LEGAL ISSUE: Whether a consumer is entitled to a refund with interest for delayed possession of an apartment despite a delay compensation clause in the Apartment Buyer’s Agreement.
CASE TYPE: Consumer Protection
Case Name: Experion Developers Pvt. Ltd. vs. Sushma Ashok Shiroor
Judgment Date: 7 April 2022
Date of the Judgment: 7 April 2022
Citation: [Not Available in Source]
Judges: Uday Umesh Lalit, J., S. Ravindra Bhat, J., Pamidighantam Sri Narasimha, J.
Can a homebuyer demand a full refund with interest if a builder fails to deliver an apartment on time, even if the agreement has a clause for delay compensation? The Supreme Court of India recently addressed this crucial question, clarifying the rights of consumers in cases of delayed possession. This judgment emphasizes that consumers are not bound by unfair terms in builder-buyer agreements and can seek a full refund with interest for unjustifiable delays. The bench comprised Justices Uday Umesh Lalit, S. Ravindra Bhat, and Pamidighantam Sri Narasimha, with the judgment authored by Justice Pamidighantam Sri Narasimha.
Case Background
The case involves a dispute between Experion Developers Pvt. Ltd. (the Developer) and Sushma Ashok Shiroor (the Consumer). The Consumer booked an apartment in the Developer’s “Windchants” project in Gurgaon, Haryana, for a total cost of ₹2,36,15,726. The Apartment Buyer’s Agreement, dated 26 December 2012, stipulated that possession would be given within 42 months from the date of approval of the building plan, or the date of receipt of environmental clearance, or the date of the agreement, whichever was later. The agreement also included a clause for delay compensation at ₹7.50 per square foot per month if the Developer failed to deliver possession within the agreed timeframe. The Consumer paid ₹2,06,41,379 but did not receive possession of the apartment even by the time of filing the complaint. The Consumer sought a full refund with 24% interest.
Timeline:
| Date | Event |
|---|---|
| 26 December 2012 | Apartment Buyer’s Agreement executed. |
| 26 June 2016 | 42-month period for possession expired (calculated from the date of agreement). |
| 26 December 2016 | End of the 180-day grace period for possession. |
| 6 December 2017 | Developer obtained Occupation Certificate for Phase-I of the project. |
| 23 July 2018 | Developer obtained Occupation Certificate for Phase-II of the project. |
| 24 July 2018 | Notice of possession issued to the Consumer. |
| 19 June 2019 | National Consumer Disputes Redressal Commission (NCDRC) directed refund with 9% interest. |
| 7 April 2022 | Supreme Court modified the NCDRC order, directing interest from the date of deposits. |
Course of Proceedings
The Consumer filed a complaint with the National Consumer Disputes Redressal Commission (NCDRC), seeking a refund of ₹2,06,41,379 with 24% interest, citing the Developer’s failure to deliver possession within the stipulated time. The Developer argued that the Consumer was only entitled to delay compensation as per the agreement, amounting to ₹4,54,052. The Developer claimed to have obtained the Occupation Certificate and issued a notice of possession, arguing the complaint should be dismissed. The NCDRC, relying on the Supreme Court’s decision in Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghavan, ruled in favor of the Consumer, directing a refund of the amount with 9% interest, holding that the agreement was one-sided and unfair.
Legal Framework
The judgment primarily revolves around the interpretation and application of the following legal provisions:
- Consumer Protection Act, 1986: This Act aims to protect the interests of consumers and provides a mechanism for redressal of their grievances. Section 2(g) defines “deficiency” in service, and Section 14 empowers consumer forums to direct refunds and compensation.
- Real Estate (Regulation and Development) Act, 2016 (RERA Act): This Act regulates the real estate sector and aims to protect the interests of homebuyers. Section 18 of the RERA Act provides for remedies such as refund with interest for failure to give possession of the apartment.
