The Supreme Court has held that the real estate developer is not liable to pay homebuyer’s bank loan interest for delay in flat delivery; but the developer is only liable to pay principal amount and compensation.
The bench of Justice Sanjay Karol has observed that the amount of interest awarded is the compensation to the investment maker for the amount of money and the time he has been denied the fruits of that investment. The 8% interest awarded in this case on top of the entire amount that is being invested, is the compensation for being deprived of the investment of that money. Apart from this no amount of interest on the loan taken by the homebuyers could have been awarded.
The Greater Mohali Area Development Authority (GMADA) launched a scheme of residential flats termed ‘Purab Premium Apartments’ to be constructed in the Sector 88 locality, at Mohali in the year 2011. Anupam Garg secured an application form for a 2-BHK + Servant Room Residential Apartment-Type II upon payment of 10% of the total consideration of ₹ 55 lakhs, i.e., ₹ 5,50,000/- as earnest money.
The allotment of the flats took place through a ‘draw of lots’ on 19th March, 2012. He was successful and a Letter of Intent was issued in his favour on 21st May, 2012. It provided details regarding price, payment schedule, possible plans of payment, locations where payment can be deposited, particulars of ownership, possession, management and maintenance and other general terms and conditions.
The scheduled date of delivery of possession was 21st May, 2015. It has been alleged that on his visit to the development site in May, 2015, the respondent found no development commensurate to the time that had passed. Since it did not appear likely that possession of the flat would be delivered to the respective owners for another 2-3 years, he resolved to opt out of the scheme.
He approached the concerned official in this regard, who apparently informed him that if he chooses to pursue this route, GMADA would pay him the deposited amount, along with 8% interest thereon, from 21st May, 2015, till the date of payment.
GMADA carried the matter in appeals to NCDRC. In the order, reference is made to Greater Mahali Area Development Authority v. Priyanka Naiyyar, which was also referred to by the State Commission, where the Commission had granted compensation of ₹2 lakhs to the complainant in addition to the 8% interest, which was to be given on account of the fact that the interest charged by the bank in the case was @ 10.75%. It was concluded that there was no merit in the appeals which were dismissed on the grounds of delay and merit, along with costs quantified at ₹20,000/- each to be paid to both the respondents.
The court clarified that the Commission is not empowered to give compensation, generally.
“We do not interfere with the award of certain amounts on account of mental agony and litigation costs. We have only interfered with that part of the order as set out in the notice. It has come on record that the amount deposited before the State Commission does not include the amount of interest on the loan. In view of the above discussion, we hold that there is no requirement for GMADA to make any further deposit. The amount as it stands currently, be dispersed to the respondents” the court said.
Case Details
Case Title: Greater Mohali Area Development Authority (GMADA) Versus Anupam Garg Etc.
Case No.: SLP © Nos. 27847-48 of 2019
Date: 4th June, 2025
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