Supreme Court - Consumer disputes are non-arbitrable, in the presence of Special act like the Consumer Protection Act.

 In the Matter of M/S Emaar Mgf Land Limited vs Aftab Singh Complaint no. (2019) 12 SCC 751 decided on 10.12.2018 before Supreme Court of India

The appeals were filed challenging the order of National Consumer Disputes Redressal Commission (NCDRC) in Aftab Singh v. Emaar MGF Ltd., 2017 SCC OnLine NCDRC 1614 holding consumer disputes to be non-arbitrable.The respondent entered into a buyer’s agreement with the petitioner company for the purchase of a villa in the township to be developed by them. Dispute arose regarding the same. The respondent filed a complaint with NCDRC under Consumer Protection Act, 1986 for certain reliefs in the matter. The company relied on the arbitration clause provided in the agreement and filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the matter to arbitration. This application was rejected by NCDRC. The company filed appeals against NCDRC order which was dismissed by the Delhi High Court as well as the Supreme Court.

The Hon'ble Supreme Court considered the provisions of Consumer Protection Act, 1986 & Once the public Statute is in place, Arbitration & Conciliation act 1996 can not be resorted to.It was observed that , “….complaint under Consumer Protection Act being a special remedy, despite there being an arbitration agreement the proceedings before Consumer Forum have to go on….”  Thus, it was held that the Consumer Protection Act being special legislation, NCDRC was right in rejecting the company's application under Section 8 of Arbitration Act. Therefore, the review petition was dismissed.

NCDRC - The Developer having received the sales consideration Cannot Charge Holding charges from the Allottee for the delay in taking possession.

 In the Matter of Capital Greens Flat Buyer Association & Ors. Vs. DLF Universal Limited & Anr Complaint no.Consumer case no. CC/2047/2016 decided on 03.01.2020 before National Consumer Disputes Redressal Commission

The NCDRC Observed that

36. ………………...As far as holding charges are concerned, The Developer having received the sales consideration has nothing to lose by holding possession of the allotted flat except that it would be required to maintain the apartment.Therefore the holding charges will not be payable to the developer. Even in a case where the Possession has been delayed on account of the allottee having not paid the entire sale consideration, the developer shall not be entitled to any holding charges though it would be entitled to interest for the period the payment is delayed.

in Civil Appeal CA 3864-3889/2020 Order dated 14.12.2020 the Supreme court has Upheld all directions of NCDRC except two 

(i) The compensation on account of delay in handing over possession of the flats to the flat buyers is reduced from 7% to 6%; and

(ii) The direction for the refund of parking charges and club charges and interest on these two components shall stand set aside.

NCDRC - compensation to the complainant company cannot be at par with that to an individual.The company is not entitled to compensation for the mental agony and harassment to which an individual is entitled

 In the Matter of Springdale Core Consultants Pvt Ltd vs. Pioneer Urban Land and Infrastructure Ltd Complaint no, Consumer case no. 349/2017 decided on 14.07.2020 before National Consumer Disputes Redressal Commission.

The Complainant company booked a residential apartment for its Directors in the Builders project on 29.11.2011. An agreement for sale dated 13.03.2012 was executed between the parties. Under the agreement, the Builder had to apply for Occupancy certificate by 04.09.2015 and obtain the OC by 04.03.2016. The builder could not obtain OC within agreed time. The Complainant filed a complaint seeking possession of the flat along with the compensation for delay in construction. Alternatively, the complainant company prayed for refund of the amount paid to the Builder. During the pendency of the complaint, the Builder obtained OC and offered possession to the complainant company vide letter dated 03.04.2019. 

Issue before NCDRC: 

(i) Whether the flat booked by the Complainant company for its Directors was booked for speculative purposes? 

(ii) Whether the Complainant company is entitled to any compensation in the form of interest for delay in possession of flat?

It placed reliance on the resolution passed by its board of directors on 14.11.2011, resolving to book flat for the residence of one of the directors of the company. Accordingly, the complainant argued that the purchase of flat was not for speculative purposes. 

