No law that interest charged by developer for default can't be awarded to flat or plot buyer: Supreme Court

The appellant challenged the National Consumer Disputes Redressal Commission's order granting him interest at the rate of 9% on refund amount.

New Delhi: In a significant judgment, the Supreme Court on Wednesday said, there is no principle of law that interest in default charged by the builder can never be granted to the flat or plot buyer.

A bench of Justices Dipankar Datta and Augustine George Masih, citing a series of judgments, pointed out, it cannot be said that this court has always rejected the claim of parity.

"Law is well settled that the amount of interest should be reasonable. What is reasonable varies from case to case. The same is to be granted considering the facts and circumstances of each case,'' the bench said.

Awarding an interest of 18 per cent per annum on deposits made by a plot buyer Rajnesh Sharma, the court rejected the arguments by developer M/s Business Park Town Planners Ltd that this court has consistently granted interest at the rate of 9 per cent per annum.

Having noted the long delay and charging of the interest by the developer, the bench said, "In view of the conduct of the respondent-developer, it cannot be permitted to escape with a nominal liability for its default, while it charged interest at the rate 18 per cent on default committed by the appellant."

The appellant challenged the National Consumer Disputes Redressal Commission's order granting him interest at the rate of 9 per cent on refund amount.

Although, the court emphasised, the rate of interest charged by the builder cannot be granted to the buyer as a rule of thumb.

However, in the present case, the bench said, "equity and fairness demands that the respondent be put to the same rigours for charging 18 per cent 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 court said the series of judgments cited by the developer will make no difference to the decision in the present lis, as all the said cases were decided in light of the peculiar facts of each matter.

The bench, however, agreed to a contention that the objective of granting compensation cannot be altered such that it amounts to a windfall gain to the other party. Proof of actual loss would require evidence to be tendered, for, it is a guiding lamp for grant of compensation, it noted.

In the case, the bench pointed out, it was not deciding the actual loss suffered by the appellant.

"We are only concerned with deciding the rate of interest to be awarded to the appellant on the principal amount paid by him to the respondent,'' the bench said.

The court held this is an appropriate case where refund of the principal amount of Rs 43,13,212 with interest at the rate of 9 per cent per annum for a plot booked in 2006, as awarded by the NCDRC, will not serve the ends of justice.

The court noted the delay was caused by the developer in offering the plot, and it charged the appellant delay compensation at the rate of 18 per cent per annum on the due amount. The appellant had to endure long wait over a period of a decade, causing harassment and anxiety, it said.