MADHU KUDAPA (FORMERLY KNOWN AS K. MADHUSUDHAN RAO) v. M/S LODHA HEALTHY CONSTRUCTIONS AND DEVELOPER PRIVATE LIMITED

2026 INSC 1131 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.8994 OF 2022

MADHU KUDAPA (FORMERLY KNOWN AS K. MADHUSUDHAN RAO) …APPELLANT VERSUS M/S LODHA HEALTHY CONSTRUCTIONS AND DEVELOPER PRIVATE LIMITED (LHCPL) & ANR. …RESPONDENTS

WITH

CIVIL APPEAL NOS. 4622-4623 OF 2023

JUDGMENT ALOK ARADHE, J.

1. The purchase of a residential apartment in a project under

construction is, more often than not, financed partly from the

savings of the purchaser and partly by a housing loan, which

the lender disburses directly to the builder under a tripartite

arrangement. When the builder fails to deliver possession

and the purchaser seeks a refund, the question which arises,

is not merely whether the consideration must be returned,

but to whom it must be returned and in what measure. Signature Not Verified

2. Digitally signed by Jayant Kumar Arora Date: 2026.10.15 These three appeals preferred under Section 23 of the 17:11:12 IST Reason:

Consumer Protection Act, 1986 (the Act) arise out of orders

dated 01.07.2022 and 07.12.2022 passed by the National

Consumer Disputes Redressal Commission, New Delhi (the

Commission). Civil Appeal No. 8994 of 2022 has been filed by

the complainant who had booked an apartment, namely, Mr.

K. Madhusudhan Rao (the Borrower), whereas, Civil Appeal

Nos. 4622-4623 of 2023 have been filed by the Housing

Development Finance Corporation Limited (the Bank). In

order to appreciate the grievance of the appellants relevant

facts need mention which are stated infra.

FACTUAL BACKGROUND

3. In the year 2009, M/s Lodha Healthy Constructions and

Developers Private Limited (LHCPL) (the Builder) launched a

residential project called “Lodha Bellezza” at Kukatpally,

Hyderabad. On 08.08.2009, the Borrower, then a Non-

resident Indian, booked an apartment for a total

consideration of Rs.2,30,73,876/- (Rupees Two Crore Thirty

Lakh Seventy Three Thousand Eight Hundred Seventy Six

only). The Borrower paid a booking amount of Rs.4,50,000/-

(Rupees Four Lakh Fifty Thousand only). Thereafter, he paid

sums of Rs.22,45,288/- (Rupees Twenty Two Lakh Forty Five

Thousand Two Hundred Eighty Eight only) and 24,16,288/-

(Rupees Twenty-Four Lakh Sixteen Thousand Two Hundred

Eighty Eight only) on 25.08.2009 and 30.09.2009

respectively. In all, the Borrower paid a sum of

Rs.51,11,576/- (Rupees Fifty One Lakh Eleven Thousand

Five Hundred Seventy Six only), that is, 22% of the sale

consideration from his own funds. On 21.10.2009, an

Agreement for Sale was executed between the Borrower and

the Builder.

4. In order to make payment of the balance consideration, the

Borrower approached Housing Development Finance

Corporation Limited (the Bank). On 27.11.2009, the Bank

sanctioned a housing loan of Rs.2 Crores. Thereafter, on

30.01.2010, a Tripartite Agreement was executed between

the Borrower, the Builder and the Bank. A Loan Agreement

dated 01.02.2010 was executed between the Bank, the

Borrower and his wife as co-borrower.

5. Between February, 2010 to July, 2011, the Bank disbursed

the sum of Rs.1,68,80,531/- (Rupees One Crore Sixty Eight

Lakh Eighty Thousand Five Hundred Thirty One only) to the

Builder in thirteen tranches. Thus, the Builder received

about 95% of the sale consideration from the Borrower as well

as the Bank.

6. Despite having received a substantial amount, there was a

delay in delivery of the possession of the apartment. On

04.08.2011, the Builder informed the Borrower that there

was delay and that possession of the apartment would be

handed over by April, 2012. However, the Builder failed to

deliver the possession even by April, 2012 and between

October and December, 2012 called upon the Borrower to

take the possession for “fit-outs”. The Borrower did not

accord his consent to the aforesaid proposal and inquired

whether the Occupancy Certificate and the No-Objection

Certificate (NOC) of the Fire Department had been obtained.

