The ruling in a Faridabad case gives relief to buyers of stalled projects who stop payments when they do not see any progress in the construction of the project or the possibility of timely delivery.

The Supreme Court has ruled that default on the part of homebuyers is not a ground for denying refund in a delayed project, giving relief to buyers who stop payments when construction timelines are not met.

The case involved a builder in Faridabad, Haryana, who was appealing an earlier decision by the National Consumer Disputes Redressal Commission (NCDRC) to refund the entire amount paid by two buyers after possession of the property was not handed over on time.

The buyers had filed a case in the consumer court and sought a refund of the amount paid to the builder.

The NCDRC had directed the builder to refund the entire amount deposited by the buyers along with delay compensation at the rate of 10 percent per annum on the deposited amount from the respective dates of deposits till realisation, within two months of the order.

The builder had argued before the consumer court that the buyers had defaulted in making payments since 2014 and made no payment since 2016 and therefore were in violation of section 52 of the Indian Contract Act 1872.

he Supreme Court, in its order last week, noted, “It is, no doubt, true that, in case of default, the appellant stands mulcted with interest at the rate of 12 per cent per annum. He would also submit that on a proper construction of the clauses in a case where the Occupational Certificate has not been obtained, there will be no justification for interfering with the principal premise of the Commission’s decision,” the Supreme Court said in its order.

The court, however, reduced the rate of interest ordered by the NCDRC from 10 percent to 8 percent per annum and warned that if the amount was not paid within two months, interest would be charged at 12 percent per annum.

“This is on the condition that the amount due as determined shall be paid to the respondents within a period of two months. In case the balance amount is not paid to the respondents within a period of two months from today, it will carry interest at the rate of 12 per cent per annum,” the order said.

“In many cases allottees stop payments when they do not see any progress in the construction of the project or the possibility of timely delivery. In such cases defaults of allottees cannot be held against them and their right to claim refund cannot be refuted. This is what the Supreme Court has held in this order. It is unreasonable to consider that allottees keep complying with the demands of the builder even in case of a stalled or delayed project,” said Aditya Parolia, Partner at PSP Legal.

Meanwhile, there was no comment from the builder.

The case

The buyers had paid a booking amount of Rs 7.01 lakh for an apartment in the Royal Heritage project situated at Sector-70 in Faridabad. The proposed date of possession was in 2017. The builder failed to offer possession of the unit even after five years following which the buyer moved the consumer court.

The buyers said they had “diligently” made the payments as and when the demands were raised by the builder, and by June 2016 they had paid around Rs 77.88 lakh, which was 70 percent of the total consideration for the apartment. They had also availed a home loan of Rs 70 lakh from a bank in 2014 for the purchase of the apartment.

They said the builder despite having collected the amount failed to give possession by 2017.

The buyers said they had through emails in 2017 requested the builder to cancel the allotment of the unit and refund the entire amount paid by them along with interest. But they did not receive any response and the builder “unilaterally” and “without any explanation” changed the date of possession to February 2019 and informed them about the same vide email dated July 2018.

They stated that the builder had neither refunded the money paid by them nor had offered possession of the unit.

In its response, the builder had argued that the proposed date of possession was January 2017 and no offer of possession was made and no Occupancy Certificate was obtained. He further argued that the buyers had stopped paying in 2016 when no construction was taking place.