on `extension of time’. In my opinion the same reasons should also be provided in the projects where RERA is not applicable.

MahaRERA at draft stage had included some more reasons i.e. non-availability of steel, other building material, water or electric supply, but subsequently deleted them in final notification. I remember, I did object to this draft provision then, because I thought that these reasons should be well defined, else such ambiguity shall be the source of corruption. Firstly, the essential part of these reasons has aptly been covered under MahaRERA mentioned reasons (i) & (ii). Also, the reason of non-availability of material needs to be defined within certain framework to which the sanctioning authority can refer. This framework should consist of the terms such as geographical area specified for procurement of material, acceptable proofs/ documents supporting the efforts made at appropriate time to procure the material, minimum number of suppliers who should have been approached for material procurement, any other terms allowed for acceptance of such claim by the authority. Even after such meticulous definition there is every chance that the false claim can be made about non-availability of material & passed by a corrupt official interpreting suitably by finding some loophole. The tenderer is always supposed to make quotations foreseeing the normal escalations, plan the procurement sufficiently in advance with due process & considering the risk factors involved. Hence, the escalation in amount, if any, due to the failure of the tenderer for the reasons not covered under MahaRERA mentioned reasons (i) & (ii) has to be borne by the tenderer.

Interpretation of acceptable reason for delay, even within the mentioned terms can always be frowned with doubt, since it can be a source of corruption. I shall suggest that the sanctioning authority particularly for accepting the reason for delay be mentioned shall be formed by creating a committee of three members i.e. PMC, Representative of Society & Architect of building & sanction shall be based on a majority decision.

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