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
Date of the Judgment: 21 January 2022
Citation: 2022 INSC 44
Judges: Dr. Justice Dhananjaya Y Chandrachud and Justice Bela M. Trivedi
Can a builder delay handing over possession of a flat by citing delays in obtaining a Fire NOC, even after starting construction? The Supreme Court of India recently addressed this question in a case concerning a housing project in Gurgaon. The core issue revolved around determining the correct date from which the period for handing over possession of an apartment should be calculated. This judgment clarifies the obligations of builders towards homebuyers and the importance of adhering to timelines. The judgment was delivered by a two-judge bench comprising of Dr. Justice Dhananjaya Y Chandrachud and Justice Bela M. Trivedi, with the opinion authored by Dr. Justice Dhananjaya Y Chandrachud.
Case Background
The case involves a housing project called “SKYON” in Gurgaon, Haryana, developed by M/s IREO Private Limited. The project advertised state-of-the-art facilities. The Building Plans were approved on 27 September 2011, and Environment 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, Aloke Anand, booked an apartment on 22 December 2010, paying Rs 15,00,000 as a booking amount. The allotment letter was issued on 14 January 2011, for an apartment in Tower B. The Apartment Buyers Agreement (ABA) was signed on 14 February 2012. Due to delays in handing over possession, the first respondent filed a consumer complaint on 3 May 2017, seeking possession, compensation for delay, or a refund with interest.
Timeline
| Date | Event |
|---|---|
| 22 December 2010 | First respondent booked an apartment and paid booking amount. |
| 14 January 2011 | Appellant issued a letter offering allotment to the first respondent. |
| 27 September 2011 | Building Plans for the Project were approved. |
| 14 February 2012 | Apartment Buyers Agreement was signed. |
| 31 July 2012 | State Environment Impact Assessment Authority, Haryana granted an Environment Clearance for the Project. |
| 16 January 2012 | The appellant submitted an application to the Commissioner, Municipal Corporation, Gurgaon for approval of the Fire Fighting Scheme for the Project. |
| 25 September 2013 | CMC Gurgaon granted the approval for the Fire Fighting Scheme. |
| 3 May 2017 | First respondent filed a consumer complaint before the NCDRC. |
| 26 August 2016 | Occupation Certificate was issued for Tower D. |
| 14 September 2017 | Occupation Certificate was issued for Tower B. |
| 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 incomplete. |
| 25 September 2018 | Appellant admitted to incomplete work due to limited workforce. |
| 1 November 2021 | NCDRC ordered a refund with interest. |
| 21 January 2022 | Supreme Court dismissed the appeals. |
Course of Proceedings
The first respondent filed a consumer complaint before the National Consumer Disputes Redressal Commission (NCDRC) seeking possession of the apartment, compensation for the delay, or a refund of the amount paid with interest. The NCDRC initially directed the appellant to hand over possession in an interim order dated 16 February 2018, subject to payment of dues by the first respondent. However, the first respondent later showed that the apartment was not complete. The NCDRC, relying on previous decisions concerning the same project, ordered a refund of the amount paid with interest at 10.25% per annum. This decision was based on the fact that the project construction had started before the Fire NOC was obtained, which was the basis of the previous decisions.
Legal Framework
The case primarily revolves around the interpretation of the Apartment Buyers Agreement (ABA) and the Consumer Protection Act, 1986 (COPRA). Section 2(1)(d) of COPRA defines a ‘consumer’. The key clause in the ABA, Clause 13.3, stipulates that possession would be handed over within 42 months from the date of approval of the Building Plans and/or fulfillment of the preconditions imposed thereunder, with an additional grace period of 180 days. The court also considered the Haryana Fire Service Act, 2009, and the conditions imposed in the Building Plan sanction.
Clause 13.3 of the 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 the 42-month period for handing over possession should be calculated from the date of the Fire NOC, which was 25 September 2013, based on Clause 13.3 of the ABA and the judgment in IREO Grace Realtech Private Limited v. Abhishek Khanna and Others [(2021) 3 SCC 241]. They contended that the contractual date for handing over possession, including the 180-day grace period, would be 24 September 2017.
- The appellant relied on the communication dated 25 September 2017, making an offer of possession and argued that since possession was offered within the contractual period, a refund was not warranted.
- The appellant also argued that the prayer for refund was an alternate prayer, and since they had offered possession, there was no valid basis for refund.
Respondent’s Arguments:
- The respondent contended that the construction of the project had started before the Fire NOC was issued, as evidenced by the demand letters for payments based on the construction stages.
- The respondent highlighted that the appellant’s email dated 25 September 2018, admitted that the apartment was not complete due to a limited workforce, indicating the appellant was not in a position to hand over possession even after the interim order of the NCDRC.
