Supreme Court Refuses To Grant Interest To Flat-Owners On Amount Paid To The Builders

The Supreme Court refused to grant interest to Flat-Owners on the amount paid to the builders.


One of the issues that was brought to the notice of the Court by the Amicus Curiae pertains to the interest claimed by the flat-owners on the amount they paid to the Builders. After the demolition of four building complexes situated in Ernakulam, Kerala, Miscellaneous Application was initiated Suo Motu by the Court for monitoring the compliance of the directions issued by the Court in its judgment in The Kerala State Coastal Zone Management Authority v. The State of Kerala Maradu Municipality & Ors. 


Jain Coral Cove Allottee’s Association, submitted that the flat-owners had made payment in installments between 2007-2013. They were given possession in the year 2013 and the demolition took place in the year 2019. 

They argued that the amount that was directed to be paid to them by the Committee is not the actual market value but only the amount that was paid by them for purchasing the flats. 

The builders contended that all the flat-owners are not similarly situated. Some of the flat-owners have paid the amount towards the cost of the flats in full and the others would have been paying the amounts till the date of demolition. Therefore, a blanket rate of interest cannot be determined by the Court to be paid to all the flat-owners. 

They argued that there is no dispute that possession has been given to the flat-owners of the four building complexes between 2009 to 2013 and they have enjoyed the fruits of their investment from thereon till 2019. 

The builders further contended that the flat-owners have the undivided interest in the said land till date and that the market value of the land has increased exponentially. As the flat-owners have resided in their apartment for 6 to 10 years, the depreciation cost of the flats also has to be taken into consideration. 

One of the builders argued that the flat owners were well aware of the show cause notices issued by the authorities, and even then, they proceeded to invest in the property and reside therein. 


The division bench of Justice L. Nageswara Rao and Justice B. R. Gavai noted that for the loans that were taken for purchasing the flats, banks are charging a higher rate of interest at 17 per cent for its repayment as the collateral does not exist anymore.

The court said that the report that has been submitted in the Court by Justice K. Balakrishnan Nair Committee, observed that it would be difficult to determine the market value of the flats since the furnishing and interior of each flat is different. Therefore, assessment of the market value after their demolition in 2019 is not possible as it would have varied substantially. 

The Committee further observed that the particulars of the payment made in installments by the flat-owner was not available and, therefore, it is difficult to determine the calculation of interest in respect of at least 1/3rd of the flat-owners. 

The court noted that insofar as the remaining flat-owners are concerned, the Committee held that it is not easy to calculate the interest that has to be paid. The committee pointed out the procedural difficulties and also mentioned that if it was to do this exercise, all the cases will have to be reopened with notices to the Builders and the flat-owners of each flat and the entire exercise would take at least 6 months to materialize, not to mention the further unforeseen complications that might arise due to lack of material data on record. 

The court took notice of the fact that the flat owners had the benefit of staying in the flats for a period of 8-9 years on an average and also that the land belongs to the flat-owners as joint owners the market value of which has increased substantially.

The  court viewed that the flat-owners are not entitled for any interest on the amounts paid by them to the builders. 

Case title: The Kerala State Coastal Zone Management Authority Member Secretary v/s Maradu  Municipality & Ors.

Citation: Civil Appeal Nos. 4784-85 of 2019

Click here to read the Order/Judgment 

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