CONSUMER
COMPLAINT AGAINST BUILDER SEEKING REFUND
The
Consumer Protection Act, 1986 have undergone periodic changes vide several
amendments and finally there has been a comprehensive changes in the Act and
Consumer Protection Act 2019 is enacted.
The Consumer Commissions are flooded with cases against builders seeking
various sorts of relief relating to possession, lapses, deficiency in service
and more importantly, for seeking refund of the principal deposited along with
due interest thereon, on account of delay in delivery of possession and also
for seeking refund simpliciter owing
to the delay in projects. It is a common knowledge, that, sometime the delay in
construction is inordinate and therefore rather than seeking possession of the
property, the consumer seeks refund of the sums paid. The law in this regard
has evolved vastly, and despite some earlier hiccups, broad and clear periphery
has now emerged. The Consumer Protection Act, though, shall only be limited to
such consumer dispute which is as per the definition clause, the consumer dispute
and that should not relate to a commercial dispute. The pith and substance of
this article, though, shall revolve around the periphery of seeking only refund
of amount, deposited towards allotment of flat or plot on account of delay in
handing over possession.
To begin with, what is of worth
reference is a recent Three (3) Judge Bench judgment of hon’ble Supreme Court
reported as EXPERION DEVELOPERS PVT. LTD. VERSUS SUSHMA ASHOK SHIROOR[1]
It is
held that When Statutes provide more than one judicial fora for effectuating a
right or to enforce a duty-obligation, it is a feature of remedial choices
offered by the State for an effective access to justice. Thus, whether one opts
to approach RERA or Consumer Commissions constituted under the provisions of
Consumer Protection Act is a choice of a consumer. It is also held that while
interpreting statutes provisioning plurality of remedies, it is necessary for
Courts to harmonize the provisions in a constructive manner.
The Supreme Court in Experion Developers (Supra) was pleased
to dismiss the appeal preferred by the developer against order of National Consumer Disputes Rederessal
Commission (NCDRC), whereby refund and compensation to Consumer was directed for
the failure of the builder to deliver possession of the apartment, within the
time stipulated as per the Apartment Buyers Agreement was dismissed. The
Supreme Court has held that the Commission is correct in its approach in
holding that the clauses of the agreement are one-sided and that the Consumer
is not bound to accept the possession of the apartment and can also seek refund
of the amount deposited by her with interest - Commission has correctly
exercised its power and jurisdiction in passing the directions for refund of
the amount with interest.
Pertinently, the appeals were preferred under Section 23 of the Consumer
Protection Act, 1986, which has arisen out of the judgment dated 19.06.2019
passed by the National Consumer Disputes Redressal Commission, whereunder, the
Commission had directed the Developer to refund an amount of Rs. 2,06,41,379/-
with interest @ 9% p.a. to the Respondent-Consumer for its failure to deliver
possession of the apartment within the time stipulated as per the Apartment
Buyers Agreement. The delay in delivery of possession was held unjustifiable.
The interplay between the judicial remedies under the Act and the Real Estate
(Regulation and Development) Act, 2016 and the remedial choices of a consumer
under these statutes were delved in. It was held that the Commission created
under the Act has the power to direct refund under Section 14 of the Act. The Consumer
Protection Act (CPA) and the RERA Act 2016 does not exclude or contradict each
other and therefore harmonious construction of the provisions shall be
necessary with a view to achieve common object. The cross appeal was also
preferred i.e one by the consumer also was preferred to the limited extent of
seeking enhanced rate of interest.
As already delved in above, the
power to direct refund of the amount and to compensate a consumer for the
deficiency in not delivering the apartment as per the terms of Agreement is held
within the jurisdiction of the Consumer Courts - A consumer can pray for refund
of the money with interest and compensation. The consumer could also ask for
possession of the apartment with compensation. The consumer can also make a
prayer for both in the alternative. If a consumer prays for refund of the
amount, without an alternative prayer, the Commission will recognize such a
right and grant it, of course subject to the merits of the case. If a consumer
seeks alternative reliefs, the Commission will consider the matter in the facts
and circumstances of the case and will pass appropriate orders as justice
demands.
The Supreme Court has earlier also
held that Consumer Protection Act and the RERA Act neither exclude nor
contradict each other - They are concurrent remedies operating independently
and without primacy. [Referred to Imperia Structures
Ltd v. Anil Patni[2] and
IREO Grace Realtech (P) Ltd. V. Abhishek Khanna[3].
