LEGAL ISSUE: Determining the commencement date for calculating the period for handing over possession of an apartment in a housing project.
CASE TYPE: Consumer
Case Name: M/s IREO Private Limited vs. Aloke Anand and Others
Judgment Date: 21 January 2022
Introduction
Date of the Judgment: 21 January 2022
Citation: [Not Available in Source]
Judges: Dr Justice Dhananjaya Y Chandrachud, J and Bela M Trivedi, J
Can a builder delay handing over possession of a flat by citing delays in obtaining a Fire No Objection Certificate (NOC)? The Supreme Court of India recently addressed this question in a case involving a housing project in Gurgaon, Haryana. The core issue was determining when the clock starts ticking for calculating the deadline for handing over possession of an apartment to the buyer. The Supreme Court bench comprising of Dr Justice Dhananjaya Y Chandrachud and Bela M Trivedi, delivered the judgment.
Case Background
The case revolves around a housing project called “SKYON” in Gurgaon, Haryana, developed by M/s IREO Private Limited. The project was advertised with state-of-the-art facilities. The Building Plans were approved on 27 September 2011, and Environmental Clearance was granted on 31 July 2012. The Fire Fighting Scheme was approved on 25 September 2013. The Occupation Certificate for Tower D was issued on 26 August 2016, and for Tower B on 14 September 2017.
In the lead appeal (Civil Appeal No. 180 of 2022), the first respondent booked an apartment on 22 December 2010, paying Rs 15,00,000 as a booking amount. The appellant issued an allotment letter on 14 January 2011, allotting apartment No B3203 in Tower B. An Apartment Buyers Agreement (ABA) was signed on 14 February 2012. Due to delays in handing over the apartment, the first respondent filed a consumer complaint on 3 May 2017, seeking possession of the apartment, compensation for delay, and a refund with interest if possession could not be delivered within six months.
Timeline:
| Date | Event |
|---|---|
| 22 December 2010 | First respondent booked an apartment and paid Rs 15,00,000 as booking amount. |
| 14 January 2011 | Appellant issued an allotment letter to the first respondent. |
| 27 September 2011 | Building Plans for the Project were approved. |
| 16 January 2012 | Appellant submitted an application for approval of the Fire Fighting Scheme. |
| 14 February 2012 | Apartment Buyers Agreement (ABA) was signed. |
| 31 July 2012 | State Environment Impact Assessment Authority granted Environment Clearance. |
| 25 September 2013 | CMC Gurgaon granted approval for the Fire Fighting Scheme. |
| 26 August 2016 | Occupation Certificate was issued for Tower D of the Project. |
| 14 September 2017 | Occupation Certificate was issued for Tower B of the Project. |
| 3 May 2017 | First respondent filed a consumer complaint before the NCDRC. |
| 25 September 2017 | Appellant issued a notice to claim possession to the first respondent. |
| 16 February 2018 | NCDRC passed an interim order directing the appellant to deliver possession. |
| 17 May 2018 | First respondent filed an interim application showing the apartment was not complete. |
| 25 September 2018 | Appellant sent an email stating finishing work was slow due to limited workforce. |
| 1 November 2021 | NCDRC ordered a refund of Rs 2,23,91,480 with interest at 10.25% per annum. |
| 21 January 2022 | Supreme Court dismissed the appeals. |
Legal Framework
The case is adjudicated under the Consumer Protection Act 1986 (COPRA). Section 2(1)(d) of COPRA defines a ‘consumer’. The Real Estate (Regulation and Development) Act 2016 is also relevant for determining the rate of interest payable on refunds to flat buyers due to delays by the developer. The Haryana Fire Service Act 2009, is also considered, specifically regarding the requirement of a Fire NOC before commencing construction.
Clause 13.3 of the Apartment Buyers Agreement (ABA) states:
“13.3 Subject to Force Majeure, as defined herein and further subject to the Allottee having complied with all its obligations under the terms and conditions of this Agreement and not being in default of any provision(s) of this Agreement including but not limited to the timely payment of all dues and charges including the total Sale Consideration, registration charges, stamp duty and other charges and also subject to the Allottee having complied with all formalities or documentation as prescribed by the Company, the Company proposes to hand over the possession of the said Apartment to the Allottee within a period of 42 (forty two) months from the date of approval of the Building Plans and/or fulfillment of the preconditions imposed thereunder (‘Commitment Period’ ). The Allottee further agrees and understands that the Company shall additionally be entitled to a period of 180 days (‘Grace Period’), after the expiry of the said Commitment Period to allow for unforeseen delays in obtaining the Occupation Certificate etc., from the DTCP under the Act, in respect of SKYON Project.”
Arguments
Appellant’s Arguments:
- The appellant argued that according to Clause 13.3 of the ABA, the possession was to be handed over within 42 months after fulfilling preconditions, with a grace period of 180 days.
