Depending on the situation, subsequent purchaser of flat can have the same right as the original allottee

In M/s Laureate Buildwell Pvt. Ltd vs Charanjeet Singh, the allotment letter dated 16.10.2012 assured the original allottee that the possession of the flat would be handed over within 36 months i.e. on or before 15.10.2015. The original allotee made payment to the tune of Rs. 1,55,89,329/-, towards the first seven instalments as and when demanded. She sold the flat and an agreement to sell was executed between the parties on 17.02.2016. The original allottee thereafter approached the builder, informing it that the purchaser had stepped into her shoes and would continue with the obligations, and was therefore entitled to possession. Significantly, the builder endorsed and even required the purchaser to execute the letter of undertaking, which he did. With this development, the builder acknowledged that the rights and entitlements of the original allottee relation to the flat were assumed by the purchaser, and signified its obligations, correspondingly to the purchaser, as the consumer. 

In the meanwhile, there was a slowdown in construction, apparently, on account of orders made by NGT which imposed certain restrictions within 10 km radius of the Okhla Bird Sanctuary. It appears that there was no construction of the project for about six months. However, despite this position, the builder continued to demand and received instalments. The purchaser entered the scene in 2016, waited for some time and demanded refund of the entire amount with interest from the dates that deposits were made. After receiving notice, the builder demanded further instalments. It was in this background that the purchaser approached the NCDRC successfully with the claim for refund. The claim for interest was allowed to the extent of 10% on the entire amounts deposited from the respective dates of deposits. 

The principal argument of the builder before the Supreme Court while quoting HUDA v. Raje Ram 2008 (17) SCC 407 and the recent judgment of Supreme Court in Wing Commander Arifur Rahman Khan and Anr. v. DLF Southern Homes Pvt. Ltd. 2020 SCC Online 667 (SC) is that the rights of a purchaser are not the same as an original allottee.

The question then is whether a subsequent purchaser is not entitled to similar treatment as the original allottee, and can be denied relief which otherwise the original allottee would have been entitled to, had she or he continued with the arrangement.

The SC observed that the builder does not deny that upon issuance of the endorsement letter, the purchaser not only stepped into the shoes of the original allottee but also became entitled to receive possession of the flat. There is no denial that the purchaser fulfils the description of the complainant/ consumer and is entitled to move any forum under the Consumer Protection Act for any deficiency in service. 

Referring to a larger five judge bench ruling in Economic Transport Organization v. Charan Spinning Mills (P) Ltd (2010) 4 SCC 114 and Canara Bank v. United India Insurance Co. Ltd. (2020) 3 SCC 455,  the SC held that an individual such as the original allottee, enters into an agreement to purchase the flat in an on-going project where delivery is promised. The terms of the agreement as well as the assurance by the builder are that the flat would be made available within a time- frame. It is commonplace that in a large number of such transactions, allottees are not able to finance the flat but seek advances and funds from banks or financial institutions, to which they mortgage the property. The mortgage pay-outs start initially after an agreed period, commencing in a span of about 15 to 24 months after the agreement. This would mean that in most cases, allottees start repaying the bank or financial institutions with instalments (mostly equated monthly instalments) towards the principal and the interest spread over a period of time, even before the flats are ready. If these facts are taken into consideration, prolongation of the project would involve serious economic repercussions upon such original allottees who are on the one hand compelled to pay instalments and, in addition, quite often -if she or he is in want of a house -also pay monthly rents. Such burdens become almost intolerable. It is at this point that an indefinite wait is impossible and allottees prefer to find purchasers who might step into their shoes. That such purchasers take over the obligations of the original allottee – either to pay the balance instalments or to wait for sometime, would not per se exclude them from the description of a consumer. All that then happens is that the consumer forum or commission – or even courts have to examine the relative equities having regard to the time frame in each case. 

In view of these considerations, this court is of the opinion that the per se bar to the relief of interest on refund, enunciated by the decision in Raje Ram (supra) which was applied in Wg. Commander Arifur Rehman (supra) cannot be considered good law. The nature and extent of relief, to which a subsequent purchaser can be entitled to, would be fact dependent. However, it cannot be said that a subsequent purchaser who steps into the shoes of an original allottee of a housing project in which the builder has not honoured its commitment to deliver the flat within a stipulated time, cannot expect any – even reasonable time, for the performance of the builders obligation. Such a conclusion would be arbitrary, given that there may be a large number- possibly thousands of flat buyers, waiting for their promised flats or residences; they surely would be entitled to all reliefs under the Act. In such case, a purchaser who no doubt enters the picture later surely belongs to the same class. Further, the purchaser agrees to buy the flat with a reasonable expectation that delivery of possession would be in accordance within the bounds of the delayed timeline that he has knowledge of, at the time of purchase of the flat. Therefore, in the event the purchaser claims refund, on an assessment that he too can (like the original allottee) no longer wait, and face intolerable burdens, the equities would have to be moulded. It would no doubt be fair to assume that the purchaser had knowledge of the delay. However, to attribute knowledge that such delay would continue indefinitely, based on an a priori assumption, would not be justified.