In a significant ruling, the Supreme Court granted relief to homebuyers by raising the interest rate from 9% to 18% for the delayed handover of plot possession. The court observed that a builder who imposes 18% interest on buyers for late payments cannot avoid the same responsibility when failing to deliver possession 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.”, the court remarked.
The Court noted that while the interest rate charged by a builder on delayed payments from a homebuyer does not automatically serve as the standard for compensating delays in possession handover, principles of equity and fairness may justify applying the same standard to the builder.
In this case, the Appellant had booked a plot in 2006 and paid over ₹28 lakhs, yet possession was not provided until May 2018. As a result, a consumer complaint was filed seeking the return of the principal amount with interest.
A Bench of Justices Dipankar Datta and A.G. Masih disagreed with the NCDRC’s decision to award 9% interest, finding it inadequate, and instead ordered that interest be paid at 18% per annum—the same rate the builder had charged the buyer for delayed payments.
“In view of the respondent’s actions, it cannot be allowed to escape with a nominal liability for its default while charging interest at 18% on the default committed by the appellant. Although the interest rate charged by the builder cannot be granted to the buyer as a general rule, in this instance, equity and fairness demand that the respondent be subjected to the same standards for charging 18% interest and face consequences similar to those imposed on the appellant for his default. If we decide otherwise, we will be perpetuating a manifestly unjust agreement.”, the court stated.
“The law is well established that the amount of interest should be reasonable. What is deemed reasonable varies from case to case and should be determined based on the facts and circumstances of each case.”