Supreme Court raises consumer refund interest from 9% to 18% in delayed possession dispute

A bench of Justice Dipankar Datta and Justice Augustine George Masih heard an appeal by a plot-buyer challenging an order of the National Consumer Disputes Redressal Commission (NCDRC) that directed a developer to refund the principal paid with simple interest at 9% per annum. The appeal arose from a long-standing dispute over delayed possession, additional demands by the developer and disputed charges under a 2007 plot buyer agreement.

The Court partly allowed the appeal and substituted the rate of interest awarded by the NCDRC, increasing it from 9% to 18% per annum while keeping the other directions intact. The Court ordered the respondent to refund the requisite principal amount within two months and recorded no order as to costs. The judgment noted that "Law is well settled that the amount of interest should be reasonable" and that "before compensation can be granted by the NCDRC, actual loss must be proved to have been suffered by the consumer." The Court, in its reasoning, observed: Background

The appellant booked a plot in the respondent's Park Land project on 10 March 2006 for a basic price of Rs. 30,87,000 and paid registration/advance charges the same day. A plot buyer agreement was executed on 11 December 2007. Clause 22 provided that possession would be handed over within 24 months of sanction of service plans; clause 12 declared "time is of the essence" and allowed the developer to charge 18% p.a. for buyer default. By April 2011 the buyer had paid substantial sums (total payments later recorded as Rs. 43,13,312.67). In April 2011 the developer, citing changes in layout plan, allotted an alternative plot and demanded an additional amount; an addendum was executed.

The buyer made further payments, including interest demands, and ultimately terminated the agreement by letter dated 27 March 2017. He sought refund and compensation and filed a consumer complaint in April 2018. The NCDRC disposed the complaint after the respondent's counsel offered to repay the principal with 9% simple interest, and directed repayment with interest and Rs. 25,000 as litigation costs; the order did not record any acceptance of that offer by the appellant. The appellant challenged this order before the Supreme Court contending that 9% was inadequate given the prolonged delay, alleged overcharging of various heads (enhanced EDC, PLC, electricity/STP and GST), and the fact that the developer had itself charged the buyer 18% for delayed payments. The respondent argued that compensation required proof of actual loss, cited precedents where lower interest rates were awarded, and submitted that one-sided contractual clauses could not be enforced.

The Supreme Court examined cited precedents and the peculiar facts of the case, observed that interest must be reasonable and depend on circumstances, and concluded that equity and fairness warranted matching the 18% rate the developer had imposed on the buyer. The Court therefore increased the interest rate to 18% p.a., ordered refund within two months and otherwise left the NCDRC directions undisturbed.

Case No.: CIVIL APPEAL NO. 3988 OF 2023 Case Title: Rajnesh Sharma v. M/s. Business Park Town Planners Ltd. Appearances: For the Petitioner(s): Mr. Vivek Malik, Advocate For the Respondent(s): Mr. Nayyar, Senior Counsel