SUPREME COURT HOLDS THAT FLAT BUYERS ARE ENTITLED TO BOTH REFUND AND COMPENSATION IN CASE OF DELAY IN HANDING OVER POSSESSION

The Three Judge Bench of the Hon’ble Supreme Court of India comprising of Justices Dr. Dhananjaya Y Chandrachud, Indu Malhotra and Indira Banerjee passed an Order dated 14-12-2020 in the case of DLF Home Developers Ltd. and Another v. Capital Greens Flat Buyers Association Etc. Etc. (Civil Appeal Nos. 3864-3889 of 2020) and held that an offer by the #Developer-Appellant to #refund the consideration amount of an #apartment shall not disentitle the #flatpurchasers from claiming #compensation for the inordinate #delay caused by the Developer in handing over the timely possession of the flat.

In the present case, the National Consumer Disputes Redressal Commission (NCDRC) had passed a Judgment dated 03-01-2020, wherein Complaints were filed by an Association representing the flat purchasers, called the Capital Greens Flat Buyers Association and by individual flat buyers (Respondents) against the Appellant. There was a substantial delay in handing over the possession of the apartments and as a result of which the flat buyers claimed a compensation for the delay caused in handing over the possession of the flats. In the NCDRC, the Developer (Appellant) contended that they could not deliver the possession on time due to certain Force Majeure conditions. The NCDRC allowed the Complaints filed by the flat purchasers and directed the Appellant to pay compensation in the form of simple interest @ 7% per annum from the expected date for delivery of possession till the date on which the possession was actually offered.

Aggrieved, the Appellant file an Appeal in the Hon’ble Supreme Court of India on the following grounds:

1. The Appellant could not deliver the timely possession of the apartments as it could not fulfil its contractual obligations due to certain Force Majeure conditions;
2. That the Appellant had given exit offers to the flay buyers on two occasions. Firstly, when the Appellant admitted to the fact there is a delay beyond the contractual period of thirty six months and secondly, when the Appellant had offered refunds of the consideration together with interest @ 9% per annum;
3. 45% of the flat buyers in the project have sold away their apartments;
4. The flat buyers have the benefit of an appreciation in the capital value of the apartments purchased;
5. The Appellant has extended the benefit of other contractual terms.

The Respondents contended that the Judgment passed by the NCDRC against the Appellant for the payment of compensation is justified since the Appellant has inordinately delayed the completion of the Project beyond the contractual period of thirty-six months.

Taking into consideration the contentions raised by the Parties to the dispute, the Apex Court on the issue of Force Majeure held that a delay in the approval of building plans is a normal incident of a construction project. The Appellant must be aware of these delays and cannot take up this defense and delay the completion and handing over of the possession as per the contractual period stipulated in the Builder Buyer Agreement. Further, in the present case, the Court observed that the fatal accidents that took place at the site were due to a failure of the Appellant to take proper safety measures. Hence, the Court concluded that the Appellant cannot take up the defense of Force Majeure conditions.

Furthermore, on the aspect of exit option given by the Appellant, the Supreme Court observed that merely an exit option has been offered by the Developer, it would not disentitle the flat purchasers from claiming compensation. The Court held the following:

“For a genuine flat buyer, who has booked an apartment in the project not as an investor or financier, but for the purpose of purchasing a family home, a mere offer of refund would not detract from the entitlement to claim compensation. A genuine flat buyer wants a roof over the head. The developer cannot assert that a buyer who continues to remain committed to the agreement for purchase of the flat must forsake recourse to a claim for compensation occasioned by the delay of the developer. Mere refund of consideration together with interest would not provide a just recompense to a genuine flat buyer, who desires possession and remains committed to the project.”

Partly allowing the Appeal, the Apex Court passed the following directions:

1. The Judgment passed by the NCDRC is upheld, however, the Order passed by the NCDRC for refund of parking charges and club charges and interest on these two shall be set aside.
2. The compensation on account of delay in handing over the possession of the flats to the flat purchasers shall stand reduced from 7% to 6%.
3. These directions have to be complied with within 2 months from the date of the Order.

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services