The Supreme Court has ruled that home buyers cannot be compelled to accept possession of a flat if there is a considerable delay in its handover by the developer and are entitled to a refund, compensation and interest payment.

A bench of Justices J.K. Maheshwari and Aravind Kumar passed the ruling while dealing with an appeal filed by the Nagpur Housing and Area Development Board challenging a Bombay High Court order that had upheld a State Consumer Redressal Commission (SCDRC) ruling directing a refund of the deposit to home buyer Manohar Burde along with a 15 per cent interest and ₹10 lakh compensation.

The top court, however, reduced the compensation amount to ₹7.50 lakh and the interest rate to 9 per cent.

“Having heard the learned advocates appearing for the parties and on perusal of the case papers, we are of the considered view that the NCDRC (National Consumer Disputes Redressal Commission) having taken note of the relevant aspects, including the factum of delay and the fact that petitioner had opted for refund of money deposited, rightly held that as a home buyer, petitioner cannot be compelled to take possession of the flat after such long time, and as such ordered for refund of entire amount deposited with interest of 9 per cent per annum,” Justice Kumar observed.

Burde had applied for a 3 BHK flat in a group housing project launched by the developer in 2009 and deposited ₹4 lakh. Burde’s name came up in the lottery draw conducted on January 3, 2010, and he was allotted the flat.

Following the allotment, Burde deposited seven instalments between December 31, 2011, and March 31, 2013. The eighth and final instalment was deposited on August 26, 2013, on the assurance of the possession of the flat within the stipulated time frame. Burde alleged he was compelled to pay the entire amount but the flat was not handed over to him.

On an appeal by the developer, the NCDRC had modified the SCDRC order by waiving the ₹10 lakh compensation and reducing the interest rate from 15 to 9 per cent.

Bombay High Court had, on January 29, 2024, restored the SCDRC order. Aggrieved, the developer filed the present appeal.

While Burde defended the high court and SCDRC orders, solicitor-general Tushar Mehta, appearing for the developer, said there was no justification in the high court order that reversed the NCDRC ruling.

Partly accepting the developer’s plea, the apex court cited its judgment in the Bangalore Development Authority vs Syndicate Bank case (2007) and said the allottee was entitled to a refund with reasonable interest from the date of payment till the date of refund in cases of delay of delivery of possession.

“The NCDRC... had awarded interest at 9% p.a., which in our view was fair and reasonable. The interest @ 15% p.a. awarded by high court is excessive,” the bench said.

On the award of compensation, the apex court said: “Having regard to the fact that the appellant herein is an instrumentality of State, the delay if any, cannot be attributed to any personal animosity... we deem it proper to reduce the compensation payable from ₹10,00,000 to ₹7,50,000.”