The Builder by communication dated 25.03.2013, informed

the Borrower that NOC of the Fire Department was still

awaited, which according to the Builder was issued in May,

7. In the meantime, the Bank started debiting pre-EMI interest

on the amount disbursed by it. As per the loan statement

dated 23.03.2013, interest of Rs.41,34,940/- (Rupees Forty

One Lakh Thirty Four Thousand Nine Hundred Forty only)

had been debited to the loan account, out of which the

Borrower paid a sum of Rs.26,23,150/- (Rupees Twenty Six

Lakh Twenty Three Thousand One Hundred Fifty only) to the

Bank.

8. On 13.05.2013, the Borrower filed a consumer complaint,

namely, CC No. 150 of 2013, before the Commission seeking

refund of Rs.2,19,92,107/- (Rupees Two Crore Nineteen Lakh

Ninety Two Thousand One Hundred Seven only) with interest

at the rate of 12% per annum compounded quarterly till the

date of the complaint, and interest at the rate of 18% per

annum thereafter, as well as reimbursement of house rent of

Rs.7,97,895/- (Rupees Seven Lakh Ninety Seven Thousand

Eight Hundred Ninety Five only) for the period from

01.07.2011 till 30.04.2013 and further rent thereafter. The

Borrower also prayed for reversal of the interest debited to his

loan account, for a direction that the sum of Rs.26,23,150/-

(Rupees Twenty Six Lakh Twenty Three Thousand One

Hundred Fifty only) collected by the Bank as interest be

treated as repayment towards the principal amount, and for

a sum of Rs.15,00,000/- (Rupees Fifteen Lakh only) as

compensation from the Builder and the Bank for mental

trauma, agony and harassment.

9. During the pendency of the complaint, the Bank recalled the

loan by notice dated 19.01.2015 and filed a suit, namely,

COS No. 96 of 2017 before the Commercial Court seeking

recovery of a sum of Rs. 2,51,15,774/- (Rupees Two Crore

Fifty One Lakh Fifteen Thousand Seven Hundred Seventy

Four only) along with interest at the rate of 18% per annum

from the Borrower and his wife. During the pendency of the

complaint as well as the suit, the Borrower paid a further

sum of Rs. 20,00,000/- (Rupees Twenty Lakh only) and

30,00,000/- (Rupees Thirty Lakh only) to the Bank on

23.06.2021 and 14.07.2021 respectively. Thus, the Borrower

in all paid Rs. 76,23,150/- (Rupees Seventy Six Lakh Twenty

Three Thousand One Hundred Fifty only) to the Bank.

THE ORDER OF THE COMMISSION

10. The Commission by its order dated 01.07.2022, inter alia held

that the Borrower is a consumer and that there was a delay

in delivery of possession of the apartment, for which the

Borrower is entitled to refund of the principal amount along

with reasonable interest. The Commission rejected the plea

of force majeure raised by the Builder, holding that the

Builder had merely narrated events and obstacles routinely

faced by developers, had not intimated the Borrower of any

force majeure condition at the relevant time, and had failed

to show that the occupancy certificate had been received. The

Commission noticed that under Recital (H) of the tripartite

agreement and Clause 2.4 of the Loan Agreement, the Bank

was to disburse the loan after verifying the progress of

construction. The Commission held that the Bank did not

adduce any evidence of such verification, found the Bank to

be deficient in service, and directed the Bank to pay a sum of

Rs.2,00,000/- (Rupees Two Lakh only) to the Borrower. The

Commission further directed the Builder to refund the entire

amount deposited by the Borrower with interest at the rate of

9% per annum from the date of the respective deposits till

realisation within a period of three months, failing which the

Builder was to pay the principal amount with interest at the

rate of 12% per annum. The Commission, however, did not

advert to the claim of the Borrower for reimbursement of

house rent and for compensation.

11. Being aggrieved by the direction of the Commission to refund

the entire amount to the Borrower, the Bank preferred a

review petition which was dismissed vide order dated

07.12.2022 by the Commission.

12. The Builder did not challenge the order of the Commission

and sought leave to deposit the amount due under it. On

01.02.2023, the Commission permitted the Builder to deposit

a sum of Rs.4,43,24,510/- (Rupees Four Crore Forty Three

Lakh Twenty Four Thousand Five Hundred Ten only) without

prejudice to the rights and contentions of the parties. The

said amount was deposited by the Builder. The amount so

deposited, together with the interest accrued thereon, stood

at Rs.5,65,43,411/- (Rupees Five Crore Sixty Five Lakh Forty

Three Thousand Four Hundred Eleven only) as on

13. On 10.12.2024, the Commercial Court dismissed the suit

filed by the Bank on the ground that in view of findings

recorded by the Commission in Consumer Complaint, the

suit was not maintainable. However, the Commercial Court

did not answer the remaining issues in the suit. Being

aggrieved, the Bank has filed an appeal which is pending

before the High Court.

