Builder's Delay and Homebuyers' Rights: Supreme Court Ruling on Refund and Compensation

The recent Supreme Court judgment in the case of M/S Laureate Buildwell Pvt. Ltd. vs. Charanjeet Singh has brought much-needed clarity on the rights of homebuyers in cases where builders fail to deliver possession of flats on time. The case, which arose from a delay in handing over possession of a residential flat in Noida, dealt with crucial issues related to refunds, interest, and compensation for homebuyers.

The Supreme Court examined the legal rights of a subsequent purchaser who had stepped into the shoes of the original allottee, the extent of the builder’s liability in case of delays, and whether a subsequent purchaser was entitled to interest on refunds.

Background of the Case

The case involved a residential flat in Noida’s Parx Laureate project, which was initially allotted to Ms. Madhabi Venkatraman in 2012. The builder, Laureate Buildwell Pvt. Ltd., had promised possession within 36 months, i.e., by October 2015. However, construction delays forced the original allottee to sell the flat to Charanjeet Singh (the respondent), who entered into an agreement to purchase the flat in February 2016.

Despite assurances from the builder, possession was not handed over, leading Singh to demand a refund. When the builder refused, Singh approached the National Consumer Disputes Redressal Commission (NCDRC), which ordered a refund with interest at the rate of 10% per annum.

Builder’s Arguments

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

That the delay was caused by external factors, including a stay order issued by the National Green Tribunal (NGT) on construction near the Okhla Bird Sanctuary.
That the original allottee and the subsequent purchaser were aware of these delays when they entered into the agreement.
That as a subsequent purchaser, Singh was not entitled to claim interest on the refund, as he had willingly taken over the property despite knowing about the delay.

Homebuyer’s Arguments

On the other hand, Singh contended:

That the builder had repeatedly assured him of possession, which led him to complete the transaction.
That despite his attempts to verify the status of construction, the builder refused to provide access to the site.
That he was entitled to a full refund along with interest, as the builder had failed to honor its commitment.

Supreme Court’s Observations and Judgment

Right to Refund

The Supreme Court upheld Singh’s right to a refund, stating that “a flat purchaser cannot be made to wait indefinitely for possession.” The Court reaffirmed its previous ruling in Kolkata West International City Pvt. Ltd. vs. Devasis Rudra, where it held that builders cannot indefinitely delay possession and must refund homebuyers in such cases.

Right to Interest

A key question before the Court was whether a subsequent purchaser was entitled to interest on the refund. The builder argued that Singh, as a second buyer, was not in the same position as the original allottee and should not be entitled to the same relief.

The Supreme Court disagreed, stating:

“The equities must be molded in such a way that a subsequent purchaser is not treated unfairly. The fact that Singh entered into the transaction later does not mean he should be denied his right to seek a refund with reasonable interest.”

The Court modified the NCDRC order and directed the builder to refund the amount with interest at 9% per annum from the date the builder acquired knowledge of the transfer.

Builders’ Liability in Delayed Projects

The judgment also highlighted the responsibilities of builders in ensuring timely delivery of projects. The Court criticized the builder’s argument that external factors such as the NGT stay order justified the delay, pointing out that the builder had continued to collect payments despite knowing the project was delayed.

Key Takeaways for Homebuyers

Homebuyers, including subsequent purchasers, have the right to seek a refund if possession is delayed beyond a reasonable period.
Builders cannot indefinitely delay construction and continue to demand payments.
Interest on refunds is not limited to original allottees; subsequent purchasers may also be entitled to compensation.
Builders must provide full transparency regarding project delays and cannot use force majeure clauses unfairly.

Conclusion

The Supreme Court’s ruling in Laureate Buildwell Pvt. Ltd. vs. Charanjeet Singh strengthens consumer rights in the real estate sector. By affirming the rights of subsequent purchasers and holding builders accountable for delays, the judgment ensures greater protection for homebuyers against errant developers.

Petitioner Name: M/S Laureate Buildwell Pvt. Ltd..
Respondent Name: Charanjeet Singh.
Judgment By: Justice Uday Umesh Lalit, Justice Hemant Gupta, Justice S. Ravindra Bhat.
Place Of Incident: Noida, India.
Judgment Date: 22-07-2021.

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