Developer to Refund and Pay Agreed Interest for Delayed Possession

In a landmark judgement, Vidya and others v. M/S Parsvnath Developers Ltd. (2024 SCC OnLine SC 1823), dated July 29, 2024, the Hon’ble Supreme Court of India ruled in favor of homebuyers, addressing the issue of interest rates on refunds in cases of delayed possession. The court found that the National Consumer Disputes Redressal Commission (NCDRC) erred in awarding an interest rate lower than what was stipulated in the original agreement between the parties.

M/s Parsvnath Developers Limited (“Developer”) had launched the “Parsvnath Paramount” housing project in which the complainants had booked a 3BHK flat. The complainants had entered into a flat-buyer agreement, dated October 10, 2008, (“Agreement”) with the Developer and had paid nearly 95% of the total price. According to the agreement, possession of the flat was to be handed over within a period of 30 months, with an additional grace period of 6 months. However, possession of the flat was delayed beyond the agreed timeline. When the complainants visited the construction site, they found that no work was being carried out. The complainants approached NCDRC, New Delhi, seeking a refund and compensation. The NCDRC partially granted the claim, directing the Developer to refund the entire consideration paid but awarding an interest rate that was lower than that specified in the agreement. Dissatisfied with this decision, the complainants appealed to the Hon’ble Supreme Court of India.

The Hon’ble Supreme Court of India observed that the NCDRC was not justified in awarding an interest rate of 9% per annum, which was below the rate agreed upon in the contract. It upheld the order of the NCDRC for the refund of the entire amount deposited by the complainants. However, it modified the interest rate directive, ruling that interest should be paid at the rate of 12% per annum from the date of the respective deposits until the date of refund. The court partly allowed the appeal, ensuring the complainants received the agreed-upon rate of interest.

This ruling is a significant step in protecting consumer rights, reinforcing the importance of honoring contractual terms. Developers are now reminded of their obligation to meet the agreed terms, particularly regarding interest rates on refunds.