14. By an order dated 07.11.2025, this Court declined to grant

interim relief to the Bank, but directed that the disbursal of

the amounts would be subject to the final outcome of the

appeals. By a subsequent order dated 22.05.2026, this Court

permitted the Borrower to withdraw 50% of the amount

deposited by the Builder before the Commission on

furnishing a bank guarantee to the satisfaction of the

Commission.

15. Being aggrieved by the denial of the claim for house rent and

compensation, and by the rate of interest, the Borrower has

filed the Civil Appeal No. 8994 of 2022. Being aggrieved by

the finding recorded by the Commission with regard to

deficiency of service on the part of the Bank and the

consequential direction to pay a sum of Rs. 2,00,000/-

(Rupees Two Lakh only) as well as the direction to refund the

entire amount along with interest to the Borrower, the Bank

has filed the Civil Appeal Nos. 4622-4623. The Bank has also

challenged the order dated 07.12.2022 by which its review

petition was rejected.

SUBMISSIONS

16. Mr. Amit Anand Tiwari, learned senior counsel for the

Borrower, submitted that the loan was to be disbursed as per

the schedule and in step with the construction and the Bank

while disbursing the amount of loan failed to adhere to the

schedule. It was contended that about 80% of the amount

was disbursed at a time when the Builder did not even have

permission to construct and the project was joint venture of

the Bank and the Builder and they have acted in collusion. It

was urged that the Borrower was entitled to rent for a period

from 30.06.2011 to 01.07.2022 as well as compensation and

the aforesaid prayers of the Borrower were not even adverted

to by the Commission. It was also urged that the Borrower is

entitled to 18% interest on the amount due to him. It was

argued that the Borrower is entitled to refund of the entire

amount including the amount paid by the Bank on his behalf

and he shall pay the amount to the Bank in case the Bank

succeeds in its appeal pending before the High Court. It was

urged that the appeal filed by the Bank is barred by res

judicata as the suit filed by the Bank was dismissed. Our

attention was also invited to the averments in the rejoinder

affidavit filed by the Borrower before this Court wherein a

claim had been made for payment of rent at the rate of Rs.

38000/- (Rupees Thirty Eight Thousand only) per month

from July 2011 to July 2013 and at the rate of Rs. 65000/-

(Rupees Sixty Five Thousand only) per month from August

2013 to October 2022. It was also pointed out that the

Borrower had incurred litigation expenses of Rs. 35,00,000/-

(Rupees Thirty Five Lakh only) and the Borrower was entitled

to the payment of said amounts. In support of the aforesaid

submissions, reliance has been placed on a decision of this

Court1.

17. Mr. Gaurav Agarwal, learned senior counsel and Mr. Rahul

Kripalani learned counsel for the Builder, submitted that

Builder has accepted the order passed by the Commission

and with a view to bring quietus to the dispute has submitted

that out of the amount deposited by the Builder, the amount

of Rs.1.27 Crores which was paid by the Borrower from his

own pocket be refunded to the Borrower along with such rate

of interest, as this Court may deem fit. It was further

submitted that the remaining amount with interest accrued

1 Rajnesh Sharma v. Business Park Town Planners Ltd., 2025 SCC OnLine SC 2061

thereon be paid to the Bank so that the present appeals as

well as the first appeal filed by the Bank pending before the

High Court can be disposed of. Alternatively, learned senior

counsel has supported the order passed by the Commission

and has submitted that the Borrower is entitled to 9%

interest which has rightly been awarded to him. It was

pointed out that the Borrower in his letter dated 03.11.2012

had himself quantified the loss in terms of rent which the

apartment could have fetched, and the Borrower stands

adequately compensated by the award of interest. In support

of the aforesaid submissions, reliance has been placed on the

decisions of this Court2.

18. Ms. Suhasini Sen, learned counsel for the Bank, submitted

that the Commission erred in granting refund of the entire

amount of Rs.2.19 Crores to the Borrower in violation of

Clauses 16 and 17 of the Tripartite Agreement. It was

contended that by cancellation of allotment, the Bank which

was a secured creditor had been reduced to the position of an

unsecured creditor. It was urged that the finding recorded by

the Commission that there was deficiency on the part of the

Bank cannot be sustained on the basis of material placed on

record. However, it was submitted that the proposal made by

the Builder for amicable settlement of dispute was not

acceptable to the Bank. It was contended that the suit was

dismissed solely on the ground of maintainability and there

had been no adjudication on merits and an appeal against

the said judgment of the Commercial Court is pending,

therefore, the doctrine of res judicata has no application.

