While limiting the purchaser’s refund to his out-of-pocket payments, the Supreme Court has upheld Rs. 2 lakh compensation against HDFC for deficient construction verification, and directed retention of the remaining deposit pending adjudication of the bank’s recovery appeal. The Court said that the purchaser was entitled, in his own right, to Rs. 1.27 crores representing his payments to the builder and the bank, and not the entire sale consideration, which included unrepaid loan funds.
The Apex Court clarified that refunding the whole amount to him while the loan remained outstanding and the bank’s claim was disputed, would constitute unjust enrichment. Applying Clause 24 of the Agreement for Sale, the Court awarded 12% simple interest from each payment date until payment. It rejected 18% interest, emphasising that the rate charged by a builder for delayed payments cannot automatically be awarded to a purchaser as a rule of thumb.
In the circumstances, rent reimbursement alongside refund interest would duplicate compensation for the same default. The expanded rent claim also exceeded the pleadings and supporting proof. Nevertheless, the Court awarded Rs. 15 lakhs in full and final satisfaction of claims against the builder towards rent, mental agony, harassment and litigation expenses. The Court clarified that matching loan releases to the instalment schedule did not prove that the bank had verified construction progress. After the purchaser discharged his initial evidentiary burden, the bank failed to produce inspection reports.
The Court declined to adjudicate the bank’s recovery claim in the consumer proceedings. The remaining deposit must stay in an interest-bearing account pending the bank’s appeal, which the High Court must decide independently on its merits; the parties’ contentions concerning loan liability remain open.
Briefly, Madhu Kudapa booked an apartment in the ‘Lodha Bellezza’ project in Hyderabad in 2009. He paid Rs. 51.11 lakhs from his own funds, while HDFC disbursed Rs. 1.68 crores directly to the builder under a tripartite arrangement. Despite receiving about 95% of the sale consideration, the builder failed to deliver possession within the agreed timeline.
The purchaser filed a consumer complaint seeking refund, interest, rent reimbursement and compensation. He also made payments to the bank, bringing his total out-of-pocket expenditure to Rs. 1.27 crores. The National Consumer Disputes Redressal Commission ordered a refund with 9% interest, rising to 12% upon non-compliance, and awarded Rs. 2 lakhs against the bank for deficiency in service. Both the purchaser and the bank challenged different parts of that order before the Supreme Court.
A Two-Judge Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe observed that refunding the entire sale consideration to the purchaser, while the housing loan remained outstanding and the bank’s claim was disputed, would amount to unjust enrichment. The contractual provision deeming payment to the builder as payment to the borrower created a repayment obligation; it did not turn unpaid borrowed money into the purchaser’s own funds. Accordingly, his refund entitlement in his own right was limited to Rs. 1.27 crores. The Court applied Clause 24 of the Agreement for Sale and awarded 12% simple interest from each payment date, rejecting the claim for 18% interest.
On rent reimbursement, the Court held that a separate award alongside interest would compensate the purchaser twice for the same default in the circumstances of this case. The expanded rent claim was also raised for the first time in the Supreme Court without adequate supporting evidence before the Commission. Having elected to terminate the agreement and seek a refund, the purchaser could not claim rent indefinitely thereafter. Nevertheless, considering the prolonged uncertainty and deprivation of the apartment and his money, the Court awarded Rs. 15 lakh as full and final compensation for claims against the builder towards rent, mental agony, harassment and litigation expenses.
The Court also upheld the finding of deficiency against the bank. The purchaser had discharged his initial burden by questioning construction progress and seeking inspection reports. The bank then failed to produce evidence showing that it had verified construction before releasing loan instalments. Merely matching payments to the contractual instalment schedule did not establish that the required verification had occurred.
