The Supreme Court has held that a homebuyer seeking a refund for delayed possession cannot receive the entire amount paid to the developer when a substantial portion was financed by a housing loan that remains unpaid. Applying the principle against unjust enrichment, the Court restricted the buyer’s entitlement in his own right to the money paid from his own pocket, including payments made to the lender.

The Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe directed the release of ₹1,27,34,726 with simple interest at 12% per annum from the respective dates of payment, together with ₹15 lakh as compensation. The Court also upheld the award of ₹2 lakh against the housing finance company for failing to establish that it verified construction progress before disbursing the loan.

Buy Now: 90+ Supreme Court Judgments – September 2026

The buyer formerly known as K. Madhusudhan Rao, booked the apartment in August 2009 for ₹2,30,73,876. He paid ₹51,11,576 from his own funds, representing approximately 22% of the sale consideration.

To finance the balance, he obtained a housing loan from Housing Development Finance Corporation Limited. A tripartite agreement between the buyer, developer and lender was executed in January 2010. Between February 2010 and July 2011, the lender disbursed ₹1,68,80,531 directly to the developer in 13 installments.

The developer consequently received approximately 95% of the apartment’s price.

Under the agreement for sale, possession was due by June 30, 2011, with a six-month grace period for reasons beyond the developer’s control. However, possession was delayed. When the developer subsequently offered possession for “fit-outs” in late 2012, the buyer questioned whether the occupancy certificate and fire department clearance had been obtained. According to the developer, the fire clearance was issued in May 2013.

The buyer approached the National Consumer Disputes Redressal Commission in May 2013, seeking a refund, interest, reimbursement of rent and compensation.

The NCDRC held that the buyer was a consumer and was entitled to a refund because of the delay in possession. It rejected the developer’s force majeure defence, observing that the obstacles relied upon were routinely encountered by developers and that the developer had failed to establish receipt of the occupancy certificate.

The Commission ordered refund of the entire amount deposited with interest at 9% per annum, increasing to 12% upon failure to comply within the stipulated period.

It also found the lender deficient in service because it had not produced evidence showing that construction progress was verified before loan disbursements. The lender was directed to pay ₹2 lakh to the buyer.

However, the operative order did not address the buyer’s claims for rent and compensation against the developer. Both the buyer and lender challenged different aspects of the Commission’s decision.

The central question before the Supreme Court was whether the buyer could receive the entire ₹2,19,92,107 paid to the developer, including the lender-financed portion, while the housing loan remained outstanding and disputed.

The Court held that he could not.

It explained that restitution restores value to the person at whose expense it was received. It does not confer an additional financial benefit merely because a person has suffered a wrong.

The buyer had paid ₹51,11,576 directly to the developer and a further ₹76,23,150 to the lender. The latter amount included ₹26,23,150 paid towards interest and two subsequent payments of ₹20 lakh and ₹30 lakh in 2021.

His total expenditure from his own pocket therefore amounted to ₹1,27,34,726.

Although the tripartite agreement treated disbursement to the developer as disbursement to the borrower, the Court held that this contractual fiction imposed a repayment obligation; it did not transform unpaid borrowed funds into the buyer’s own money.

Releasing the entire developer refund to the buyer while the lender’s claim remained unresolved would amount to unjust enrichment. Accordingly, the Court confined the buyer’s immediate entitlement in his own right to ₹1,27,34,726.

The Supreme Court enhanced the interest payable on the buyer’s refundable contribution to 12% simple interest per annum.

It relied particularly on Clause 24 of the agreement for sale, which prescribed a 12% rate in connection with the developer’s failure to deliver possession and the purchaser’s contractual remedies.

The buyer had sought 18% interest, but the Court declined to adopt that rate. It reiterated that interest must depend on the facts of each case and cannot be fixed mechanically by reference to rates charged by developers for delayed payments.

The Court directed that 12% interest run from the respective dates of the buyer’s payments to the developer and lender until payment to him.

The Court accepted that the NCDRC had failed to address the buyer’s compensation prayers. However, it declined to grant the enlarged rental reimbursement sought before it.

The buyer’s original complaint quantified rent at ₹7,97,895 for the period from July 2011 to April 2013, with a claim for further rent. Before the Supreme Court, he sought rent at ₹38,000 per month for July 2011 to July 2013 and ₹65,000 per month for August 2013 to October 2022.

The Court found that the expanded figures were introduced through a rejoinder affidavit and lacked adequate supporting evidence before the Commission, such as lease deeds or rent receipts.

It also reasoned that awarding rent in addition to interest on the refund would, in the circumstances, compensate the buyer twice for the same default. Further, the buyer had elected to terminate the transaction and seek his money back.

Nevertheless, the Bench recognised the prolonged uncertainty and hardship he had suffered. Approximately 95% of the price had been paid by July 2011, yet he had remained deprived of both the apartment and his money for over 15 years. He had also lost the benefit of appreciation in the apartment’s value.

Considering these circumstances, the Court awarded ₹15 lakh as a composite amount towards full and final satisfaction of claims against the developer for rent, mental agony, harassment and litigation expenses.

The Court upheld the finding of deficiency against the lender.

It noted that the buyer repeatedly requested assessments of construction progress and inspection reports. Despite the developer having received approximately 95% of the consideration by July 2011, the lender itself reported in October 2012 that the building was only 90% ready.

Although the lender claimed its engineers inspected the project before each disbursement, it produced no inspection reports before the Commission.

The Court held that matching disbursements to the developer’s stage-wise demands did not establish that the lender independently verified construction progress as required by its sanction terms. The ₹2 lakh compensation award was therefore upheld.

The Supreme Court declined to adjudicate the lender’s recovery claim within these consumer proceedings.

The lender had separately instituted a recovery suit, which the Commercial Court dismissed on maintainability grounds. Its appeal against that decision remained pending before the High Court.

The Supreme Court left all contentions concerning the loan liability open and directed the High Court to decide the appeal independently on its merits.

The NCDRC was directed to release the buyer’s refundable contribution with 12% interest and a further ₹15 lakh compensation from the developer’s deposit. The compensation was ordered to be released within one month. The balance was directed to remain in an interest-bearing account, subject to the outcome of the lender’s appeal.

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