The Supreme Court on Wednesday directed a real estate developer to refund the entire amount deposited by a homebuyer, along with 18% per annum interest, after failing to hand over possession of a plot for almost 12 years [Rajnesh Sharma v. M/s Business Park Town Planners Ltd].

A Bench of Justices Dipankar Datta and Augustine George Masih modified a 2023 order of the National Consumer Disputes Redressal Commission (NCDRC), which had restricted the refund to the principal amount with 9% interest.

The Court held that since the builder had charged the buyer 18% interest on delayed instalments, equity demanded that it face the same liability for its own default.

"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," the Court said.

The case stemmed from a plot booking made in 2006 by Rajnesh Sharma. Over the years, he deposited substantial sums towards the purchase price, complying with the developer’s demands. However, possession was not delivered within the stipulated period.

In 2011, the builder unilaterally allotted him an alternative plot citing changes in the layout plan and raised further demands including enhanced external development charges, preferential location charges and penal interest. Despite continued payments, possession was not offered until 2018 - twelve years after booking - and even then, it was conditional on fresh charges.

Frustrated, the buyer terminated the agreement in 2017 and filed a consumer complaint before the NCDRC in 2018.

The builder offered to refund the principal with 9% simple interest per annum. Accepting this proposal, the NCDRC disposed of the complaint in January 2023, directing refund accordingly along with ₹25,000 towards litigation costs. The Commission did not examine the buyer’s allegations of unfair charges or arbitrary conduct.

Aggrieved by the order, he approached the Supreme Court.

Before, the Court the appellant argued that awarding only 9% interest was unjust since the builder had itself levied 18% penal interest on his alleged defaults. He also pointed out that charges such as GST (though payments were made before its introduction), inflated preferential location charges and enhanced development costs were wrongly demanded.

The builder, however, defended the NCDRC order, contending that compensation under the Consumer Protection Act, 1986 must reflect actual loss, and cited earlier judgments where compensation was capped at 9% interest.

The Court disagreed, holding that there is no absolute rule against awarding consumers the same rate of interest that builders impose. What is reasonable, the Bench said, depends on the facts of each case.

"There is no principle of law that interest in default charged by the builder can never be granted to the buyer. Law is well settled that the amount of interest should be reasonable. What is reasonable varies from case to case. The same is to be granted considering the facts and circumstances of each case," the order stated.

The Court added that possession was delayed until 2018 without justification and the builder had failed to produce evidence supporting the alleged change in layout plan. It stressed that allowing the builder to refund with only 9% interest, after charging 18% from the buyer, would perpetuate a “manifestly wrong bargain.”

“Although the rate of interest charged by the builder cannot be granted to the buyer as a rule of thumb, in the present case equity and fairness demand that the respondent be put to the same rigours."

Accordingly, the Court modified the NCDRC’s order and directed the developer to refund the entire amount deposited by the buyer along with 18% simple interest per annum, payable from the dates of deposit.

Advocates Vivek Malik, Gaurav Goel, Rajesh Kumar, Aparna Rohtagi Jain, Jns Tyagi and Vivek Sinha appeared for the appellant.

Advocates Kaushik Poddar and Akash Dalal appeared for respondent.

[Read Judgment]