Purchasing Units for the purpose of Earning Rental Income are not ‘Consumers’ under CP Act 2019 held NCDRC

Purchasing Units for the purpose of Earning Rental Income are not ‘Consumers’ under CP Act 2019 held NCDRC

Case law: 

Varun Ahuja & Ors Dw-40 Nirvana Country, Sector-50 Gurugram Haryana  

Versus

  1. M3m India Private Limited 41st Floor, Tower-1, M3m International Financial Center, Sector-66 Badshahpur Gurgaon Gurugram Haryana
  2. Martial Buildcon Private Limited F-022, Lg, Sushant Arcade, Sushant Lok – 1, Guru Gram Gurugram Haryana
  3. M-Worth Services Private Limited Shop No. 163, Upper Ground Floor, C-Block, Sushant Vyapar Kendra, Sushant Lok-Phase-I Gurgaon-122002 Gurugram Haryana

Consumer Case No. 139 OF 2023

Decided on 22.10.2024

Brief Facts:

A project named ‘M3M Urbana’, located in Gurgaon, Haryana was initiated by. ‘M3M India Pvt. Ltd.‘, ‘Martial Buildcon Pvt. Ltd.‘ and ‘M-Worth Services Pvt. Ltd.‘ (collectively referred to as “Builders”). It commenced in the year 2012 and comprised Nine Blocks Of Commercial Spaces like restaurants, retail units, office spaces, etc. The price range of the units ranged from Rs. 57 Lakh to Rs. 1.94 Crore.

 The Complainants purchased units in the this project

Subsequently, the Complainants were informed that a new block would be formed on the land which was originally designated for parking purposes. Complainants’ consent was not taken before deciding to use the common space for the development of a new block.

The Complainants filed a consumer complaint in the National Consumer Disputes Redressal Commission (NCDRC), New Delhi alleging that the new construction would strain the existing facilities and amenities. It would increase the burden on common areas meant only for the original blocks. 

In response, the Builders filed an Interlocutory Application and contended that the Complainants do not come under the definition of ‘consumer’ under the Consumer Protection Act, 2019. The units bought by the Complainants were solely for generating rental income by further leasing them.

Legal Issues :

Now the question before the commission were-

  1. Whether the services availed by a homebuyer/allottee for construction of the particular unit from a builder fall under the definition of “service” as prescribed under the Consumer Protection Act, 2019
  2. Will the subsequent use of the unit after taking possession(Rental income) and the nature of usage of the property sets free the builder from the liabilities arising out of the defects and deficiencies in the unit
  3. Can  Rental Income be called self- livelihood

Legal question -1

Dominant purpose to be seen for establishing commercial purpose 

Supreme Court in Lilavati Kirtilal Mehta Medical Trust v. M/s. Unique Shanti Developers & Ors. (C.A./12322/2016) (Para 7) has to be taken into consideration whereby one has to see the “dominant purpose” for which the services were availed and not the “immediate purpose”.

Onus lies on OP to establish purpose for hiring services 

The Opposite Party has to show that their services of construction which were availed by the Complainants were for commercial purposes and has to cross the threshold laid down by the Hon’ble Supreme Court in Shriram Chits (India) Private Limited Earlier Known as Shriram Chits (K) Pvt. Ltd. V. Raghachand Associates, SLP (C) No. 15290 of 2021 (Para 20), Lilavati (supra) (Para 7) and National Insurance Co. Ltd. vs Harsolia Motors and Ors. [Civil Appeal No(S).5352-5353 OF 2007] (Para 31-44), and the definition of “commercial purpose” has to be read and evaluated only on this  parameter

Legal question-2

Does Rental income equate to commercial purpose:

Purchaser No 1 & 2 Varun Ahuja and Sameer Suneja:

 Unit No   SB/R/GL/09/001 FLY: leased out to  First Love Yourself Lounge & Bar

Unit No  SB/R/GL/01/011 Axis Bank Ltd. 

