Homebuyer Can Claim Delay Compensation Through Arbitration Over RERA, Consumer Law Remedies: Delhi High Court

The Delhi High Court has ruled that a homebuyer can claim compensation for delayed possession through arbitration even though remedies are also available under the Real Estate (Regulation and Development) Act, 2016, and the Consumer Protection Act, 2019.

“Merely because the Respondent elected to invoke the arbitration agreement instead of pursuing remedies under the Consumer Protection Act, 2019 or RERA, it cannot be deprived of compensation otherwise legally payable for delayed possession The substantive right to claim such compensation is founded in Section 55 of the Act of 1872, while the Consumer Protection Act, 2019 and RERA statutes provides additional forums and statutory mechanisms for enforcement of that right.,” the court observed.

It held that the substantive right to claim such compensation is founded in Section 55 of the Indian Contract Act, 1872, while RERA and the Consumer Protection Act provide additional forums and statutory mechanisms for enforcing that right.

The Division Bench of Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora dismissed two appeals filed by Omaxe Ltd. and upheld arbitral awards in favour of homebuyer Asha Saini. The arbitrator had awarded compensation at 15% per annum for the delay in handing over possession of two flats.

The dispute involved two flats booked by Saini in Omaxe's 'Omaxe North Avenue' project in Bahadurgarh, Haryana, in March 2006. The Builder-Buyer Agreements were signed in February 2012.

Between March 2006 and January 2009, Saini had paid the entire amount towards the base price demanded by Omaxe under the construction-linked payment plan. Only the amount payable upon receiving the offer of possession remained unpaid.

Omaxe maintained that the period for handing over the flats began only from the execution of the Builder Buyer Agreements in 2012. The arbitrator, however, ultimately found that the contractual relationship had begun in 2006, when Saini applied for allotment, Omaxe accepted the booking amount, and the parties proceeded under the construction-linked payment plan.

The sale deeds were executed on January 8, 2014, after which Saini took possession of the flats. She had claimed compensation for the delay beyond April 1, 2009.

Saini initially approached a civil court seeking compensation for the alleged delay in delivering possession. Omaxe then sought reference of the disputes to arbitration, and its applications were allowed on January 25, 2017.

After her challenge to the referral order failed, Saini invoked the arbitration clause. The Delhi High Court subsequently appointed a common sole arbitrator to decide the two disputes.

By separate awards dated December 26, 2018, later modified on February 11, 2019, the arbitrator partly allowed Saini's claims.

It held that the booking applications, the basic terms and conditions, Omaxe's acceptance of the booking amounts, and the subsequent payments together constituted a concluded and enforceable contract.

The Builder Buyer Agreements signed in 2012 were held to be a continuation of that earlier contract. Omaxe could not use their later execution to postpone its obligation to hand over possession.

The arbitrator also found that Saini had executed the Builder Buyer Agreements under coercive circumstances. By then, Omaxe had received almost the entire sale consideration, and the arbitrator found that failing to sign the agreements would have resulted in Saini being denied possession despite completing the requisite payments.

The agreements contained a clause limiting compensation for delayed possession to ₹5 per square foot per month. The arbitrator did not treat that stipulation as determinative of Saini's entitlement and awarded compensation at 15% per annum on the amount invested for the period of delay.

It also awarded interest on the damages while the proceedings were pending, ordered the refund of ₹29,000 recovered towards delayed-payment interest, and granted litigation costs and post-award interest.

Omaxe challenged the awards before the District Judge (Commercial Court). The challenges were dismissed on January 11, 2022, and the awards were upheld.

Omaxe then approached the Delhi High Court. It argued, among other things, that Saini had not pleaded or proved actual loss or damage and that compensation should have been limited to ₹5 per square foot per month under the Builder Buyer Agreements.

Omaxe also conceded that such compensation could have been granted if Saini had approached the National Consumer Forum. It nevertheless argued that the same relief could not be granted through arbitration.

The High Court rejected this distinction.

It observed that an allottee's entitlement to compensation for delayed possession is a well-recognized legal right and held that the substantive right to claim such compensation is founded in Section 55 of the Indian Contract Act.

RERA and the Consumer Protection Act, the court observed, provide additional forums and statutory mechanisms for enforcing that right.

The court also upheld the finding that the Builder Buyer Agreements had been executed under coercive circumstances. Omaxe, it held, could therefore not insist on enforcing the clause limiting compensation to ₹5 per square foot per month.

Finding no patent illegality warranting interference with the arbitral awards, the court dismissed both appeals. It imposed costs of ₹1 lakh in each appeal, payable to Saini within two weeks.

For Petitioner (Omaxe Ltd.): Senior Advocate Ramesh Singh and Advocates Mukti Bodh, Mala Diwadi, Nanya Hage and Subhashish Panda.

For Respondent (Asha Saini): Advocates Praveen Mahajan and Raj Choudhary.