Supreme Court: Agreed Compensation Rate For Delayed Possession Can Be Exceeded Only For Exceptional Reasons By Consumer Forums
The Supreme Court has allowed the Appeal filed by the GMADA, challenging the decision of the NCDRC, which affirmed the Order of the State Commission.
Once parties agree to a particular consequence for delay in handing over possession, the Supreme Court reiterated that a consumer forum needs exceptional and strong reasons to award compensation at more than the agreed rate.
The Court has allowed the Appeal filed by the Greater Mohali Area Development Authority (GMADA), challenging the decision of the National Consumer Disputes Redressal Commission (NCDRC). NCDRC had affirmed the Ordr of the State Commission, which directed GMADA to refund the entire amount deposited by both parties in respect of securing flats in the residential scheme launched by it along with 8% interest thereon as also paying additional costs for mental harassment, litigation and the interest paid by the Respondents to the State Bank of India, for the loans that they had secured to arrange for the funds required to be invested in the project.
The Bench of Justice Sanjay Karol and Justice Prasanna B Varale held that “whether the buyers of the flat do so by utilizing their savings, taking a loan for such purpose or securing the required finances by any other permissible means, is not a consideration that the developer of the project is required to keep in mind. For, so far as they are concerned, such a consideration is irrelevant. The one who is buying a flat is a consumer, and the one who is building it is a service provider. That is the only relationship between the parties. If there is a deficiency or delay in service, the consumer is entitled to be compensated for the same. Repayment of the entire principal amount along with 8% interest thereon, as stipulated in the contract, alongside the clarification that there shall be no other liability on the authority, sufficiently meets this requirement.”
Advocate Prashant Manchanda appeared for the Appellant, while Senior Advocate Gagan Gupta represented the Respondent.
Brief Facts
The Respondents had booked plots and made payments to GMADA. Due to GMADA's non-delivery of possession and non-development of the allotted plots, the Respondents claimed that they faced mental agony and harassment and had to take loans to pay the installments.
Court’s Reasoning
The Supreme Court noted, “The appellants’ case is that casting liability for the respondents’ loan upon GMADA is not a position under law. In contrast, the respondents argue to the contrary, stating that the Commissions have the requisite authority to grant compensation over and above what is agreed in the contract. It is their case that the terms of the agreement cannot circumscribe the authority of the Commission to award just compensation.”
The Court referred to its decision in DLF Homes Panchkula (P) Ltd. v. D.S. Dhanda (2020), wherein it was held that “The order to grant interest at the maximum of rate of interest charged by nationalised bank for advancing home loan is arbitrary and has no nexus with the default committed. The appellant has agreed to deliver constructed flats. For delay in handing over possession, the consumer is entitled to the consequences agreed at the time of executing buyer's agreement. There cannot be multiple heads to grant of damages and interest when the parties have agreed for payment of damages @ Rs 10 per square foot per month. Once the parties agreed for a particular consequence of delay in handing over of possession then, there have to be exceptional and strong reasons for Scdrc/Ncdrc to award compensation at more than the agreed rate.”
The Bench remarked, “What flows from the above is that the amount of interest awarded is the compensation to the investment maker for the amount of money and the time he has been denied the fruits of that investment. The 8% interest awarded in this case on top of the entire amount that is being invested, is the compensation for being deprived of the investment of that money. Apart from this no amount of interest on the loan taken by the respondents could have been awarded.”
Consequently, the Court ordered, “For that reason, we do not interfere with the award of certain amounts on account of mental agony and litigation costs. We have only interfered with that part of the order as set out in the notice. It has come on record that the amount deposited before the State Commission does not include the amount of interest on the loan. In view of the above discussion, we hold that there is no requirement for GMADA to make any further deposit. The amount as it stands currently, be dispersed to the respondents.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: Greater Mohali Area Development Authority (GMADA) v. Anupam Garg Etc. (Neutral Citation: 2025 INSC 808)
Appearance:
Appellant: Advocate Prashant Manchanda; AOR Vagisha Kochar
Respondents: Senior Advocate Gagan Gupta; AOR Ananta Prasad Mishra
