In a ruling that seeks to level the playing field between builders and homebuyers, the Supreme Court has held that real estate developers, who delay handing over possession, can be ordered to compensate buyers at the same punitive rate of interest they themselves levy on buyers for late payments.
A bench of justices Dipankar Datta and AG Masih directed M/s Business Park Town Planners Ltd to refund the principal amount to a buyer with interest at 18% per annum — the same rate the builder had earlier imposed on the buyer for missing a payment deadline.
“Equity and fairness demand that the respondent be put to the same rigours for charging 18% interest and face consequences similar to those imposed on the appellant for default committed by him. If we hold otherwise, we will be perpetuating a manifestly wrong bargain,” ruled the bench on Wednesday, rejecting the National Consumer Disputes Redressal Commission’s (NCDRC) earlier award of 9% interest.
The dispute dates back to 2006, when the buyer, Rajnesh Sharma, booked a plot in the builder’s Park Land project in Haryana for ₹36.03 lakh. By 2011, Sharma had paid more than ₹28 lakh, but possession was not offered. Instead, the builder sought to allot him an “alternative plot” and even charged additional sums for this.
Despite repeated payments, including interest at 18% for alleged delays by the buyer, possession was delayed for years. In 2017, Sharma terminated the agreement and sought a refund with interest. The developer eventually offered possession in 2018, but only on the condition of further payment, prompting Sharma to approach the NCDRC.
{{/usCountry}}Despite repeated payments, including interest at 18% for alleged delays by the buyer, possession was delayed for years. In 2017, Sharma terminated the agreement and sought a refund with interest. The developer eventually offered possession in 2018, but only on the condition of further payment, prompting Sharma to approach the NCDRC.
{{/usCountry}}The consumer forum partly allowed his plea, ordering a refund with 9% interest and ₹25,000 litigation costs. Dissatisfied, Sharma appealed to the Supreme Court.
Sharma, represented by advocate Vivek Malik, argued that the NCDRC had erred in granting only 9% interest, a rate too meagre given the prolonged 12-year delay in handing over possession. Sharma stressed that the developer had, on multiple occasions, imposed 18% interest on him for even minor payment defaults, but when ordered to refund, sought to compensate at less than half that rate. He contended that the same yardstick must apply to both sides, and that forcing a buyer to accept less would cause grave injustice.
The developer, represented by senior advocate Nikhil Nayyar, defended the NCDRC’s order and vehemently opposed parity between buyers and builders on interest rates. He submitted that under the Consumer Protection Act, compensation cannot exceed the actual loss suffered, and in this case, the buyer had not led evidence to prove such loss. The builder maintained that while its right to charge 18% on buyer defaults was contractually agreed, a buyer could not demand the same rate in return. Further, he argued that the Supreme Court has consistently standardised consumer compensation at 9% interest, and cited its 2021 decision in IREO Grace Realtech Vs Abhishek Khanna, where claims for parity were expressly rejected.
But the top court found that a nominal 9% rate of compensation did not adequately reflect the harassment, financial loss and prolonged anxiety suffered by the buyer, especially when the developer had freely imposed 18% compounded interest for delays on his part.
It rejected the builder’s argument that buyers could never claim parity with developers on interest rates, clarifying that no blanket rule exists and that each case must be judged on its facts. “Law is well settled that the amount of interest should be reasonable… what is reasonable varies from case to case,” the bench said.
“Keeping in mind the overall conduct of the respondent: the delay caused by it in offering the plot, the fact that the respondent charged the appellant delay compensation @ 18% p.a. on the due amount, and the long wait that the appellant had to endure over a period of a decade, causing harassment and anxiety, which are writ large, we find that this is an appropriate case where refund of the principal amount with interest @ 9% p a., as awarded by the NCDRC, will not serve the ends of justice,” said the court.
It emphasised that allowing builders to get away with low compensation while they impose high penalty rates on buyers would amount to “perpetuating a manifestly wrong bargain.”
The Supreme Court then modified the NCDRC’s ruling, directing the developer to refund the homebuyer’s principal amount of ₹43.13 lakh with 18% simple interest from the dates of payment until refund, within two months.