SC: If there’s delay of 2-4 years in handing over possession, compensation cannot be foreclosed by a term of the agreement

The Hon’ble Supreme Court, on 24th August 2020, in the matter of Wg. Cdr. Arifur Rahman Khan and Aleya Sultana and Ors. v. DLF Southern Homes Pvt Ltd (now Known as BEGUR OMR Homes Pvt. Ltd.) and Ors. pronounced that where there is a delay ranging between periods of two years and four years in the handing over of possession of flat, the jurisdiction of the consumer forum to award reasonable compensation cannot be foreclosed by a term of the agreement.

The Hon’ble Supreme Court observed that:

The court must take a robust and common-sense based approach by taking judicial notice of the fact that flat purchasers obtain loans and are required to pay EMIs to financial institutions for servicing their debt. Delays on the part of the developer in handing over possession postpone the date on which purchasers will obtain a home. Besides servicing their loans, purchasers have to finance the expenses of living elsewhere. (Para 23)

Where there is a delay ranging between periods of two years and four years, the jurisdiction of the consumer forum to award reasonable compensation cannot be foreclosed by a term of the agreement. (Para 23)

A failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. There is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. (Para 24)

Intrinsic to the jurisdiction which has been conferred to direct the removal of a deficiency in service is the provision of compensation as a measure of restitution to a flat buyer for the delay which has been occasioned by the developer beyond the period within which possession was to be handed over to the purchaser. Flat purchasers suffer agony and harassment, as a result of the default of the developer. Flat purchasers make legitimate assessments in regard to the future course of their lives based on the flat which has been purchased being available for use and occupation. These legitimate expectations are belied when the developer as in the present case is guilty of a delay of years in the fulfilment of a contractual obligation. To uphold the contention of the developer that the flat buyer is constrained by the terms of the agreed rate irrespective of the nature or extent of delay would result in a miscarriage of justice. (Para 24)

Where there has been a gross delay in the handing over of possession beyond the contractually stipulated debt, the jurisdiction of the consumer forum to award just and reasonable compensation as an incident of its power to direct the removal of a deficiency in service is not constrained by the terms of a rate which is prescribed in an unfair bargain. (Para 24)

The jurisdiction of the consumer forum extends to the award of compensation to alleviate the harassment and agony to a consumer. (Para 25)

Where possession has been given, one of the circumstances which must be factored in is that the purchaser has been compensated by the increase in the value of the property. (Para 26)

A flat purchaser who invests in a flat does so on an assessment of its potential. The amenities which the builder has committed to provide impinge on the quality of life for the families of purchasers and the potential for appreciation in the value of the flat. The representation held out by the developer cannot be dismissed as chaff. (Para 43)

The general appreciation in land values results in an increase in the value of the investment made by the buyers. Difficulties in determining the measure of compensation cannot however dilute the liability to pay. A developer who has breached a clear representation which has been made to the buyers of the amenities which will be provided to them should be held accountable to the process of law. To allow the developer to escape their obligation would put a premium on false assurances and representations made to the flat purchasers. (Para 43)

Copy of judgement: Judgement_24-Aug-2020

-Adv. Tushar Kaushik

Leave a Reply

Your email address will not be published. Required fields are marked *