The Supreme Court also considered the interplay between these two acts, emphasizing that they are concurrent remedies operating independently and without primacy.
Arguments
Arguments by the Developer:
- The Developer argued that the terms of the Apartment Buyer’s Agreement should govern the relationship between the parties, and the Consumer was only entitled to delay compensation as per Clause 13 of the agreement.
- The Developer contended that the decision in Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghavan was not applicable as that case did not involve a delay compensation clause.
- The Developer submitted that since the Consumer had elected to proceed under the Consumer Protection Act, the provisions of the RERA Act would not apply.
- The Developer argued that the interest granted by the Commission was excessive.
Arguments by the Consumer:
- The Consumer supported the decision of the Commission and relied on the judgment in Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghavan.
- The Consumer argued that the rate of interest granted by the Commission was too low and should be enhanced to 24% p.a.
[TABLE] of Submissions:
| Main Submission | Sub-Submissions by Developer | Sub-Submissions by Consumer |
|---|---|---|
| Applicability of Agreement Terms |
|
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| Relevance of Pioneer Judgment |
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| Applicability of RERA Act |
|
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| Interest Rate |
|
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Issues Framed by the Supreme Court
The Supreme Court framed the following issues for consideration:
- Whether the terms of the Apartment Buyers Agreement amount to an ‘unfair trade practice’ and whether the Commission is justified in not giving effect to the terms of Apartment Buyer’s Agreement as laid down in the Pioneer case?
- Whether the Commission has the power under the Consumer Protection Act, 1986 to direct refund of the amount deposited by the Consumer with interest?
- Whether the relief granted by the Commission require any modification to serve ends of justice?
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the terms of the Apartment Buyers Agreement amount to an ‘unfair trade practice’ and whether the Commission is justified in not giving effect to the terms of Apartment Buyer’s Agreement as laid down in the Pioneer case? | Yes, the terms are unfair and the Commission was correct. | The clauses were one-sided and loaded in favor of the Developer, and the Consumer is not bound to accept possession and can seek a refund. |
| Whether the Commission has the power under the Consumer Protection Act, 1986 to direct refund of the amount deposited by the Consumer with interest? | Yes, the Commission has the power. | The Consumer Protection Act empowers the Commission to direct refunds, and the RERA Act does not exclude this power. Both Acts provide concurrent remedies. |
| Whether the relief granted by the Commission require any modification to serve ends of justice? | Yes, the relief was partly modified. | The interest should be payable from the date of each deposit, not just the last deposit, but the rate of interest at 9% was found to be fair and just. |
Authorities
The Supreme Court considered the following authorities:
Cases:
- Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghavan (2019) 5 SCC 725 – The Supreme Court held that one-sided clauses in an agreement constitute an unfair trade practice.
- Arifur Rahman Khan v DLF Southern Homes Pvt. Ltd. (2020) 16 SCC 512 – The Supreme Court held that Consumer Forums can award compensation beyond the rate stipulated in the agreement for delayed possession.
- NBCC v Shri Ram Trivedi (2021) 5 SCC 273 – The Supreme Court held that a term of a contract would not be final and binding if the flat purchasers had no option but to sign on the dotted line.
- DLF Home Developers Ltd. v. Capital Greens Flat Buyers (2021) 5 SCC 537 – The Court reiterated that Consumer Forums are empowered to award just and reasonable compensation.
- IREO Grace Realtech (P) Ltd. v. Abhishek Khanna (2021) 3 SCC 241 – The Supreme Court held that Consumer Courts can declare a contractual term as unfair and one-sided.
- Imperia Structures Ltd v. Anil Patni (2020) 10 SCC 783 – The Supreme Court clarified that remedies under the Consumer Protection Act and the RERA Act are concurrent.
- Pioneer Urban Land Infrastructure Ltd v. Union of India (2019) 8 SCC 416 – The Supreme Court held that RERA is to be read harmoniously with the Insolvency and Bankruptcy Code and Consumer Protection Act.
