In a landmark ruling that could protect thousands of distressed homebuyers, the Debt Recovery Appellate Tribunal (DRAT) in Allahabad has ruled in favor of a buyer who took a home loan for an under-construction flat but never got possession. The key takeaway? If the bank disbursed the money directly to the builder and you never received the keys (or the flat), the bank cannot force you to repay the loan.
What Happened in This Case?
The case involves Shri Vikas (or Vikash) Chaudhary and his wife, who applied for a home loan from the State Bank of India (SBI) back in 2014 to buy a flat in a project in Dehradun, Uttarakhand.
- They signed loan documents and a tripartite agreement (a three-way contract between the buyer, the builder/developer, the landowner, and the bank).
- The loan amount of about ₹12.79 lakh was disbursed directly by SBI to the builder — the buyer never touched the money.
- The builder promised to complete the flat and hand over possession, but the project got delayed indefinitely.
- Despite this, the buyer kept paying EMIs for some time while living in rented accommodation.
- When the buyer stopped payments, SBI classified the account as a non-performing asset (NPA) in 2018 and demanded repayment of over ₹13.5 lakh plus interest.
SBI filed a recovery case against everyone: the buyer, his wife (who was the guarantor), the builder, and the landowner.
The Lower Tribunal’s Decision
The Debt Recovery Tribunal (DRT) in Dehradun allowed SBI’s claim but gave major relief to the homebuyers:
- It held the builder and landowner fully liable.
- The buyer and guarantor were completely exonerated (let off the hook).
- Interest was reduced to simple (instead of compounded monthly) and penal interest was removed.
SBI appealed, arguing that the buyers should still be liable since they signed the loan agreement.
Why DRAT Upheld the Relief for Buyers
On November 19, 2025, DRAT Allahabad dismissed SBI’s appeal and confirmed the DRT’s order. The most powerful observation came in paragraph 10 of the judgment:
“If purchaser has neither taken any amount from Bank nor received the possession of the flat from builder, bank is not entitled to recover any amount from the purchaser of the flat.”
Key reasons:
- Under the tripartite agreement, the bank had the right to ask the builder to refund the money (after deductions) if the project failed — without chasing the buyer.
- The buyer got no benefit: no money in hand, no flat to live in.
- The buyer had even complained to RERA (Real Estate Regulatory Authority), which ordered the builder to refund with interest and penalty.
- DRAT said banks can’t rewrite contracts or ignore the fact that the real fault was the builder’s delay.
On interest, DRAT agreed that once a recovery case is filed, tribunals have the discretion to award reasonable (simple) interest as compensation, not the full contractual rate with penalties.
What This Means for You as a Homebuyer
If you’re stuck in a similar situation — delayed project, loan disbursed to builder, no possession — this judgment strengthens your position:
- Always check the tripartite agreement carefully. It often includes clauses protecting buyers if the builder defaults.
- File complaints with RERA early — it can order refunds from builders.
- If the bank comes after you, you can cite this case to argue that recovery should be from the builder, not you.
- This aligns with growing buyer protections under RERA and court trends favoring homebuyers in delayed projects.
While every case depends on specific facts and agreement terms, this DRAT ruling is a strong precedent for tribunals across India.
Also Read: HC Slams Insurer for Denying Dead Man’s Home Loan Cover
