Can You Get a Full Refund for Delayed Possession?

Govindan Raghavan signed an Apartment Buyer's Agreement on May 08, 2012 to buy a home in Pioneer Urban Land's "Araya Complex" project in Sector 62, Golf Course Extension Road, Gurugram. The total sale consideration was ₹4,83,25,280. Excavation began on June 04, 2012. Clause 11.2 required Pioneer to make all efforts to apply for the occupancy certificate within 39 months from excavation, followed by a 180-day grace period.

On those dates, the application deadline was September 04, 2015, and the grace period expired on March 04, 2016. Pioneer did not apply for the occupancy certificate within that timeline. Raghavan filed a consumer complaint before the National Consumer Disputes Redressal Commission on January 27, 2017. He sought a refund of ₹4,48,43,026 with 18% interest, ₹10,00,000 for mental agony and harassment, refund of wrongly charged taxes and other charges, and ₹1,00,000 in litigation costs.

On February 06, 2017, the Commission passed an ex-parte interim order restraining Pioneer from cancelling his allotment. Pioneer then obtained the occupancy certificate on July 23, 2018 and issued a possession letter on August 28, 2018. Raghavan told the Commission he was not interested in taking possession because of the inordinate delay of almost three years. By then he had taken an alternate property in Gurugram.

Pioneer argued that construction was complete and the occupancy certificate had been obtained, so Raghavan should be directed to take possession instead of getting a refund. On October 23, 2018, the National Commission disagreed. It held that he could not be compelled to take possession at such a belated stage. It also held that Pioneer's grounds for the delay did not justify denying compensation. Pioneer was ordered to refund the deposited amount with 10.7% simple interest as compensation.

Pioneer's appeal raised three objections. First, it said Raghavan had not terminated the agreement by the written 90-day notice required under Clause 11.5(ii). Second, it argued that if his consumer complaint counted as termination, it was premature, because that clause allowed termination only 12 months after the grace period ended, meaning after March 04, 2017. Third, it said the agreement's 6% and 9% interest figures stopped the Commission from awarding 10.7%.

The clauses themselves exposed the imbalance. Pioneer could charge Raghavan 18% interest on delayed installments. It could cancel his allotment if an installment stayed in arrears for more than 30 days. Raghavan, by contrast, had to wait 12 months after the grace period before serving a 90-day termination notice. Even then, Pioneer had another 90 days to refund only the installments actually paid, after adjusting taxes, interest and penalty on delayed payments. Any further delay in refund carried just 9% interest. Clause 20 gave the buyer a right of cancellation solely where the developer's warranties clearly and unambiguously failed and the contract was frustrated. It offered a refund with 6% interest, barred every other claim, and denied the buyer any other right to cancel.

That is where the statute and the state rule met the contract. The Supreme Court held these terms one-sided on their face and an unfair trade practice under Section 2(r) of the Consumer Protection Act. On RERA delayed possession compensation, the National Commission applied Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017. Where a promoter fails to give possession under the agreement, the rule requires it to return the entire amount with interest, plus compensation payable. The interest rate is the State Bank of India's highest marginal cost of lending rate plus two percent. The Commission fixed 10.7% simple interest under that rule.

The Court dismissed Pioneer's appeals and held that Raghavan had made out a clear case of deficiency of service. Filing the consumer complaint was a justified way of terminating the Apartment Buyer's Agreement. He could not be compelled to accept possession whenever the builder chose to offer it.

The Court closed two loopholes:

• A builder cannot rely on a one-sided notice clause, interest figure or bar on other claims to bind the flat purchaser. The Court held such terms an unfair trade practice under Section 2(r).
• A builder cannot insist that a buyer accept possession offered long after the contractual deadline and a reasonable further period. Interest runs from each installment, except for the period covered by the interim stay obtained at the buyer's request.

Raghavan told the Court that he had taken a loan of ₹3,30,00,000 from Standard Chartered Bank to buy the flat and paid 10% annual interest on it. That was his submission. In its own reasoning, the Court noted that during the delay he had to service a loan taken for the purchase, paying 10% interest to the bank, and that he had located an alternate property in Gurugram. On that footing it held he was entitled to a refund of the entire amount deposited, with interest. Pioneer was given three months from the judgment date to repay.

This table shows how the ruling treats the compensation a buyer can receive for delay in possession of a flat in different situations.

• Gather the paper trail first. The documents that mattered in this case were the Apartment Buyer's Agreement, proof of each installment paid, the loan agreement and interest paid to the bank, the occupancy certificate, the possession letter, and the interim order.
• Know the forum used in this case. Raghavan filed his consumer complaint before the National Consumer Disputes Redressal Commission under the Consumer Protection Act, 1986. The builder's appeal then went to the Supreme Court under Section 23 of that Act. The National Commission fixed the interest by applying Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017.
• Avoid the biggest mistake: treating the builder's notice clause as final. The Court held that the builder's termination-notice, interest and bar-on-other-claims clauses were one-sided and could not bind the flat purchaser. It treated the consumer complaint itself as a justified termination.
• Note the repayment deadline in the final order. In this case the Supreme Court gave Pioneer three months from April 02, 2019 to refund Raghavan's money.