Flat Purchasers are not Disentitled from Claiming Compensation Merely because the Developer Offered an Exit Option of Refund: SC

Flat purchasers are not disentitled from claiming compensation merely because the developer offered an exit option of refund of consideration together with interest, held the Apex Court.

Brief Facts of the Case

  • The appeals arise from a judgment of the National Consumer Disputes Redressal Commission dated 3 January 2020 in a batch of consumer complaints. The complaints were instituted inter alia by an association representing flat purchasers, called the Capital Greens Flat Buyers Association and by individual flat purchasers against the appellant. The gist of the grievance was that there was a substantial delay on the part of the developer in handing over possession of the apartments which were contracted to be sold. The complainants also specifically challenged the recovery of parking and club charges by the developer. A claim for compensation for delay in handing over possession of the flats was made.
  • The appellants in their defence to the complaints inter alia contended that as a result of force majeure conditions, they were prevented from achieving timely completion of their contractual obligations. The circumstances which according to the appellants triggered the force majeure clause of the agreements with flat buyers were: (i) delay in the approval of building plans; and (ii) issuance of stop work orders as a result of fatal accidents during the course of construction. The NCDRC has, after a detailed evaluation of the facts, rejected the force majeure defence.

Observation made by the Court

  • For a genuine flat buyer, who has booked an apartment in the project not as an investor or financier, but for the purpose of purchasing a family home, a mere offer of refund would not detract from the entitlement to claim compensation, the Court noted while disposing an appeal against an order passed by National Consumer Disputes Redressal Commission (NCDRC).
  • The bench observed on the issue of force majeure defence:

“It is evident that a delay in the approval of building plans is a normal incident of a construction project. A developer in the position of the appellant would be conscious of these delays and cannot set this up as a defence to a claim for compensation where a delay has been occasioned beyond the contractually agreed period for handing over possession. As regards the stop work orders, there is a finding of fact that these were occasioned by a succession of fatal accidents which took place at the site and as a result of the failure of the appellant to follow safety instructions. This is a pure finding of fact. There is no error of law or fact. Hence, we find no substance in the force majeure defence.”

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  • The Court, while rejecting the second ground observed that,

“For a genuine flat buyer, who has booked an apartment in the project not as an investor or financier, but for the purpose of purchasing a family home, a mere offer of refund would not detract from the entitlement to claim compensation. A genuine flat buyer wants a roof over the head. The developer cannot assert that a buyer who continues to remain committed to the agreement for purchase of the flat must forsake recourse to a claim for compensation occasioned by the delay of the developer. Mere refund of consideration together with interest would not provide a just recompense to a genuine flat buyer, who desires possession and remains committed to the project. It was for each buyer to either accept the offer of the developer or to continue with the agreement for purchase of the flat. Similar is the position in regard to the submission on the appreciation of the value of the flats. Undoubtedly, this is one factor which has to be borne in mind in considering whether and, if so to what extent, compensation for delay should be awarded. Having regard to the principles which have been enunciated in the earlier two decisions which have been noted above, we are unable subscribe to the submission that the flat buyers are not entitled to any payment whatsoever on account of delayed compensation.”

Reference was made to  Pioneer Urban Land and Infrastructure Ltd vs. Govindan Raghvan (2019) 5 SCC 725 and Wing Commander Arifur Rahman Khan and Aleya Sultana and Others vs DLF Southern Homes Pvt Ltd and Others

  • The court thus, in the present case ruled that the flat buyers had to suffer on account of a substantial delay on the part of the developers and thus they cannot be constrained to the compensation of Rs 10 per square foot provided by the agreements for flat purchase. The Court, however, observed that compensation on account of delay in handing over possession of the flats to the flat buyers is reduced from 7% to 6%;

Case Name: DLF Home Developers Ltd. (Earlier Known as DLF Universal Ltd) vs. Capital Greens Flat Buyers Association

Citation: CA 3864-3889/2020

Coram: Justices DY Chandrachud, Indu Malhotra and Indira Banerjee

Flat purchasers are not disentitled from claiming compensation merely because the developer offered an exit option of refund: SC

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