Delay in possession of the flat amounts to a deficiency, DLF to pay interest of 6 per cent per annum; SC

The SC on Aug 25, 2020 {Wg. Cdr. Arifur Rahman Khan and Aleya Sultana and Ors. vs DLF Southern Homes Pvt Ltd} held that a failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. It was held that there is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. It was held that the expression "service" in Section 2 (1) (o) means a service of any description which is made available to potential users including the provision of facilities in connection with (among other things) housing construction. 

It was held by the Bench, comprising of Justice D.Y. Chandrachud & Justice K M Joseph, that the agreement is manifestly one-sided: the rights provided to the developer for a default on the part of the home buyer are not placed on an equal platform with the contractual right provided to the home buyer in the case of a default by the developer.

It was held by the SC that the terms of the agreement have been drafted by the developer. It was also held that they do not maintain a level platform as between the developer and purchaser. It was held that the stringency of the terms which bind the purchaser are not mirrored by the obligations for meeting times lines by the developer. The agreement does not reflect an even bargain.

In the present case, the National Consumer Disputes Redressal Commission dismissed a consumer complaint filed by 339 flat buyers, accepting the defence of DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. that there was no deficiency of service on their part in complying with their contractual obligations and, that despite a delay in handing over the possession of the residential flats, the purchasers were not entitled to compensation in excess of what was stipulated in the Apartment Buyers Agreement. The said judgment was subject matter of present appeal before the Supreme Court.

The SC held that there has been a gross delay on the part of the developer in completing construction ranging between two and four years. It was held that despite successive extensions of time to deliver possession sought by the developer, possession was not delivered on time.

It was held that the nature and quantum of the delay on the part of the developer are of such a nature that the measure of compensation which is provided in clause 14 of the ABA would not provide sufficient recompense to the purchasers.

It was also held that Judicial notice ought to be taken of the fact that a flat purchaser who is left in the lurch as a result of the failure of the developer to provide possession within the contractually stipulated date suffers consequences in terms of agony and hardship, not the least of which is financial in nature. It was held that having paid a substantial amount of the purchase price to the developer and being required to service the debt towards loan installments the purchaser is unable to obtain timely possession of the flat which is the subject matter of the ABA.

It was held by the SC that the simple question which needs to address is whether a flat buyer who seeks to espouse a claim against the developer for delayed possession can as a consequence of doing so be compelled to defer the right to obtain a conveyance to perfect their title. It was held that it would, in its view, be manifestly unreasonable to expect that in order to pursue a claim for compensation for delayed handing over of possession, the purchaser must indefinitely defer obtaining a conveyance of the premises purchased or, if they seek to obtain a Deed of Conveyance to forsake the right to claim compensation. The SC held that this basically is a position which the NCDRC has espoused. It was held that it cannot countenance that view.

The SC held that in the present case, there exist, clear and valid reasons for not holding down the flat buying consumers merely to the entitlement to receive compensation at the rate of 5 per square foot per month in terms of clause 14 of the ABA.

The NCDRC has upheld the collection of the charges towards electricity based on the terms of the ABA. The SC, however, held that there is no infirmity in the finding of the NCDRC, which is based on the provisions contained in clause 23(b) of the ABA. It was held that the charges recovered are not contrary to what was specified in the contract between the parties. It was further held by the SC that there is no deficiency of service in regard to the demand of interest payable on the tax which was required to be deposited with the revenue. It was also held by the SC that the demand of parking charges is in terms of the ABA and hence it is not possible to accede to the submission that there was a deficiency of service under this head.

The SC held that it has come to the conclusion that the dismissal of the complaint by the NCDRC was erroneous. It was held that the flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities. It was held by the SC that the reasoning of the NCDRC on these facets suffers from a clear perversity and patent errors of law. Allowing the appeals in part, the SC set aside the impugned judgment and order of the NCDRC dismissing the consumer complaint.

It was directed by the SC to the DLF to pay an amount calculated at the rate of 6 per cent simple interest per annum to each of the appellants. It was directed that the amount shall be computed on the total amounts paid towards the purchase of the respective flats with effect from the date of expiry of thirty-six months from the execution of the respective ABAs until the date of the offer of possession after the receipt of the occupation certificate. It was further held by the SC that the above amount shall be in addition to the amounts which have been paid over or credited by the developer at the rate of Rs 5 per square foot per month at the time of the drawing of final accounts.