Court’s decision
The Supreme Court of India dismissed three civil appeals filed by a real estate developer challenging orders of the National Consumer Disputes Redressal Commission directing completion of construction, delivery of possession with Occupancy Certificate, and payment of compensation at 8% per annum for delay.
The Court held that restrictive compensation clauses in builder-buyer agreements cannot curtail the statutory powers of consumer fora under the Consumer Protection Act, 1986. It affirmed that failure to obtain an Occupancy Certificate constitutes deficiency in service and upheld the NCDRC’s award of interest, rebate, litigation costs, and direction to bear increased stamp duty.
Facts
The appeals arose from separate orders of the NCDRC in consumer complaints filed by flat purchasers in a residential project at Sector-53, Gurgaon known as Parsvnath Exotica.
Under the Flat Buyer Agreements, possession was to be delivered within 36 months from commencement of construction, with a grace period of six months. The buyers paid nearly the entire sale consideration within the stipulated timelines.
Despite this, the developer failed to complete construction and obtain the Occupancy Certificate within the contractual period. The purchasers approached the NCDRC alleging deficiency in service.
The NCDRC directed completion of construction, delivery of possession with Occupancy Certificate, payment of 8% simple interest from specified cut-off dates till possession, continuation of rebate, litigation costs, and bearing of increased stamp duty.
Issues
The Supreme Court considered:
- Whether the NCDRC exceeded jurisdiction under Section 14 of the Consumer Protection Act by awarding compensation beyond the contractual stipulation.
- Whether Clause 10(c) of the Flat Buyer Agreement limiting delay compensation to ₹10 per sq. ft. per month could restrict statutory remedies.
- Whether possession could be offered without obtaining the Occupancy Certificate.
- Whether 8% interest constituted excessive or unjustified compensation.
Appellant’s arguments
The developer contended that Clause 10(c) of the Flat Buyer Agreement fixed compensation for delay and barred additional claims. It argued that the NCDRC travelled beyond contractual terms and granted interest without legal basis.
The appellant further submitted that delays were attributable to force majeure factors, labour shortages, financial constraints, and delay in statutory approvals.
It was argued that the NCDRC failed to adopt a rational methodology for computing compensation and ignored payments already made towards delay compensation pursuant to interim orders of the Supreme Court.
The developer also challenged the direction requiring it to bear increased stamp duty, claiming that such liability lay with buyers under Clause 11(a).
Respondents’ arguments
The flat purchasers submitted that they had paid almost the entire consideration before the committed possession dates, yet possession was delayed by several years.
They argued that the developer repeatedly failed to obtain the Occupancy Certificate and sought to offer possession on an “as is where is” basis.
The respondents relied on binding precedents holding that one-sided contractual clauses cannot override statutory rights under the Consumer Protection Act.
It was contended that the award of 8% interest was reasonable compensation for prolonged deprivation and financial hardship.
Analysis of the law
The Court emphasised that Sections 12, 14, and 22 of the Consumer Protection Act confer statutory jurisdiction on consumer fora to redress deficiency in service.
Relying on Lucknow Development Authority v. M.K. Gupta, the Court reiterated that “compensation” under the Act is of wide amplitude and includes mental agony and harassment.
The Court referred to Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, IREO Grace Realtech Pvt. Ltd. v. Abhishek Khanna, and Arifur Rahman Khan v. DLF Southern Homes Pvt. Ltd., holding that one-sided builder-buyer clauses constitute unfair trade practice.
The restrictive clause granting ₹10 per sq. ft. per month was found nominal and disproportionate, particularly when the agreement permitted 24% interest for buyer defaults.
The Court held that contractual terms cannot curtail statutory remedies under a beneficial legislation.
Precedent analysis
The Court relied on:
- Lucknow Development Authority v. M.K. Gupta (1994) 1 SCC 243 — Liberal interpretation in favour of consumers; compensation includes mental agony.
- Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725 — One-sided clauses are unfair trade practice.
- IREO Grace Realtech Pvt. Ltd. v. Abhishek Khanna (2021) 3 SCC 241 — Consumer fora can award just compensation beyond contractual limits.
- Samruddhi Cooperative Housing Society Ltd. v. Mumbai Mahalaxmi Construction (P) Ltd. (2022) 4 SCC 103 — Failure to obtain Occupancy Certificate is deficiency in service.
- Dharmendra Sharma v. Agra Development Authority (2024 INSC 667) — Possession without statutory completion certificate is legally untenable.
Applying these principles, the Court upheld the NCDRC’s statutory jurisdiction.
Court’s reasoning
The Court found undisputed delay in completion and delivery. It noted repeated extensions and directions issued by the Supreme Court requiring compliance and payment of interim compensation.
The developer’s persistent failure to obtain the Occupancy Certificate was considered significant. Possession without statutory approval cannot be forced upon buyers.
The Court held that 8% interest was fair and reasonable in light of prolonged delay and hardship suffered.
The direction to bear increased stamp duty and extend rebate was found ancillary to the main relief and within statutory competence.
The Court clarified that if bona fide circumstances prevented obtaining the Occupancy Certificate within six months, limited liberty was granted to approach the NCDRC regarding interest beyond that period.
Conclusion
The Supreme Court dismissed all three appeals and affirmed the NCDRC’s orders.
The developer was directed to obtain the Occupancy Certificate and hand over possession within six months, failing which compensation would continue. In one appeal where possession was already taken, buyers were entitled to 8% interest until the date of possession, subject to adjustment of amounts already paid.
No order as to costs was passed.
Implications
This judgment reinforces key principles in real estate consumer litigation:
- Builder-buyer contractual clauses cannot override statutory consumer rights.
- Nominal delay compensation clauses are liable to be disregarded if unfair.
- Occupancy Certificate is mandatory before lawful possession.
- 8% interest remains a judicially accepted benchmark for delayed possession cases.
- Consumer fora possess broad powers to mould relief, including rebate and ancillary financial directions.
The ruling strengthens homebuyer protection jurisprudence and affirms judicial scrutiny of one-sided real estate contracts.
Case law references
- Lucknow Development Authority v. M.K. Gupta (1994) 1 SCC 243
Compensation under Consumer Protection Act is broad and includes mental agony. - Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725
One-sided clauses in builder agreements are unfair trade practices. - IREO Grace Realtech Pvt. Ltd. v. Abhishek Khanna (2021) 3 SCC 241
Consumer fora may grant just compensation beyond contractual limits. - Samruddhi Cooperative Housing Society Ltd. v. Mumbai Mahalaxmi Construction (P) Ltd. (2022) 4 SCC 103
Failure to obtain Occupancy Certificate amounts to deficiency in service. - Dharmendra Sharma v. Agra Development Authority (2024 INSC 667)
Possession without completion certificate is legally invalid.
FAQs
1. Can consumer fora award compensation higher than the builder’s contractual clause?
Yes. Statutory powers under the Consumer Protection Act override unfair or one-sided contractual stipulations.
2. Is an Occupancy Certificate mandatory before possession?
Yes. Offering possession without obtaining the Occupancy Certificate constitutes deficiency in service.
3. What rate of interest is typically awarded in delayed possession cases?
Courts have consistently upheld 8% interest as reasonable compensation in such cases, depending on facts.
