Builder Held Liable for Delayed Possession: Supreme Court Upholds Homebuyer’s Right to Refund

The Supreme Court of India, in its judgment dated April 2, 2019, ruled in favor of homebuyers, holding that builders cannot impose one-sided agreements and delay possession indefinitely. The case, Pioneer Urban Land & Infrastructure Ltd. vs. Govindan Raghavan, involved a dispute over delayed possession in a residential project in Gurugram, where the builder had failed to obtain the Occupancy Certificate within the agreed timeframe. The Court upheld the National Consumer Disputes Redressal Commission’s (NCDRC) decision, affirming the homebuyer’s right to a refund along with interest.

Background of the Case

The appellant, Pioneer Urban Land & Infrastructure Ltd., launched a luxury residential project named “Araya Complex” in Sector 62, Golf Course Extension Road, Gurugram. The respondent, Govindan Raghavan, entered into an Apartment Buyer’s Agreement with the builder on May 8, 2012, to purchase a flat for Rs. 4,83,25,280/-.

As per Clause 11.2 of the Agreement, the builder was required to make all efforts to obtain the Occupancy Certificate within 39 months from the date of excavation, with an additional grace period of 180 days. Since excavation began on June 4, 2012, the Occupancy Certificate was supposed to be obtained by September 4, 2015, or at the latest by March 4, 2016.

Legal Dispute Arises

The builder failed to apply for the Occupancy Certificate within the stipulated timeframe. As a result, the homebuyer filed a consumer complaint before the NCDRC on January 27, 2017, alleging deficiency in service. He sought:

• Refund of Rs. 4,48,43,026/- with interest at 18% per annum.
• Compensation of Rs. 10,00,000/- for mental agony and undue hardship.
• Refund of wrongfully charged service tax and other amounts.
• Litigation costs of Rs. 1,00,000/-.

During the proceedings, the builder obtained the Occupancy Certificate on July 23, 2018, and issued a Possession Letter on August 28, 2018. The builder argued that the homebuyer must take possession of the apartment instead of seeking a refund.

Homebuyer’s Stand

The respondent rejected the offer, citing an inordinate delay of almost three years. He stated that he had already purchased another property in Gurugram and was no longer interested in taking possession.

NCDRC’s Verdict

The NCDRC ruled in favor of the homebuyer, holding that:

• Since the builder had delayed possession by three years, the homebuyer could not be forced to accept possession.
• The delay was unjustified, making the builder liable for a refund.
• The terms of the Agreement were one-sided and unfair.
• The builder was directed to refund Rs. 4,48,43,026/- with interest at 10.7% per annum.

Supreme Court’s Observations

The builder challenged the NCDRC order in the Supreme Court, arguing:

• The homebuyer did not terminate the Agreement as per the contract.
• The refund claim was premature as per contractual terms.
• The builder should not have to pay 10.7% interest since the contract stipulated 6-9% interest.

The Supreme Court rejected these arguments and upheld the homebuyer’s right to seek a refund. It noted that:

• “A homebuyer cannot be made to wait indefinitely for possession.”
• The agreement’s terms were one-sided and favored the builder excessively.
• As per Fortune Infrastructure & Anr. v. Trevor D’Lima & Ors., a buyer is entitled to a refund if possession is delayed indefinitely.
• The builder failed in its contractual obligation to deliver possession on time.

Final Judgment

The Supreme Court ruled:

“The clauses relied upon by the builder are wholly one-sided, unfair, and unreasonable. The builder cannot compel the buyer to accept possession after an inordinate delay.”

It directed Pioneer Urban Land & Infrastructure Ltd. to:

• Refund Rs. 4,48,43,026/- to the homebuyer.
• Pay interest at 10.7% per annum.
• Complete the refund within three months.

Impact of the Judgment

This ruling has significant implications:

• Protects Homebuyers: Ensures that buyers are not forced to accept delayed possession.
• Regulates Builder Conduct: Reinforces that builders must adhere to contractual timelines.
• Establishes Precedent for Refunds: Homebuyers can seek refunds if possession is delayed unreasonably.
• Limits One-Sided Agreements: Builders cannot impose unfair contractual terms on homebuyers.

Conclusion

The Supreme Court’s ruling in Pioneer Urban Land & Infrastructure Ltd. vs. Govindan Raghavan sets a crucial precedent in protecting homebuyers. By upholding their right to refunds in case of delayed possession, the judgment ensures greater accountability in the real estate sector.

Petitioner Name: Pioneer Urban Land & Infrastructure Ltd..
Respondent Name: Govindan Raghavan.
Judgment By: Justice Uday Umesh Lalit, Justice Indu Malhotra.
Place Of Incident: Gurugram, Haryana.
Judgment Date: 02-04-2019.

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