Unit No SB/R/GL/01/010 Axis Bank Ltd

Purchaser No 3-7 Amarjit Singh, Late Mrs. Suveni Sapra Singh, Inayat Singh, Arman Singh and Antara Singh 

Unit No SB/R/GL/03/004 leased out to Pizza hut

Purchaser No 8 Amarjit Singh, Late Mrs. Suveni Sapra Singh, Inayat Singh, Arman Singh and Antara Singh

Unit No  SB/R/GL/03/004 .leased out to  DebarshiWrap Caffe/Dakshini Zaika Lajawaab South India Café

Neeraj Bhagat AND Vandana Bhagat

 unit no  SB/R/GL/09/02 FLY: First Love Yourself Lounge & Bar

Nitin Ahuja AND Isha Aggarwal 

unit no SB/R/1L/04/018 Palette by Km/Kritika Madan Label

He then submits that to treat rental income exclusively as a commercial purpose activity is incorrect. He submits that rental income is not profit and is not governed by the principles of commercial contracts as profits are always correlated with losses. Therefore the rental income per se is not a commercial purpose venture.

Reliance is being placed upon Rohit Chaudhary and Anr. V. Vipul Ltd. [2023 SCC Online SC 1131] (Para 5, 11 and 13).

This agreement did not convince the court because commercial purpose in Income Tax Act is not applicable in cases under consumer protection act as the concept is different.

The order passed in the case of Shivani Thakran have confirmed by the Apex court as well as the other judgments that where the investments are on a large scale in a mall is commercial purpose under Consumer Protection Act 

Legal question -3

Does the case fall under self-livelihood, an exception to ‘commercial purpose” ?

At the outset, the NCDRC clarified that the dispute pertained to deficiencies in the construction of commercial units and not regarding any goods defined under the Consumer Protection Act, 2019.

 In this regard, reliance was placed on Shri Ram Chits (India) Pvt. Ltd. vs Raghachand Associates [SLP (C) No. 15290 of 2021], wherein it was observed that the intention of the legislature differed under the Consumer Protection Amendment Act, 2002, and the 2019 Act. Under the 2019 Act, the exclusions for earning livelihood by self-employment applied only to goods, not services. Therefore, the explanation for services did not arise.

Provision re produced here under –

“consumer” means any person who-

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.

Explanation. – For the purposes of this clause,

(a) the expression “commercial purpose” does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment

(b) the expressions “buys any goods” and “hires or avails any services” includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing

It is found ,dominant purpose was to earn income clearly established with cogent evidence i.e. lease agreements ‘that units were purchased for commercial purpose and exception self-livelihood not applicable in-service.

Consequently, for all the reasons stated hereinabove, we find that the complainants are not consumers as their entire acquisition of the property is for a commercial purpose as understood under the provisions of Consumer Protection Act 2019. The complaint is accordingly dismissed as not entertainable. 

Development of Consumer Jurisprudence in India

Development of Consumer Jurisprudence in India

(Supreme Court sets Law) 

The judgments which contributed to develop Consumer Jurisprudence. Consumer jurisprudence is the study of legal principles, judicial decisions, and precepts that protect and regulate the interests of consumers.

1

Bombay High court struck down Rue 6(1) of Rule 2020 of Consumer Protection Act 2019

(Legal issue: Appointment of Presidents & Members in Consumer Commissions )

Dominance of executives over Judicial Person, chairman 

Writ 3680 of 2023; Challenge to Rule 6(1) of the Rules of 2020:

Case Law : 

Dr.Mahendra Bhaskar Limaye & others 

Versus.

  1. Union of India, Through its Secretary, Ministry of Consumer Affairs, Food and Public Distribution, Department of Consumer Affairs, Krushi Bhavan, New Delhi. 
  2. State of Maharashtra, Through its Secretary, Food and Civil Supplies and Consumer Affairs, Department/Ministry, Mantralaya, Mumbai-32. 

Writ Petition No. 3680/2023

 High Court of Bombay, Nagpur Bench

(Decided on 20 Oct 2023 )

According to the said provision, the President and the Members of the State Commission and the District Commission can be appointed by the State Government on the recommendation of the Selection Committee. 