Lastly, it was contended that the rights of the Bank to recover

the amount from the Borrower cannot be adjudicated in a

complaint filed by a consumer.

ISSUES

19. We have considered the rival submissions and have perused

the record.

20. The issues which arise for consideration are as follows:-

(a) whether the Borrower is entitled to refund of the entire

amount including the amount disbursed by the Bank, and if

so, at what rate of interest?

(b) whether the Borrower is entitled to compensation,

including reimbursement of the rent claimed by him?

(c) whether the Bank was deficient in rendering service to

the Borrower?

(d) the relief to which the Bank is entitled to in these

proceedings.

21. Now, we proceed to deal with the issues ad seriatim.

ANALYSIS

(a) WHETHER THE BORROWER IS ENTITLED TO REFUND OF THE ENTIRE AMOUNT INCLUDING THE AMOUNT DEPOSITED BY THE BANK, IF SO, AT WHAT RATE OF INTEREST?

22. The entitlement of the Borrower to refund of the entire

amount is required to be examined on the touchstone of the

principle that no one shall be enriched at the expense of

another. The principle is of ancient origin and finds

expression in the maxim nemo debet locupletari ex aliena

jactura, that is, no one ought to be enriched by the loss of

another.

23. In India, the principle has a statutory home. Chapter V of the

Indian Contract Act, 1872 (the Contract Act), comprising

Sections 68 to 72, deals with “certain relations resembling

those created by contract”. Section 70 of the Contract Act

obliges a person who enjoys the benefit of a lawful, non-

gratuitous act of another to compensate him. Section 72

mandates that a person to whom money has been paid, or

anything delivered, by mistake or under coercion, must repay

or return it. Sections 64 and 65 require a benefit received

under a contract which is rescinded, or which becomes void,

to be restored to the person from whom it was received.

24. The elements of the Doctrine of Unjust Enrichment were

identified by this Court in Mahabir Kishore v. State of

Madhya Pradesh3, and it was held that the doctrine

proceeds on the basis that it would be unjust to allow one

person to retain a benefit received at the expense of another.

Stated simply, ‘unjust enrichment’ means retention of a

benefit by a person that is unjust or inequitable4. It has also

been described as “the unjust retention of a benefit to the loss

of another”5. A Bench of nine Judges of this Court applied the

doctrine to claims for refund of duties and held that a

claimant who has passed on the burden of a duty to others

cannot recover it for himself, for he has suffered no loss6.

25. Three things follow. First, the doctrine is part of our law, both

by statute and as a principle of equity. Second, it looks at the

3 (1989) 4 SCC 1 4 Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise, (2005) 3 SCC 738 5 Indian Council for Enviro-Legal Action v. Union of India, (2011) 8 SCC 161 6 Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536

person who holds a benefit and asks whether, in conscience,

he may keep it. Third, it is a doctrine of correction and not of

reward. Restitution restores. It does not redistribute. It

returns value to the person at whose expense it was received.

It does not confer value on a person merely because he has

been wronged.

26. The law of contract compensates, it does not enrich. Even

while enhancing the rate of interest payable to a buyer, this

Court in Rajnesh Sharma (supra) cautioned that the

objective of granting compensation cannot be altered such

that it amounts to a windfall gain to the other party.

27. In the backdrop of the aforesaid well-settled legal principles,

we advert to the facts of the case in hand. The transaction is

triangular. The Builder received Rs.2,19,92,107/- (Rupees

Two Crore Nineteen Lakh Ninety Two Thousand One Hundred

Seven only) and gave nothing in return. The retention of that

amount by the Builder is plainly unjust, and the Builder has

rightly not disputed its liability to refund it. The real question

is to whom the refund must go. The money came from two

sources. Admittedly, the Borrower paid a sum of

Rs.51,11,576/- (Rupees Fifty One Lakh Eleven Thousand

Five Hundred Seventy Six only) to the Builder from his own

funds. He also paid a sum of Rs.76,23,150/- (Rupees Seventy

Six Lakh Twenty Three Thousand One Hundred Fifty only) to

the Bank, comprising Rs.26,23,150/- (Rupees Twenty Six

Lakh Twenty Three Thousand One Hundred Fifty only) paid

towards interest up to March, 2013, Rs.20,00,000/- (Rupees

Twenty Lakh only) paid on 23.06.2021 and Rs.30,00,000/-

(Rupees Thirty Lakh only) paid on 14.07.2021. Thus, the

Borrower paid a total sum of Rs.1,27,34,726/- (Rupees One

Crore Twenty Seven Lakh Thirty Four Thousand Seven

Hundred Twenty Six only) out of his own pocket. The

remaining amount was paid by the Bank to the Builder out

of the loan, and has not been repaid by the Borrower.

