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Chandigarh Housing Board v. M/s. Parasvanath Developers Pvt. Ltd. & Anr.

Civil Appeal · 2019 INSC 1392Decided 17 Dec 2019
Civil Appeal No. 10748 of 2016
Justice Mohan M. Shantanagoudar · Justice R. Subhash Reddy

Background

Chandigarh Housing Board (CHB) partnered with a private developer to build a residential project, and a buyer paid over Rs. 1 crore towards a flat under a tripartite agreement. When construction never started due to a land-encumbrance dispute between CHB and the developer, the buyer sought a refund and approached the National Consumer Disputes Redressal Commission, which ordered CHB and the developer to jointly refund the principal with 10% interest, plus Rs. 1 lakh each for mental harassment and litigation costs, split 70:30 between the developer and CHB. CHB appealed to the Supreme Court, disputing only its 30% share of the harassment/litigation costs and the enhanced interest rate, arguing a specific contractual compensation clause should make the developer solely liable.

Decision Breakdown

The Supreme Court held that the contractual compensation clause (Clause 9(c), a fixed per-square-metre penalty for late possession) did not apply here because construction never even began, so the clause's trigger condition was never met; the Rs. 1 lakh awards for mental harassment and litigation costs were general lump-sum amounts, not the specific compensation contemplated by that clause. It held that a prior arbitration award (binding as between CHB and the developer) which attributed the project's failure to breaches by both parties, apportioning liability 70:30, had attained finality and matched how the two had already split the sale proceeds under an escrow agreement, so that same ratio properly governed the consumer liability too. It also upheld the Commission's discretionary increase of the interest rate from 9% to 10% as unobjectionable. The appeal was dismissed, with CHB directed to pay its remaining 30% share of costs plus an extra 1% interest on its portion within eight weeks.

Lesson Learnt

A contract clause fixing compensation for a specific type of breach (like late delivery) does not automatically cover every liability arising from the deal: general damages like litigation costs or harassment compensation can still be split according to a separately established liability ratio (here, from an arbitration award), even between joint obligors.

Official source (sci.gov.in)View Judgment (PDF)

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