Homebuyer Cannot Claim Both Interest On Full Refund And Rent For Builder’s Same Delay: Supreme Court
The Court held that interest compensated the homebuyer for being deprived of money that could have secured another home, making a separate rent award compensation for the same loss twice.
Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, Supreme Court
The Supreme Court has held that a homebuyer cannot claim both interest on the full refund and reimbursement of rent for the same delay by a builder, as this would amount to double compensation for the same default.
The Court directed the refund of ₹1,27,34,726 paid by the homebuyer, with 12% simple interest from the respective dates of payment. It separately awarded ₹15 lakh in full and final satisfaction of his claims towards rent, mental agony, harassment and litigation expenses.
The Court was hearing appeals arising from a National Consumer Disputes Redressal Commission order directing Lodha Healthy Constructions and Developer Private Limited to refund the amount deposited towards an apartment in its “Lodha Bellezza” project in Hyderabad. The homebuyer challenged, among other things, the Commission’s failure to decide his claims for rent and compensation.
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held: “… the award of rent in addition to interest on the full refund would amount to double compensation for the same default. Interest at 12% per annum is awarded precisely because the Borrower was deprived of the use of his money. Had that money been with him, he could have applied it to secure a home of his own.”
Referring to DLF Homes Panchkula Pvt. Ltd. v. D.S. Dhanda (2020), the Bench added: “… the consumer fora ‘cannot award interest and/or compensation by applying rule of thumb’. To award him both, the return on the money which would have bought him a home and the rent which he paid for want of one would be to compensate him twice for the same loss.”
Senior Advocate Amit Anand Tiwari appeared for the homebuyer. Senior Advocate Gaurav Agarwal and Advocate Rahul Kripalani appeared for the builder, while Advocate Suhasini Sen appeared for the Bank.
Background
The judgment noted that the homebuyer booked the apartment in 2009 for approximately ₹2.30 crore and paid ₹51.11 lakh from his funds. Housing Development Finance Corporation Limited sanctioned a ₹2 crore loan and disbursed approximately ₹1.68 crore to the builder under a tripartite arrangement.
According to the judgment, the builder received nearly 95% of the sale consideration but did not deliver possession within the promised period. The homebuyer approached the NCDRC in 2013, seeking a refund with interest, reimbursement of ₹7.97 lakh paid as rent until April 2013, further rent and ₹15 lakh as compensation.
The NCDRC directed the builder to refund the amount deposited with 9% interest, rising to 12% upon failure to comply within three months. The Commission, however, did not decide the claims for rent and compensation.
Court’s Observations
Consumer Protection Act Creates No Independent Statutory Right To Rent Reimbursement
The Court first observed that the Consumer Protection Act, 1986 did not contain any provision comparable to rent-control legislation statutorily recognising a right to claim rent in specified circumstances.
The Bench stated: “Firstly, the Act has no provision corresponding to provisions in other branches of law, such as Rent Control legislations which statutorily recognises the right of a tenant to claim rent, in case he hands over the possession of the tenanted premises for reconstruction/rebuilding.”
Referring to Lucknow Development Authority v. M.K. Gupta (1994), Ghaziabad Development Authority v. Balbir Singh (2004), Bangalore Development Authority v. Syndicate Bank (2007) and Fortune Infrastructure v. Trevor D’Lima (2018), the Court observed that compensation must correspond to proved loss or injury arising from the service provider’s default.
Claim Exceeded Pleadings And Proof
The Court noted that the homebuyer expanded his rent claim before the Supreme Court to ₹38,000 per month until July 2013 and ₹65,000 per month from August 2013 to October 2022.
The Bench observed that this enlarged claim was raised for the first time in a rejoinder and was supported only by a bank statement for 2021. It noted that no lease deed, rent receipt or other evidence of tenancy had been placed before the NCDRC and held that such a claim could not be adjudicated in a statutory appeal on the strength of rejoinder averments.
Homebuyer Had Chosen The Refund Remedy
The Court noted that Clause 24 of the agreement provided two alternative remedies upon the builder’s failure to deliver possession. The purchaser could remain in the project and receive compensation at 12% until possession, or terminate the agreement and obtain a refund with 12% simple interest.
The Bench held: “By filing the complaint on 13.05.2013 and seeking a refund, the Borrower chose the second course. Having chosen to give up the apartment, he cannot claim, in addition, the rent which he would have saved had he taken possession of it. From the date of that election, the cost of housing himself is not a loss caused by the non-delivery of an apartment which he no longer wished to have. It is a cost which every person must bear, whether he owns a home or rents one. The obligation of the Builder thereafter was to return his money with interest, and that obligation is being enforced.”
The Court also found the rent claim inconsistent with the homebuyer’s earlier position. It noted that he had initially quantified his loss as the rent that he could have earned by letting out the apartment but subsequently sought reimbursement of the rent allegedly paid for his residence.
Referring to Section 73 of the Contract Act, the Bench held that a purchaser who elected to recover his money and received interest upon it could not continue claiming rent indefinitely.
Consolidated Compensation Awarded
The Court nevertheless observed that the homebuyer had paid nearly 95% of the consideration by July 2011 and remained deprived of both the apartment and his money for over 15 years. It also noted that he had lost the benefit of escalation in the apartment’s value.
The Bench observed: “The Borrower has been subjected to prolonged uncertainty, having paid about 95% of the consideration by July 2011 and having been kept out of both the apartment and his money for over fifteen years. The Borrower has been deprived of the benefit of escalation in the price of the apartment and therefore, compensation, in such a case has to be higher than the return of the money deposited by the Borrower. The quantum of compensation depends on the facts of each case.”
The Court consequently awarded ₹15 lakh as full and final compensation towards rent, mental agony, harassment and litigation expenses.
Conclusion
The Supreme Court directed the NCDRC to release ₹1,27,34,726 to the homebuyer with 12% simple interest from the respective dates of payment. It also directed the release of ₹15 lakh as consolidated compensation within one month and upheld the ₹2 lakh compensation awarded against the Bank for deficiency in service.
The Court directed that the remaining deposited amount be retained in an interest-bearing account subject to the outcome of the Bank’s pending appeal. It directed the High Court to decide that appeal independently, without being influenced by the Supreme Court’s observations, and left open the Bank’s and the homebuyer’s contentions concerning liability under the loan.
The Supreme Court modified the NCDRC’s order and disposed of the appeals without costs.
Cause Title: Madhu Kudapa (Formerly Known as K. Madhusudhan Rao) v. M/s Lodha Healthy Constructions and Developer Private Limited (LHCPL) and Another (Neutral Citation: 2026 INSC 1131)
Appearances
Appellant: Senior Advocate Amit Anand Tiwari
Respondents: Senior Advocate Gaurav Agarwal; Advocate Rahul Kripalani; Advocate Suhasini Sen