The Supreme Court in June held that a homebuyer who accepts possession of a flat after a delay does not automatically lose the right to seek compensation for the period of delay.
Setting aside orders of three consumer fora, the Court ruled that the buyer’s complaint must be heard on its merits and cannot be diverted to arbitration merely because the agreement contains an arbitration clause.
The order settles two questions that often come up in a builder-buyer dispute—whether an arbitration clause in the buyer’s agreement can override a consumer forum’s jurisdiction and if the buyer who eventually gets the flat can still be treated as a “consumer” for the period of delay.
What was the case?
T K A Padmanabhan became a member of the Abhiyan Cooperative Group Housing Society in New Delhi in January 2003 and was allotted a flat. In 2005, he filed a complaint before the District Consumer Disputes Redressal Commission, Dwarka, citing the delay in handing possession of the said property.
The society moved the court under Section 8 of the Arbitration and Conciliation Act, asking if the dispute could be referred to arbitration instead, given the clause concerning the same in the buyer’s agreement. The court eventually referred the parties to arbitration in 2009, a decision that the state commission subsequently upheld.
Padmanabhan moved the National Consumer Disputes Redressal Commission, which said that since the consumer complaint was filed a year and a half after receiving possession. “There is nothing on record to show, that at the time of taking possession of the flat, petitioner had lodged any protest with regard to delay or took conditional possession. When petitioner had taken the possession of the flat…unconditionally and without any protest, thereafter he cease to be a Consumer. The agreement executed between the parties, comes to an end. Thus, on the date when Consumer Complaint was filed, there was no privity of contract between the parties,” the commission said.
Legal framework
Under Section 2(1)(d) of the Consumer Protection Act, 1986, a consumer is anyone who “hires or avails of any services for a consideration which has been paid or promised.”
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Section 2(1)(o) defines “service” to include “housing construction”, which is what brings flat-allotment disputes before consumer fora in the first place. Section 3 of the Act states that the remedy it provides “shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”
Section 12(4) adds a procedural bar. Its proviso says that once a complaint is admitted by the District Forum, “it shall not be transferred to any other court or tribunal or any authority set up by or under any other law for the time being in force.”
RERA, 2016 runs alongside the consumer remedy. Section 18 says that where a promoter fails to give possession on time, a buyer who wants to exit the project is entitled “to return of the amount received by him…with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act.” A buyer who’d rather stay gets a running monthly interest instead, “for every month of delay, till the handing over of the possession.”
What the Supreme Court said
The Supreme Court bench of Justices Vikram Nath and V Mohana relied on its earlier ruling in Emaar MGF Land Ltd. v. Aftab Singh in which the court had held that an arbitration clause does not by itself take away a consumer forum’s jurisdiction, since the 1986 Act creates “a special and additional remedy” for consumers.
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Reading this against Section 12(4), the court said that once Padmanabhan’s complaint was admitted in 2005, the district forum had no statutory power to send it elsewhere, including arbitration. It said, “a private contractual clause cannot be permitted to defeat the continued operation of a statutory remedy.”
The bench further disagreed with the premise that Padmanabhan was no longer a consumer. His complaint was never for possession but only for a claim for compensation for the delay in getting it. The order says that “the subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay.”
Whether the delay actually occurred, who was responsible, and what compensation follows are all matters the Court left open to be decided on the merits. The complaint goes back to the Dwarka district forum with a year given to decide it.
How has the Supreme Court ruled in similar cases?
In 2021, in Newtech Promoters and Developers Pvt. Ltd. v State of UP, the court held that an allottee’s right under Section 18 of RERA to seek a refund with interest where a promoter fails to hand over possession within the stipulated time is an “unconditional absolute right” which is available regardless of the delays or unforeseen events that are not attributable to the allottee.
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In 2025, GMADA v Anupam Garg, in which Greater Mohali Area Development Authority (GMADA) allottees had taken bank loans to pay for their flats, the lower forums had directed GMADA to cover the interest on those loans on top of the 8% interest already due under the contract. The SC reversed the latter, holding that 8% interest already compensates a buyer for being kept out of the use of their money and that interest on a buyer’s personal loan cannot be added on top of it.
In MHADA v Manohar Burde, the court held that a buyer who had waited years past the promised date should have their money refunded as “a homebuyer, petitioner cannot be compelled to take possession of the flat after such a long time.” It also reduced the compensation awarded for mental harassment from Rs 10 lakhs to Rs 7.5 lakhs, saying that the developer was a state authority and the delay could not be attributed to any individual officer’s conduct.