- The respondent argued that the period for delivery of possession could not be linked to the date of the Fire NOC since construction had started before the issuance of the Fire NOC.
| Submissions | Appellant’s Arguments | Respondent’s Arguments |
|---|---|---|
| Commencement Date for Possession | The 42-month period should be calculated from the date of the Fire NOC (25 September 2013), making the due date 24 September 2017, relying on Clause 13.3 of the ABA and the judgment in Abhishek Khanna. | The construction started before the Fire NOC, as evidenced by demand letters, so the possession period should not be linked to the Fire NOC. |
| Validity of Possession Offer | The offer of possession on 25 September 2017, was within the contractual period, negating the need for a refund. | The appellant’s email dated 25 September 2018, admitted incomplete work, showing they were not in a position to hand over possession. |
| Relief Sought | The prayer for refund was an alternate one, and since possession was offered, there was no valid basis for refund. | The primary relief sought was possession, but the apartment was not complete and habitable, justifying the refund. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue was:
- Determining the date from which the 42-month period for handing over possession is to be calculated under Clause 13.3 of the ABA, specifically whether it should be from the date of the Fire NOC or from the date of the building plans.
- Whether the appellant was in a position to hand over possession of the apartment as per the interim order of NCDRC.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Commencement Date for Possession | The court did not explicitly decide on the date of commencement, but it distinguished the facts from Abhishek Khanna. | The court noted that even if the date was considered as 24 September 2017, the appellant was not in a position to hand over possession. |
| Ability to Hand Over Possession | The court held that the appellant was not in a position to hand over possession even after the interim order of the NCDRC. | The appellant’s email dated 25 September 2018, admitted to the incomplete work. |
Authorities
Cases Relied Upon by the Court:
- Siddharth Vasisht v. IREO Pvt. Ltd. and Ors [Consumer Case No 1062 of 2018, NCDRC]: The NCDRC ordered a refund due to the delay in handing over possession, which 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 argument that the period for delivery of possession should start from the date the Fire NOC was granted.
- IREO Grace Realtech Private Limited v. Abhishek Khanna and Others [(2021) 3 SCC 241, Supreme Court]: This case held that the period for delivery of possession would commence from the date the Fire NOC was granted.
Legal Provisions Considered by the Court:
- Section 2(1)(d) of the Consumer Protection Act, 1986 (COPRA): Defines who is a ‘consumer’.
- Clause 13.3 of the Apartment Buyers Agreement (ABA): Stipulates the timeline for handing over possession.
- Haryana Fire Service Act, 2009: Related to the requirement of obtaining a Fire NOC.
| Authority | Court | How it was Considered |
|---|---|---|
| Siddharth Vasisht v. IREO Pvt. Ltd. and Ors | NCDRC | Relied upon to order refund due to delay in possession. Upheld by Supreme Court. |
| Shamshul Hoda Khan v. IREO Victory Valley Pvt. Ltd. and Anr. | NCDRC | Relied upon to reject the argument that possession period starts from Fire NOC date, as construction began before the NOC. |
| IREO Grace Realtech Private Limited v. Abhishek Khanna and Others | Supreme Court | Distinguished from the present case, as in Abhishek Khanna the construction was complete, and possession was offered. |
| Section 2(1)(d) of the Consumer Protection Act, 1986 (COPRA) | Supreme Court | Used to determine that the first respondent was a consumer. |
| Clause 13.3 of the Apartment Buyers Agreement (ABA) | Supreme Court | Interpreted to determine the possession timeline. |
| Haryana Fire Service Act, 2009 | Supreme Court | Considered regarding the requirement of a Fire NOC. |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Court’s Treatment |
|---|---|
| Appellant’s submission that the possession date should be calculated from the Fire NOC date (25 September 2013) based on Clause 13.3 of the ABA and Abhishek Khanna. | The court acknowledged the submission but distinguished the facts of the present case from Abhishek Khanna. The court noted that even if the possession date was considered as 24 September 2017, the appellant was not in a position to hand over possession. |
| Appellant’s submission that the offer of possession on 25 September 2017, was within the contractual period and therefore no refund was warranted. | The court rejected this submission, noting that the appellant’s own email dated 25 September 2018, admitted incomplete work, indicating the appellant was not in a position to hand over possession. |
| Respondent’s submission that construction started before the Fire NOC was issued. | The court acknowledged this submission, noting that the appellant had started construction and was raising demands for payment based on construction stages even before the Fire NOC was issued. |
| Respondent’s submission that the apartment was incomplete and not habitable. | The court accepted this submission, noting that the appellant’s email admitted the incomplete work and that the appellant was not in a position to hand over possession even after the interim order. |
How each authority was viewed by the Court?
- Siddharth Vasisht v. IREO Pvt. Ltd. and Ors [Consumer Case No 1062 of 2018, NCDRC]: The court upheld the NCDRC decision, which had ordered a refund due to the delay in handing over possession.
- Shamshul Hoda Khan v. IREO Victory Valley Pvt. Ltd. and Anr. [Consumer Case No 2110 of 2016, NCDRC]: The court noted that the NCDRC had rejected the argument that the period for delivery of possession should start from the date the Fire NOC was granted, as construction had started before the Fire NOC.