28. It is true that under Recital (H) and Clause 4 of the Tripartite

Agreement, a disbursal to the Builder is deemed to be a

disbursal to the Borrower. That fiction, however, serves a

limited purpose. It fastens the obligation to repay the loan on

the Borrower, though the money never passed through his

hands. It does not convert borrowed money, which remains

unpaid, into the Borrower’s own money. The Commission

nevertheless directed refund of Rs.2,19,92,107/- (Rupees

Two Crore Nineteen Lakh Ninety Two Thousand One Hundred

Seven only) to the Borrower along with interest, without any

reference to the lender whose money it largely was. Payment

of the entire amount to the Borrower, while the loan remains

outstanding and the claim of the Bank is in dispute, would

place in his hands a sum which he has not paid. It amounts

to unjust enrichment, which is impermissible in law. We,

therefore, hold that the Borrower is entitled, in his own right,

to refund of a sum of Rs.1,27,34,726/- (Rupees One Crore

Twenty Seven Lakh Thirty Four Thousand Seven Hundred

Twenty Six only).

29. Now we examine the claim of the Borrower for interest. The

relevant extract of Clause 24 of the Agreement for Sale dated

21.10.2009 reads as under: -

“24. The Builder/Promoter shall give possession of the said Residential Apartment to the purchaser on or before 30th day of June, 2011. The Builder/Promoter shall be entitled to a grace period of 6 months if he fails or neglects to give possession of the said Residential Apartment to the Purchaser on or before the date aforesaid on account of reasons beyond its control. In the event, the Builder/Promoter fails to handover the possession of the Residential Apartment to the Purchaser beyond the said grace period

of 6 months, then and in that event, the Builder/Promoter shall, on demand, be liable to refund to the Purchaser the compensation calculated at the rate of 12 percent per annum on the amounts paid by the Purchaser from the date of expiry of such grace period of 6 months … Alternatively, on such expiry of the said grace period of 6 months, the Purchaser may by giving notice in writing to the builder elect to terminate this Agreement and in such event, the Builder/Promoter shall on demand be liable to refund to the Purchaser the amounts already received by the Builder/Promoter in respect of the said premises with simple interest at 12 percent per annum from the date the Builder/Promoter received such demand till the date of refund. …”

30. Thus, by Clause 24 of the Agreement for Sale, the parties

themselves have fixed the rate of interest at 12% per annum.

Clause 24 of the Agreement for Sale provides that the Builder

must pay compensation at the rate of 12% per annum in case

it fails to deliver the apartment in time, and that in case the

purchaser terminates the agreement, the Builder must

refund the amount to the purchaser with simple interest at

the rate of 12% per annum. The Borrower himself, in his

complaint, claimed interest at the rate of 12% per annum up

to the date of the complaint. The claim of the Borrower for

interest at the rate of 18% per annum, founded on Clause 19

of the Agreement for Sale and on the decision in Rajnesh

Sharma (supra), is of no assistance to him. Clause 19 does

not stand alone; Clause 24 stands beside it and specifically

governs the consequence of the Builder’s default. In Rajnesh

Sharma (supra), this Court enhanced the rate of interest

from 9% to 18% in view of the conduct of the builder, who

had kept the buyer waiting for over a decade and had charged

him interest at 18% for delayed payments. This Court,

however, made it clear that what is reasonable varies from

case to case, and that the rate of interest charged by the

builder cannot be granted to the buyer as a rule of thumb.

This Court has also held that interest at 18% cannot be

awarded as a uniform rule, and that the relief must depend

on the facts of each case7. Where the parties have agreed

upon a particular consequence of delay in handing over

possession, require strong reasons to depart from it8.

