Flat or refund? 22 years on, national consumer body orders Gurgaon builder to pay 18% interest after failure to deliver

The core issue before the commission was whether the complainants were entitled to actual possession of the property or whether a refund with appropriate interest was the proper relief in light of the builder’s failure to deliver the flat.

Possession not legally viable: NCDRC

• The national consumer commission held that possession without legal title or regulatory compliance would not amount to meaningful relief.
• There is no hope of a perfect title over the property being conveyed to the complainant or possession being delivered as promised.
• The deficiency is, therefore, established and to that extent, the order of the state commission has not even been challenged by the opposite parties.
• It concluded that a refund, rather than possession, was the only viable remedy in the circumstances.
• We find it expedient and in the interest of justice to award refunds with interest by balancing the equities amongst the parties.

Interest raised to 18%

• While upholding the state commission’s decision to grant refund, the national consumer commission modified the interest rate from 10 per cent to 18 per cent per annum, citing the “peculiar facts” of the case.
• The commission noted that the buyers had invested a substantial amount as early as 2004.
• They had been waiting since 2006 for possession.
• The builder’s deficiency remained unchallenged.
• It further directed that the amount be paid within three months, failing which the interest will rise to 21 per cent.

Justice A P Sahi (president) and Bharatkumar Pandya (member) was hearing an appeal filed by the homebuyers against the Delhi State Commission’s 2015 order.

2004 booking that never materialised

• The case dates back to April 5, 2004, when Priajit Sandhu and Karan Sandhu entered into a flat buyer agreement with ARDEE Infrastructure for a unit in “ARDEE City,” Gurgaon.
• The buyers paid Rs 26.96 lakh, almost the entire consideration on the same date, with possession contractually promised within 30 months.
• However, possession was never handed over.
• Over the years, the buyers issued multiple communications, including a demand for possession in October 2010 and a legal notice in July 2011.
• The developer, instead of delivering the flat, raised additional monetary demands, leading to a prolonged dispute.

From possession claim to refund battle

• In 2012, the buyers approached the Delhi State Consumer Commission seeking possession of the flat, compensation for harassment, and litigation costs.
• On March 17, 2015, the state commission ruled in their favour, holding the builder guilty of “deficiency in service” and “unfair trade practice.”
• However, instead of directing possession, the commission ordered a refund of Rs 26.96 lakh, interest at 10 per cent per annum, Rs 2 lakh compensation and Rs 50,000 litigation costs.
• Dissatisfied with being denied possession, the buyers moved the national consumer commission arguing that the relief granted did not align with their primary claim and failed to account for the steep rise in property prices.

Builder’s defence

• Senior advocate S K Pattjoshi, along with advocates Bimlendu Shekhar and Raina Anand, argued that the developer contended that possession had been offered as early as October 26, 2006, and that the buyers had defaulted by not paying the balance amount.
• It claimed that out of 204 flats in the project, 203 had been occupied, and only the complainants’ unit remained uninhabited.
• However, the builder admitted key constraints, including cancellation of its licence.
• It could not obtain an occupancy certificate.
• Title issues and ongoing litigation affected the project.
• As a result, it offered possession only on an “as is where is basis,” without guaranteeing clear title or compliance.

Balancing conduct of both parties

• The commission also considered that the builder had, in 2015, offered Rs 56.9 lakh in compliance with the state commission’s order, an amount the buyers chose not to encash while pursuing their appeal.
• Balancing these equities, the national commission justified the enhanced interest as a fair measure of compensation without granting additional damages.

Legal significance: When refund trumps possession

• The ruling reinforces key principles in consumer and real estate law.
• Possession cannot be forced where legal title or regulatory approvals are absent.
• Refund becomes the “best possible solution” in stalled or legally compromised projects.
• Consumer forums may enhance interest to reflect delay, inflation, and loss of opportunity.
• Importantly, the commission clarified that the 18 per cent interest rate was awarded in “special circumstances” and should not be treated as a precedent for all cases.

Conclusion

• The judgment marks a strong message to errant developers – prolonged delay, coupled with legal incapacity to deliver, will not only mandate refund but also attract higher financial liability.
• For homebuyers, it underscores that while possession is the preferred remedy, courts will ensure meaningful compensation where delivery becomes impossible.