Builder’s contentions: 

1. Since the complainant is a private limited company resolution may have been manufactured at a later date. 2. As per the information provided by the Registrar of companies, the business activities of the complainant company were confined to Amritsar and all the Directors were residents of Amritsar. A director was also a partner of LLP engaged in the business of Real estate. 

3. The compensation for the delay in delivery of the possession where the complainant is a company should not be at par with the compensation granted to an individual. 

4. Submitting the lease deeds, the builder showed the prevailing rentals in the project. They stated that there would be no justification for compensation higher than the prevailing rentals in the project.

5. Builder also claimed for holding charges from the complainant company.

Verdict of NCDRC: 

NCDRC directed the Builder to hand over the possession of flat to the complainant company within 8 weeks from the date of order. The court also awarded compensation to the complainant company. It rejected the Builder’s contention that the flat in question was for speculative purposes. It observed that the Director became a partner in the LLP in the year 2017 and the flat in question was booked earlier in the year 2011. Secondly, she was residing at Gurgaon and was planning to shift to Gurgaon even if she was residing at Amritsar. Therefore, it is difficult to infer that the flat was booked for speculative purposes 

The Commission relied on the decision of Vishal Malik & Anr. Vs. Pioneer Urban Land Infrastructure Ltd 1 , to direct possession of flat along with the compensation. The commission agreed with the Builder that the compensation to the complainant company cannot be at par with that to an individual. 

The company is not entitled to compensation for the mental agony and harassment to which an individual is entitled. On quantum of compensation, NCDRC stated that the prevailing rents in respect of similarly situated flats of identical specifications and size cannot be made the sole basis for grant of such compensation. Else the builder would have no incentive to complete the construction within the agreed time frame. He would know that even if he diverts the funds collected from the flat buyer to another project, he would easily compensate the buyer which would not cost him more than 3-4% of the capital employed. 

NCDRC placed reliance on the decision of Capital Greens Flat Buyer Association & Ors. Vs. DLF Universal Limited & Anr 2 to observe that the builder is not entitled to holding charges. Since the builder having received the consideration has nothing to lose by holding possession of flat except to maintain the apartment.

Supreme Court - Subsequent buyers are entitled to receive interest only after the date of endorsement in their favour.

 In the Matter of Haryana Urban Development Authority Vs. Diwan Singh Complaint no. Civil Appeal no. 3409 of 2003 // (2010) 14 SCC 770 decided on 23.10.2008 before Supreme Court of India

Fact of the Case.

• Plot No. 2163P in Sector 13, Bhiwani was allotted by the Appellant in the year 1990

• on the request of the original allottee, it was re-allotted to the respondent by the appellant on 21.4.1998

• In the year 1999, respondent approached the District Consumer Disputes Redressal Forum, Bhiwani, alleging that in spite of payment of the full price, the appellant had failed to deliver possession, on account of non-completion of development

• He therefore sought three reliefs. 

• First, a direction to the appellant to pay interest at 24% per annum on the amounts deposited, till the date of delivery of possession (after removing the road laid over a part of the plot). 

• Second was for a direction to the appellant not to charge any extension fee after 1994 or any interest on the extension fee. 

• Third was for payment of compensation of Rs.1,00,000/ for harassment and suffering

• The appellant resisted the claim on several grounds and also alleged that it had offered possession in 1994 and again in May 1998

• The District Forum by its order dated 10.8.1999 accepted the contention of the respondent that there was no effective offer of delivery of possession in May 1998 and awarded interest at 18% per annum on the amounts deposited, with effect from the date commencing on the expiry of two years from the date of deposit, till date of fresh offer of possession with a further direction to the appellant not to charge interest on the extension fee. The prayer for compensation for suffering/mental agony was rejected.  

• The appeal filed by the appellant was dismissed by the State Consumer Disputes Redressal Commission on 21.9.1999 by a nonspeaking order on the ground that there was no merit in the appeal.

• The appellant challenged the order of the State Commission in a Revision filed before the National Consumer Disputes Redressal Commission.