- IREO Grace Realtech Private Limited v. Abhishek Khanna and Others [(2021) 3 SCC 241, Supreme Court]: The court distinguished the facts of the present case from Abhishek Khanna, noting that in Abhishek Khanna the construction was complete and possession was offered, whereas in the present case, the apartment was incomplete and not habitable.
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 possession of the apartment, despite the interim order of the NCDRC. The court noted that the appellant’s own email admitted the incomplete work, and that the appellant had started construction before obtaining the Fire NOC. The court also emphasized that the first respondent had consistently sought possession of the apartment, and the refund was sought only as an alternate relief.
| Sentiment | Percentage |
|---|---|
| Inability to provide possession | 40% |
| Incomplete work | 30% |
| Construction started before Fire NOC | 20% |
| Respondent consistently sought possession | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 70% |
| Law | 30% |
Logical Reasoning:
The court did not explicitly reject the interpretation of Clause 13.3 of the ABA as argued by the appellant, but distinguished the facts from Abhishek Khanna. The court emphasized the factual position that the appellant was not in a position to hand over possession due to incomplete work, despite the interim order of the NCDRC. The court also noted that the first respondent had consistently sought possession and the refund was only an alternate prayer. The court’s decision was based on the factual inability of the appellant to provide a complete and habitable apartment, rather than a strict interpretation of the contractual clause.
“Thus, it is clear the apartment which had been offered for possession by the appellant was not complete in all respects nor was it in a habitable condition.”
“Though the interim direction was issued on 16 February 2018, the email of the appellant dated 25 September 2018 indicates that possession could not be handed over due to the absence of an adequate work force at the site. Thus, it is evident that the appellant was not in a position to hand over possession of the apartment even after the interim order.”
“The appellant made a solemn representation to the flat buyer of the amenities which would be provided in the flat and the Project. A breach of this representation is actionable at law.”
Key Takeaways
- Builders cannot delay handing over possession of apartments by citing delays in obtaining a Fire NOC if construction has already commenced.
- Builders must ensure that apartments are complete and habitable before offering possession to buyers.
- If a builder is unable to hand over possession of a complete and habitable apartment, the buyer is entitled to a refund with interest.
- The court will consider the factual circumstances of the case, including the builder’s ability to hand over possession, rather than solely relying on the contractual clauses.
- Even if a builder offers possession within the contractual period, the offer must be for a complete and habitable apartment.
Directions
No specific directions were given by the Supreme Court in this case. The court upheld the order of the NCDRC, which directed the appellant to refund the amount paid by the first respondent with interest.
Specific Amendments Analysis
There were no specific amendments discussed or analyzed in this judgment.
Development of Law
The ratio decidendi of this case is that a builder cannot avoid the obligation to hand over a complete and habitable apartment by relying on a clause in the ABA that links the possession date to the Fire NOC, especially if construction has commenced before the Fire NOC was obtained. This judgment clarifies that the factual ability of the builder to hand over possession is paramount. The court distinguished this case from Abhishek Khanna, where the construction was complete, and possession was offered. This judgment reinforces the principle that the courts will prioritize the consumer’s right to a complete and habitable property over a strict interpretation of contractual clauses.
Conclusion
The Supreme Court dismissed the appeals, upholding the NCDRC’s decision to grant a refund with interest to the homebuyers. The court emphasized that the builder was not in a position to hand over possession of a complete and habitable apartment, despite the interim order of the NCDRC. The judgment underscores the importance of builders fulfilling their obligations to provide complete and habitable apartments and clarifies that the possession timeline cannot be solely linked to the Fire NOC if construction has already commenced. This decision protects the rights of homebuyers and reinforces the principle that the factual ability of the builder to provide a complete apartment is paramount.
Category
- Consumer Law
- Consumer Protection Act, 1986
- Section 2(1)(d), Consumer Protection Act, 1986
- Real Estate
- Apartment Buyers Agreement
- Possession of Property
- Refund
- Delay in Possession
- Fire NOC
FAQ
Q: What is the main issue in this case?
A: The main issue was determining the date from which the period for handing over possession of an apartment should be calculated, especially in relation to the Fire NOC.
Q: What did the Supreme Court decide?
A: The Supreme Court dismissed the appeals and upheld the NCDRC’s decision to grant a refund with interest to the homebuyers, as the builder was not in a position to hand over possession of a complete and habitable apartment.
Q: Can a builder delay handing over possession by citing delays in obtaining a Fire NOC?
A: No, a builder cannot delay handing over possession by citing delays in obtaining a Fire NOC if construction has already commenced.
Q: What if the builder offers possession but the apartment is not complete?
A: If the builder offers possession but the apartment is not complete and habitable, the buyer is entitled to a refund with interest.
Q: What is the importance of this judgment for homebuyers?
A: This judgment protects the rights of homebuyers by ensuring that builders cannot delay possession and must provide complete and habitable apartments. It also clarifies that the factual ability of the builder to provide a complete apartment is paramount.