The judgment decides only these appeals' relief. It does not decide the bank's loan-recovery claim against the buyer — that remains pending in appeal before the High Court, which must decide it on its own merits. It also does not disturb the NCDRC's finding of delay in possession.
- Case
- Madhu Kudapa (formerly known as K. Madhusudhan Rao) v. M/s Lodha Healthy Constructions and Developer Private Limited & Anr.
- Court
- Supreme Court of India
- Decision
- Citation
- 2026 INSC 1131
- Bench
- Justice Pamidighantam Sri Narasimha; Justice Alok Aradhe
- Judgment by
- Alok Aradhe, J.
- Case numbers
- Civil Appeal No. 8994 of 2022; Civil Appeal Nos. 4622-4623 of 2023
- Outcome
- Three appeals disposed of: NCDRC order modified; buyer to get Rs.1,27,34,726 with 12% simple interest plus Rs.15 lakh composite compensation; bank's Rs.2 lakh deficiency direction upheld; bank's loan-recovery claim left to the pending High Court appeal. No order as to costs.
The ruling
On 15 October 2026, the Supreme Court held that a homebuyer whose apartment was never delivered is entitled, in his own right, to a refund of only the money he actually paid out of his own pocket — Rs.1,27,34,726 — and not the full Rs.2,19,92,107 that reached the builder, most of it through an unpaid housing loan.
Writing for the Bench, Justice Alok Aradhe held that paying the bank-funded portion to the buyer while the loan remained outstanding would put money he never paid into his hands — unjust enrichment, which the law does not permit. The Court also fixed simple interest at 12% per annum on the refund, refused a separate award of rent on top of that interest, and awarded a composite Rs.15 lakh as full compensation for rent, mental agony, harassment and litigation expenses.
The flat that was never delivered
In 2009, M/s Lodha Healthy Constructions and Developers Pvt. Ltd. launched the “Lodha Bellezza” project at Kukatpally, Hyderabad. The buyer, then a Non-resident Indian, booked an apartment for Rs.2,30,73,876 and paid Rs.51,11,576 from his own funds by September 2009. An agreement for sale was executed on 21 October 2009.
The buyer borrowed the balance: HDFC sanctioned a Rs.2 crore housing loan on 27 November 2009, a tripartite agreement was executed on 30 January 2010, and the bank disbursed Rs.1,68,80,531 directly to the builder in thirteen tranches between February 2010 and July 2011. The builder thus received about 95% of the consideration. Possession was due by 30 June 2011; the builder missed even its own extended deadline of April 2012, and the fire department's no-objection certificate — which the buyer had asked about before accepting “fit-out” possession — came only in May 2013.
The NCDRC order and the appeals
The buyer filed consumer complaint CC No. 150 of 2013 in May 2013, seeking refund of Rs.2,19,92,107 with interest, reimbursement of rent of Rs.7,97,895, reversal of interest debited to his loan account, and Rs.15 lakh as compensation. The National Consumer Disputes Redressal Commission's order of 1 July 2022 ordered a full refund with 9% interest (12% on default within three months), found the bank deficient in service for disbursing tranches without verifying construction progress, and directed the bank to pay Rs.2 lakh — but never addressed the rent and compensation claims.
Both sides appealed under Section 23 of the Consumer Protection Act, 1986: the buyer for rent, compensation and 18% interest, and the bank against the deficiency finding and the direction to refund the entire amount to the buyer. The builder accepted the Commission's order and deposited Rs.4,43,24,510 with the Commission; with accrued interest that deposit stood at Rs.5,65,43,411 on 8 October 2026. The bank's recovery suit against the buyer was dismissed by the Commercial Court, and its appeal remains pending before the High Court.
BANTHRY ANALYSISThe doctrine: restitution restores, it does not redistribute
The Court framed the refund question as one of unjust enrichment — the maxim nemo debet locupletari ex aliena jactura, no one ought to be enriched by another's loss — which it traced to Sections 68 to 72, 64 and 65 of the Indian Contract Act, 1872 and to decisions from Mahabir Kishore to Mafatlal Industries. Three consequences follow, the Court explained: the doctrine asks whether the holder may in conscience keep the benefit; it is a doctrine of correction, not reward; and restitution restores — it does not redistribute.