• The National Commission by a non-speaking order dated 27.8.2002 disposed of the Revision Petition in terms of its decision in HUDA v. Darsh Kumar (Revision petition No. 1197 of 1998) wherein it has upheld the award of interest even at 18% per annum.

Order of the Supreme court

• One significant aspect to be noticed is that respondent is not the allottee who was allotted the plot in 1990, but a re-allottee who was re-allotted the plot in April 1998. When he was offered possession of the plot in May 1998, he found that a part of it was used for road purposes of road. Thereafter, the appellant even offered an alternative plot. The respondent however rushed to the District Forum in 1999, hardly within a year of re-allotment.

•  A re-allottee in 1998 cannot obviously be awarded interest from 1992 on the amounts paid by the original allottee in 1990 on the ground that the original allottee was not offered delivery in 1990.

x

NCDRC - Wherever the builder commits a particular date or time frame for completion of the construction and offering possession to the buyer, he must necessarily honour the commitment made by him, If the builder can indefinitely postpone and delay the construction of the flat and the flat buyer has no option but to wait till the builder decides to complete the construction and offer possession to the buyer, that would be nothing but a travesty of justice.

 In the Matter of Pradeep Narula & Anr. Vs. M/s. Granite Gate Properties Pvt. Ltd. & Anr. Complaint no. Consumer Case No. 315 OF 2014 decided on 23.08.2016 before National Consumer Disputes Redressal Commission

The NCDRC in this case Observed that 

"10.   ...........  The primary purpose of a consumer in booking a residential flat which the builder is to construct for him, is to start living in that house on or about the date committed to him by the builder for delivering possession of the flat booked by him.  If the builder does not deliver upon his contractual obligation and at the same time, is unable to show that the delay in completion of the flat and offering its possession to the consumer was on account on circumstances beyond his control, this would constitute deficiency on the part of the builder / service provider in rendering services to the consumer.  If I accept the contention that the builder can indefinitely postpone and delay the construction of the flat and the flat buyer has no option but to wait till the builder decides to complete the construction and offer possession to the buyer, that would be nothing but a travesty of justice and result in a situation where the flat buyer is left at the mercy of the builder, without recourse to an appropriate legal remedy.  Such an interpretation, if taken, is bound to defeat the very objective behind the enactment of the Consumer Protection Act, as far as housing construction is concerned.  Therefore, I am unable to accept the contention advanced by the learned counsel for the opposite party.  In my view, wherever the builder commits a particular date or time frame for completion of the construction and offering possession to the buyer, he must necessarily honour the commitment made by him, though a minor delay may not constitute deficiency in the service rendered by him to the buyer.  Of course, if the builder is able to how that the delay in completion of the construction and offering possession to the buyer is attributable wholly to the circumstances beyond his control, that may not be a case of deficiency in the services rendered to the consumer".

Consumer Protection Act: Entitlement of the Allottee / Homebuyer has to be reckoned in terms of the Date of the Agreement and not the RERA Registration date.

 IN THE MATTER OF: M/s. Imperia Structures Ltd. Vs. Anil Patni and Another (Decided by Hon’ble Supreme Court of India on 02.11.2020) 

Issues: 

    1. Whether the remedies available to the consumers under provisions of the Consumer Protection Act, 1986 (“CP Act”) would be additional remedies, not barred by the coming in force of the Real Estate (Regulation and Development) Act, 2016 (“RERA Act”)? 

2. Whether the provisions of the RERA Act have made any change in the legal position with regards to remedies available to the Allottees? 

3. Whether the entitlement of the Allottee has to be reckoned in terms of the date of Agreement or the RERA registration date? 

Facts: 

    1. A Housing Scheme called “The ESFERA” in Gurgaon, Haryana was launched by the Appellant in 2011. All the Complainants booked their respective apartments by paying the requisite booking amounts and thereafter executed the Builder Buyer Agreement towards their individual units. The Agreement provided for delay due to reasons beyond the control of the Developer (Appellant) and failure to deliver possession due to Govt. Rules/Notifications, etc under the Force Majeure clause and the compensation thereof. Even after four yearsthere was no sign of Project getting completed. Thereafter, in 2017, the Project was registered with Haryana Real Estate Regulatory Authority, Panchkula (“HRERA”). 

