Builder Must Pay Delayed Possession Interest At Rate It Could Charge Allottee For Default: Allahabad High Court

Rejecting a builder's plea that its liability was confined to MCLR+1%, the Court upheld an award of interest at 24% per annum because the builder-buyer agreement itself provided for interest at that rate against a defaulting buyer.

The court read Section 2(za) of the Act, 2016, as placing the rate payable by the builder at parity with the rate chargeable from the allottee on default. Since interest under Section 18 is compensatory in character, it held, levying it from a promised date of possession falling before the Act came into force was neither illegal nor arbitrary.

While imposing a cost of ₹2.5 lakh on builder for making the homebuyer go through various rounds of frivolous litigation, Justice Prashant Kumar held

“The provisions of the Act, 2016 specially Section 2(za) makes it clear that the interest means the rate of interest paid by the builder to the allottee, which would be equal to the interest charged from the allottee in case of default. In this case, Clause-19 of the agreement, clearly stipulates that in case of default by the allottee, he would be charged 24% interest.”

The allottee booked a flat in the appellant-builder's project 'Golf City' at Plot No. 7, Sector-75. A builder-buyer agreement was executed on April 9, 2011, under which possession was promised by June 2013 against a total consideration of Rs.34,44,250/-. The buyer paid Rs.35,90,252/-, but possession was not delivered.

She complained to the Real Estate Regulatory Authority, Gautam Budh Nagar, which by order dated July 26, 2018, directed the builder to hand over possession immediately and to pay interest at 24% from June 30, 2013 , the date by which possession was due. The builder neither paid nor delivered possession. On the buyer moving execution, a recovery certificate for Rs.41,21,411.88 was issued on June 6, 2019.

It was only thereafter that the builder appealed to the U.P. Real Estate Appellate Tribunal on May 16, 2019. It also moved a writ petition seeking a stay of the recovery proceedings, which was dismissed on May 23, 2019, and a special leave petition against that dismissal, which was withdrawn on July 8, 2019. The appeal was dismissed for want of prosecution on July 10, 2020, having twice earlier been dismissed on that ground and restored..

The buyer then obtained a direction from the High Court to the District Magistrate to execute the recovery certificate and, when that too went unenforced, instituted contempt proceedings. A fresh recovery certificate followed on 08.04.2022. The builder applied to recall the order dated July 1o, 2020, only on August 28, 2022, with a delay of 721 days, and the Tribunal rejected the application on September 14, 2022 for want of sufficient cause and for non-compliance with Section 43(5) of the Act.

After its bank accounts were attached, the builder deposited Rs.67,77,518/- in December, 2022 and filed the present appeal under Section 58.

The Court held that pandemic disruption was not sufficient cause on these facts. The only explanation offered for the two years following 10.07.2020 was that the appeal had escaped the builder's attention until the recovery amin arrived at its office.

Even after excluding the period from 15.03.2020 to 28.02.2022 in terms of the Supreme Court's directions on extension of limitation, the Court held, the restoration application remained out of time. The builder had not shown that it was reasonably diligent, and that test for condonation was therefore not satisfied.

The Court held that Section 44(4) of the Act, which requires the Appellate Tribunal to send a copy of every order to the parties, had been complied with. The Tribunal had issued a public notice on resumption of work after the lockdown, had sent the dismissal order by e-mail, and maintained the status of every case on its portal, so it could not be said that the builder was unaware of the proceedings.

Referring to Supreme Court's decision in Newtech Promoters & Developers (P) Ltd. v. State of U.P., the Court held

“…it is clear that interest as provided under Section 18 of the Act, 2016, is compensatory in character and therefore, it cannot operate retrospectively and hence Section 2(za) of the Act, 2016, are deployed for levy of interest for the delay which occurred prior to the said Act, it cannot be said to be illegal or arbitrary. The levy of interest at the rate of 24% for delay in handing over the possession has been made applicable from the promised date of possession i.e., 30.06.2013, which is prior to the Act of 2016.”

The Court went on to record that the statute enacted to secure transparency and speedy redressal for allottees had been defeated here as the builder had made the homebuyer go through various rounds of “various frivolous and vexatious litigation”.

The court counted seven rounds of litigation initiated by the builder over the same dispute, against four rounds the buyer had been forced into merely to enforce an order already in her favour.

Accordingly, finding no illegality in the order of the Appellate Tribunal, the Court dismissed the appeal and imposed a cost of Rs.2,50,000/- on the builder, payable to the buyer within four weeks.

For Appellant: Shuchita Singh

For Respondent: Aprajita Bansal, Anilesh Tewari