2025 (6) TMI 1085 - SC - Indian Laws

Entitlement to refund of the amounts paid to the developer authority (GMADA) along with interest for delay in possession of flats under the residential scheme - case of respondent is that the terms of the agreement cannot circumscribe the authority of the Commission to award just compensation - HELD THAT - In Bangalore Development Authority v. Syndicate Bank 2007 (5) TMI 565 - SUPREME COURT this Court having surveyed several other judgments laid down seven principles regarding grant/non-grant of relief to an allottee who is aggrieved by non-delivery or delay in delivery of plots/flats. This court held that Where the development authority having received the full price does not deliver possession of the allotted plot/flat/house within the time stipulated or within a reasonable time or where the allotment is cancelled or possession is refused without any justifiable cause the allottee is entitled for refund of the amount paid with reasonable interest thereon from the date of payment to date of refund. In addition the allottee may also be entitled to compensation as may be decided with reference to the facts of each case. The entitlement of compensation therefore is not in dispute. A reference to Balbir Singh 2004 (3) TMI 753 - SUPREME COURT shows that compensation can take different forms considering the facts and circumstances at hand. Determination has to be made keeping in view the stage of the work completed where the service provider has lapsed in duty and the loss caused thereby etc. Uniformity is foreign to such determination. A perusal of the judgment and orders of the Commissions does not reveal any exceptional or strong reasons for the interest on the loan taken by the respondents to be paid by GMADA. That apart whether the buyers of the flat do so by utilizing their savings taking a loan for such purpose or securing the required finances by any other permissible means is not a consideration that the developer of the project is required to keep in mind. For so far as they are concerned such a consideration is irrelevant - Repayment of the entire principal amount along with 8% interest thereon as stipulated in the contract alongside the clarification that there shall be no other liability on the authority sufficiently meets this requirement. The amount of interest awarded is the compensation to the investment maker for the amount of money and the time he has been denied the fruits of that investment. The 8% interest awarded in this case on top of the entire amount that is being invested is the compensation for being deprived of the investment of that money. Apart from this no amount of interest on the loan taken by the respondents could have been awarded. Conclusion - The respondents are entitled to refund of the amounts paid along with 8% compounded interest as per the contract. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in these appeals include:

- Whether the respondents (allottees) were entitled to refund of the amounts paid to the developer authority (GMADA) along with interest for delay in possession of flats under the residential scheme.

- Whether the consumer forums had jurisdiction to entertain the complaints despite the presence of an arbitration clause in the allotment agreement.

- Whether the compensation awarded by the consumer forums, particularly the payment of interest on the loan taken by the respondents to finance the flat purchase, was legally sustainable.

- The extent and nature of compensation payable for deficiency in service and mental harassment caused by delay in delivery of possession.

- The applicability and interpretation of contractual terms governing refund and compensation in the context of consumer protection laws and precedents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund and Interest for Delay in Possession

Legal framework and precedents: The allotment agreement (Letter of Intent) stipulated that possession was to be delivered within 36 months from issuance of LOI, failing which the allottee could withdraw and claim refund of the entire amount deposited along with 8% interest compounded annually. The Supreme Court in Bangalore Development Authority v. Syndicate Bank laid down that where possession is not delivered within stipulated or reasonable time, the allottee is entitled to refund with reasonable interest, and may also be entitled to compensation depending on facts.

Court's interpretation and reasoning: The Court noted that the stipulated possession date was 21st May, 2015, but possession was delayed beyond this date. The respondents opted to withdraw and claimed refund along with interest. The consumer forums found no proof that GMADA completed the project within the stipulated time, thus validating the respondents' right to refund and interest as per the contract.

Key evidence and findings: The respondents had paid substantial amounts (over 90% of the total consideration), and the possession was delayed by more than a year. GMADA had also extended refund facility to other allottees in similar circumstances.

Application of law to facts: The contractual clause and precedent supported refund with 8% interest. The Court upheld this entitlement, emphasizing that the refund clause was binding and applicable.

Treatment of competing arguments: GMADA argued that the allotment-cum-possession offer dated 29th June, 2016, negated the respondents' claim. The Court rejected this, holding that delayed possession beyond the stipulated period entitled the respondents to withdraw and claim refund.

Conclusions: The respondents were entitled to refund of the amounts paid along with 8% compounded interest as per the contract.

Issue 2: Jurisdiction of Consumer Forums Despite Arbitration Clause

Legal framework and precedents: The presence of an arbitration clause does not oust the jurisdiction of consumer forums in consumer disputes, as held in National Seeds Corporation Ltd. v. M. Madhusudan Reddy.

Court's interpretation and reasoning: The Court agreed with the consumer forums' view that the arbitration clause did not bar their jurisdiction to entertain the complaints.

Key evidence and findings: The consumer complaints were properly filed and entertained, and the arbitration clause was not a bar.

Application of law to facts: Consumer protection statutes provide for consumer forums' jurisdiction notwithstanding arbitration clauses in contracts.

Treatment of competing arguments: GMADA contended that arbitration should be the forum. The Court rejected this, affirming consumer forums' jurisdiction.

