SC: Flat Buyers Are Fully Entitled to Compensation for Delayed Handing Over of Possession

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On August 24th, a 2-Judge Bench held that flat buyers are fully entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers regarding the provision of amenities. The dismissal of the complaint by the NCDRC was erroneous and was set aside, the SC held.

Background 

On 02.07.2019, the National Consumer Disputes Redressal Commission (NCDRC) dismissed a consumer complaint filed by 339 flat buyers. It accepted the defence of DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. that despite a delay in handing over the possession of the residential flats, the purchasers were not entitled to compensation over the stipulated amount in the Apartment Buyers Agreement (ABA). Hence, the present appeal filed before the SC.

Appellant’s Averments

  1. There is a gross delay ranging between two and four years in handing over possession and the flat buyers ought not to be duly constrained by the terms of the agreement which are one-sided and unreasonable; 
  2. The execution of conveyances or settlement deeds would not operate to preclude the flat buyers from claiming compensation;
  3. The developers have not provided the amenities under the contract; 
  4. The flat buyers are not liable to indemnify the developer for the demand of interest and penalty raised by the tax authorities as a result of the failure to deposit the tax on time. 

Issue 

  1. Whether the stipulation contained in the ABA providing compensation for delay constrains the flat buyers? 
  2. Can a flat buyer who seeks a claim against the developer for delayed possession thereby compelled to defer the right to obtain a conveyance to perfect their title?

Court’s Observations

The Bench comprising Justices DY Chandrachud and KM Joseph observed: 

  1. The ABA is one-sided. The agreement does not reflect an even bargain. To uphold the contention of the developer that the flat buyer stands constrained by the terms of the agreed rate irrespective of the nature or extent of delay would result in a miscarriage of justice.
  2. Failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a ‘deficiency’. 
  3.  In cases where there is a gross delay in the handing over of possession beyond the contractually stipulated period, the jurisdiction of the consumer forum to award just and reasonable compensation is not constrained by the terms of a rate in builders agreement. The jurisdiction of the consumer forum extends to directing the opposite party inter alia to remove the deficiency in the service in question.
  4. The execution of the Deed of Conveyance by a flat purchaser does not preclude a consumer claim for delayed possession. 
  5. There is no absence of jurisdiction to award compensation beyond the rate stipulated in the flat buyer’s agreement where delay in handing over of the possession of a flat under the Consumer Protection Act 1986 happened. 
  6.  It is unreasonable to expect that the execution of the Deed of Conveyance by a flat purchaser precludes a consumer claim for delayed possession.
  7. A developer who has breached a clear representation made to the buyers of the amenities should be accountable to the process of law. To allow the developer to escape their obligation would put a premium on false assurances and representations made to the flat purchasers. 

Court’s Decision

The impugned NCDRC’s Judgment and Order dated 02.07.2019 was erroneous and thereby set aside. The Court directed the Respondents to pay an amount calculated at the rate of 6 percent simple interest per annum to each of the Appellants as compensation. This was in addition to the amounts which were over or credited by the developer at the time of the drawing of final accounts. The amount is payable within a period of one month from the date of the Judgment failing which would carry interest at the rate of 9 per cent per annum until paid.


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