Delayed Possession and Compensation: Supreme Court’s Ruling on Builder-Buyer Dispute

This case concerns a dispute between M/s Imperia Structures Ltd. (the appellant) and Anil Patni (the respondent) regarding delayed possession of residential property under the project ‘The Esfera’ in Gurgaon, Haryana. The appellant, a real estate developer, failed to complete the construction of the respondent’s apartment within the stipulated time, leading the respondent to seek compensation under the Consumer Protection Act, 1986. The case involves issues of delayed possession, consumer rights, and the applicability of compensation under the Real Estate (Regulation and Development) Act, 2016 (RERA).

Background of the Case

The appellant launched a housing scheme named ‘The Esfera’ in Sector 13C, Gurgaon, with promises of delivering possession within 42 months. The respondent booked Apartment No. 1803 in Tower C, but despite paying a substantial sum, the project was not completed as scheduled. The respondent filed a consumer complaint citing the delay and non-delivery of possession of the apartment. The appellant, on the other hand, attributed the delay to force majeure events, including demonetization and delays in obtaining approvals from the authorities.

Petitioner’s Arguments

The appellant, represented by learned senior counsel, argued that:

• The delay in possession was due to force majeure events, including demonetization, which led to a shortage of labor and cash flow issues.
• Despite the delay, the appellant had completed Phase-I of the project on time and was actively working on Phase-II, which was impacted by factors beyond their control.
• The appellant had offered alternative accommodation to the respondent, which was rejected. This, according to the appellant, demonstrated that the respondent’s primary concern was the investment aspect rather than the genuine need for the apartment.
• The Consumer Protection Act (CP Act) does not apply to such cases, as the respondents were not ‘consumers’ within the meaning of the Act since the apartments were booked primarily for investment purposes.

“We have done everything in our capacity to complete the project, and the delay was caused by circumstances that were beyond our control, such as government regulations and labor shortages.”

Respondent’s Arguments

The respondent, Anil Patni, countered the appellant’s arguments, stating:

• The delay in the delivery of possession was unreasonable and unjustified, especially since the project had already crossed the 42-month timeline stipulated in the agreement.
• Force majeure events such as demonetization were not sufficient to justify the delay, and the appellant had failed to provide valid evidence that the delay was caused by such events.
• Under Clause 11.4 of the Builder-Buyer Agreement, the appellant was liable to pay compensation for the delay, which they had not done in full. The amount offered by the appellant as compensation was far below the actual financial loss incurred by the respondent.
• The respondent had made all payments promptly and had relied on the appellant’s commitments, which had not been honored.

“The delay has caused significant financial and personal distress, and the compensation offered is insufficient considering the time elapsed and the financial burden of the EMI payments for an apartment that has not been delivered.”

Supreme Court’s Judgment

The Supreme Court, after considering the arguments of both parties, ruled in favor of the respondent. The Court made the following observations:

• The Court emphasized that real estate developers must adhere to the timelines specified in the Builder-Buyer Agreement, and failure to do so without valid justification is a violation of consumer rights under the Consumer Protection Act.
• The Court noted that while force majeure events could justify delays in some cases, the appellant had failed to provide sufficient evidence to prove that the delay was caused by such events. The delay was primarily due to poor planning and lack of timely action on the part of the appellant.
• The Court also pointed out that the offer of alternative accommodation, though made, was not reasonable, as the alternative offered was not comparable to the promised apartment in terms of location or quality.
• On the issue of compensation, the Court held that the appellant had not paid adequate compensation for the delay, as specified under Clause 11.4 of the Agreement. The Court directed the appellant to refund the amounts deposited by the respondent along with simple interest at the rate of 9% per annum from the respective dates of deposit until the date of realization, along with costs of Rs.50,000/- to be paid to the respondent.

“The delay in possession is a serious matter, and consumers have the right to timely possession as per their agreements. The compensation offered should reflect the actual financial loss suffered due to such delays.”

Conclusion

The Supreme Court’s judgment reinforces the principles of accountability and consumer protection in the real estate sector. Developers must adhere to the timelines specified in their agreements, and failure to do so without valid justification will lead to liability for compensation. This case also highlights the importance of providing reasonable and adequate compensation to homebuyers who suffer due to delays in possession, especially when the delay causes financial hardship.

Petitioner Name: M/s Imperia Structures Ltd..
Respondent Name: Anil Patni.
Judgment By: Justice Uday Umesh Lalit, Justice Vineet Saran.
Place Of Incident: Gurgaon, Haryana.
Judgment Date: 02-11-2020.

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