Consumer Fora Are Not Bound By Oppressive Builder-Buyer Agreements – Statutory Powers Prevail: Supreme Court

“Possession Without Occupancy Certificate Is No Possession In The Eye Of Law”, In a significant ruling reinforcing homebuyers’ rights, the Supreme Court on 20 February 2026 dismissed three appeals filed by Parsvnath Developers Ltd., affirming orders of the National Consumer Disputes Redressal Commission directing delivery of possession with Occupancy Certificate and payment of compensation at 8% per annum for delay.

The Division Bench of Justice B.V. Nagarathna and Justice R. Mahadevan held that consumer fora exercise statutory jurisdiction under the Consumer Protection Act, 1986, and are not bound by restrictive or one-sided clauses in builder-buyer agreements. The Court ruled that compensation awarded by the NCDRC was fair, reasonable and legally sustainable.

The appeals arose from delays in handing over residential flats in the “Parsvnath Exotica” project at Sector-53, Gurgaon. Despite receiving nearly the entire sale consideration, the developer failed to deliver possession within the agreed 36 months plus six months’ grace period. The NCDRC directed delivery of possession after obtaining Occupancy Certificate and awarded interest at 8% per annum from the committed dates till actual possession.

The developer contended that Clause 10(c) of the Flat Buyer Agreement limited delay compensation to Rs. 10 per sq. ft. per month and that consumer fora could not grant compensation beyond the contract.

Rejecting this argument, the Court held:

“The jurisdiction of the consumer fora is traceable not merely to the contractual terms agreed between the parties but to the statute itself.”

The Court emphasized that Sections 12, 14 and 22 of the Consumer Protection Act empower consumer fora to grant appropriate compensation for deficiency in service. The source of power is statutory, not contractual.

“Incorporation Of One-Sided Clauses Is An Unfair Trade Practice”

The Court carefully examined Clause 10(c), which provided nominal compensation for delay, while Clause 5(b) empowered the developer to charge interest at 24% per annum from buyers for delayed payments.

The Bench observed that such terms were “evidently one-sided and have been drafted unilaterally by the developer,” and that the stipulated compensation was “nominal and disproportionate, particularly in cases of prolonged delay.”

Relying on Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan and Arifur Rahman Khan v. DLF Southern Homes (P) Ltd., the Court held that one-sided builder-buyer clauses constitute an unfair trade practice under Section 2(1)(r).

The Court categorically declared:

“The Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the apartment buyer’s Agreement.”

Thus, contractual stipulations cannot curtail statutory jurisdiction or defeat consumer remedies.

“Compensation Under Consumer Law Is Remedial And Protective – Not Confined To Strict Pecuniary Loss”

The Supreme Court reiterated the broad meaning of “compensation” under consumer law, quoting extensively from Lucknow Development Authority v. M.K. Gupta.

It observed:

“The word ‘compensation’ is of very wide connotation… It may extend to physical, mental or even emotional suffering.”

The Court clarified that detailed mathematical calculation of loss is not mandatory. Compensation must be “just, reasonable and proportionate to the delay, deprivation and hardship established on record.”

Applying the principles laid down in Bangalore Development Authority v. Syndicate Bank and Ghaziabad Development Authority v. Balbir Singh, the Court held that prolonged delay, failure to secure statutory approvals, and persistent non-compliance justified award of interest at 8%.

“Possession Without Occupancy Certificate Is Legally Untenable”

A crucial aspect of the case was the developer’s attempt to offer possession on an “as is where is” basis without obtaining Occupancy Certificate.

The Court firmly rejected this approach, relying on Samruddhi Cooperative Housing Society Ltd. v. Mumbai Mahalaxmi Construction (P) Ltd. and Dharmendra Sharma v. Agra Development Authority.

The Bench held:

“Possession without an Occupancy Certificate cannot be forced upon the respondents. Obtaining such certificate is a statutory pre-condition integral to lawful delivery of possession.”

Failure to obtain Occupancy Certificate was held to constitute “deficiency in service.”

“Subsequent Purchaser Steps Into The Shoes Of Original Allottee”

In one of the appeals involving a subsequent allottee, the developer argued that compensation should not extend to later purchasers.

The Court rejected this contention, relying on Laureate Buildwell Pvt. Ltd. v. Charanjeet Singh, and held that the right to seek compensation travels with the allotment unless expressly barred.

“Ancillary Reliefs Like Stamp Duty And Rebate Fall Within Section 14”

The developer also challenged directions requiring it to bear increased stamp duty and extend rebate.

The Court held that such directions were incidental and ancillary to the main relief of compensation and fell squarely within Section 14 of the Consumer Protection Act. No perversity or jurisdictional error was found.

The Court affirmed the NCDRC orders in entirety and dismissed all appeals.

The developer was directed to obtain the requisite Occupancy Certificate and hand over possession in two appeals within six months. Compensation at 8% per annum shall continue until delivery.

In the third appeal, where possession had been taken on 14.08.2022, the respondents were held entitled to interest at 8% per annum from the committed date till 14.08.2022, after adjusting amounts already paid.

Liberty was granted to approach the NCDRC only on the limited issue of post-period interest in case of bona fide impediment.

This judgment reaffirms three critical principles in housing jurisprudence: statutory consumer rights override one-sided contractual clauses; possession without Occupancy Certificate is legally impermissible; and compensation must be fair and reflective of prolonged hardship.

The ruling strengthens consumer protection in real estate disputes and underscores that builders cannot hide behind oppressive clauses to evade accountability.

Date of Decision: 20 February 2026