Supreme Court Slams Parsvnath Over One-Sided Clauses

• 8% annual interest upheld as fair compensation for project delays

• One-sided builder clauses cannot override consumer protection law

• Occupancy certificate declared mandatory before lawful possession

Supreme Court of India has dismissed appeals filed by Parsvnath Developers Limited and its group entity, upholding an 8% annual interest award granted to buyers of flats in Gurugram.

The ruling relates to long-delayed apartments in the Parsvnath Exotica project in Sector 53, Gurugram. The court made it clear that consumer forums derive their powers from statute—not from builder-buyer agreements—and are not bound by contractual clauses that unfairly limit compensation.

A bench of Justices B V Nagarathna and R Mahadevan observed that compensation awarded by consumer forums must be “just and reasonable” and cannot be restricted by one-sided terms drafted by developers.

The court upheld the decision of the National Consumer Disputes Redressal Commission, which had directed the developer to pay simple interest at 8% per annum for the delay in handing over possession.

Parsvnath had argued that its flat buyer agreement capped delay compensation at Rs 10 per square foot per month. However, the Supreme Court rejected this defence, stating that statutory consumer rights cannot be curtailed by contractual clauses that operate to the detriment of buyers.

The court noted that delay in delivering possession was undisputed. Under the Consumer Protection Act, 1986, such delay constitutes “deficiency in service,” empowering consumer forums to award appropriate relief.

Importantly, the judgment clarified that compensation cannot follow a rigid formula. It must reflect the hardship, financial loss, and mental agony suffered by buyers. Where possession is eventually delivered, interest may be lower than in refund cases—but it must still be fair and proportionate.

In this case, the apex court found that 8% annual interest was reasonable and legally sound.

A critical issue was the developer’s failure to obtain the occupancy certificate (OC), even after years of delay.

At one stage, the builder proposed handing over flats on an “as is where is” basis without statutory approvals. The Supreme Court firmly rejected this approach, reiterating that possession without an OC is not lawful possession.

The bench directed the developer to secure the occupancy certificate and complete the remaining formalities within six months in two of the three cases. Compensation payments must continue until lawful possession is handed over.

The matter arose from three separate complaints filed before the NCDRC in 2017. Buyers had booked 3,390 sq ft apartments between 2007 and 2011, paying nearly the entire sale consideration—ranging from Rs 1.82 crore to Rs 2.44 crore.

Under the agreement, construction was to be completed within 36 months, with a six-month grace period. However, possession was delayed by several years.

In one case, possession was eventually taken in August 2022 due to urgent need—but without an occupancy certificate and without prejudice to the buyer’s rights.

The NCDRC had earlier ordered the developer to complete construction, obtain the OC, pay 8% annual interest for the delay period, bear certain stamp duty increases, and pay litigation costs.

Challenging these directions, Parsvnath approached the Supreme Court, arguing that the consumer body had exceeded its jurisdiction. The apex court, however, dismissed all appeals.

The judgment reinforces three important principles:

1. Builder-drafted clauses cannot override statutory rights.

2. Delay in possession is a clear deficiency in service.

3. Occupancy certificates are mandatory before handing over flats.

Legal experts say the ruling will have wider implications for real estate disputes, especially in projects where buyers are bound by heavily one-sided agreements.

For thousands of homebuyers across India facing delayed projects, the verdict signals stronger judicial backing and reaffirms that consumer protection law remains paramount over contractual fine print.

Also Read: NCLAT Orders Maintenance Handover at 2 Supertech Projects

Also Read: NCLAT Clears Insolvency Case Against Mahagun After ₹256 Crore Settlement