31. For the aforementioned reasons, and especially in view of

Clause 24 of the Agreement for Sale, the Borrower is entitled

7 Ghaziabad Development Authority v. Balbir Singh, (2004) 5 SCC 65 8 DLF Homes Panchkula Pvt. Ltd. v. D.S. Dhanda, (2020) 16 SCC 318 and Greater Mohali Area Development Authority v. Anupam Garg, 2025 SCC OnLine SC 1312

to simple interest at the rate of 12% per annum. The interest

shall run from the date of each payment.

32. Accordingly, issue (a) is answered by stating that the

Borrower is entitled to refund of a sum of Rs. 1,27,34,726/-

(Rupees One Crore Twenty Seven Lakh Thirty Four Thousand

Seven Hundred Twenty Six only), that is the amount

deposited by him along with interest at the rate of 12% per

annum from the date of each deposit till the amount is paid

to the Borrower.

(b) WHETHER THE BORROWER IS ENTITLED TO COMPENSATION, INCLUDING REIMBURSEMENT OF THE RENT CLAIMED BY HIM?

33. The complaint made by the Borrower was not confined to

refund of the amount and interest. The Borrower had sought

reimbursement of rent of Rs.7,97,895/- (Rupees Seven Lakh

Ninety Seven Thousand Eight Hundred Ninety Five only) for

the period from 01.07.2011 to 30.04.2013 and further rent

thereafter, and had also claimed a sum of Rs.15,00,000/-

(Rupees Fifteen Lakh only) for mental agony and harassment.

The Commission reproduced these prayers in its order and

even observed that the Borrower was entitled to refund of the

amount deposited along with compensation. Yet, the

operative part of its order grants no compensation against the

Builder. The prayers were not adverted to at all. The grievance

of the Borrower in this regard is, to that extent, well founded.

34. The power to award compensation flows from Section 14(1)(d)

read with Section 22 of the Act. In Lucknow Development

Authority v. M.K. Gupta9, this Court explained that the Act

enables the consumer to claim, and the forum to award, not

only the value of the goods or services but also compensation

for the injustice suffered. In Ghaziabad Development

Authority (supra), this Court held that what is awarded

under the Act is compensation, that is, a recompense for the

loss or injury, and that it “necessarily has to be based on a

finding of loss or injury and has to correlate with the amount

of loss or injury”. The Court illustrated that where possession

is not given, the loss may be determined on the basis of the

rent which could have been earned, or the rent actually paid

by the consumer. In Bangalore Development Authority v.

Syndicate Bank10, this Court held that where possession is

not delivered within the stipulated time, the allottee is

entitled to refund of the amount paid with reasonable interest

9 (1994) 1 SCC 243 10 (2007) 6 SCC 711

from the date of payment, and may in addition be entitled to

compensation, as may be decided with reference to the facts

of each case. The power, however, is to award compensation

for loss or injury suffered by the consumer due to the

negligence of the opposite party. It is a power to compensate

for a loss which is proved and which flows from the default.

It is not a power to award every expense which the consumer

has incurred during the pendency of the dispute. Damages

for contractual breach are generally compensatory; an award

which surpasses actual loss enters the domain of a gain-

based remedy, and the court must take a balanced approach

so as to ensure right compensation.11

35. Before this Court, the claim for rent has grown far beyond

what was initially claimed before the Commission. In the

rejoinder affidavit, for the first time, the rent at Rs.38,000/-

(Rupees Thirty Eight Thousand only) per month from July,

2011 to July, 2013, and the rent at Rs.65,000/- (Rupees

Sixty Five Thousand only) per month from August, 2013 to

October, 2022 has been claimed. The aforesaid sum cannot

be permitted to be claimed for the first time in these Civil

11 Fortune Infrastructure v. Trevor D’lima, (2018) 5 SCC 442

Appeals. For the reasons which follow, we are not persuaded

to compensate the Borrower for the rent so claimed.

36. Firstly, the Act has no provision corresponding to provisions

in other branches of law, such as Rent Control legislations

which statutorily recognises the right of a tenant to claim

rent, in case he hands over the possession of the tenanted

premises for reconstruction/rebuilding.

37. Secondly, the award of rent in addition to interest on the full

refund would amount to double compensation for the same

default. Interest at 12% per annum is awarded precisely

because the Borrower was deprived of the use of his money.

Had that money been with him, he could have applied it to

secure a home of his own. In D.S. Dhanda (supra), this

Court, relying on Irrigation Department, Government of

Orissa v. G.C. Roy,12, held that a person deprived of the use

of money to which he is legitimately entitled has a right to be

compensated for that deprivation, which may be called

interest, compensation or damages; that “such interest will

take into its ambit, the consequences of delay in not handing

over his possession”; and that an award “under various heads

12 (1992) 1 SCC 508

in respect of the same default is not sustainable”. The Court

further held that the consumer fora “cannot award interest

and/or compensation by applying rule of thumb”. To award

him both, the return on the money which would have bought

him a home and the rent which he paid for want of one would

be to compensate him twice for the same loss.

