Supreme Court rejects DLF Group's exit deals says the right to compensation is independent of agreed terms

Supreme Court rejects DLF Group's exit deals says the right to compensation is independent of agreed terms

While ruling in favour of consumers, the apex court said that the right to compensation is independent of agreed terms and condition between the developer and the buyer

The Supreme Court of India has ruled that a developer cannot get away by simply offering a homebuyer enhanced compensation for delay in completion of the project.

The judgement of a three-member bench headed by Justice Dhananjay Y Chandrachud is seen as a landmark judgement that may have a far-reaching impact on India's burgeoning real estate industry while strengthening a homebuyer's rights under the Consumer Protection Act.

Justices Indu Malhotra and Indira Banerjee were other two members of the bench, which dismissed an appeal of the real estate giant DLF Home Developers Limited against an order of the National Consumer Commission.

The bench believed that exit deals offered by the developer cannot negate a homebuyer's right to compensation. The developer had moved to the apex court through senior advocate Pinaki Misra, who challenged the Commission's order saying the delay in completion of the Capital Greens project in Delhi was due to reasons beyond the control of the developer.

The developer had offered the homebuyers exit option including a refund of the money along with 9 per cent per annum interest. The court was of the opinion that the right to claim compensation was independent of any scheme offered by the developer that offered a homebuyer to cancel his booking.

"For a genuine flat buyer, who has booked an apartment in the project not as an investor or financer, but for the purpose of purchasing a family home, a mere offer of refund would not detract from the entitlement to claim compensation," the bench said while making it amply clear that the refund scheme offered by the developer in itself would not suffice.

The apex court bench also held that the damages to a homebuyer cannot be confined to the amount mentioned in the developer-buyer agreement and the consumer was entitled to damages over and above the amount mentioned the purchase agreement.

The bench further said that a homebuyer who continues to be keen on taking possession of his flat in the delayed project will have to give up his right to a suitable compensation while responding to the developer's advocate Pinaki Misra's submission that the developer had offered to refund the paid amount to its buyers along with interest of 9 per cent per annum.

The homebuyers were represented in the court by senior advocate Shyam Divan. The National Consumer Commission had ordered the developer to pay interest at the rate of 7 per cent per annum from the promised date of delivery of flats for possession till the actual date on which the possession was offered.

The bench also rejected the reason offered for delay in the project saying the consumer cannot be made to suffer due to a fatal accident that took place due to the developer's laxity in adhering to safety regulations.

"The flat buyer had to suffer on account of a substantial delay on the part of the appellants. In such a situation, they cannot be constrained to the compensation of Rs. 10 per square foot, provided by the agreement for flat purchase," the court said while commenting on the contractual rate mentioned in the developer-buyer agreement.

The only relief for the developer DLF Home Developers Limited came in the form of slash in the rate of interest to be paid to the homebuyers. The apex court bench reduced the 7 per cent per annum rate of interest ordered by the Commission to 6 per cent per annum.

The Supreme Court order is bound to force other developers to pull up their shocks who generally delay projects on trivial grounds once the project has been sold out and money collected from homebuyers.