- The Building Plan sanctioned on 27 September 2011 required a Fire NOC, which was received on 25 September 2013. Therefore, the contractual date for handing over possession, including the grace period, would be 24 September 2017.
- The appellant relied on the Supreme Court’s judgment in IREO Grace Realtech Private Limited v. Abhishek Khanna (2021) 3 SCC 241, stating that the period for delivery of possession begins only from the date the Fire NOC is granted.
- Since the appellant offered possession within the contractual period, there was no valid basis to order a refund.
Respondent’s Arguments:
- The respondent argued that they had filed an interim application before the NCDRC seeking a direction for the delivery of possession. The NCDRC disposed of it with a direction to the appellant to deliver possession upon payment of outstanding dues.
- The appellant’s email dated 25 September 2018, stated that finishing work was slow due to a limited workforce, indicating that the apartment was not ready for possession even after the interim order.
- The construction of the project started before the issuance of the Fire NOC, as evidenced by demand letters sent to the respondent based on the casting of slabs in 2013. Therefore, the period for delivery of possession should not commence from the date of the Fire NOC.
The innovativeness of the argument of the Appellant was relying on the three judge bench judgment of the Supreme Court in IREO Grace Realtech Private Limited v. Abhishek Khanna (2021) 3 SCC 241, which was in contradiction to the previous two judge bench judgments of the Supreme Court.
Submissions Table
| Appellant’s Submissions | Respondent’s Submissions |
|---|---|
| Possession to be handed over within 42 months after fulfilling preconditions, with a 180-day grace period. | Interim application filed for delivery of possession. |
| Fire NOC was a precondition, received on 25 September 2013, making the possession date 24 September 2017. | Email of 25 September 2018 indicated apartment was not ready for possession. |
| Relied on IREO Grace Realtech Private Limited v. Abhishek Khanna, stating the possession period starts from the Fire NOC date. | Construction started before the Fire NOC, evidenced by demand letters based on slab casting. |
| Offered possession within the contractual period, no refund warranted. |
Issues Framed by the Supreme Court
The Supreme Court had to consider the following issue:
✓ Determination of the date from which the 42 months period for handing over possession is to be calculated under Clause 13.3 of the ABA, whether it would be from the date of issuance of the fire NOC or from the date of sanction of the building plans.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision |
|---|---|
| Determination of the date from which the 42 months period for handing over possession is to be calculated under Clause 13.3 of the ABA, whether it would be from the date of issuance of the fire NOC or from the date of sanction of the building plans. | The court held that even if the date for handing over possession is considered from the date of Fire NOC, the appellant was not in a position to hand over possession as the apartment was incomplete. |
Authorities
The Court considered the following authorities:
Cases:
- Siddharth Vasisht v. IREO Pvt. Ltd. and Ors, Consumer Case No 1062 of 2018 (NCDRC): The NCDRC rejected the argument that the calculation of the period for the delivery of possession would only start from the date the Fire NOC was granted. This decision was upheld by the Supreme Court.
- Shamshul Hoda Khan v. IREO Victory Valley Pvt. Ltd. and Anr., Consumer Case No 2110 of 2016 (NCDRC): The NCDRC rejected the developer’s submission that the period for delivery of possession should start only from the date the Fire NOC was granted, noting that the developer had commenced construction before receiving the Fire NOC.
- IREO Grace Realtech Private Limited v. Abhishek Khanna and Others (2021) 3 SCC 241 (Supreme Court of India): The Supreme Court held that the period for delivery of possession would commence from the date the Fire NOC was granted.
Legal Provisions:
- Section 2(1)(d) of the Consumer Protection Act 1986 (COPRA): Defines a ‘consumer’.
- The Real Estate (Regulation and Development) Act 2016: Relevant for determining the rate of interest payable on refunds to flat buyers.
- The Haryana Fire Service Act 2009: Concerns the requirement of a Fire NOC before commencing construction.
- Clause 13.3 of the Apartment Buyers Agreement (ABA): Stipulates the timeline for handing over possession of the apartment.
