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R V Prasannakumaar & Ors. v. Mantri Castles Pvt. Ltd. & Anr.

Civil Appeal · 2019 INSC 174Decided 11 Feb 2019
Civil Appeal No. 1232 of 2019
Dr. Justice D.Y. Chandrachud · Justice Hemant Gupta

Background

Flat purchasers in a Bangalore housing project were due to receive possession by 31 January 2014, but the developer failed to meet this deadline, obtaining the occupation certificate only in February 2016 and offering possession to buyers only from mid-2016 onward. The National Consumer Disputes Redressal Commission (NCDRC) found the developer in breach, awarded the buyers compensation and 6% annual interest on their deposits, but limited that interest award to the period ending 31 July 2016, even though many buyers still had not received possession. Both the flat purchasers (seeking interest beyond that cut-off date) and the developer (disputing the 6% interest rate itself) appealed to the Supreme Court.

Decision Breakdown

The Supreme Court rejected the developer's argument that interest should be capped by the agreement's meagre compensation clause (just Rs. 3 per sq. ft. per month, which the Court found grossly inadequate for a flat buyer in a city like Bangalore), holding that the NCDRC's consumer-protection jurisdiction to award just compensation could not be constrained by such a one-sided contractual term. It found the NCDRC's error lay in arbitrarily cutting off interest liability at 31 July 2016, when the developer's own evidence showed many buyers, out of 55 total, still had not been given possession, including some who were denied possession precisely because they had filed the consumer complaint, which the Court held was no valid justification. The Court therefore allowed the flat purchasers' appeal and dismissed the developer's appeals, directing that the 6% annual interest must continue running separately for each flat purchaser until the date possession is actually offered to that specific buyer, with the NCDRC to verify each buyer's possession date during execution.

Lesson Learnt

A builder's own contractual penalty clause for delayed possession does not cap what a consumer forum can award as fair compensation, and interest for delay must run individually for each buyer until that buyer actually receives possession: a builder cannot rely on an arbitrary cut-off date, especially where possession was withheld because the buyer exercised their right to complain.

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

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