Delhi Development Authority v. Skipper Construction Co. Ltd. (2000)

Quick Summary

The Supreme Court of India held that buyers who paid for space in the Jhandevalan project had a statutory charge on the seller’s interest under Section 55(6)(b) of the Transfer of Property Act (TPA). This charge covers the purchase money and interest. The limitation to enforce the charge is 12 years (Article 62, Limitation Act). A “no-interest” clause in these facts was unconscionable. Fraud by Skipper—selling far more than available—strengthened relief. Buyers were reimbursed in full.

Issues

• Do purchasers get a statutory charge under Section 55(6)(b) TPA over the seller’s interest in the Jhandevalan property?
• Are purchasers entitled to interest under Section 55(6)(b)?
• Is the limitation period to enforce the charge twelve years under the Limitation Act?
• Does “subject to contract to the contrary” plus a “no-interest” clause bar interest here?
• Can purchasers rely on the Court’s finding of fraud to sustain their claims for interest?

Rules

• Section 55(6)(b) TPA: Buyer has a charge on the seller’s interest for purchase money and interest, unless the buyer improperly refuses delivery.
• Substituted security: If the charged property changes form, the charge follows the new form; the buyer can proceed against the substitute.
• Limitation: Article 62 of the Limitation Act gives 12 years to enforce a charge, counting from when the amount becomes due.
• Unconscionable clauses: In mass overselling without clear warning, a clause denying interest is not fair dealing and cannot defeat statutory protection.

Arguments

Judgment

• Purchasers must be reimbursed in full (about ₹13.27 crores to ~700 persons noted).
• Under s.55(6)(b) TPA, buyers are entitled to interest on amounts paid.
• Article 62 applies: 12-year limitation to enforce the charge.
• Given the fraud and overselling, a “no-interest” clause was unconscionable and ineffective.

Ratio Decidendi

The statutory scheme of Section 55(6)(b) TPA protects buyers by creating a charge over the seller’s interest for the sums paid with interest. In fraud-tainted mass bookings, contractual terms that strip buyers of interest are unfair and cannot trump this protection. Enforcement of such a charge falls under Article 62 (12 years).

Why It Matters

• Strengthens buyer protection in real estate pre-sales.
• Confirms interest accompanies buyer’s statutory charge.
• Sets the correct limitation framework for enforcement (12 years).
• Signals that unfair “no-interest” terms will not pass in fraud/overselling settings.

Key Takeaways

1. Buyer’s money = charge on seller’s interest (s.55(6)(b)).
2. Interest is part of that protection.
3. Enforcement window: 12 years (Art. 62).
4. “No-interest” clause can fail if unconscionable.
5. Fraud and overselling weigh heavily for buyer relief.

Mnemonic + 3-Step Hook

Mnemonic: “C-I-L-F” — Charge, Interest, Limitation-12, Fraud-kills-clause.

1. Spot the buyer’s Charge (s.55(6)(b)).
2. Add Interest to the amount paid.
3. Check Limitation (12 years) and Fraud impact.

IRAC Outline

Issue: Whether buyers had a statutory charge with interest and a 12-year enforcement period; effect of “no-interest” clause; role of fraud.

Rule: s.55(6)(b) TPA (charge + interest), Article 62 Limitation Act (12 years), unconscionability limits.

Application: Overselling, defective guarantees, and ignoring Court orders made the “no-interest” term unfair; charge follows any substituted security.

Conclusion: Buyers have a charge with interest; 12-year limitation applies; clause denying interest fails in these facts.

Glossary

Statutory Charge

A legal security created by law over property to secure repayment.

Substituted Security

When original property changes form, the charge attaches to the new form.

Unconscionable

So one-sided or unfair that a court refuses to enforce it.

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