- DLF Homes Panchkula Pvt Ltd v. DS Dhanda (2020) 16 SCC 318 – The Supreme Court held that interest on refunds should be paid from the date of deposit.
Legal Provisions:
- Section 2(g) of the Consumer Protection Act, 1986: Defines “deficiency” as any shortcoming or inadequacy in the performance of a service.
- Section 14 of the Consumer Protection Act, 1986: Empowers the District Forum to direct the opposite party to return the price or charges paid by the complainant.
- Section 18 of the Real Estate (Regulation and Development) Act, 2016: Provides for remedies such as refund with interest for failure to give possession of the apartment.
[TABLE] of Authorities:
| Authority | Court | How it was Considered |
|---|---|---|
| Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghavan (2019) 5 SCC 725 | Supreme Court of India | Followed – The Court relied on this case to hold that one-sided clauses in agreements are unfair trade practices. |
| Arifur Rahman Khan v DLF Southern Homes Pvt. Ltd. (2020) 16 SCC 512 | Supreme Court of India | Followed – The Court followed this case to hold that compensation can be awarded beyond the rate stipulated in the agreement. |
| NBCC v Shri Ram Trivedi (2021) 5 SCC 273 | Supreme Court of India | Followed – The Court followed this case to hold that one-sided contracts are not binding. |
| DLF Home Developers Ltd. v. Capital Greens Flat Buyers (2021) 5 SCC 537 | Supreme Court of India | Followed – The Court followed this case to reiterate that Consumer Forums can award just and reasonable compensation. |
| IREO Grace Realtech (P) Ltd. v. Abhishek Khanna (2021) 3 SCC 241 | Supreme Court of India | Followed – The Court followed this case to hold that Consumer Courts can declare unfair contractual terms as void. |
| Imperia Structures Ltd v. Anil Patni (2020) 10 SCC 783 | Supreme Court of India | Followed – The Court relied on this case to clarify that remedies under the Consumer Protection Act and the RERA Act are concurrent. |
| Pioneer Urban Land Infrastructure Ltd v. Union of India (2019) 8 SCC 416 | Supreme Court of India | Followed – The Court relied on this case to hold that RERA, the Insolvency and Bankruptcy Code and the Consumer Protection Act are to be read harmoniously. |
| DLF Homes Panchkula Pvt Ltd v. DS Dhanda (2020) 16 SCC 318 | Supreme Court of India | Followed – The Court relied on this case to modify the order of the commission to direct interest on refunds from the date of deposit. |
| Section 2(g) of the Consumer Protection Act, 1986 | Parliament of India | Considered – Used to define “deficiency” in service. |
| Section 14 of the Consumer Protection Act, 1986 | Parliament of India | Considered – Used to determine the power of the Commission to direct refunds. |
| Section 18 of the Real Estate (Regulation and Development) Act, 2016 | Parliament of India | Considered – Used to determine the remedies available to an allottee for failure to give possession. |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Party | Court’s Treatment |
|---|---|---|
| Terms of the Apartment Buyer’s Agreement should govern. | Developer | Rejected – The Court held that the terms of the agreement were one-sided and unfair and cannot bind the consumer. |
| The Consumer is only entitled to delay compensation. | Developer | Rejected – The Court held that the consumer is entitled to a refund with interest. |
| Pioneer case is not applicable. | Developer | Rejected – The Court held that the Pioneer case is a relevant and conclusive precedent. |
| RERA Act does not apply. | Developer | Rejected – The Court held that the Consumer Protection Act and the RERA Act provide concurrent remedies. |
| Interest granted by the Commission is excessive. | Developer | Partly Rejected – The Court held that the 9% interest was fair and just, but modified the order to direct interest from the date of deposit. |
| The rate of interest should be enhanced to 24% p.a. | Consumer | Rejected – The Court held the 9% interest rate was fair and just. |
| Interest should be payable from the date of each deposit. | Consumer | Accepted – The Court modified the order to direct interest from the date of each deposit. |
How each authority was viewed by the Court?
