Supreme Court: Homebuyers cannot be forced to accept flats without occupancy certificate; builder clauses can’t override consumer rights

The homebuyers also pointed out that possession in one case was accepted only due to urgent need. (AI image)

In a significant judgment reaffirming consumer protection in housing disputes, the Supreme Court has held that homebuyers cannot be compelled to accept possession of flats without an Occupancy Certificate and that contractual clauses limiting compensation cannot override statutory powers of consumer fora to award just and reasonable compensation for delay.A bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan dismissed appeals filed by Parsvnath Developers Ltd. and Parsvnath Hessa Developers Pvt. Ltd., thereby affirming orders of the National Consumer Disputes Redressal Commission (NCDRC) directing the developer to complete construction, obtain Occupancy Certificates, hand over possession, and pay compensation at 8% interest per annum to homebuyers in the “Parsvnath Exotica” housing project at Sector-53, Gurgaon.The Court categorically observed:“Obtaining such certificate is a statutory pre-condition integral to lawful delivery of possession.”Background of the DisputeThe appeals arose from consumer complaints filed by flat purchasers between 2017 and 2019 before the NCDRC. The respondents had booked residential flats in the developer’s Parsvnath Exotica project between 2007 and 2011 and had paid almost the entire sale consideration.Under the Flat Buyer Agreements, possession was to be delivered within 36 months from commencement of construction, with an additional six-month grace period. However, despite substantial payments made by the purchasers, the developer failed to complete construction or hand over possession within the contractual period. The homebuyers were therefore compelled to approach the NCDRC seeking possession, compensation and other reliefs.By orders dated 30.07.2018 and 21.11.2019, the NCDRC directed the developer to:

