A Bird’s Eye of the Hybrid Problem of Delayed Possession Compensation and one Sided Contracts in real Estate Development
If your builder delayed handing over your flat by months or years, one question decides everything: can you still claim compensation after you have already taken possession? For a long time, developers argued that once a buyer accepted the keys and signed the conveyance deed, the claim was closed. The Supreme Court disagreed. In Wg. Cdr. Arifur Rahman Khan & Ors. vs DLF Southern Homes Pvt. Ltd., the Court held that homebuyers can claim compensation for delayed possession even after taking possession—and that a one-sided builder-buyer agreement cannot cap what a buyer is owed. This article breaks down what the Court decided, why one-sided clauses fail, and the routes available to a buyer under RERA and consumer law.
For the last two decades the field of real estate and development has seen an increase in the number of frauds against the consumers by the promoters and builders. These allottees often find themselves crushed under the broken promises and deceitful practices of unscrupulous promoters and builders. They are often lost between misleading advertisements, construction delays and promises that seem like a fairy tale. Even after investing tons of their hard-earned money, most of these homebuyers are left stranded in legal battles in court rooms, just to be given incomplete and substandard homes. There was a lack in the regulatory oversight and enforcement capabilities on the part of the government, leaving these allotees vulnerable and easily exploited. The Government therefore after finally scanning the multiple issue at hand enacted the Real Estate and Development Act 2016 (RERA), which gave much better clarity on how to deal with such issues. Despite the implementation of RERA, the homebuyers continue to grapple with numerous issues in the real estate sector. Till date such challenges still persist and are being tackled by the courts. One such issue had come up in the case of Wg. Cdr. Arifur Rahman Khan & Aleya Sulatana & Ors vs DLF Southern Homes Pvt Ltd (Supreme Court) No.229/2022 in C.A. No.6239/2019.. This issue delt with the fact that courts are not at all constrained by the terms provided in the Builder Buyer Agreement while awarding any form of compensation. The courts in this case have carefully studied the delays and defaults on the part of the builders and have then come to this conclusion.
Overview of the Facts
A project called Westend Heights at New Town, DLF, BTM Extension at Begu, Bengaluru had been booked by multiple allottees. The suit was initially instituted by nine flat buyers on the grounds that they were not given adequate compensation by the developers for delayed possession of the flat. The Builder Buyer Agreement contained within itself a clause 11(a) that the Developer will “endeavour” to complete the construction of the flats within thirty-six months from the date of execution of the Builder Buyer Agreement except for force majeure conditions and such conditions would include delays due to Government rules, order or notifications. The delivery of possession of the flats were to be given to the allottees by the middle of 2012. That promise was not fulfilled and the developers revised their completion date to October 2013 and then further extended the date to June 2014. Later on, the Developers modified their tentative dates of possession finally to 2015 on a compartmentalised basis for different allottees for different months of 2015. Thus, the National Consumer Dispute Redressal Commission (NCDRC) had to entertain multiple complaints under the section 12(c) of the Consumer Protection Act 1986, where the complainants had approached the court for delayed compensation for dragging the date of possession.
The NCDRC divided the complainants into 6 groups. Gorup A were the ones who took possession before filing of complaint, Group B who took possession, executed deed of conveyance during pendency of complaint, Group C entailed people who took possession during pendency of complaint but did not execute deed of conveyance, Group D who settled disputes during pendency of complaint, Group E who sold flats during pendency of complaint and Gorup F who neither took possession nor executed the conveyance deed.