- The Court relied on Pioneer Urban Land and Infrastructure Ltd. v. Govind Raghavan (2019) 5 SCC 725* to determine that the terms of the agreement were one-sided and unfair, constituting an unfair trade practice.
- The Court followed Arifur Rahman Khan v DLF Southern Homes Pvt. Ltd. (2020) 16 SCC 512* to hold that Consumer Forums can award compensation beyond the rate stipulated in the agreement.
- The Court relied on NBCC v Shri Ram Trivedi (2021) 5 SCC 273* to determine that flat purchasers are not bound by one-sided contracts.
- The Court followed DLF Home Developers Ltd. v. Capital Greens Flat Buyers (2021) 5 SCC 537* to reiterate that Consumer Forums are empowered to award just and reasonable compensation.
- The Court relied on IREO Grace Realtech (P) Ltd. v. Abhishek Khanna (2021) 3 SCC 241* to hold that Consumer Courts can declare unfair contractual terms as void.
- The Court followed Imperia Structures Ltd v. Anil Patni (2020) 10 SCC 783* to clarify that remedies under the Consumer Protection Act and the RERA Act are concurrent.
- The Court relied on Pioneer Urban Land Infrastructure Ltd v. Union of India (2019) 8 SCC 416* to hold that RERA, the Insolvency and Bankruptcy Code and the Consumer Protection Act are to be read harmoniously.
- The Court followed DLF Homes Panchkula Pvt Ltd v. DS Dhanda (2020) 16 SCC 318* to modify the order of the commission to direct interest on refunds from the date of deposit.
- The Court considered Section 2(g) of the Consumer Protection Act, 1986 to define “deficiency” in service.
- The Court considered Section 14 of the Consumer Protection Act, 1986 to determine the power of the Commission to direct refunds.
- The Court considered Section 18 of the Real Estate (Regulation and Development) Act, 2016 to determine the remedies available to an allottee for failure to give possession.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the need to protect consumers from unfair trade practices and ensure that they receive fair compensation for delays in possession of their apartments. The court emphasized the following points:
- The one-sided nature of the Apartment Buyer’s Agreement, which heavily favored the Developer and left the Consumer with little recourse.
- The inordinate delay in handing over possession of the apartment, which amounted to a deficiency in service.
- The concurrent nature of remedies available under the Consumer Protection Act and the RERA Act, which allows consumers to choose the forum that best suits their needs.
- The need to provide restitutionary and compensatory interest to consumers from the date of their deposits.
[TABLE] of Sentiment Analysis of Reasons:
| Reason | Percentage |
|---|---|
| One-sided nature of the Agreement | 30% |
| Inordinate delay in handing over possession | 30% |
| Concurrent remedies under Consumer Protection Act and RERA Act | 25% |
| Need for restitutionary and compensatory interest | 15% |
Fact:Law Ratio:
| Category | Percentage |
|---|---|
| Fact (Consideration of factual aspects) | 40% |
| Law (Consideration of legal aspects) | 60% |
Logical Reasoning Flowchart:
The Court rejected the Developer’s argument that the Consumer was bound by the delay compensation clause, emphasizing that such clauses are often one-sided and unfair. The Court also rejected the argument that the Consumer was bound to accept possession of the apartment, holding that the Consumer had the right to seek a refund due to the inordinate delay. The court also considered that the Consumer Protection Act and RERA Act are concurrent remedies and that the consumer has the choice to seek remedies under either of the acts.
The Court also considered the fact that the Consumer had made payments over a period of time and that the interest should be payable from the date of each deposit to ensure that the consumer is fully compensated for the loss caused due to the delay in possession. The Court also considered the fact that the interest rate of 9% was just and fair.
