Supreme Court: Developer Not Liable for Home Loan Interest Due to Delay in Flat Delivery, Absent Exceptional Circumstances

The Supreme Court held that a developer is not liable to reimburse the interest paid by a homebuyer on a home loan due to a delay in flat delivery, unless exceptional circumstances justify such reimbursement.

On 4 June 2025, the Supreme Court Bench comprising Justice Sanjay Karol and Justice Prasanna B. Varale, while adjudicating two appeals, held that although consumer fora are empowered to award compensation for deficiency in service, such compensation must be reasonable and tailored to the facts of each case. It cannot include reimbursement of home loan interest paid by the buyer due to delay in flat delivery, unless exceptional circumstances warrant it—particularly where interest on the deposited amount has already been awarded as compensation.

In a significant decision, the Supreme Court considered appeals filed by the Greater Mohali Area Development Authority (GMADA) against the judgment of the National Consumer Disputes Redressal Commission (NCDRC) dated 1st April 2019, which had upheld the order of the State Consumer Disputes Redressal Commission, Punjab. The case arose from complaints filed by allottees, Anupam Garg and Rajiv Kumar, who had booked flats under GMADA’s ‘Purab Premium Apartments’ scheme. Despite the payment of substantial amounts and allotment through a draw of lots, GMADA failed to deliver possession within the promised 36-month period. Alleging prolonged delays and modifications in project amenities, the complainants chose to withdraw from the scheme, prompting the State Commission to order a refund of the deposited amount along with 8% interest, compensation for mental harassment and litigation costs, and reimbursement of interest paid on housing loans.

GMADA’s appeals before the NCDRC were dismissed on grounds of both merit and delay, with costs imposed. Aggrieved, GMADA approached the Supreme Court, which granted leave and confined the scope of the appeal to a single issue—whether GMADA could be held liable for the interest paid by the complainants on their bank loans, in addition to the 8% compound interest already awarded. GMADA opposed this additional liability, contending that it lacked any contractual or legal basis, while the complainants argued for a broader interpretation of just compensation under consumer law, invoking case law including Bangalore Development Authority v. Syndicate Bank.

The Supreme Court, while reaffirming that compensation in cases of deficient service was not disputed, underscored that such awards must be grounded in the specific facts and circumstances of each case, as per the principles laid down in GDA v. Balbir Singh. The Court emphasised that compensation could take many forms and that there could be no uniform standard. In doing so, it distinguished the facts of the present case from those in Priyanka Nayyar, clarifying that the compensation in that matter was not intended to cover the full interest liability on a loan and should not have been used to justify a similar award here without compelling reasons.

The Court also relied on DLF Homes Panchkula (P) Ltd. v. D.S. Dhanda to caution against arbitrary or multiple awards of compensation for the same default, observing that once the agreed compensation—here, 8% interest on the principal amount—was granted, no separate reimbursement of housing loan interest was warranted. The bench held that awarding interest on the loan in addition to the contractual interest would amount to duplicative compensation for a single lapse, particularly when there was no exceptional hardship demonstrated by the complainants.

While upholding the Commission’s authority to award compensation for mental harassment and litigation expenses, the Supreme Court set aside the portion of the relief granting reimbursement of bank loan interest. It found that GMADA was under no further financial obligation and directed the disbursal of the amount already deposited to the complainants. The appeals were thus allowed to that limited extent, and all pending applications were disposed of accordingly.

Ms Uttara Babbar, Advocate, represented the Appellant.

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REEDLAW 2025 SC 06512