2. The Consumer Complaint was filed by the Complainants for the delay in handing over of the possession of their respective apartments. In response, the Appellant challenged the jurisdiction of the National Consumer Dispute Redressal Commission (“National Commission”) on the ground that the Complainants/Respondents would not come within the definition of consumers. After having heard the submissions, the Commission allowed the Complaint and granted relief of refund to the Complainants/Respondents. 

3. The Appellant aggrieved by the order of the National Commission, preferred an appeal under Section 23 of the CP Act before the Hon’ble Supreme Court. Court’s Observations: 

• The Counsel for Appellants submitted that once the RERA Act came into force, all questions concerning the Project including issues relating to construction and completion thereof, would be under the exclusive control and jurisdiction of the authorities under RERA Act. The National Commission, therefore, ought not to have entertained the Consumer Complaint. Further, the Registration Certificate being valid upto 31.12.2020, the Appellant could not be said to have delayed the construction and consequently, there could be no finding that there was deficiency on part of the Appellant. The Counsel for the Respondents submitted that whether the delay occurred due to force majeure was already dealt by the National Commission and no reasonable explanation was available on record to dislodge that finding. It was further submitted that the remedy afforded by the CP Act would be an additional remedy to a consumer and such legal position remained unchained even after the enactment of the RERA Act. 

• The Court noted that conclusions drawn by the National Commission that – i) all the Complainants were consumers within the meaning of the Act; and ii) there was delay on part of the Appellant in completion the construction within time, are absolutely correct and does not call for interference of this Hon’ble Court. • While discussing various precedents, the Court observed that the Hon’ble Apex Court has consistently held that the remedies available under the provisions of the CP Act are additional remedies over and above the other remedies including those made available under any special statutes;and that the availability of an alternate remedy is no bar in entertaining a complaint under the CP Act. The Hon’ble court further observed that insofar as cases where such proceedings under the CP Act are initiated after the provisions of the RERA Act came into force, there is nothing in the RERA Act which bars such initiation. The absence of bar under Section 79 to the initiation of proceedings before a fora which cannot be called a Civil Court and express saving under Section 88 of the RERA Act, make the position quite clear. Furthermore, Section 18 itself specifies that the remedy under said Section is "without prejudice to any other remedy available". Thus, the parliamentary intent is clear that a choice or discretion is given to the allottee whether he wishes to initiate appropriate proceedings under the CP Act or file an application under the RERA Act. 

• The Court held that in the present case the apartments were booked by the Complainants in 2011-2012 and the Builder Buyer Agreements were entered into in November, 2013. As promised, the construction should have been completed in 42 months. The period had expired well before the Project was registered under the provisions of the RERA Act. Merely because the registration under the RERA Act is valid till 31.12.2020 does not mean that the entitlement of the concerned Allottees to maintain an action stands deferred. It is relevant to note that even for the purposes of Section 18, the period has to be reckoned in terms of the agreement and not the registration. Therefore, the entitlement of the Complainants must be considered in the light of the terms of the Builder Buyer Agreements and was rightly dealt with by the Commission. 

The Hon’ble Court dismissed the appeal, affirming the view taken by the National Commission.

Whether the Commission or Forum under the CP Act is a civil court or not?

 in Malay Kumar Ganguli v. Dr. Sukumar Mukherjee, (2009) 9 SCC 221 ,  it was held that,

“The proceedings before the National Commission are although judicial proceedings, but at the same time it is not a civil court within the meaning of the provisions of the Code of Civil Procedure. It may have all the trappings of the civil court but yet it cannot be called a civil court.”

Flat Owners’ Association That Are Formed Due to Mandate of Law Cannot File a Consumer Complaint: Supreme Court

 A bench of Justices Mohan M Shantanagoudar and R Subhash Reddy passed their judgement while dismissing a civil appeal filed by Sobha Hibiscus Condominium against Managing Director of M/s Sobha Developers Ltd. 