The constitution of the Selection Committee consisting of

  • Two members from the Executive as the Secretary in-charge of the Consumer Affairs and a nominee of the Chief Secretary of the State, the doctrine of separation of powers is violated. 
  • In the light of the law laid down in these decisions, it is the contention of the petitioners that Rule 6(1) of the Rules of 2020 compromises the aspect of primacy to the judiciary in the Selection.

Hence HC HELD –

  • Rule 6(1) invalid and the notifications dated 10.04.2023 and 13.06.2023 would not survive. They are accordingly quashed.in the light of earlier decided case by the SC in the matter of Rojer Mathew Versus South Indian Bank Limited & Others [(2020) 6

2

Pecuniary Jurisdiction of Commissions on The Basis of Paid Actual Cost  

Case Law; M/S. Pyaridevi Chabiraj Steels Pvt. Ltd.  V/S National Insurance Company Ltd. & ors Case No. 833 Of 2020 

Decided on: 28 Aug 2020

Law Point -Pecuniary Jurisdiction of National Commission in the light of new provisions in the Act 2019 

Bench -Hon’ble Mr. Justice R.K. Agrawal, President Hon’ble Dr. S.M. Kantikar, Member

Earlier Status: Consideration for Jurisdiction: actual loss, compensation and cost of litigation 

Commission Held: The consideration paid should be the criteria 

While enacting the Act of 2019 the Parliament, 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.

3

CCPA has jurisdiction to initiate proceeding Suo moto against enterprise 

Case title:

 Cloudtail India Private Limited. Versus Central Consumer Protection Authority CCPA Appeal No. 4 Of 2022, Decided on 23 Aug 2023) 

 (Against the Order dated 04/11/2022 in Complaint No. J-25/72/2021 of the CCPA DELHI) 

CCPA while rejecting the plea that their product was international standard tested, directs Cloudtail India Private Limited to recall 1033 pressure cookers, sold by the company in the country which were not BIS marked , refunding its price to the consumers, within 45 days and imposed a penalty of Rs.100000/-, for selling the pressure cooker, in violation of Quality Control Order, 2020.

This is the first order of its kind by CCPA after CP Act 2019 enforced  which has been challenged before the apex consumer commission questioning the jurisdiction of CCPA.Since this is the new entity established under the Act 2019 ,this order holds significant importance. 

4

Home Buyer A Financial Creditor

The Supreme Court in the case of Pioneer Urban Land and Infrastructure Limited & Anr v. Union of India & Ors. (Writ Petition (Civil) No. 43 of 2019) (Decided on  9 Aug 2019) has held that the homebuyers from now onwards shall be considered as Financial Creditors under the Insolvency and Bankruptcy Code.

NCLAT  in the case of Nikhil Mehta and Sons (HUF) v. AMR Infrastructure Ltd. held that

“The amount raised by developer from allottees under assured return scheme had the effect of “commercial effect of a borrowing”. Further, the amount so raised by developer was shown as “commitment charges” under the head “Financial Cost” in the annual return, which made it clear for the NCLAT to consider such allottees as “Financial Creditor” within the meaning of Section 5(7) of I&B Code.”

SC Held;

RERA is to be read harmoniously with the Code, as amended by the Amendment Act and in case of a conflict I&B Code will prevail over RERA. Further, the remedies that are given to allottees of flats/apartments are concurrent remedies, and therefore, allottees of flats/apartments are in position to avail remedies given under the Consumer Protection Act, RERA as well as I&B Code. Further, Section 5(8)(f) as it originally appeared in the Code is a residuary provision, which always incorporated within it allottees of flats/apartments. The explanation together with the deeming fiction was added by the Amendment Act to only clarify the position of law.

5

Law on forfeiture of Earnest Money: Real Estate

Legal Issue: How much deduction is reasonable and justifiable if the home buyer cancels the booking amount

Case Law; Goutam Roy V/S Avalon Projects

CC No 1941 of 2018, Decided on 24.01.2023 (NC)

A landmark judgement National Commission (NCDRC)

National commission ordered for forfeiture of 10% of the total sale cost of the property.