Applying that, the Court traced the money. The builder received Rs.2,19,92,107 and gave nothing in return, so a refund was due — but the real question was to whom. The buyer paid Rs.51,11,576 to the builder from his own funds and Rs.76,23,150 to the bank (Rs.26,23,150 towards interest, Rs.20 lakh in June 2021 and Rs.30 lakh in July 2021): Rs.1,27,34,726 of his own money in all. The rest of what reached the builder was the bank's money under a loan that was still outstanding and whose recovery is disputed. The tripartite agreement's fiction that a disbursal to the builder counts as a disbursal to the borrower only fixes the repayment obligation; it does not convert borrowed, unpaid money into the borrower's own money. Handing him the bank's share would be a windfall, not restitution.
Interest at 12%, and why rent cannot ride on top
On interest, the Court held the parties to their own bargain. Clause 24 of the agreement for sale fixed 12% per annum for delayed possession, and the buyer himself had claimed 12% in his complaint. His claim for 18% — founded on another clause and on Rajnesh Sharma, where this Court had enhanced interest because of a builder's decade-long delay and misconduct — was rejected: that decision itself warns the 18% rate is not a rule of thumb and relief must depend on the facts of each case. The buyer gets 12% simple interest from the date of each payment.
On rent, the Court refused to add it on top of full interest. Interest at 12% is awarded precisely because the buyer was deprived of the use of his money — money that could have secured him a home. Awarding both the return on the money and the rent paid for want of a home would compensate the same loss twice, which the Court had already held impermissible in DLF Homes v. D.S. Dhanda. The enlarged rent figures — Rs.38,000 a month and then Rs.65,000 a month, running into lakhs each year — were also raised for the first time in a rejoinder affidavit, with no lease deed or rent receipts, and the buyer had himself valued the loss differently in a 2012 letter. Instead, the Court awarded a composite Rs.15 lakh towards rent, mental agony, harassment and litigation expenses, noting he had been kept out of both apartment and money for over fifteen years and lost the benefit of price appreciation.
The bank stays deficient; its recovery claim waits
The Court upheld the Commission's finding that the bank was deficient in service. The buyer had discharged his initial burden — he repeatedly asked the bank to verify construction progress, including by e-mail in March 2010 and letters in June and October 2012 — and though the bank claimed its engineers inspected the site before each release, it produced no inspection report before the Commission and led no evidence. The Rs.2 lakh compensation against the bank, the Court said, was modest and commensurate.
But the bank's own claim to recover its loan cannot be decided inside the buyer's consumer complaint. That claim — Rs.2,51,15,774 plus interest, the subject of its suit before the Commercial Court — is pending in appeal before the High Court, which must decide it on its own merits, uninfluenced by this judgment. Accordingly, the remaining part of the builder's deposit stays in an interest-bearing account with the Commission to abide by the High Court's decision.
BANTHRY ANALYSISFor law students
This judgment is a compact course on three remedies. First, the doctrine of unjust enrichment: remember its statutory homes (Sections 68–72, 64, 65 of the Contract Act) and the Court's three consequences — it corrects, it does not reward; it asks who may in conscience keep the benefit. Second, the agreed interest rate: where a contract fixes the consequence of delay, courts need strong reasons to depart from it. Third, the no-double-counting rule for consumer compensation: interest already prices the deprivation of money, so rent for the same period is the same loss in different clothes — and any head of compensation must be proved with evidence, not asserted in a rejoinder.
Watch also the procedural lesson on deficiency in service: the initial burden lies on the complainant, but once discharged — here, by repeated written requests for inspection reports — the burden shifts, and a fact specially within the bank's knowledge (whether it verified construction before each disbursal) must be proved by the bank with documents, not assertions.
READING PROMPTSQuestions for a closer reading
- Why did the Supreme Court refuse to refund the buyer the entire Rs.2.19 crore that reached the builder, and which doctrine did it apply?
- On what basis did the Court fix interest at 12% per annum instead of the 18% the buyer claimed, and what did it say about Rajnesh Sharma?
- Why did the Court treat awarding rent in addition to interest on the full refund as impermissible, and what evidentiary gaps did it identify in the enlarged rent claim?
