Damages against developer must reflect flat buyer’s loss

By Karthik Somasundram and Sneha Jaisingh, Bharucha & Partners

A man’s home is supposed to be his castle, but in reality owning a home remains a chimera notwithstanding introduction of the Real Estate (Regulation and Development) Act, 2016. The Supreme Court in Fortune Infrastructure & Anr v Trevor D’lima & Ors recently laid down principles for awarding compensation to flat purchasers against defaulting developers. The case fell under the Consumer Protection Act, 1986, which operates to protect consumers against deficient service including delays and non-performance by real estate developers.

Karthik SomasundramPartnerBharucha & Partners
Karthik Somasundram
Bharucha & Partners

The case before the Supreme Court was an appeal by Fortune from a decision of the National Consumer Disputes Redressal Commission (NCDRC) in favour of D’lima, the flat purchaser. Since booking the flat along with a parking space in a redevelopment project in 2011, D’lima had paid almost the entire purchase price to Fortune, the developer. However, the project did not go ahead. Fortune claimed that it could not be compelled to complete construction and hand over the flat to D’lima as it had assigned the project to a third party. D’lima claimed before the NCDRC delivery of the flat he had booked, or a flat of similar specifications in the same locality, and compensation for inconvenience on account of delay, etc.

Fortune offered other flats to D’lima but these were unsuitable. The NCDRC therefore ordered Fortune to refund the purchase price and pay compensation to D’lima based on the cost of similar flats in the locality.

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Karthik Somasundram is a partner and Sneha Jaisingh is a managing associate at Bharucha & Partners.

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