Conclusions: The consumer forums had jurisdiction to adjudicate the complaints despite the arbitration clause.

Issue 3: Award of Interest on Loan Taken by Respondents

Legal framework and precedents: The consumer forums awarded interest on the bank loan taken by the respondents to finance the flat purchase, in addition to the 8% interest on the refund amount. The Court examined precedents including Bangalore Development Authority v. Syndicate Bank and DLF Homes Panchkula (P) Ltd. v. D.S. Dhanda.

Court's interpretation and reasoning: The Court held that while compensation for delay and deficiency in service is permissible, awarding the entire interest paid on the loan to the respondents as a liability on GMADA is not supported by law. The interest awarded on the loan lacked nexus with the default committed by GMADA and was arbitrary. The 8% compounded interest on the refund amount already constituted compensation for deprivation of use of money.

Key evidence and findings: The consumer forums relied on a prior case (Priyanka Nayyar) to justify awarding interest on loan interest, but that case awarded compensation considering the interest rate as a factor, not direct liability for loan interest. There were no exceptional circumstances here warranting such an award.

Application of law to facts: The Court applied the principle that compensation must be just and reasonable, and not a multiplication of damages for the same default. The loan interest paid by respondents is a personal financial arrangement, not a direct consequence of the developer's default.

Treatment of competing arguments: Respondents argued that consumer forums have power to grant compensation beyond contractual terms. The Court agreed in principle but clarified that such power does not extend to saddling the developer with loan interest payments absent exceptional circumstances.

Conclusions: The award of interest on the loan taken by respondents was set aside. The refund with 8% interest sufficed as compensation for delay.

Issue 4: Compensation for Mental Harassment and Litigation Costs

Legal framework and precedents: The consumer forums awarded compensation for mental agony and litigation costs, consistent with precedents recognizing compensation for harassment arising from deficiency in service.

Court's interpretation and reasoning: The Court did not interfere with these awards, recognizing the Commission's authority to grant such compensation based on facts.

Key evidence and findings: The respondents suffered mental tension and incurred litigation expenses due to delay and deficiency in service.

Application of law to facts: Compensation for mental harassment is discretionary and fact-specific. The awards were reasonable and justified.

Treatment of competing arguments: GMADA did not challenge these awards specifically. The Court upheld them.

Conclusions: Compensation for mental harassment and litigation costs was rightly awarded and maintained.

Issue 5: Interpretation of Contractual Terms and Relationship Between Parties

Legal framework and precedents: The contract stipulated refund and interest terms, bar on sale, and ownership conditions. The Court referred to precedents emphasizing that the relationship is that of service provider and consumer, and contractual terms set the framework for remedies.

Court's interpretation and reasoning: The Court emphasized that the contractual clause providing refund with 8% interest was binding and comprehensive, limiting further liability of GMADA.

Key evidence and findings: The contract explicitly stated no other liability beyond refund and interest on withdrawal due to delay.

Application of law to facts: The Court applied the contract terms strictly, rejecting claims beyond those terms without exceptional justification.

Treatment of competing arguments: Respondents argued for broader compensation beyond contract terms. The Court balanced this with the necessity of contractual sanctity and reasoned limits on compensation.

Conclusions: Contractual terms govern the scope of liability and compensation, subject to consumer protection principles.

3. SIGNIFICANT HOLDINGS

"Where the development authority having received the full price, does not deliver possession of the allotted plot/flat/house within the time stipulated or within a reasonable time, or where the allotment is cancelled or possession is refused without any justifiable cause, the allottee is entitled for refund of the amount paid, with reasonable interest thereon from the date of payment to date of refund. In addition, the allottee may also be entitled to compensation, as may be decided with reference to the facts of each case."

"The Commission/Forum must determine that there has been deficiency in service and/or misfeasance in public office which has resulted in loss or injury. No hard-and-fast rule can be laid down... compensation cannot be uniform and can best be illustrated by considering cases where possession is being directed to be delivered and cases where only monies are directed to be returned."

"The order to grant interest at the maximum of rate of interest charged by nationalised bank for advancing home loan is arbitrary and has no nexus with the default committed... There cannot be multiple heads to grant of damages and interest when the parties have agreed for payment of damages @ Rs 10 per square foot per month."

"The amount of the interest is the compensation to the beneficiary deprived of the use of the investment made by the complainant. Thus, such interest will take into its ambit, the consequences of delay in not handing over his possession."

"Whether the buyers of the flat do so by utilizing their savings, taking a loan for such purpose or securing the required finances by any other permissible means, is not a consideration that the developer of the project is required to keep in mind."

Final determinations:

- The respondents were entitled to refund of the amounts paid along with 8% compounded interest as per the contract.

- The consumer forums had jurisdiction despite the arbitration clause.

- The award of interest on the loan taken by respondents was not sustainable and was set aside.

- Compensation for mental harassment and litigation costs was upheld.

- Contractual terms govern the scope of compensation and liability, subject to consumer protection principles and absence of exceptional circumstances.