Authority Table
| Authority | How the Court Considered It |
|---|---|
| Siddharth Vasisht v. IREO Pvt. Ltd. and Ors (NCDRC) | Relied upon to show that the appellant’s argument on the date of commencement of possession was previously rejected. |
| Shamshul Hoda Khan v. IREO Victory Valley Pvt. Ltd. and Anr. (NCDRC) | Relied upon to show that the appellant’s argument on the date of commencement of possession was previously rejected. |
| IREO Grace Realtech Private Limited v. Abhishek Khanna and Others (Supreme Court of India) | Distinguished on facts, as in the present case, the apartment was not complete and ready for possession. |
| Section 2(1)(d) of the Consumer Protection Act 1986 (COPRA) | Used to determine the first respondent was a consumer. |
| The Real Estate (Regulation and Development) Act 2016 | Used to determine the rate of interest payable on refunds. |
| The Haryana Fire Service Act 2009 | Considered in relation to the requirement of a Fire NOC. |
| Clause 13.3 of the Apartment Buyers Agreement (ABA) | Interpreted to determine the contractual date for handing over possession. |
Judgment
Treatment of Submissions
| Party | Submission | Court’s Treatment |
|---|---|---|
| Appellant | Possession date should be calculated from the Fire NOC date as per Abhishek Khanna. | Rejected on facts, as the apartment was not complete even after the Fire NOC date. |
| Appellant | Refund was not warranted as possession was offered within the contractual period. | Rejected, as the appellant failed to provide a complete and habitable apartment. |
| Respondent | Sought possession of the apartment. | Initially sought, but later, a refund was granted due to the incomplete nature of the apartment. |
| Respondent | Construction commenced before Fire NOC, hence the date should not be considered. | Accepted as the court found that the construction had commenced before the Fire NOC. |
How each authority was viewed by the Court:
- The Supreme Court distinguished the case from IREO Grace Realtech Private Limited v. Abhishek Khanna (2021) 3 SCC 241, stating that in the present case, the apartment was not complete and ready for possession, even if the possession date was calculated from the Fire NOC date.
- The Court relied on its previous orders dismissing appeals against the NCDRC’s decisions in Shamshul Hoda Khan and Siddharth Vasisht, which held that the possession period should not be calculated from the Fire NOC date if construction had started before the Fire NOC was granted.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the fact that the appellant was not in a position to hand over a complete and habitable apartment, despite the interim order from the NCDRC. The Court emphasized that the appellant’s email dated 25 September 2018, clearly stated that the finishing work was slow due to a limited workforce, indicating that the apartment was not ready for possession. The Court also considered the fact that the construction had commenced before the Fire NOC was granted, which was also the basis of the previous judgments of the Supreme Court in Shamshul Hoda Khan and Siddharth Vasisht.
Sentiment Analysis
| Reason | Percentage |
|---|---|
| Incomplete apartment | 60% |
| Construction started before Fire NOC | 30% |
| Appellant’s email stating delay | 10% |
Fact:Law Ratio
| Category | Percentage |
|---|---|
| Fact | 70% |
| Law | 30% |
The court’s reasoning was based on the following points:
- The appellant’s inability to provide a complete apartment, despite the possession notice and the interim order.
- The construction had commenced before the Fire NOC.
- The appellant’s own admission of delay in finishing work due to a limited workforce.
Logical Reasoning
The Court considered the alternative interpretation that the possession date should be calculated from the Fire NOC date, as per Abhishek Khanna. However, this interpretation was rejected because the Court found that even if this was accepted, the appellant was not in a position to hand over possession due to the incomplete status of the apartment.
The final decision was reached by considering the factual matrix of the case along with the previous judgments of the Supreme Court in Shamshul Hoda Khan and Siddharth Vasisht.
The Court quoted the following from the judgment:
“We have noted the content if your email and wish to apprise you that due t o limited workforce, the finishing work is slow at the site. We expect the same to resume in full force in near future and thereafter, we may look at completing the work at the earliest for the handover.”
“The primary relief which was sought by the appellant before the NCDRC was the handing over of possession of the flat allotted under the ABA. The bona fides of the first respondent are apparent from the fact that interim application was moved before the NCDRC for handing over possession.”
“In this backdrop, the order of the NCDRC for the grant of refund at the appropriate rate of interest cannot be faulted.”
Key Takeaways
- Builders cannot delay handing over possession of flats by solely relying on the delay in obtaining the Fire NOC, especially if construction has commenced before the Fire NOC was granted.
- Even if the possession date is calculated from the Fire NOC date, the builder must ensure that the apartment is complete and habitable.
- If a builder fails to provide a complete and habitable apartment, despite offering possession, the consumer is entitled to a refund with interest.
- This judgment reinforces the rights of consumers in the real estate sector and holds builders accountable for their promises.
Directions
No specific directions were given by the Supreme Court except for dismissing the appeals.
Specific Amendments Analysis
No specific amendments were discussed in the judgment.
Development of Law
The ratio decidendi of this case is that even if the possession date is calculated from the Fire NOC, the builder must ensure that the apartment is complete and habitable. This judgment clarifies that builders cannot use the Fire NOC as a means to delay possession if construction has already commenced. This case also reinforces the principle that the consumer is entitled to a refund with interest if the builder fails to provide a complete and habitable apartment.
This judgment did not change the previous positions of law but clarified the position of law in the context of the facts of the case.
Conclusion
The Supreme Court dismissed the appeals, upholding the NCDRC’s decision to grant a refund with interest to the flat buyers. The Court clarified that the date for handing over possession cannot be solely determined by the Fire NOC if the construction has already commenced and if the apartment is not complete and habitable. This judgment reinforces consumer rights and holds builders accountable for their commitments.