The NCDRC took a very biased view while deciding the application of the complainants/allotees and solely dismissed the said application on the ground that under the agreement it is stipulated that the compensation would be given at the rate of Rs 5 per sq. ft of the super area for every month of delay and the homebuyers had agreed to this by affixing their sign on the agreement, therefore they are not entitled to seek any other and further compensation on the grounds of delayed possession. NCDRC also failed to consider the fact that the agreement was in itself only arbitrary and one sided and further the NCDRC also categorically dismissed most of the claims of all the complainants whom they had made groups of. Moreover, the NCDRC was adamant to not accept the contentions of the flat buyers wherein they had pleaded that they signed the agreement under coercion and undue influence by stating that no such facts and circumstances were pleaded by such buyers which had made them surrender their free will. The stance of the NCDRC was that if the allottees had agreed to such stipulations then they were not entitled to further delayed compensation. The Ld. Tribunal also failed to consider that the payment schedule mentioned in the agreement was also unreasonable and lop sided. The NCDRC was also of the opinion that the flat buyers were aware of the fact that under the terms of the Builder Buyer agreement they were also not entitled to any right, title or interest in the amenities outside their residential complex.
The Matter Before the Supreme Court
Once the NCDRC dismissed the complaint, the allottees approached the Supreme court for seeking relief wherein a plethora of issues were raised before the Hon’ble Supreme court, which are, whether the flat buyers are constrained by the terms of the contract, whether the rights of conveyance would be deferred if the allottee wants to make a claim against the developer for delayed possession compensation and whether the rights of the developer are overriding the rights of the flat buyers i.e. the one-sided nature of the contracts. The appellants/allotees also extensively explained the nature of the arbitrary agreement that they were made to sign, by stating a clause before the Hon’ble Supreme Court, which read as, when an allotee defaulted his payments in accordance with the schedule, then they would be charged an interest rate of 15% for the first ninety days and thereafter an additional penal interest of 3% per annum which would make it a total of 18% per annum. On the other hand, where a builder delayed in handing over the possession to the flat buyers, the allottees are restricted to receive an interest at a rate of 5%. Thus, vide this argument the homebuyers explained the arbitrary nature of the contracts and how they were drafted for the benefit of the builders.
The allottees have further claimed that their right to compensation for delayed handing over of the possession of the property cannot be constrained by the terms of the agreement, and also that most of the amenities under the contract were not handed over to the homebuyers. The allottees cited the case of DLF Homes Panchkula Pvt Ltd vs D.S. Dhandha CA. Nos. 4910-4941/2019 wherein it was decided that the court cannot be oblivious to one sided contracts which are drafted to protect the interest of the developers. Further, the allottees to substantiate their claim also placed their reliance on the case of Ghaziabad Development Authority v Balbir Singh CA NO. 7173/2002 wherein it was observed that the award of compensation should be based on the gravity of loss or injury suffered by the allotees. The allotees/appellants addressed the arguments at length and emphasised the fact that where late possession has been handed over by the builder, then the purchaser/ allottee is entitled to be compensated adequately according to the increased value of the property.
The respondent/developer/builder to counter the arguments of the allottees/ appellants, raised a number of points in their defence wherein they argued that the flat buyers voluntarily, without any coercion executed agreements of conveyance and settlement with the Developer, thereby settling all the claims. Further, while executing the Deeds of Conveyance, the flat buyers were informed that no form of protest or reservation would be acceptable after the execution of the conveyance deed. The respondent/builder took the support of the observations made by the NCDRC, stating that the compensation would be given at the rate of Rs 5 per sq. ft of the super area for every month of delay and the homebuyers had agreed to this, therefore they were not entitled to seek any other compensation for delay. They argued further that at least 145 applicants have already received compensation as per the contract by the respondent/builder/developer. Moreover, the respondent/ builder/ developer, very conveniently stated that the reason they were not able to provide the additional amenities because Bangalore Development Authority did not let them provide the same.