The Commission, in its judgment dated 19.06.2019, allowed the
complaint after referring to Clause 10 (relating to the project completion
period), Clause 11 (relating to the possession and conveyance of the
apartment), as well as Clause 13 (relating to delay in possession). The
Commission found that the agreement is one-sided, heavily loaded against the
allottee and entirely in favour of the Developers. Following the decisions of the
Supreme Court Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghvan[4],
the Commission directed the Developer to refund the amount of
Rs.2,36,15,726/- with interest @ 9% p.a.
It is against these findings and the consequential directions
of the Commission that the cross appeals were filed –one by the Developer
bearing Civil Appeal No. 6044/2019 and another by the Consumer being Civil
Appeal No. 7149/2019, challenging the Commission's judgment to a limited extent
for grant of an enhanced interest @ 24% p.a.
The following issues were for consideration before the
hon’ble Supreme Court:
(i)
Whether the terms of the Apartment Buyers Agreement
amount to an ‘unfair trade practice’ and whether the Commission is justified in
not giving effect to the terms of Apartment Buyer’s Agreement as laid down in
the Pioneer case?
(ii)
Whether the Commission has the power under the Consumer
Protection Act, 1986 to direct refund of the amount deposited by the Consumer
with interest?
(iii)
Whether the relief granted by the Commission require
any modification to serve ends of justice?
The
Supreme Court has in “Pioneer case”(Supra) in
somewhat similar factual as well as legal context held as under:
“6.1 In the present case, admittedly the
appellant builder obtained the occupancy certificate almost 2 years after the
date stipulated in the apartment buyer’s agreement. As a consequence, there was
a failure to hand over possession of the flat to the respondent flat purchaser
within a reasonable period. The occupancy certificate was obtained after a
delay of more than 2 years on 28-8-2018 during the pendency of the proceedings
before the National Commission. In LDA v. M.K. Gupta, this Court held that when
a person hires the services of a builder, or a contractor, for the construction
of a house or a flat, and the same is for a consideration, it is a “service” as
defined by Section 2(o) of the Consumer Protection Act, 1986. The inordinate
delay in handing over possession of the flat clearly amounts to deficiency of
service. In Fortune Infrastructure v. Trevor D’ Lima, this Court held that a person cannot be made to wait
indefinitely for possession of the flat allotted to him, and is entitled to
seek refund of the amount paid by him, along with compensation”.
The principle laid down in Pioneer’s case has been
followed consistently in many cases where the terms of the Apartment Buyer’s
Agreement were found to be one-sided and entirely loaded in favour of the
Developer, and against the allottee at every step. The following are instances
where the terms of the Apartment Buyer’s Agreement were found to be oppressive,
constituting unfair trade practice and the Court has not given effect to such
terms of the Agreement.
In NBCC (India) Ltd.
v. Shri Ram Trivedi[5],
the Supreme Court has found that the agreement fastening liability on the
purchaser to pay simple interest @ 12% p.a. if he failed to pay installments on
time and at the same time, if the seller failed to hand over the possession on
time, he would have to pay compensation only @ of Rs. 2 per square feet would
constitute an unfair trade practice. The Court held that a term of a contract
would not be final and binding if it is shown that the flat purchasers have no
option but to sign on the dotted line of a contract framed by the builders. The
Supreme Court further held that Consumer Forums were empowered to award just
and reasonable compensation as an incident of its power to direct removal of a
deficiency in service; they are not constrained by the rate prescribed in the
agreement. The Supreme Court has held that the compensation could be granted,
even if possession had been delivered. The same principles are followed in a
subsequent decision in DLF Home Developers Ltd. v. Capital Greens Flat
Buyers Association & Ors[6].
A Three-Judge bench of Supreme Court in IREO Grace
Realtech (P) Ltd. v. Abhishek Khanna & Ors (Supra) had occasion to deal
with a delay compensation clause, which is similar to the clause in the present
case, which provided that the Developer would be liable to pay delay
compensation @ Rs 7.5 per square foot which works out to approximately 0.9 to
1% p.a. The Court held that this Clause was one-sided and entirely loaded in
favour of the Developer and against the allottee. The Supreme Court had concluded
that the powers of the Consumer Courts are in no manner constrained to declare
a contractual term as unfair and one-sided as an incident of the power to
discontinue unfair or restrictive trade practices. It was held:
“34.
