LEGAL ISSUE: Whether a consumer is entitled to a refund with interest for a delayed real estate project.
CASE TYPE: Consumer Law
Case Name: Marvel Omega Builders Pvt. Ltd. and Anr. vs. Shrihari Gokhale and Anr.
[Judgment Date]: July 30, 2019
Date of the Judgment: July 30, 2019
Citation: Civil Appeal Nos. 3207-3208 of 2019
Judges: Uday Umesh Lalit, J. and Vineet Saran, J.
Can a homebuyer demand a refund with interest if a builder fails to deliver a property on time? The Supreme Court of India addressed this question in a recent case involving a delayed villa project. The court ruled in favor of the homebuyers, ordering a full refund with interest due to the builder’s significant delay. This judgment emphasizes the rights of consumers in real estate transactions and the obligations of builders to adhere to agreed timelines. The bench comprised of Justice Uday Umesh Lalit and Justice Vineet Saran.
Case Background
The case involves a dispute between Marvel Omega Builders Pvt. Ltd. (the builder) and Shrihari Gokhale and Anr. (the homebuyers). The homebuyers had booked a residential villa in a project called ‘Marvel Selva Ridge Estate’. The total cost of the villa, including parking and an open terrace, was ₹8,31,04,425. An agreement was signed on March 22, 2013, which stipulated that the builder would hand over possession of the villa by December 31, 2014, provided that all payments were made on time.
The homebuyers paid ₹8.14 crores between July 2012 and November 2013. However, the builder failed to complete the villa by the agreed date and did not offer a refund. The builder claimed that the homebuyers had requested additional work costing ₹2,67,000 and that the Pune Municipal Corporation had issued Stop Work Notices on July 23, 2014, and November 15, 2014.
Due to the delay, the homebuyers filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC), seeking a refund of the principal amount with interest, along with litigation costs.
Timeline:
| Date | Event |
|---|---|
| July 2012 – November 2013 | Homebuyers paid ₹8.14 crores to the builder. |
| 22 March 2013 | Agreement between the builder and homebuyers was signed. |
| 31 December 2014 | Original deadline for handing over possession of the villa. |
| April 2014 | Builder claimed homebuyers requested extra work. |
| 23 July 2014 and 15 November 2014 | Pune Municipal Corporation issued Stop Work Notices. |
| 28 May 2014 | Revised Construction Schedule sent by the builder, promising possession by October 2014 |
| 2016 | Homebuyers filed a complaint with the NCDRC. |
| 31 May 2018 | NCDRC ordered a refund with interest. |
| 05 September 2018 | NCDRC rejected the builder’s request for an extension. |
| 3 December 2018 | Builder claimed the villa was ready and completion certificate would be obtained in 21 days. |
| 30 July 2019 | Supreme Court dismissed the builder’s appeal and upheld the NCDRC order. |
Course of Proceedings
The homebuyers filed a complaint with the National Consumer Disputes Redressal Commission (NCDRC) seeking a refund of ₹13,24,07,052, which included the principal amount of ₹8.14 crores and compensation in the form of interest at 18% per annum. They also sought litigation costs.
The NCDRC ruled in favor of the homebuyers, noting that the additional work requested by the homebuyers would only have taken three months to complete. The NCDRC also stated that the Stop Work Notices issued by the Pune Municipal Corporation could not be attributed to the homebuyers. The NCDRC ordered the builder to refund the entire principal amount of ₹8.14 crores with 10% interest per annum from the date of each payment until the date of refund, along with ₹25,000 as litigation costs.
The builder then filed a miscellaneous application seeking an extension of time to comply with the NCDRC order, which was rejected. The builder then appealed to the Supreme Court against the NCDRC order.
Legal Framework
The case was adjudicated under the Consumer Protection Act, 1986. Section 23 of the Consumer Protection Act, 1986, allows for appeals to the Supreme Court against orders of the National Consumer Disputes Redressal Commission.
The agreement between the parties included clauses 5(a) and (b), which stated:
“5. The Promoter declares that:
a) The said Unit shall be constructed in accordance with the plans and specifications approved and sanctioned by the Municipal Corporation of Pune.
b) Possession of the said Unit agreed to be purchased by the Purchaser/s shall be handed over to the Purchaser/s by the Promoter on or before 31.12.2014 provided that the Purchaser/s shall have made payment of the instalments towards the purchase price of the said Unit and other charges/ deposit/s as mentioned in Clauses 20 to 23 hereinbelow as agreed upon without delay at the times stipulated for payment therefor.”
These clauses obligated the builder to construct the villa as per the approved plans and hand over possession by December 31, 2014, provided that the homebuyers made all payments on time.
Arguments
The Appellants (builder) argued that the delay in handing over possession was due to the additional work requested by the Respondents (homebuyers) and the Stop Work Notices issued by the Pune Municipal Corporation. They also contended that the villa was now ready for occupation and the Completion Certificate would be obtained soon.
The Respondents (homebuyers) argued that the additional work requested was minor and would not have caused a significant delay. They also contended that the Stop Work Notices were not their responsibility. They highlighted that the builder had failed to deliver the villa even after a considerable delay. They sought a refund of the amount paid with interest.
| Main Submission | Sub-Submissions (Appellants/Builder) | Sub-Submissions (Respondents/Homebuyers) |
|---|---|---|
| Delay in Handing Over Possession |
|
|
| Current Status of the Villa |
|
|
| Relief Sought |
|
|
The innovativeness of the argument by the Appellants was that they tried to shift the blame for the delay onto the homebuyers and the municipal corporation, while the homebuyers focused on the builder’s failure to meet the agreed-upon deadline and their entitlement to a refund.
