SC orders builder to pay 18% interest for delayed handover of plot’s possession

In a relief to home/plot buyers, the Supreme Court has said that a developer/builder who imposes 18% interest on buyers for delayed payments cannot evade the same liability if he fails to deliver possession of a plot/flat on time to the consumer.

“There is no principle of law that interest in default charged by the builder can never be granted to the buyer,” a Bench of Justices Dipankar Datta and A.G. Masih said, enhancing interest from 9% to 18% for delayed handover of possession of a plot to a buyer.

In this case, the possession of the alternative plot allotted in 2011 to appellant Ranjesh Sharma was offered only in 2018. He paid a total sum of Rs 43,13,312.67 of which Rs 83,300.76 was towards interest @18% per annum charged by the respondent (developer) for Sharma’s default/delay in making the payments.

Aggrieved by the respondent’s inaction in allotting the plot, Sharma terminated the agreement with M/S Business Park Town Planners Ltd on March 27, 2017, and issued a legal notice informing the developer about the termination and sought a refund of Rs 43,13,212 along with 24% interest per annum and a sum of Rs 72,30,000 on account of loss of appreciation of property.

Ultimately, in April 2018, Sharma moved the NCDRC, following which the developer offered the possession of the plot on May 8, 2018, subject to payment of a further amount of Rs 7,60,900.33. The NCDRC disposed of the matter merely based on the offer made by the developer’s counsel.

However, terming a January, 13, 2023, decision the National Consumer Disputes Redressal Commission (NCDRC) to award only 9% interest to a plot buyer for delayed handover of possession as inadequate, the top court directed that interest be paid at 18% per annum—the same rate the builder had charged the buyer for delayed payments.

“Keeping in mind the overall conduct of the respondent: the delay caused by it in offering the plot, the fact that the respondent charged the appellant delay compensation @ 18% p.a. on the due amount, and the long wait that the appellant had to endure over a period of a decade, 15 causing harassment and anxiety, which are writ large, we find that this is an appropriate case where refund of the principal amount with interest @ 9% p.a., as awarded by the NCDRC, will not serve the ends of justice,” the Bench said in its September 24 order.

“In view of the conduct of the respondent (builder), it cannot be permitted to escape with a nominal liability for its default, while it charged interest @ 18% on default committed by the appellant. Although, the rate of interest charged by the builder cannot be granted to the buyer as a rule of thumb, however, in the present case, equity and fairness demands that the respondent be put to the same rigours for charging 18% interest and face consequences similar to those imposed on the appellant for default committed by him. If we hold otherwise, we will be perpetuating a manifestly wrong bargain,” the Bench said.

“Respondent (builder) shall refund the requisite amount (to the buyer) within a period of two months…,” it ordered.