We are of the view that the incorporation of such one-sided and unreasonable
clauses in the apartment buyer’s Agreement constitutes an unfair trade practice
under Section 2(1)(r) of the Consumer Protection Act. Even under the1986 Act,
the powers of the consumer fora were in no manner constrained to declare a
contractual term as unfair or one-sided as an incident of the power to
discontinue unfair or restrictive trade practices. An “unfair contract” has
been defined under the 2019 Act, and powers have been conferred on the State
Consumer Fora and the National Commission to declare contractual terms which
are unfair, as null and void. This is a statutory recognition of a power which
was implicit under the 1986 Act”.
That as regards the issue of payment of interest, as to what
shall be the date of reckoning of payment of interest, the Supreme Court, has
held that the date of respective deposits shall be the point wherefrom the
interest shall be payable. It was thus held as under:
22.1 We are of the opinion that for the interest payable on
the amount deposited to be restitutionary and also compensatory, interest has
to be paid from the date of the deposit of the amounts. The Commission in the
order impugned has granted interest from the date of last deposit. We find that
this does not amount to restitution. Following the decision in DLF Homes
Panchkula Pvt. Ltd. v. DS Dhanda and Ors. (2020) 16 SCC 318 and in modification of the direction
issued by the Commission, we direct that the interest on the refund shall be
payable from the dates of deposit. Therefore, the appeal filed by purchaser
deserves to be partly allowed. The interests shall be payable from the dates of
such deposits”.
The Supreme Court had upheld, though, payment of interest @9% per annum
from the dates of respective deposits of installment.
In Wing Commander Arifur Rahman Khan and Aleya Sultana & Ors. v.
DLF Southern Homes Private Limited[7]
the Supreme Court has held that
there is no embargo on the award of compensation beyond the rate stipulated in
the Apartment Buyer’s Agreement, where handing over the possession of the flat
has been delayed. The Court observed that the Consumer Forums must take a
robust and a common-sense approach by taking judicial notice of the fact that
flat purchasers obtained loans and are required to pay EMIs to financial
institutions for subserving their debts. The Delay Compensation Clause provided
for Rs. 5 per square foot per month. This Court found that this stipulation is
clearly one-sided and does not maintain a level platform or even reflect a
bargain between the parties. The Court granted additional compensation @ 6%
p.a. simple interest to each buyer therein, over and above the Delay
Compensation Clause.
The Supreme Court has further held that a consumer invoking the
jurisdiction of the Commission can seek such reliefs as he/she considers
appropriate. A consumer can pray for refund of the money with interest and
compensation. The consumer could also ask for possession of the apartment with
compensation. The consumer can also make a prayer for both in the alternative.
If a consumer prays for refund of the amount, without an alternative prayer,
the Commission will recognize such a right and grant it, of course subject to
the merits of the case. If a consumer seeks alternative reliefs, the Commission
will consider the matter in the facts and circumstances of the case and will
pass appropriate orders as justice demands. This position is similar to the
mandate under Section 18 of the RERA Act[8].
The Supreme Court has clearly referred to the legal regime under the
Consumer Protection Act, with a view to show that the Commission has the power
and jurisdiction to direct return of money under Section 14 of the Consumer
Protection Act, if a consumer so chooses. The freedom to choose the necessary
relief is of the Consumer and it is the duty of the Courts to honour it.
CONCLUSION
What
thus emerges from the aforesaid discussion is that no fetter is attached to the
power of Consumer Commissions and there is no conflict between RERA and
Consumer Protection Act and a consumer may have the option to their remedy in
whichever forum they prefer. Further, there is no embargo in a case against
builder, as regards the necessity of seeking possession, notwithstanding delay.
A consumer can seek possession of plot or flat as the case may be or refund of
the sums paid as alternative, or compensation for delayed possession of the
flat. The standard form agreement which contains one sided clauses has held to
be not binding. As law has evolved, the one sided contract can also be negated
by Consumer Commission. The sum ad substance of the law that has emerged is
that unfair trade practices on the part of builder cannot be permitted. The one
sided agreement proposed by the builder and eventually signed by the consumer is
construed to be unfair trade practices and the periphery of relief or ambit of the
Consumer Protection Act has considerably been widened since then.
------
Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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