The Supreme Court held that the Commission was correct in holding that the clauses of the agreement are one-sided and that the Consumer is not bound to accept the possession of the apartment and can seek a refund of the amount deposited by her with interest. The Court also held that the Commission has the power and jurisdiction to direct return of money under Section 14 of the Consumer Protection Act, if a consumer so chooses. The Court further held that the freedom to choose the necessary relief is of the Consumer and it is the duty of the Courts to honour it.
The Court quoted from the judgment:
- “A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder.”
- “The remedies under Section 18 are “without prejudice to any other remedy available.””
- “The freedom to choose the necessary relief is of the Consumer and it is the duty of the Courts to honour it.”
There was no minority opinion in this case.
Key Takeaways
- Consumers are not bound by one-sided clauses in Apartment Buyer’s Agreements.
- Consumers can seek a full refund with interest for unjustifiable delays in possession of apartments.
- The Consumer Protection Act and the RERA Act provide concurrent remedies, allowing consumers to choose the forum for redressal.
- Interest on refunds should be calculated from the date of each deposit.
- Consumer forums have the power to award compensation beyond the rate stipulated in the agreement.
Directions
The Supreme Court directed that the interest on the refund shall be payable from the dates of deposit. The Court also directed that the amount of Rs. 50,000 deposited by the Developer in the registry of the Court shall be made over to the Consumer, to be adjusted against the final amount payable by the Developer to the Consumer.
Development of Law
The ratio decidendi of this case is that consumers are not bound by one-sided clauses in Apartment Buyer’s Agreements and can seek a full refund with interest for unjustifiable delays in possession of apartments. This judgment reaffirms the concurrent nature of remedies available under the Consumer Protection Act and the RERA Act. This case also clarifies that interest on refunds should be calculated from the date of each deposit, which is a change from the previous position of calculating interest from the date of last deposit.
Conclusion
The Supreme Court’s judgment in Experion Developers Pvt. Ltd. vs. Sushma Ashok Shiroor reinforces the rights of consumers in the real estate sector. It clarifies that consumers are not bound by unfair terms in builder-buyer agreements and can seek a full refund with interest for unjustifiable delays in possession. The judgment also emphasizes the concurrent nature of remedies under the Consumer Protection Act and the RERA Act, providing consumers with multiple avenues for redressal. This decision serves as a significant victory for homebuyers and a reminder to developers to adhere to their commitments.
Category
Parent Category: Consumer Protection Law
Child Categories:
- Real Estate Disputes
- Refund of Money
- Deficiency in Service
- Unfair Trade Practices
- Consumer Rights
Parent Category: Real Estate (Regulation and Development) Act, 2016
Child Categories:
- Section 18, Real Estate (Regulation and Development) Act, 2016
- Delayed Possession
- Refund with Interest
Parent Category: Consumer Protection Act, 1986
Child Categories:
- Section 2(g), Consumer Protection Act, 1986
- Section 14, Consumer Protection Act, 1986
- Consumer Forums
- Deficiency of Service
FAQ
Q: What does this judgment mean for homebuyers?
A: This judgment means that homebuyers have the right to seek a full refund with interest if the builder fails to deliver the apartment on time, and they are not bound by unfair clauses in the agreement.
Q: Can I get a refund even if my agreement has a delay compensation clause?
A: Yes, the Supreme Court has ruled that delay compensation clauses are often one-sided and unfair, and you can seek a full refund with interest.
Q: Which law can I use to seek a refund, the Consumer Protection Act or the RERA Act?
A: You can use either the Consumer Protection Act or the RERA Act, as both provide concurrent remedies. You can choose the forum that best suits your needs.
Q: From when will the interest on my refund be calculated?
A: The interest on your refund will be calculated from the date of each deposit you made to the builder.
Q: What if the builder says I have to accept possession of the apartment?
A: You are not bound to accept possession if there has been an inordinate delay. You have the right to seek a refund.