Compensation Upheld Against Department for Disbursing Housing Loans Without Verifying Construction Progress

1. Core Facts & Background

• The assessee booked a residential unit financed partly via personal savings and partly through a loan sanctioned by the department under a tripartite arrangement.
• Under the sanction terms and agreement, loan amounts were required to be disbursed in tranches strictly linked to verified construction milestones.
• Nearly 95% of the consideration was disbursed directly to the developer, but the project suffered severe delays with no delivery of possession.
• The assessee approached the redressal commission alleging deficiency in service and seeking compensation for unjustified fund releases and pre-EMI interest debits.

2. Revenue / Department’s Action

• The department disbursed stage-wise loan tranches directly to the developer relying merely on payment demands raised.
• The department debited pre-EMI interest against the assessee despite persistent failure by the developer to hand over timely possession.
• The department asserted that site inspections were conducted by its technical team prior to fund releases but failed to place any inspection reports on record.
• The department contested the finding of service deficiency and challenged the direction to pay compensation before the apex appellate authority.

3. Assessee’s Defense & Arguments

• The assessee argued that the department was contractually bound to verify physical construction progress before releasing any loan tranche.
• It was contended that substantial funds were released when requisite permissions were lacking, indicating negligence and lack of due diligence.
• The assessee demonstrated that repeated written requests and emails demanding inspection reports and progress verifications were ignored.
• The assessee submitted that the initial burden of proving deficiency was fully discharged, shifting the evidentiary burden onto the department.

4. Final Ruling & Outcome

• The appellate authority held that the department committed deficiency in service by failing to substantiate independent physical verification prior to loan releases.
• It was ruled that matching disbursement tranches to developer demands does not fulfill the mandatory contractual obligation of progress verification.
• The award directing the department to pay compensation of two lakh rupees to the assessee was accordingly affirmed.