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Buyer Can’t Wait Indefinitely For Flat, Supreme Court Asks Developer To Refund The Amount Along With Interest

A buyer cannot be required to wait indefinitely for possession, said the Supreme Court while affirming National Commission order directing the developer to refund the amount to the buyer.

In this case of Kolkata West International City Pvt Ltd vs Devasis Rudra, the buyer paid an amount of Rs 39, 29, 280 in 2006 to the builder and the agreement between them envisaged that possession of the Row House would be handed over to the buyer by 31 December 2008 with a grace period of a further six months.

Rudra has booked a flat with a developer in 2006 for over Rs 39.29 lakh. According to the terms of the builder-buyer agreement, the builder had to hand over the unit latest by June 2009. Upon the builder failure to do so, the buyer first approached the West Bengal State Consumer Disputes Redressal Commission in 2011 and then the National Consumer Disputes Redressal Commission in 2019. Both the forums ruled in Rudra’s favour. The State Commission allowed the complaint by directing the developer to refund the moneys paid together with interest at 12% per annum and compensation of Rs 5 lakhs. The National Commission modified this order by reducing the compensation from Rs 5 lakhs to Rs 2 lakhs.

It was highlighted by the Apex Court that builder-buyer agreement is one sided which the developer has set only to favour himself. The agreement said that the company would be liable to pay prevailing 4% saving bank interest of the State Bank of India for each month of delay on the money given by the buyer as compensation. It also stated that the builder would not be liable to pay any compensation in case of force majeure. However, if the buyer is in default, the agreement stipulates that interest at the rate of 18 per cent from the date of default until the date of payment would be charged for a period of two months, failing which the allotment would be cancelled, by deducting five per cent of the entire value of the property. The Bench said that the agreement was evidently one sided.

The essential aspect before the Apex court bench comprising Justice DY Chandrachud and Justice Hemant Gupta in the appeal filed by the developer against order of refund was whether the buyer was entitled to seek a refund or was estopped from doing so, having claimed compensation as the primary relief in the consumer complaint. While refusing to interfere with the order of refund, the bench said according to the agreement, the date for handing over possession was 31 December 2008, with a grace period of six months. Even in 2011, when the buyer filed a consumer complaint, he was ready and willing to accept possession. It would be manifestly unreasonable to construe the contract between the parties as requiring the buyer to wait indefinitely for possession. By 2016, nearly seven years had elapsed from the date of the agreement. Even according to the developer, the completion certificate was received on 29 March 2016. This was nearly seven years after the extended date for the handing over of possession prescribed by the agreement. A buyer can be expected to wait for possession for a reasonable period. A period of seven years is beyond what is reasonable. Hence, it would have been manifestly unfair to non-suit the buyer merely on the basis of the first prayer in the reliefs sought before the SCDRC. There was in any event a prayer for refund.

The Supreme Court said that the orders passed by the State Commission and by the National Commission for refund of moneys were hence justified and modified the order of the National Commission by directing the developer to pay interest at the rate 9% instead and in place of 12% by the National Commission.  This judgment of Supreme Court is welcomed by the aggrieved homebuyers who waited indefinitely for possession.

Written by:
Ankur Saha
Head- Legal

Divya Patwal


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