Recently, the Supreme Court upheld the power of consumer courts to award interest and enforce delivery obligations against a builder despite restrictive clauses in a flat buyer agreement, holding that prolonged delay in handing over possession amounts to “deficiency in service” under consumer law. The Court made it clear that statutory remedies cannot be diluted by one-sided contractual terms, firmly observing that consumer forums derive authority from legislation, not from private agreements.
Brief Facts:
The dispute arose from a residential housing project in Gurgaon where the respondents had booked flats developed by the appellant-builder. The flat buyer agreements stipulated a fixed timeline for delivery of possession, subject to a grace period. The buyers paid nearly the entire sale consideration within the agreed schedule. However, construction remained incomplete for several years, and the builder failed to secure the mandatory Occupancy Certificate within time. Aggrieved by the inordinate delay, the buyers approached the National Consumer Disputes Redressal Commission seeking possession along with compensation.
The NCDRC directed the builder to complete construction, obtain the Occupancy Certificate, deliver possession within a specified period, and pay interest as compensation for delay along with litigation costs. Challenging these directions, the builder moved the Supreme Court, contending that the Commission had exceeded its jurisdiction and disregarded the compensation clause stipulated in the agreement.
Contentions:
The builder argued that the agreement itself prescribed a specific rate of compensation for delay, which barred the consumer forum from awarding any higher or additional amount. It attributed the delay to circumstances beyond its control, including financial constraints, labour shortages, rising construction costs, and regulatory approvals. The builder further contended that the directions to bear enhanced stamp duty and litigation costs were contrary to the contractual allocation of liabilities. According to the appellant, the compensation awarded lacked a rational nexus with actual loss and effectively resulted in unjust enrichment of the buyers.
Whereas, the buyers countered that they had fulfilled their financial obligations long ago and were subjected to years of uncertainty and hardship. They submitted that the builder not only failed to meet promised timelines but also attempted to offer possession without obtaining the legally required Occupancy Certificate. Emphasizing the imbalance in bargaining power, they argued that the compensation clause was one-sided and could not override statutory protections under consumer law. They also pointed to repeated non-compliance by the builder, forcing them into prolonged litigation.
Observations of the Court:
The Court reaffirmed that housing construction constitutes a “service” within the meaning of consumer protection law, and failure to deliver possession within the committed timeframe squarely falls within “deficiency in service.” The Court emphasized that consumer forums exercise statutory powers and are not constrained by restrictive contractual clauses. It categorically observed that “one-sided clauses limiting compensation cannot restrict the jurisdiction of consumer forums to grant just and reasonable relief.”
Recognizing the inherent imbalance in builder-buyer agreements, the Court noted that such contracts are typically drafted by developers, leaving purchasers with little real negotiating power. The Bench also underscored that offering possession without an Occupancy Certificate is legally untenable and cannot be forced upon buyers. Given the prolonged delay, repeated defaults, and tangible hardship suffered, the award of interest as compensation was found to be justified, proportionate, and legally sound.
The decision of the Court:
Dismissing the builder’s appeals, the Top Court upheld the NCDRC’s directions requiring completion of construction, procurement of the Occupancy Certificate, delivery of lawful possession, and payment of interest and costs; the ruling cements the principle that statutory consumer rights prevail over unfair contractual clauses and that prolonged delay in housing projects constitutes actionable deficiency in service.
Case Title: Parsvnath Developers Ltd And Ors. Vs. Mohit Khirbat And Ors.
Case No.: Civil Appeal No. 5289 OF 2022
Coram: Hon’ble Justice. B.V. Nagarathna, Hon’ble Justice. R. Mahadevan
Advocate for the Petitioner: AOR Rajesh P.,
Advocate for the Respondent: Adv. Parmanand Yadav, AOR Divya Jyoti Singh, Adv. Ankita Singh, Adv. M.L. Lahoty, Adv. Anchit Sripat, Adv. Arvind Kumar, AOR Himanshu Shekhar,
Read Judgment @Latestlaw.com
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