Aggrieved by these directions, the developer approached the Supreme Court.Developer’s Submissions:Senior counsel for the developer argued that the NCDRC had exceeded its jurisdiction and granted relief contrary to the terms of the Flat Buyer Agreements. It was argued that Clause 10(c) of the Agreement specifically restricted compensation for delay to Rs. 10 per square foot per month, and therefore, awarding interest at 8% per annum was impermissible.The developer also argued that the agreement expressly provided that buyers were liable to bear stamp duty and registration charges, and therefore, the NCDRC’s direction requiring the developer to bear increased stamp duty was contrary to contractual terms.The developer further argued that delays were caused due to factors beyond its control, including financial constraints, labor shortages, escalation in costs and delay in statutory approvals. It was further submitted that the developer had already paid substantial amounts as compensation and offered possession in some cases.Therefore, the developer sought liberty to settle the dispute by refund or delivery of possession on an “as is where is” basis.Homebuyers’ Submissions:Senior counsel for the homebuyers supported the NCDRC orders and argued that the developer had failed to fulfill contractual obligations despite receiving almost the entire sale consideration. It was submitted that possession was delayed for several years and, in some cases, offered without obtaining Occupancy Certificates.The homebuyers also pointed out that possession in one case was accepted only due to urgent need and without prejudice to their rights. It was further submitted that the homebuyers had suffered prolonged deprivation and hardship due to the developer’s failure.Supreme Court’s FindingsThe Supreme Court rejected the developer’s arguments and held that consumer fora derive their powers from statute and are not bound by unfair contractual clauses.The Court held:“The source of power, therefore, is statutory, and not contractual.”The Court clarified that Sections 12, 14 and 22 of the Consumer Protection Act empower consumer fora to award compensation for deficiency in service.The Court stressed that housing construction is a “service” under the Consumer Protection Act and delay in handing over possession constitutes deficiency in service. The Court relied on its previous judgments including Lucknow Development Authority v. M.K. Gupta, Imperia Structures Ltd. v. Anil Patni, and IREO Grace Realtech Pvt. Ltd. v. Abhishek Khanna.The Court held:“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 held that statutory remedies under consumer law cannot be curtailed by contractual stipulations.The Court then examined the developer’s argument that compensation was restricted by Clause 10(c) of the Flat Buyer Agreement.The Court examined Clause 10(c) of the agreement, which provided nominal compensation for delay, and held that such clauses were one-sided and unfair. The Court also noted that while the developer paid nominal delay compensation, it could charge buyers 24% interest for delayed payment.The Court observed:“The stipulated compensation is nominal and disproportionate, particularly in cases of prolonged delay causing financial strain and mental hardship to homebuyers.”The Court reiterated that consumer fora are not bound to mechanically enforce unfair contractual clauses.It held:“Departure from such a clause, where justified by the nature and duration of the delay and the hardship caused, lies within the statutory competence of the forum.”The Court further reaffirmed that compensation under consumer law must be fair and proportionate. Relying on Ghaziabad Development Authority v. Balbir Singh and Bangalore Development Authority v. Syndicate Bank, the Court held that compensation depends on the facts of each case. The Court observed:“Compensation under the Act is remedial and protective in character… what is required is that the award be just, reasonable and proportionate to the delay, deprivation and hardship established on record.”The Supreme Court also strongly rejected the developer’s attempt to offer possession without obtaining the Occupancy Certificate.Relying on its earlier decision in Samruddhi Cooperative Housing Society Ltd. v. Mumbai Mahalaxmi Construction Pvt. Ltd., the Court held that failure to obtain an Occupancy Certificate constitutes deficiency in service.The Court also referred to Dharmendra Sharma v. Agra Development Authority and held:“Possession offered without the requisite completion certificate is illegal, and a purchaser cannot be compelled to take possession in such circumstances.”The Court held that Occupancy Certificate is a mandatory legal requirement and possession without it cannot be treated as valid delivery.The Supreme Court further observed that despite repeated directions, undertaking and opportunities, the developer failed to obtain Occupancy Certificates. Furthermore, the Court noted that even in 2024, the developer continued offering possession on “as-is-where-is” basis without statutory approvals.The Court also took note that the respondents had paid almost the entire sale consideration as early as 2013 but were deprived of possession for over a decade, and that the developer continued to remain in breach of its obligations despite repeated opportunities and directions. The Court found that the delay was prolonged and unjustified.Finally, the Supreme Court held that the NCDRC had acted within its statutory jurisdiction. The Court upheld the award of compensation at 8% interest and affirmed all directions issued by the NCDRC.It held:“Such failure constitutes deficiency in service.”“The power of the consumer fora to grant just and reasonable compensation… cannot be curtailed by contractual terms.”The Court issued the following directions:

The Court dismissed all appeals and granted liberty to the developer to approach NCDRC if delay in obtaining Occupancy Certificate was for bona fide reasons.CIVIL APPEAL NO. 5289 OF 2022 PARSVNATH DEVELOPERS LTD. VERSUS MOHIT KHIRBAT WITH CIVIL APPEAL NO. 5290 OF 2022 PARSVNATH DEVELOPERS LTD. VERSUS GP. CAPT. SUMAN CHOPRA (DEAD) THROUGH LRS. WITH CIVIL APPEAL NO. 11047 OF 2025 PARSVNATH HESSA DEVELOPERS PVT. LTD. VERSUS AMAN CHAWLA AND ANOTHERAppearance:For Appellant(s) : Mr. Jayant Muthraj, Sr. Adv. Mr. Rajesh P., AOR Mr. Deeptanshu Jain, Adv.For Respondent(s) :Mr. Saurabh Mishra, Sr. Adv. Mr. Parmanand Yadav, Adv. Ms. Divya Jyoti Singh, AOR Ms. Ankita Singh, Adv. Mr. Himanshu Shekhar, AOR Mr. M.l. Lahoty, Adv. Mr. Anchit Sripat, Adv. Mr. Arvind Kumar, Adv. Ms. Siddhi Bohra, Adv.(Vatsal Chandra is a Delhi-based Advocate practicing before the courts of Delhi NCR.)