38. Thirdly, the claim travels beyond the pleadings and the proof.

The complaint quantified the rent at Rs.7,97,895/- (Rupees

Seven Lakh Ninety Seven Thousand Eight Hundred Ninety

Five only) for the period up to 30.04.2013. The figures for the

subsequent period, running into several lakhs every year, are

stated for the first time in a rejoinder affidavit in this Court,

supported only by a bank statement for the year 2021. No

lease deed, rent receipt or other evidence of the tenancy was

placed before the Commission. A claim of this magnitude

cannot be adjudicated in a statutory appeal on the strength

of averments made in a rejoinder.

39. Fourthly, and more fundamentally, the Borrower elected his

remedy. Clause 24 of the Agreement for Sale provides two

alternative remedies upon the Builder’s failure to deliver

possession. The purchaser may stay in the project and

receive compensation at the rate of 12% per annum till

possession is handed over; or he may terminate the

agreement and receive a refund of the amount paid with

simple interest at the rate of 12% per annum. By filing the

complaint on 13.05.2013 and seeking a refund, the Borrower

chose the second course. Having chosen to give up the

apartment, he cannot claim, in addition, the rent which he

would have saved had he taken possession of it. From the

date of that election, the cost of housing himself is not a loss

caused by the non-delivery of an apartment which he no

longer wished to have. It is a cost which every person must

bear, whether he owns a home or rents one. The obligation of

the Builder thereafter was to return his money with interest,

and that obligation is being enforced.

40. Lastly, the claim is inconsistent with the Borrower’s own

case. By his letter dated 03.11.2012, the Borrower quantified

his loss as the rent which he could have earned by letting out

the apartment, at about Rs.1,50,000/- (Rupees One Lakh

Fifty Thousand only) per month. The same apartment, for the

same period, cannot be the source both of rent which the

Borrower would have received and of rent which he was

compelled to pay. Further, the Borrower has stated that he

resided in rented premises until he purchased another

apartment. Under Section 73 of the Contract Act,

compensation is payable for loss which naturally arose in the

usual course of things from the breach, and, by the

Explanation to that Section, the means which existed of

remedying the inconvenience caused by the non-performance

must be taken into account. A purchaser who has elected to

take his money back, and who has the benefit of interest on

it, cannot claim rent indefinitely thereafter.

41. The claim of compensation quantified by the Borrower

himself in the consumer complaint filed on 13.05.2013 was

Rs. 7,97,895/- (Rupees Seven Lakh Ninety Seven Thousand

Eight Hundred Ninety Five only). The Borrower has been

subjected to prolonged uncertainty, having paid about 95%

of the consideration by July 2011 and having been kept out

of both the apartment and his money for over fifteen years.

The Borrower has been deprived of the benefit of escalation

in the price of the apartment and therefore, compensation, in

such a case has to be higher than the return of the money

deposited by the Borrower. The quantum of compensation

depends on the facts of each case. Having regard to the

totality of circumstances and in order to avoid prolonged

inquiry, at this distance of time, we deem it appropriate to

award a sum of Rs. 15,00,000/- (Rupees Fifteen Lakh only)

to the Borrower as compensation. The said amount shall be

towards full and final satisfaction of all the claims of the

Borrower against the Builder towards rent, mental agony,

harassment and litigation expenses. Issue (b) is answered

accordingly.

(c) WHETHER THE BANK WAS DEFICIENT IN RENDERING SERVICE TO THE BORROWER?

