Consumer Protection and Real Estate: Supreme Court Partially Modifies Compensation in Builder-Buyer Dispute

The case of M/S Fortune Infrastructure (Now Known as M/S Hicon Infrastructure) & Anr. v. Trevor D’Lima & Ors. revolved around a builder-buyer dispute where homebuyers were denied possession of their purchased flat. The Supreme Court had to determine whether the builder’s failure to deliver the flat amounted to a deficiency in service and, if so, what compensation would be appropriate.

Background of the Case

In 2011, the appellants launched a residential housing project named ‘Hicons Onyx,’ later renamed as ‘Fortune Residency.’ The respondents booked a flat (Flat No. 202, 2nd Floor) in ‘A’ wing, with an area of 828.40 sq. ft., along with a parking space. The total price for the flat was Rs. 1,93,00,000, out of which the respondents paid Rs. 1,87,00,000.

However, the builder failed to deliver the flat. Instead, they transferred the project to another company, M/s Zoy Shelcon Pvt. Ltd., without informing the buyers. Frustrated by the delay and lack of clarity, the respondents approached the National Consumer Disputes Redressal Commission (NCDRC) in 2015.

Claims Made by the Respondents

The respondents sought the following reliefs from NCDRC:

Declaration that the builder engaged in deficiency of service and unfair trade practices.
Execution and registration of the agreement for sale of Flat No. 202.
Completion of construction and delivery of possession.
If the flat was unavailable, an alternate flat of the same size and specifications in the same project or locality.
Compensation of Rs. 5,00,000 for mental agony and inconvenience.
Legal expenses of Rs. 1,00,000.

Decision of the NCDRC

The NCDRC ruled in favor of the respondents and directed the builder to:

Refund Rs. 1,87,00,000 within six weeks.
Pay compensation of Rs. 3,65,46,000 at an interest of 10% per annum from the date of the order.
Pay Rs. 10,000 towards litigation costs.

The builder, dissatisfied with the decision, filed an appeal before the Supreme Court.

Arguments by the Appellants (Builder)

The appellants contended that:

They had transferred the project to another company and were no longer responsible.
The compensation awarded by the NCDRC was excessive and not reflective of market rates.
Real estate prices had declined, and a lower compensation should be awarded.

Arguments by the Respondents (Homebuyers)

The respondents maintained that:

The builder failed to honor their contractual obligation and engaged in a deficiency of service.
They had made substantial payments for the flat and were left without possession.
Market prices should not affect their right to fair compensation for their loss.

Supreme Court’s Judgment

The Supreme Court acknowledged that the builder’s actions constituted a deficiency of service. It cited precedents, including Johnson and Anr. v. Agnew, to reaffirm that damages must place the injured party in the same position as if the contract had been performed. The Court held:

“A person cannot be made to wait indefinitely for the possession of the flats allotted to them. They are entitled to seek the refund of the amount paid by them, along with compensation.”

However, the Supreme Court found the NCDRC’s awarded compensation to be excessive. It noted that real estate rates in the area varied, and the awarded price did not reflect the true market value of a redeveloped property.

Modified Compensation by the Supreme Court

Instead of the NCDRC’s compensation, the Supreme Court ruled:

The builder must refund Rs. 1,87,00,000.
Compensation for market loss was set at Rs. 2,27,20,000.
Compensation for parking space was set at Rs. 20,00,000.
Litigation costs of Rs. 10,000.
The total amount must be paid within six weeks, failing which it would incur interest at 9% per annum.

Key Takeaways from the Judgment

Builders are liable for delays in possession, and homebuyers have the right to seek compensation.
Compensation should be based on actual market conditions, not speculative or inflated claims.
Consumers can approach the NCDRC for relief in cases of builder default.
Transfer of a project to another entity does not absolve the original builder of liability.

Conclusion

This case reaffirms the importance of consumer protection in real estate transactions. While the Supreme Court reduced the compensation awarded by NCDRC, it upheld the principle that homebuyers should not suffer due to a builder’s failure to deliver on their promises. The ruling ensures a balance between fair compensation and reasonable assessment of damages, setting a precedent for future real estate disputes.

Petitioner Name: M/S Fortune Infrastructure (Now Known as M/S Hicon Infrastructure) & Anr.
Respondent Name: Trevor D’Lima & Ors.
Judgment By: Justice N.V. Ramana, Justice S. Abdul Nazeer
Place Of Incident: Bandra, Mumbai
Judgment Date: 12-03-2018

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