Observations Made by the Hon’ble Supreme Court
The Hon’ble Supreme court took a clear and a rigid stance and observed that the Respondent/ Developers/Builders had been creating problems for the allotees/appellants. The Apex court pointed out that there was a clear breach on the part of the Developers to handover possession within a period of 36 months. The court said that the agreement was prima facie one sided, unfair and there was excessive delay on the part of the contractors, therefore, a delayed compensation must be provided. The Apex court held that correct correlation must be made in situations where the compensation has to be based on finding a loss due to the delay in possession and also the factors that led to such delay. Further, the Hon’ble Court observed that where there is an existence of a one-sided contract, it eventually becomes arbitrary for the other side and therefore in such situations the court must act with reason to come to a correct conclusion. Moreover, the Apex Court also rejected the decision of the NCDRC and held that the execution of a conveyance deed cannot preclude a consumer from raising its claims against the builder. Lastly the apex court held that the respondents/builders are guilty of not providing the extra amenities to the allotees/appellants.
How to File a RERA Complaint
A homebuyer wanting delayed possession compensation has more than one route. Under Section 18 of the RERA Act, if the promoter fails to hand over possession by the date in the agreement, the buyer can either withdraw and claim a full refund with interest, or continue in the project and claim interest for every month of delay until possession. Complaints are filed before the relevant state RERA authority—for buyers in the NCR, that is typically Haryana RERA (H-RERA) or UP-RERA—and many now accept complaints online. Buyers can also approach the consumer forums, as the allottees did in the DLF Southern Homes matter. Which route recovers the most depends on the wording of your agreement, the stage of the project, and whether you have already taken possession. Our real estate disputes team advises homebuyers on the strongest available claim before a deadline lapses.
Authors Analysis
The Supreme Courts support for homebuyers shows that they have been a beacon of hope for countless individuals embroiled in real estate disputes. With this judgment and stance, the court has demonstrated a commitment to safeguarding the rights and interests of the homebuyers across the country. This is the perfect example to show that the Hon’ble Court has been proactive in holding the builders accountable for project delays, compliance with regulatory norms and protecting buyers from unfair practices of the builders. Through this the Hon’ble Court has not only upheld the principles of justice and fairness but has bolstered consumer confidence in the real estate sector. This decision has set precedents for transparency, accountability and setting the stage for more equitable relationship between buyers and builders.
Conclusion
The Apex Court has been successful in protecting the rights and interests of the allotees against the biased and coercive practices of the builder. Further, the Supreme court has been successful in reshaping the laws related to real estate with regard to prioritizing the rights of the allottees by holding the developers accountable for project delays, substandard construction and unfair contractual clauses. The Apex Court has restored the balance in the buyer seller relationship and such decisions of the SC have emerged as a steadfast guardian of homebuyers, ensuring their rights are upheld and protected.
Author – Namanveer Singh Sodhi, Associate
Co- Author – Ayushman Das, Intern
FAQs
Can homebuyers claim compensation after taking possession?
Taking possession of your flat does not close your right to compensation for the builder's delay. In Wg. Cdr. Arifur Rahman Khan & Ors. vs DLF Southern Homes Pvt. Ltd., the Supreme Court held that a homebuyer can claim compensation for delayed possession even after accepting the keys and executing the conveyance deed. The Court rejected the builder's argument that signing the deed settled all claims, and made clear that a one-sided agreement clause cannot cap what a buyer is owed for the delay. So even if you have already moved in, you may still be entitled to interest or compensation for the months the possession was delayed—the strength of the claim depends on your agreement, the length of the delay, and whether you signed the deed "without protest.
What does Section 18 of the RERA Act provide?
Section 18 lets a buyer whose possession is delayed beyond the agreed date either withdraw and claim a refund with interest, or stay in the project and claim interest for each month of delay until possession is given.
Are one-sided builder-buyer agreement clauses enforceable?
Courts have repeatedly held that arbitrary, one-sided clauses—such as charging buyers 18% interest on delays while paying them far less—do not bind the buyer and cannot cap compensation.
How do I file a RERA complaint for delayed possession?
Complaints are filed before the state RERA authority (for NCR buyers, usually Haryana RERA or UP-RERA), many of which accept online filings. A buyer may alternatively approach the consumer forums.
