Flat Buyers’ Rights Upheld: Supreme Court Directs Builder to Pay Compensation for Delayed Possession

The case of R.V. Prasannakumaar & Ors. vs. Mantri Castles Pvt. Ltd. & Anr. deals with the rights of homebuyers against real estate developers who fail to deliver possession on time. The Supreme Court addressed whether flat buyers were entitled to compensation beyond the stipulated agreement in cases of inordinate delay by builders.

Background of the Case

The dispute arose between flat buyers and Mantri Castles Pvt. Ltd., a real estate developer. The homebuyers had booked apartments in a project in Bengaluru, with the agreement stating that possession would be handed over by January 31, 2014. However, the builder failed to deliver the flats on time, and the occupation certificate was obtained only on February 10, 2016. Possession letters were issued from May 2016 onward, but several homebuyers did not receive their flats even by 2019.

Due to the delay, homebuyers filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC) under Section 12(1)(c) of the Consumer Protection Act, 1986. The NCDRC ruled in favor of the buyers and awarded compensation. However, both the buyers and the developer appealed against different aspects of the order before the Supreme Court.

NCDRC’s Findings

The NCDRC noted that:

• The possession was supposed to be handed over by January 31, 2014, but was delayed.
• The occupation certificate was obtained only in February 2016, and possession was offered in May 2016.
• The agreement stipulated a compensation of INR 3 per sq. ft. per month for delay, but this was inadequate.
• The NCDRC ordered the builder to pay interest at 6% per annum on deposited amounts from February 1, 2014, to July 31, 2016.
• The developer was directed to complete common amenities within six months, failing which further compensation of INR 1,000 per month per buyer was to be paid.

Petitioner’s Arguments

The homebuyers argued:

• The NCDRC was wrong in awarding interest only till July 31, 2016, as many of them had not received possession even after that.
• The developer deliberately delayed possession and unfairly penalized buyers who filed complaints.
• The compensation clause in the agreement (INR 3 per sq. ft. per month) was insufficient.
• The compensation should continue until actual possession is handed over.

Respondent’s Arguments

The developer, Mantri Castles Pvt. Ltd., contended:

• The agreement clearly mentioned the compensation rate, and the NCDRC should not have increased it.
• The delay in handing over possession was due to unavoidable reasons, including regulatory approvals.
• Most buyers had already received possession, and further compensation was unnecessary.

Supreme Court’s Observations

The Supreme Court considered the interests of both parties and made crucial observations:

“The jurisdiction of the NCDRC to award just compensation under the Consumer Protection Act, 1986 cannot be constrained by the terms of the agreement.”

The Court noted that the compensation of INR 3 per sq. ft. per month was inadequate. It pointed out:

“To take a simple illustration, a flat buyer with an agreement for a flat admeasuring 1000 sq. ft. would receive INR 3,000 per month. In a city like Bangalore, this does not provide just or adequate compensation.”

The Court also found that as many as 43 complainants had not been given possession because they had moved the NCDRC, which was unfair.

Final Judgment

The Supreme Court ruled:

• The compensation of INR 3 per sq. ft. per month was inadequate.
• The homebuyers were entitled to interest at 6% per annum until the date of actual possession.
• The NCDRC’s order confining the award of interest only until July 31, 2016, was modified.
• The builder was directed to complete common amenities within six months.
• The developer must provide possession to remaining buyers immediately.

Conclusion

The Supreme Court’s judgment reinforces the rights of homebuyers and ensures that they are adequately compensated for delays caused by developers. The ruling establishes that compensation clauses in builder-buyer agreements cannot override consumer protection laws. By modifying the NCDRC’s order, the Court has ensured that builders cannot take undue advantage of buyers by delaying possession indefinitely.

Petitioner Name: R.V. Prasannakumaar & Ors..
Respondent Name: Mantri Castles Pvt. Ltd. & Anr..
Judgment By: Justice Dhananjaya Y. Chandrachud, Justice Hemant Gupta.
Place Of Incident: Bangalore, Karnataka.
Judgment Date: 11-02-2019.

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