Chandigarh Housing Board vs. Parsvnath Developers: Legal Battle Over Refund and Compensation

The case between Chandigarh Housing Board (CHB) and M/s. Parsvnath Developers Pvt. Ltd. revolves around the failure of a real estate project in Chandigarh, leaving a flat buyer in distress. The case was initially heard by the National Consumer Disputes Redressal Commission (National Commission), which ruled in favor of the buyer. CHB appealed the decision, leading to this Supreme Court judgment.

Background of the Case

Chandigarh Housing Board invited bids for a large-scale integrated project at the Rajiv Gandhi Chandigarh Technological Park. The contract was awarded to Parsvnath Developers, and a Development Agreement was signed on 06.10.2006, granting development rights over 123 acres of land. The project was branded as “Parsvnath Pride Asia,” and the developers advertised the sale of apartments.

Respondent No. 2, a prospective buyer, applied for a five-bedroom apartment and paid Rs. 1,03,31,250/- out of the total cost of Rs. 3,93,25,000/-. A Tripartite Agreement was signed between CHB, the developer, and the buyer on 23.04.2008, wherein it was stipulated that the construction would be completed within 36 months.

Failure to Construct and Refund Dispute

By September-October 2009, the complainant found that no construction had started. Upon seeking a refund with interest at 20% p.a., no response was given by the developer. The complainant then approached the National Commission in 2011.

The developer defended itself, stating that CHB had failed to provide unencumbered land, leading to construction delays. CHB countered that disputes only related to commercial land and not to the residential project. Arbitration proceedings were initiated between CHB and the developer.

National Commission’s Verdict

The National Commission ruled in favor of the complainant, stating that homebuyers should not suffer due to disputes between CHB and the developer. It ordered a refund of Rs. 1,03,31,250/- with 10% interest p.a. and compensation of Rs. 1,00,000/- each for mental harassment and litigation costs, to be paid by CHB and the developer in a 70:30 ratio.

Arguments Before the Supreme Court

CHB’s Arguments:

• CHB was wrongly held liable for 30% of the compensation and litigation costs.
• Clause 9(c) of the Tripartite Agreement stipulated that the developer alone was liable to compensate buyers at Rs. 107.60 per sq. meter in case of non-delivery.
• A revocation deed signed on 04.02.2015 assigned all third-party liabilities to the developer.
• CHB had already paid 30% of the principal amount under Clause 9(d), but the interest rate was unfairly increased from 9% to 10% p.a.

Developer’s Arguments:

• The arbitrator had already found both CHB and the developer responsible for the project’s failure, making CHB liable for 30% of the refund and compensation.
• The National Commission’s decision followed the arbitrator’s findings, which had become binding.
• Clause 9(c) of the Tripartite Agreement was inapplicable in this case.

Supreme Court’s Findings

The Supreme Court upheld the National Commission’s decision, affirming that CHB and the developer were jointly responsible. The judgment highlighted:

• Clause 9(c) applied only when the developer failed to deliver completed apartments within the stipulated time, which was not the case here since no construction had begun.
• Both CHB and the developer benefited financially from the sale of flats and must share liability.
• The arbitration award confirming the 70:30 ratio of liability must be honored.
• The increase in interest rate from 9% to 10% was justified as a discretionary power of the National Commission.

Final Decision

The Supreme Court dismissed CHB’s appeal and directed it to pay its 30% share of Rs. 2 lakhs for mental harassment and litigation costs within eight weeks. It also upheld the revised interest rate of 10% on the refund amount.

This judgment reinforces the principle that homebuyers should not bear the brunt of disputes between developers and authorities. It also highlights the judiciary’s role in ensuring consumer rights in real estate transactions.

Petitioner Name: Chandigarh Housing Board.
Respondent Name: M/s. Parsvnath Developers Pvt. Ltd..
Judgment By: Justice Mohan M. Shantanagoudar, Justice R. Subhash Reddy.
Place Of Incident: Chandigarh.
Judgment Date: 17-12-2019.

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