Issues Framed by the Supreme Court
The Supreme Court framed the following issues:
- Whether the view taken by the National Consumer Disputes Redressal Commission (NCDRC) was correct.
- Whether the view taken by the NCDRC requires any interference by the Supreme Court.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the view taken by the NCDRC was correct | Affirmed | The court agreed with the NCDRC’s assessment that the builder was deficient in service and the delay was not justified. |
| Whether the view taken by the NCDRC requires any interference by the Supreme Court | No interference required | The court found no reason to interfere with the NCDRC’s order, emphasizing the significant delay and the homebuyers’ right to a refund. |
Authorities
The Supreme Court did not cite any specific case laws or books in this judgment. The primary focus was on the facts of the case and the interpretation of the agreement between the parties, along with the provisions of the Consumer Protection Act, 1986.
| Authority | How it was considered | Court |
|---|---|---|
| Consumer Protection Act, 1986, Section 23 | Basis for the appeal to the Supreme Court | Supreme Court of India |
| Agreement between the parties, Clauses 5(a) and (b) | Interpreted to determine the obligations of the builder | Supreme Court of India |
Judgment
| Submission | How it was treated by the Court |
|---|---|
| Delay caused by additional work requested by homebuyers. | Rejected. The court agreed with the NCDRC that the additional work was minor and would not justify the significant delay. |
| Delay caused by Stop Work Notices issued by Pune Municipal Corporation. | Rejected. The court stated that the homebuyers could not be held responsible for the Stop Work Notices. |
| Villa was ready for occupation and Completion Certificate would be obtained soon. | Rejected. The court noted the significant delay of almost five years and held that the homebuyers could not be forced to accept the villa. |
| Sought extension of time to comply with the NCDRC order. | Rejected. The court upheld the NCDRC’s order for a full refund with interest. |
| Homebuyers sought refund of the principal amount with interest. | Accepted. The court upheld the NCDRC’s order for a full refund with 10% interest per annum. |
The court did not cite any specific authorities in the judgment.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the significant delay in handing over the villa, the builder’s failure to fulfill their obligations, and the homebuyers’ right to seek a refund. The Court emphasized that a delay of almost five years was unacceptable and that the homebuyers could not be forced to accept the villa after such a long wait.
| Sentiment | Percentage |
|---|---|
| Emphasis on the significant delay by the builder | 40% |
| Builder’s failure to fulfill obligations | 30% |
| Homebuyers’ right to seek a refund | 30% |
| Category | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
The court’s reasoning was based on the factual aspects of the case, such as the delay in handing over the villa and the payments made by the homebuyers. The legal aspects included the interpretation of the agreement and the provisions of the Consumer Protection Act, 1986.
The court considered the builder’s arguments about additional work and Stop Work Notices but rejected them, emphasizing that these did not justify the extensive delay. The court also rejected the builder’s claim that the villa was now ready, stating that the delay was too significant for the homebuyers to be compelled to accept the property.
The court’s decision was clear and unequivocal: the builder was deficient in service, and the homebuyers were entitled to a full refund with interest.
The Supreme Court stated:
“The facts on record clearly indicate that as against the total consideration of Rs.8.31 crores, the Respondents had paid Rs.8.14 crores by November, 2013. Though the Appellants had undertaken to complete the villa by 31.12.2014, they failed to discharge the obligation.”
“Even assuming that the villa is now ready for occupation (as asserted by the Appellants), the delay of almost five years is a crucial factor and the bargain cannot now be imposed upon the Respondents.”
“The Respondents were, therefore, justified in seeking refund of the amounts that they had deposited with reasonable interest on said deposited amount. The findings rendered by the Commission cannot therefore be said to be incorrect or unreasonable on any count.”
Key Takeaways
- Builders must adhere to agreed timelines for handing over possession of properties.
- Homebuyers are entitled to a refund with interest if there is a significant delay in handing over possession.
- Minor requests for additional work by homebuyers do not justify significant delays by builders.
- Stop Work Notices issued by municipal authorities are not the responsibility of the homebuyers.
Directions
The Supreme Court directed that the residential villa in question shall not be sold or have any third party rights created in respect of it by the builder until the decree in favor of the homebuyers is completely satisfied. The villa was placed under attachment and would be subject to such orders as may be required in connection with the execution of the NCDRC order.
Development of Law
The ratio decidendi of this case is that a significant delay in handing over possession of a property entitles the homebuyer to a full refund with interest. This judgment reinforces the rights of consumers in real estate transactions and holds builders accountable for their obligations. This case does not change the previous position of law but reinforces the existing consumer rights.
Conclusion
The Supreme Court dismissed the appeals filed by Marvel Omega Builders, upholding the NCDRC’s order to refund ₹8.14 crores with 10% interest per annum to Shrihari Gokhale and Anr. The court emphasized the significant delay in handing over possession of the villa and the builder’s failure to fulfill their obligations. This judgment reinforces the rights of homebuyers and sets a precedent for holding builders accountable for delays in real estate projects.