Unfair Contractual Clauses No Bar To Just Compensation; Detailed Mathematical Assessment Not Sine Qua Non Under Consumer Protection Act: Supreme Court
Consumer fora can award reasonable compensation despite one-sided agreements; possession without Occupancy Certificate held impermissible
Justice B.V. Nagarathna, Justice R. Mahadevan, Supreme Court
The Supreme Court has reaffirmed that consumer fora are empowered to grant just and reasonable compensation for delay in housing projects, irrespective of restrictive or one-sided clauses in builder-buyer agreements. The Court also said that detailed mathematical assessment of market loss is not a sine qua non for awarding compensation under the Consumer Protection Act, 1986.
The Bench further reiterated that possession without an Occupancy Certificate cannot be forced upon buyers, as obtaining such certification is a statutory pre-condition for lawful delivery of possession.
It was also noted that the agreements in question were inherently one-sided, providing only nominal compensation of ₹10 per sq. ft. per month for delay, while simultaneously allowing the developer to charge steep interest at 24% per annum for any default by buyers. Such clauses, it observed, create an unequal contractual framework and cannot be enforced to deny fair compensation to consumers.
Accordingly, a Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan dismissed the appeals filed by Parsvnath group companies against orders of the National Consumer Disputes Redressal Commission (NCDRC). “The statute does not impose any embargo on the grant of higher or reasonable compensation merely because the parties have agreed to a particular clause, especially where such clause is found to be unfair or oppressive. While consumer fora must act judicially and not arbitrarily enhance compensation, they are not bound to mechanically enforce a contractual term that results in manifest injustice. Departure from such a clause, where justified by the nature and duration of the delay and the hardship caused, lies within the statutory competence of the forum”, the bench observed.
Holding that compensation is not uniform and must be moulded in light of the nature of delay, conduct of the authority, and extent of harassment suffered, the bench further observed, “The jurisprudence that emerges is clear: compensation under the Act is remedial and protective in character. Detailed mathematical ascertainment of market decline is not a sine qua non; what is required is that the award be just, reasonable and proportionate to the delay, deprivation and hardship established on record”.
Rajesh P., AOR appeared for the appellant and Advocate Parmanand Yadav appeared for the respondent.
In the matter, the dispute was from delayed delivery of flats in a residential project-Sector 53, Gurgaon, Parsvnath Exotica, despite homebuyers having paid substantial portions of the sale consideration years earlier. Aggrieved by the delay and non-delivery of lawful possession, the buyers approached the NCDRC, which directed the developer to complete construction, obtain the Occupancy Certificate, and pay compensation by way of interest at 8% per annum along with other consequential reliefs.
The developer had argued that the NCDRC had exceeded its jurisdiction and that compensation ought to be restricted to the terms of the builder-buyer agreement. It relied on contractual clauses that provided for limited compensation in case of delay and placed liability for additional costs such as stamp duty on the buyers.
Rejecting the developer’s argument that compensation must be strictly confined to contractual terms, the Court held that the powers of consumer fora flow from statute and cannot be curtailed by private agreements. It emphasised that where contractual terms are unfair or oppressive, consumer fora are not bound to mechanically enforce them and may award compensation commensurate with the hardship suffered.
On facts, the Court found that there was an undisputed and prolonged delay in completion of the project and handing over of possession, despite substantial payments made by the homebuyers. Thus, the same amounted to a clear deficiency in service, justifying the award of compensation by the NCDRC.
What is required is that the compensation be just, reasonable, and proportionate to the delay, deprivation, and mental hardship suffered by homebuyers, the court said.
Upholding the NCDRC’s directions, the Court found no infirmity in the award of interest at 8% per annum, along with additional reliefs such as rebate, litigation costs, and payment of increased stamp duty due to delay. These were held to be incidental and within the statutory powers of the consumer forum.
Accordingly, the Court directed the developer to obtain the requisite Occupancy Certificate and hand over lawful possession within a stipulated time, while continuing to pay compensation until compliance.
Cause Title: Parsvnath Developers Ltd. v. Mohit Khirbat [Neutral Citation: 2026 INSC 170]
Appellant: Rajesh P., AOR, Advocate.
Respondent: Parmanand Yadav, Divya Jyoti Singh, AOR, Ankita Singh, M.L. Lahoty, Anchit Sripat, Arvind Kumar, Himanshu Shekhar, AOR, Advocates.