Choices for Homebuyers if Developers Fail to Give Possession

The Supreme Court, in the recent case of Experion Developers Pvt. Ltd. Versus Sushma Ashok Shiroor, decided on 7th April 2022 took a very liberal view in favour of home buyers who invested their hard earned money in a developers’ project but did not get possession within the stipulated time. 

It was made clear that the National Consumer Disputes Redressal Commission (NCDRC) had the power to give relief what the home buyer choses. The home buyer is free to make any request and the commission may grant the same if merits so permit.

Dr Prem Lata, Legal Head VOICE

The SC has allowed three fold choices to the home buyer who has not been given possession of their dwelling within the stipulated time frame. 

1. The power to direct refund of the amount and to compensate a consumer for the deficiency in not delivering the apartment as per the terms of agreement is within the jurisdiction of the Consumer Courts. A consumer can plea for refund of the money with interest and compensation.
2. The consumer could also ask for possession of the apartment with compensation. 
3. The consumer can also make an appeal for both. If a consumer asks for refund of the amount, without an alternative request, the Commission will recognize such a right and grant “The freedom to choose the necessary relief is of the Consumer and it is the duty of the Courts to honour it.” 

The above order makes the position clear that home buyers can be given compensation in all the situations, whether it’s asking for refund with interest and compensation or possession with delayed compensation.

Objections Raised by Builder 

The objections raised by the developer were:

• The consumer is entitled for delayed compensation only. Since the occupation certificate had been applied and would be obtained, he/she would be entitled for compensation for delay to the tune of Rs Rs. 4, 54,052.
• 42 months period expired on 26-6-2016, “the trigger date for clause 10.1 is 26.12.2012, which is the date of execution of the apartment buyer’s agreement”. The Commission calculated 42 months from this period, which turns out to be 26.06.2016. Further, adding the grace period of 180 days, the time for delivery would expire on 26.12.2016.
• Occupation certificate for Phase-I of the project had already been obtained on 06.12.2017, and application for occupation certificate for Phase-2, had already been made. In the affidavit of evidence, the developer contended that it secured the occupation certificate on 23.07.2018 and a notice of possession was issued to the Consumer on 24.07.2018. It was claimed that since possession can be handed over, the complaint must be dismissed.

NCDRC Orders 

The Commission, in its judgment dated 19.06.2019, allowed the complaint after referring to Clause 10 (relating to the project completion period), Clause 11 (relating to the possession and conveyance of the apartment), as well as Clause 13 (relating to delay in possession). The Commission found that the agreement is one-sided, heavily loaded against the allottee and entirely in favour of the developers. Following the decisions of this Court in Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghvan, the Commission directed the developer to refund the amount of Rs.2, 36, 15,726 with interest @ 9% p.a. following Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghvan. Both the parties filed appeals against the above order by NCDRC. 

The developer filed the present Civil Appeal No. 6044/2019 against these findings of paying refund with interest when possession is offered and the consequential directions of the Commission.

The consumer also filed an appeal being Civil Appeal No. 7149/2019, challenging the Commission’s judgment to a limited extent for grant of an enhanced interest @ 24% p.a.

Objections Raised by Developers 

The decision of this Court in Pioneer has no application to the facts of the present case, as in Pioneer, the Court did not have to deal with delay compensation clause like in the present case.

Terms of the apartment buyer’s agreement alone would govern the relations between the parties. No prejudice would be caused to the consumer if he is asked to take possession of the property. 

Referring to the provisions of the Real Estate (Regulation and Development) Act, 20166 and particularly to the Regulations made by Haryana Real Estate Regulatory Authority, which were relied on in Pioneer case, the builder submitted that the consumer had elected to proceed under the Consumer Protection Act, 1986 and therefore the provisions of RERA Act will not apply and the Pioneer cannot be followed as a precedent.

The interest granted by the Commission is excessive in both the period of the grant and the rate of interest.

Issues before the SC 

• Whether the Commission has the power under the Consumer Protection Act, 1986 to direct refund of the amount deposited by the Consumer with interest when the developer is ready to give possession. 
• Whether the terms of the Apartment Buyers Agreement amount to an ‘unfair trade practice’ and whether the Commission is justified in referring the Pioneer Case which was mainly decided under the RERA Act.

Referred Cases 

In the case of Lucknow Development Authority vs M.K. Gupta, the Court held that when a person hires the services of a builder, or a contractor, for the construction of a house or a flat, and the same is for a consideration, it is a “service” as defined by Section 2(o) of the Consumer Protection Act, 1986. The inordinate delay in handing over possession of the flat clearly amounts to deficiency of service.

In Fortune Infrastructure v. Trevor D’Lima, the Court held that a person cannot be made to wait indefinitely for possession of the flat allotted to him, and is entitled to seek refund of the amount paid by him, along with compensation. The money deposited by him along with appropriate compensation.  

In the instance of IREO Grace Realtech (P) Ltd. V. Abhishek Khanna, a three-judge bench of this Court noticed the delay compensation clause, which is similar to the clause in the present case, which provided that the Developer would be liable to pay delay compensation @ Rs 7.5 per square foot which works out to approximately 0.9 to 1% p.a. The Court held that this clause is one-sided and entirely loaded in favour of the developer and against the allottee. The Court concluded that the powers of the Consumer Court were in no manner constrained to declare a contractual term as unfair and one-sided as an incident of the power to discontinue unfair or restrictive trade practices.