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Omkar Realtors and Developers Pvt. Ltd. vs. Kushalraj Land Developers Pvt. Ltd. & Anr.

Not available · 2024 INSC 629Decided 23 Aug 2024
Not available
Justice Pamidighantam Sri Narasimha · Justice Pankaj Mithal

Background

Kushalraj Land Developers, a private company, booked a luxury flat in Omkar Realtors' "Omkar 1973 Worli" project in Mumbai for residential use by one of its directors and his family, eventually paying over Rs. 6.79 crore towards it. When the developer advanced the possession date and demanded the balance of roughly Rs. 28.87 crore, the buyer discovered, while arranging finance, that the very same flat had also been separately allotted to another individual. Confused and unable to arrange funds, the buyer declined to take possession or pay the balance; the developer then cancelled the allotment and forfeited the entire amount already paid. The buyer approached the National Consumer Disputes Redressal Commission (NCDRC), which ruled in its favour, and the developer appealed to the Supreme Court.

Decision Breakdown

The Supreme Court first addressed whether a company buying a flat for a director's personal residence counts as a "consumer" under the Consumer Protection Act. It held that it does, since the test is the dominant purpose of the purchase (personal use versus profit-generating commercial activity), not merely that the buyer happens to be a real estate company; the burden was on the developer to prove commercial intent, and it produced no evidence to do so. On the merits, the Court found that the developer itself had created a "double allotment" of the same flat to two different buyers, a confusion that was only resolved through a rectification deed in 2018, well after the developer had already cancelled the buyer's allotment and forfeited its money. Since the cancellation was premature and unjustified, the resulting forfeiture was also unlawful, amounting to a deficiency in service and unfair trade practice. The Court upheld the NCDRC's order requiring a refund of over Rs. 7.16 crore with interest, and set a phased repayment schedule (partial payment within two weeks, balance by 31 December 2024).

Lesson Learnt

A builder cannot cancel a buyer's booking and forfeit their payment while its own administrative error (like double-allotting the same unit) remains unresolved; and a company buying property for an employee's or director's personal residence, rather than for resale or profit, is still protected as a "consumer" under consumer protection law.

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

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