In a significant ruling safeguarding the rights of homebuyers, the Supreme Court of India has held that real estate developers cannot compel purchasers to take possession of flats without a valid Occupancy Certificate, nor can they rely on one-sided contractual clauses to limit delay compensation.
The division bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan dismissed a batch of civil appeals filed by Parsvnath Developers Ltd. and upheld the orders of the National Consumer Disputes Redressal Commission (NCDRC), which had directed the developer to pay compensation at the rate of 8% per annum for the delay in handing over flats.
Background of the Case
The dispute stems from three consumer complaints regarding a residential project named ‘Parsvnath Exotica’ in Sector-53, Gurgaon, developed by Parsvnath Developers Ltd. The homebuyers (respondents) had booked residential apartments and paid almost the entire sale consideration. Under the Flat Buyer Agreements, the developer was obligated to hand over possession within 36 months from the commencement of construction, with a six-month grace period.
However, the developer failed to deliver possession within the stipulated or extended timeframe. Consequently, the buyers approached the NCDRC. By separate orders dated July 30, 2018, and November 21, 2019, the NCDRC directed the developer to complete the construction, obtain the requisite Occupancy Certificates, and hand over possession by specified dates. Furthermore, the NCDRC awarded compensation in the form of simple interest at 8% per annum from the respective cut-off dates until actual delivery, directed the developer to pay litigation costs of Rs. 25,000 in each case, and held the developer liable for any increase in stamp duty. Aggrieved by these directions, the developer appealed to the Supreme Court.
Arguments of the Parties
Appellant (Developer): Senior counsel appearing for Parsvnath Developers argued that the NCDRC exceeded its jurisdiction under Section 14 of the Consumer Protection Act, 1986, by granting reliefs beyond the agreed contractual terms. The developer relied heavily on Clause 10(c) of the Flat Buyer Agreement, which capped delay compensation at a nominal rate of Rs. 10 per sq. ft. per month, arguing that no further compensation by way of interest could be awarded.
The developer also contended that the delay was caused by factors beyond its control, such as a lack of financial resources, labor shortages, escalation in material costs, and procedural delays in statutory approvals. The appellant further submitted that offers of possession had been made for “fit-out” purposes and on an “as is where is” basis, but the buyers refused to accept them.
Respondents (Homebuyers): The counsel for the homebuyers countered that they had paid nearly the entire sale consideration by 2013, yet they were left waiting for over a decade. It was argued that the developer continuously failed to complete the project and obtain the necessary Occupancy Certificates. The buyers maintained that the developer’s offer of possession on an “as is where is” basis, without the requisite statutory approvals, was legally untenable and that they were fully justified in seeking compensation for the severe delay.
The Court’s Analysis
Authored by Justice R. Mahadevan, the judgment systematically dismantled the developer’s reliance on one-sided contractual clauses. The Court emphasized that the jurisdiction of consumer fora is derived from the statute and is not strictly confined by the terms of a contract, especially when those terms are oppressive.
1. One-Sided Contracts and Statutory Jurisdiction: The Court observed that while Clause 10(c) of the agreement limited the developer’s liability for delay to Rs. 10 per sq. ft. per month, Clause 5(b) empowered the developer to charge 24% per annum interest for any delayed payments by the buyer.
Relying on previous Supreme Court decisions in IREO Grace Realtech Private Limited v. Abhishek Khanna and Pioneer Urban Land & Infrastructure Ltd v. Govindan Raghavan, the Court noted that such one-sided clauses constitute an “unfair trade practice.”
The bench observed:
“The NCDRC acted well within the ambit of its statutory authority in awarding compensation, notwithstanding the restrictive stipulation contained in Clause 10(c) of the Agreement. The power of the consumer fora to grant just and reasonable compensation for deficiency in service is traceable to the statute and cannot be curtailed by contractual terms which operate to the detriment of the consumer.”
The Court further clarified: “The statute does not impose any embargo on the grant of higher or reasonable compensation merely because the parties have agreed to a particular clause, especially where such clause is found to be unfair or oppressive.”
2. Principles of Compensation: Discussing the nature of compensation under the Consumer Protection Act, the Court referred to Lucknow Development Authority v. M.K. Gupta, Bangalore Development Authority v. Syndicate Bank, and Ghaziabad Development Authority v. Balbir Singh. The Court reiterated that compensation encompasses not only pecuniary loss but also mental agony and harassment caused by a deficiency in service. The Court found that an 8% per annum interest rate represents a “fair and reasonable compensation.”
3. Invalidity of Possession Without Occupancy Certificate: The Supreme Court strongly rejected the developer’s argument regarding the offer of possession on an “as is where is” basis without statutory approvals. Relying on Samruddhi Cooperative Housing Society Ltd v. Mumbai Mahalaxmi Construction (P) Ltd and Dharmendra Sharma v. Agra Development Authority, the Court explicitly stated that failing to obtain an Occupancy Certificate constitutes a deficiency in service.
“In view of these authoritative pronouncements, possession without an Occupancy Certificate cannot be forced upon the respondents. Obtaining such certificate is a statutory pre-condition integral to lawful delivery of possession,” the Court held.
The Decision
Finding no merit in the developer’s appeals, the Supreme Court affirmed the orders of the NCDRC.
The Court directed Parsvnath Developers to obtain the requisite Occupancy Certificates and hand over lawful possession to the respondents in two of the appeals within six months from the date of the judgment. Until such time, the developer is mandated to continue paying the NCDRC-determined compensation without default. For the third appeal, where possession was already taken by the buyers in 2022 out of urgent need, the Court directed the developer to pay the 8% interest compensation up to the date of possession and to furnish the Occupancy Certificate forthwith.
All three civil appeals were dismissed with no order as to costs.
- Case Title: Parsvnath Developers Ltd. v. Mohit Khirbat (With connected appeals)
- Case Numbers: Civil Appeal No. 5289 of 2022; Civil Appeal No. 5290 of 2022; Civil Appeal No. 11047 of 2025
