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IREO Grace Realtech Pvt. Ltd. v. Abhishek Khanna & Others

Civil Appeal · 2021 INSC 13Decided 11 Jan 2021
Civil Appeal No. 5785 of 2019
Dr. Justice D.Y. Chandrachud · Justice Indu Malhotra · Justice Indira Banerjee

Background

A real estate developer, IREO Grace Realtech, sold apartments in a Gurgaon housing project called "The Corridors" under agreements that promised possession within 42 months (plus a 180-day grace period) of the building plan approval, subject to force majeure. Years went by with long delays, some towers never even received the mandatory Occupation Certificate, while buyers continued paying instalments, many funded through bank loans. A batch of apartment buyers filed complaints before the National Consumer Disputes Redressal Commission (NCDRC), which ruled in their favour and ordered refunds; the developer then appealed to the Supreme Court in this batch of eleven connected appeals.

Decision Breakdown

The Supreme Court held that buyers cannot be made to wait indefinitely for possession, and a construction agreement's one-sided clauses (e.g., clauses that let the developer terminate for any single default by the buyer while giving buyers only a delayed, interest-free route to exit) amount to an unfair trade practice and deficiency of service. For apartments where the Occupation Certificate had actually been obtained and possession lawfully offered, the buyers were held bound to take possession, with the developer only liable to pay delay compensation for the period of delay. For apartments where the Occupation Certificate was still not available even at the time of the judgment, the buyers were entitled to a full refund of all amounts paid, since they could not be forced to accept delayed possession or switch units. The Court fixed a uniform compensation rate of 9% simple interest per annum from the date the contractual timeline expired until repayment (12% if payment was further delayed), rejecting both the developer's token contractual compensation rate and the buyers' demand for 20% compounded interest as commercially unrealistic.

Lesson Learnt

A homebuyer cannot be held indefinitely to a builder-buyer agreement when the developer fails to deliver possession or obtain the Occupation Certificate: they are entitled to walk away and get a refund with reasonable interest, and one-sided contract clauses that trap buyers while shielding developers will not be enforced by courts.

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

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