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M/s. Ashoka Investment Co. vs. M/s United Towers India (Pvt.) Ltd.

Civil Appeal · 2022 INSC 1063Decided 11 Oct 2022
Civil Appeal No. 4913 of 2015
Aniruddha Bose · Vikram Nath · Hemant Gupta as part of the bench

Background

In 1980, the appellant paid the full sale price of Rs. 4,95,000 for two flats in a Bangalore apartment building under an agreement to sell. A dispute arose in 1991 when the builder raised additional demands that the appellant objected to and instead asked for possession. Possession was never given, and in 1999 the appellant discovered the builder had cancelled the allotment in 1995 and sold both flats to third parties. The National Consumer Disputes Redressal Commission (NCDRC) held the builder liable and ordered a refund of the sale price with 9% annual interest, but the appellant felt the compensation was inadequate given the builder's conduct and appealed to the Supreme Court.

Decision Breakdown

The Supreme Court agreed with the NCDRC's finding of fault on both sides but held that the interest rate of 9% was too low. Noting that the very agreement between the parties provided that a defaulting purchaser would be charged interest up to 18% per annum on overdue payments, the Court held it was "just and proper" to apply the same 18% rate to the builder's refund obligation, given the builder had unilaterally cancelled the allotment and resold the flats to third parties without ever paying anything back. The appeal was partly allowed, enhancing the interest rate on the Rs. 4,95,000 refund from 9% to 18% per annum from January 1995, to be paid within four weeks.

Lesson Learnt

When a builder unjustifiably cancels an allotment and diverts a buyer's already-fully-paid property to someone else, the compensation/interest awarded can be measured against the same contractual interest rate the builder itself would have charged the buyer for a default: a builder should not benefit from a lower rate than it imposed on the consumer.

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

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