Court’s Decision
The Supreme Court allowed the appeal filed by the buyer of a flat who had entered into an agreement with a builder in 2012. Despite payment of over 90% of the total amount, the builder failed to hand over possession even after 11 years. The Court observed, “This is not just a case of contractual failure, it is a case of sheer injustice to a consumer.” It held that the buyer was entitled to the refund of the amount paid along with interest @12% per annum and litigation costs of ₹1 lakh. The Court further affirmed the findings of the National Consumer Disputes Redressal Commission and set aside the High Court’s reversal of that order.
Facts
The appellant entered into a construction agreement with the respondent builder in 2012 for purchase of a residential flat. As per the agreement, the builder was to hand over possession of the completed flat within 24 months. Despite paying more than 90% of the sale consideration, the buyer was neither given possession nor refunded the money. Repeated follow-ups yielded no result. Aggrieved, the buyer filed a consumer complaint before the State Consumer Disputes Redressal Commission, which directed the builder to refund the amount with 12% interest and ₹1 lakh litigation costs. The National Commission upheld this. However, the High Court interfered and quashed this relief, holding that the buyer ought to have gone to the civil court. The appellant challenged this before the Supreme Court.
Issues
- Whether the buyer could maintain a consumer complaint for refund and compensation despite the matter arising from a construction agreement?
- Whether the High Court was right in interfering with the concurrent findings of the consumer fora?
Petitioner’s Arguments
The appellant contended that the agreement with the builder was clearly a “construction-cum-sale agreement” and despite repeated assurances, the builder failed to deliver possession even after 11 years. The buyer emphasized that this was not just breach of contract but amounted to deficiency in service and unfair trade practice. The appellant argued that consumer fora had jurisdiction to decide such disputes and that the High Court erred in compelling the buyer to approach the civil court for breach of contract. It was further submitted that the Consumer Protection Act is a beneficial legislation that should be interpreted liberally in favour of consumers.
Respondent’s Arguments
The respondent builder argued that the buyer had prematurely terminated the agreement and failed to pay the remaining amounts. They contended that this was essentially a contractual dispute involving complex questions of fact and hence, not maintainable before consumer fora. They supported the High Court’s view that the matter should have been adjudicated by a civil court. It was also contended that the buyer had no locus once he unilaterally rescinded the agreement.
Analysis of the Law
The Court held that the Consumer Protection Act, 1986 was specifically enacted to provide a simple, inexpensive, and speedy remedy to consumers. The Court reiterated that the existence of an arbitration clause or civil remedy does not oust the jurisdiction of consumer fora. It emphasized that the deficiency in service by the builder—namely failure to deliver possession despite receiving almost full payment—was squarely within the ambit of the Act. The judgment reaffirmed the principle that consumer complaints can be entertained for housing projects, even when they involve breach of contract, as long as they concern service deficiency.
Precedent Analysis
The Court relied on its earlier decision in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, (2019) 5 SCC 725, where it was held that failure to deliver possession amounts to deficiency in service and that buyers are entitled to seek relief under consumer law. It also referred to Experion Developers Pvt. Ltd. v. Sushma Ashok Shiroor, (2023) 9 SCC 301, reiterating that consumer fora jurisdiction is not ousted merely because alternative remedies are available.
Further, in Imperial Structures Ltd. v. Anil Patni, (2022) 5 SCC 659, the Supreme Court had again held that consumer complaints are maintainable even when issues pertain to contractual obligations in the real estate sector.
These judgments were cited to reaffirm that buyers cannot be left remediless when developers default.
Court’s Reasoning
The Court emphasized that “when possession is not delivered for over a decade despite payment of over 90% of the amount, the consumer is not expected to keep chasing the builder endlessly.” The Court strongly criticized the High Court’s interference with the consumer fora’s concurrent findings, terming it as “judicial overreach.” It held that the consumer fora rightly granted compensation with interest and litigation costs. The Court also reiterated that the objective of consumer law is to protect individuals from exploitation in commercial dealings, especially where there is a dominant-subordinate relationship, such as between a homebuyer and a builder.
Conclusion
The Supreme Court allowed the appeal and restored the order of the State Commission as affirmed by the National Commission. It directed the builder to pay the buyer the amount paid by him with interest @12% p.a. and ₹1 lakh as litigation cost. The Court concluded that “consumer fora are meant to protect the helpless buyer, not to drive him to expensive and time-consuming civil litigation.” The decision once again strengthens the buyer’s right to seek redress under consumer law for housing-related grievances.
Implications
This judgment reinforces the legal position that real estate buyers can seek remedy under the Consumer Protection Act for delay in delivery of possession. It clarifies that such disputes are not purely contractual and involve service deficiency, making them maintainable before consumer forums. The judgment also acts as a deterrent for builders who fail to honour possession timelines and attempt to delay or deny buyer claims. It affirms the importance of judicial deference to concurrent factual findings of consumer fora unless they are perverse or illegal.
Cases Referred and Their Relevance
- Pioneer Urban Land v. Govindan Raghavan – Held that non-delivery of possession despite payment amounts to deficiency in service.
- Imperial Structures Ltd. v. Anil Patni – Affirmed that consumer complaints are maintainable even in contractual disputes with builders.
- Experion Developers v. Sushma Shiroor – Clarified that existence of arbitration clause does not bar consumer complaint.
These precedents were cited to uphold the jurisdiction of consumer fora and affirm the buyer’s right to compensation.
FAQs
Q1. Can a homebuyer approach the consumer court if the builder delays possession?
Yes. As reaffirmed in this judgment, a buyer can file a complaint for deficiency in service and seek refund or compensation before consumer fora.
Q2. Does the existence of an arbitration clause or civil remedy bar a consumer complaint?
No. The Court held that consumer forums can still hear such disputes under the Consumer Protection Act despite the presence of an arbitration clause or availability of civil remedies.
Q3. What kind of compensation can be awarded in such cases?
Courts have awarded refund of the amount paid with interest and litigation costs, as seen in this case where 12% interest and ₹1 lakh cost were granted.
Also Read: Kerala High Court holds ‘Compromise Cannot Cure a Serious Offence’: “Courts must act as sentinels of justice and not compromise with rule of law”