42. Section 2(1)(g) of the Act defines “deficiency” as any fault,

imperfection, shortcoming or inadequacy in the quality,

nature and manner of performance which is required to be

maintained under any law, or which has been undertaken to

be performed in pursuance of a contract or otherwise, in

relation to any service. Deficiency is a matter of proof. The

burden of proving it lies on the person who alleges it13. This

Court has reiterated that the initial burden of proving

deficiency in service is on the complainant, and that the

13 Ravneet Singh Bagga v. KLM Royal Dutch Airlines, (2000) 1 SCC 66

burden shifts to the opposite party only when that initial

burden is discharged.14

43. The Borrower discharged his initial burden. He repeatedly

asked the Bank to verify the progress of construction. By e-

mail dated 21.03.2010, he sought the Bank’s own

assessment of the construction activity. On 24.05.2011, he

told the Builder that the progress made did not justify further

payment; yet the last tranche was released in July, 2011. By

a letter dated 22.06.2012 and e-mails dated 29.10.2012 and

30.10.2012, he sought its inspection reports and an

inspection by a third party. By 30.06.2011, when possession

was due, the Builder had received about 95% of the

consideration. Yet on 30.10.2012 the Bank itself reported the

building to be only 90% ready, and the fire no-objection

certificate came to be issued only in May, 2013. The burden

then shifted to the Bank. Whether it verified the progress of

construction before each disbursal was a fact especially

within its knowledge. Although the Bank claimed, by its reply

dated 02.05.2012, that its engineers had inspected the site

before each release, it produced no inspection report before

the Commission. Its written version was not taken on record,

and it led no evidence. Its witness in the suit stated that such

reports were not required. The fact that the thirteen tranches

matched the stage-wise instalments in Clause 6 of the

Agreement for Sale, or that the Borrower forwarded the

Builder’s demands, indicates only that the Bank paid what

was demanded. It does not show that the Bank verified the

stage of construction, as its own letter of sanction obliged it

to do.

44. The finding of deficiency recorded by the Commission is thus

a finding of fact founded on the material on record. It is

neither perverse nor based on no evidence. The compensation

of Rs.2,00,000/- (Rupees Two Lakh only) awarded against the

Bank is modest and commensurate with the deficiency. We

find no ground to interfere with it, either at the instance of

the Bank or at the instance of the Borrower. The finding of

deficiency and the direction to the Bank to pay Rs.2,00,000/-

(Rupees Two Lakh only) to the Borrower are accordingly

upheld. Accordingly, issue (c) is answered.

(d) THE RELIEF TO WHICH THE BANK IS ENTITLED TO IN THESE PROCEEDINGS

45. These proceedings arise out of consumer complaint in which

the claim of the Bank based on tripartite agreement cannot

be examined. The Bank is entitled to recover the sum lawfully

due to it from the Borrower. It is noteworthy that the Bank

has already initiated proceedings for recovery of the amount

due to it by filing a suit before the Commercial Court, which

was dismissed, and its claim is now pending in appeal before

the High Court. We, therefore, cannot examine the claim of

the Bank in these proceedings; it is required to be adjudicated

in the appeal pending before the High Court. The High Court

shall decide the appeal on its own merits. All contentions of

the Bank and the Borrower, including the contention of the

Borrower regarding his liability under the loan, are left open.

46. Now, we deal with I.A. No. 95385 of 2026, by which Borrower

seeks amendment of the cause title and the memo of parties.

The Borrower not only seeks change of his name but also

seeks to bring on record the present names of the

respondents. The description of the respondents as proposed

by the Borrower has been opposed by the respondents. We

are, therefore, not inclined to permit to change the

description of respondents. However, from the document

annexed with the application, we are satisfied that the name

of the appellant has been changed from K. Madhusudhan

Rao to Madhu Kudapa. The application is, therefore, allowed

to the limited extent of permitting the Borrower to change his

name in the cause title and the memo of parties. Accordingly,

I.A. No. 95385 of 2026 is disposed of.

CONCLUSION AND DIRECTIONS

47. For the foregoing reasons, the following directions are

issued:-

(i) The Commission shall release to the Borrower, a sum of

Rs.1,27,34,726/- (Rupees One Crore Twenty Seven

Lakh Thirty Four Thousand Seven Hundred Twenty Six

only) along with interest at the rate of 12% per annum

from the date of respective deposits made by the

Borrower to the Builder and the Bank till the date of

payment.

(ii) The Commission shall release a further sum of

Rs.15,00,000/- (Rupees Fifteen Lakh only) to the

Borrower as compensation out of the said deposit,

within a period of one month from today.

(iii) The remaining amount shall be kept by the Commission

in an interest bearing account which shall abide by the

decision of the appeal filed by the Bank.

(iv) The High Court shall decide the appeal pending before

it without being influenced by any of the observations

made herein, on its own merits.

48. The order of the Commission is modified accordingly. The

Appeals are disposed of accordingly. There shall be no order

as to costs.

49. Pending application(s), if any, shall stand disposed of.

….……..……………………………………J. [PAMIDIGHANTAM SRI NARASIMHA]

………………………………………………J. [ALOK ARADHE]

NEW DELHI; OCTOBER 15, 2026.