Flat buyers taken to court over VAT

Builders allege bouncing of cheques by buyers, who say they were forced to issue them under duress, Naresh Kamath reports.

The value-added tax (VAT) controversy has intensified, with several city builders filing cases in the metropolitan magistrate court against flat owners for bouncing cheques.

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Take the case of Rock Enclave society, Kandivli where 100 flat owners have been dragged to court by the builders, EBR Enterprises, for not honouring post-dated cheques.

Ashok Mohnani, a partner in EBR Enterprises, said he was forced to proceed legally. “We sent them several notices and reminders, but they were reluctant to pay up,” he said. “Flat owners should realise that VAT is the payment due to the government and we are just collectors,” he added. These cases relate to transactions between June 20, 2006, and March 31, 2010, which attracted a 5% VAT.

The office bearer of the society, who declined to be identified, said they had given the cheques under duress. “Six years ago, when we went to take the keys, we were told to sign on a blank paper and issue a cheque. We were left with no option,” he said, and added that bank accounts of many flat owners had even been closed in the interim period.

Before approaching the court, the builders had served notices under section 138 of the Indian Negotiable Instruments Act which deals with cheque-bouncing cases.

Advocate Vinod Sampat, who is representing the residents, justified the non-payment. “The builder has not fulfilled his commitments such as conveying the land and promised amenities. He is only interested in payments, which is unfair,” said Sampat.

In another building in Deonar, 50 flat owners have been asked to report to court.

“We will fight the case as the builder forced us to issue cheques,” said the office bearer, who did not wish to be identified.