The Supreme Court has ruled that homebuyers are entitled to a full refund and compensation when builders fail to hand over possession within a reasonable time. This judgment strengthens consumer protection and holds developers financially accountable for construction delays.
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NEW DELHI: In a landmark judgment on 12 March 2018, the Supreme Court of India ruled that housing developers cannot delay possession indefinitely and then escape liability. In M/S Fortune Infrastructure (now Hicon Infrastructure) & Anr. vs Trevor D’Lima & Ors., the Court held that when a builder fails to hand over a flat within a reasonable time, the homebuyer is entitled to a refund and compensation.
Background of the Case
The case originated from a residential project named Hicons Onyx (later renamed Fortune Residency), which was launched in 2011 through the redevelopment of Mohammadi House. The complainants booked a flat (828.40 sq. ft.) with a parking slot for ₹1.93 crore and paid ₹1.87 crore toward the consideration; however, the builder failed to complete construction and later transferred the project to another company.
However, despite receiving almost full payment, the developer:
- Failed to complete construction
- Transferred the project to another company (Zoy Shelcon Pvt. Ltd.)
- Did not hand over possession or execute a sale agreement
Proceedings Before the NCDRC
In 2015, the buyers approached the National Consumer Disputes Redressal Commission (NCDRC) seeking:
- Declaration of deficiency in service
- Possession of the booked flat OR
- Alternative flat of identical specifications and compensation
The NCDRC allowed the complaint and ordered the builder to refund the entire payment and pay ₹3,65,46,000 compensation, plus litigation costs.
Appeal Before the Supreme Court
The developers challenged the NCDRC ruling, claiming:
- They transferred the project; hence, they were not liable
- The compensation awarded was excessive
- Real estate prices had fallen in the area
The Supreme Court rejected these arguments and held that developers remain contractually bound despite transferring the project, and buyers cannot be made to wait endlessly for possession.
Supreme Court Observations
The Supreme Court rejected the builder’s defenses and confirmed contractual breach.
1. Deficiency in Service
The Court directly emphasized the statutory definition under Section 2(1)(g) of the Consumer Protection Act, noting deficiency as:
“any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance”
The Court concluded that the builder offered deficient service because the complainants were kept waiting with no possession.
2. Reasonable Waiting Time
Even though the agreement did not prescribe a construction deadline, the Court ruled:
“a person cannot be made to wait indefinitely for the possession of the flats allotted to them”
It was then determined that three years was a reasonable timeframe for completion, meaning possession should have been handed over by the last quarter of 2014.
3. Damages and Compensation
The Court reaffirmed the compensatory nature of contractual damages:
“the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed.”
Further, it reiterated:
“every breach of contract gives rise to an action for damages.”
The Supreme Court partly modified the NCDRC ruling and directed the developer to make specific monetary payments to the complainants. The Court ordered the refund of ₹1,87,00,000, being the amount already paid by the homebuyers toward the flat.
In addition to the refund, the Court held the builder liable to pay ₹2,27,20,000 as compensation, calculated based on the applicable market rate per square foot. Furthermore, the Court awarded ₹20,00,000 as compensation for the single parking space, along with ₹10,000 toward litigation costs.
ALSO READ: Supreme Court’s Landmark Ruling: Tenant Can Never Become Owner of Rented Property
The Court further directed that the entire amount must be paid within six weeks from the date of the judgment, failing which the builder would be required to pay interest at 9% per annum on the total payable amount.
The Court also permitted the homebuyers to withdraw the ₹2.5 crore already deposited before NCDRC.
By declaring that “a person cannot be made to wait indefinitely for possession”, the Court strengthened consumer protection against real-estate malpractice. It ensured that builders must be held financially accountable when contractual obligations are not fulfilled.
Case Title:
M/S. FORTUNE INFRASTRUCTURE (NOW KNOWN AS M/S. HICON INFRASTRUCTURE) & ANR. VERSUS TREVOR D’LIMA & ORS.
CIVIL APPEAL NO(S). 3533-3534 OF 2017
READ JUDGMENT
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