The Supreme Court in its verdict held that an association which consists of members of flat owners in a building, registered compulsorily under the provisions of Karnataka Apartment Ownership Act, 1972, cannot be said to be a voluntary organisation. Therefore it cannot file a complaint under the Consumer Protection Act against any deficiency in goods or services under the welfare legislation.

This order came when two judge bench was considering an appeal against the National Commission order which rejected the complaint filed by the Association on the ground that it has no locus standi to file the complaint since neither it is a ‘consumer’ nor it is a ‘recognised consumer association’ within the meaning of Section 12 of the Act.

    In the instant case, the complainant is a statutory body under the provisions of Karnataka Apartment Ownership Act. It consists of members, who are the owners of an apartment called “Shoba Hibiscus”. The Apex Court said that it is clear from the objects of the said Act that it was enacted with a view to provide for the ownership of an individual apartment in a building to make such apartment heritable and transferable property. Once the apartments are registered under this Act, the owners, among other rights, would also get an undivided interest in the common areas and facilities of the apartment complex.

However, the mandatory provision of the law for registration of the flat owners’ association takes away its voluntariness, precluding it to invoke the consumer law. Going through the provisions of the Consumer Protection Act, the court said the statute made it clear that any recognised consumer association could file a complaint but such a group had to be of voluntary nature, registered under the Companies Act, 1956 or any other law.

The Supreme Court said that a voluntary consumer association is a body formed by a group of persons coming together, of their own will and without any pressure or influence from anyone and without being mandated by any other provisions of law.

In the said instance therefore the association formed by the members of the “Shoba Hibiscus” cannot be recognised as a consumer association because it has come into existence pursuant to a declaration which is required to be made compulsorily under the provisions of 1972 Act. Since it is not a ‘consumer’ or a ‘recognised consumer association’ within the meaning of Section 12 of the Act, it cannot file a complaint.

Consumer Protection Act, 2019 - For determining pecuniary jurisdiction, value of the goods or services paid as consideration alone has to be taken

 The National Consumer Disputes Redressal Commission (NCDRC) in M/S Pyaridevi Chabiraj Steels Pvt. Ltd. V. National Insurance Company Ltd. & Ors. [Consumer Case No. 833 of 2020]  held that for determining the pecuniary jurisdiction of the Consumer. The value of the goods “paid” as consideration has to be taken and not the value of goods or services “purchased”.

It was held that, “It appears that the Parliament, while enacting the Act of 2019 was conscious of this fact and to ensure that Consumer should approach the appropriate Consumer Disputes Redressal Commission whether it is District, State or National only the value of the consideration paid should be taken into consideration while determining the pecuniary jurisdiction and not value of the goods or services and compensation, and that is why a specific provision has been made in Sections 34 (1), 47 (1) (a) (i) and 58 (1) (a) (i) providing for the pecuniary jurisdiction of the District Consumer Disputes Redressal Commission, State Consumer Disputes Redressal Commission and the National Commission respectively.”

ONE-SIDED AND UNREASONABLE CLAUSES IN APARTMENT BUYER’S AGREEMENT CONSTITUTES “UNFAIR TRADE PRACTICE” – SUPREME COURT

 In Ireo Grace RealTech Pvt. Ltd. v. Abhishek Khanna & Ors.,CIVIL APPEAL NO. 5785 OF 2019 the Supreme Court of India examined the clauses of the buyers’ agreement and inter alia observed that 

• the allottees are given a very limited right to cancel the agreement in the event of the clear and unambiguous failure of the warranties of the developers, which leads to frustration of the agreement on that account. 

• The Court held that the terms of the apartment buyer‘s agreement, having this limited right of cancellation by the buyers are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Section 2(1)(r) of the Consumer Protection Act, 2019 (CP Act).

The Court stated that term “unfair contract” is defined under the CP Act and the

conferment of powers on the State Consumer Fora and the National Commission to

declare contractual terms which are unfair, as null and void, is a statutory recognition of a power which was implicit under the CP Act. Hence, the buyers cannot be bound by such terms in the agreement. It is a welcome judgment to protect the helpless homebuyers who are left at vagaries of the developers who seek to mis-use the legal provisions.