Landowners are also liable along with Builder for Deficiencies in Flat Constructions, SC

Landowners are also liable along with Builder for Deficiencies in Flat Constructions, SC

The Supreme Court held –

“ A revocation of power of attorney executed between landowners and builder for developing their land would not absolve the landowners from being jointly and severally liable along with the builder in a consumer case for deficiency of service.”

Case Details : Akshay & Anr. V. Aditya & Ors Civil Appeal Nos.3642-3646/2018 

Bench :Bela M. Trivedi J Satish Chandra Sharma J 

 Decided on 29th August, 2024.

Facts of the case:

The appellants who are landowners, and respondent No.2 (builder) Glandstone Mahaveer Infrastructure Pvt. Ltd had entered into a Joint Venture Agreement (JVA) for building flats and selling them subsequently. Appellants(landowners) had also executed an Irrevocable Power of Attorney (IPA) in favour of the respondent No.2(Builder) on July 6, 2013. On the premise of the said IPA, the respondent No.2 (builder) entered into an agreement with complainants /home buyers for the units. on the basis of the said documents 

Subsequently the said power of attorney was revoked by the appellants vide the letter dated 12-8-2014,  In the letter dated 12-8-2014, the appellants had stated to be not liable “Henceforth”, i.e. after the said letter was sent.

 The respondents, complainants filed the complaints before the `State Commission’ under Section 17 of the Consumer Protection Act, 1986 against the present Appellants(landowners ) and Respondent No.2(Builders) seeking the declaration that the present Appellants(Landowners ) and the Respondent No.2 (Builders )were jointly and severally involved in the unfair trade practices and were guilty of deficiency in service, they were jointly and severally liable to complete the activities and construction as per the terms and conditions agreed upon between the parties.

The  `State Commission’ holding Builders and Landowners (the present appellants and Respondent No.2) liable for the completion of the construction of dwelling units as per the agreement with the complainants and passed the following order:-

  1. The OP Nos.1,2&3 before the state commission  to provide the possession of the dwelling unit agreed in Agreement to Sell (SA) with each complainant in the span of six months from the date of the receipt of copy of this order
  2. The complainants to pay the entire consideration of the dwelling unit as per the stages and the final amount at the time of sale deed and possession as per the agreement.
  3. The O.P. No.1 before the state commission   to provide the compensation of Rs.1,00,000/- to each of complainant for physical and mental harassment The O.P.No.1 to provide the cost of Rs.10,000/- to each of the complainant in the span of 30 days from the date of the receipt of copy of this order

The present appellants, preferred the First Appeals before the `NCDRC’, which came to be dismissed by the `NCDRC. NCDRC stated :

“The State Commission concluded that at the time of the agreement between the builder and the complainants, the JVA and IPA were very much operative. It is evident, therefore, that the appellants cannot wash their hands off from the matter, as it would result in grave injustice to the complainants’ consumers.”

Now matter comes before SC for adjudication 

Arguments by Advocate appearing for the appellants 

  • That the appellants revoked the IPA granted to respondent no.2(Builder) on August 12, 2014 along with a public notice and hence could not be held liable for the acts done by the respondent no.2.
  • That since the appellants were not privy to the agreement between the respondent no.2 and flat buyer/remaining respondents, a complaint against them under the Consumer Protection Act would not be maintainable.
  • Advocate representing respondent no.2 had submitted that respondent no.2 was ready to complete the construction work and honour the JVA 

Supreme Court observed that 

“that though allegedly the said power of attorney was revoked by the appellants vide the letter dated 12-8-2014, the JVA has not been revoked so far and the same still continues to be in force”

It is further stated –

“In the letter dated 12-8-2014, the appellants had stated to be not liable “Henceforth”, i.e. after the said letter was sent. The appellants therefore were bound by the acts/deeds of the Respondent No.2 carried out pursuant to the irrevocable Power of Attorney till it was terminated, in accordance with law.”

To sum-up SC held – 

  • The Joint Venture Agreement (JVA) between the builder and the landowners remained operative even after the revocation of the power of attorney.
  •  It was also held that the expression ‘henceforth’ used in the revocation letter to the builder meant that landowners would be ceased of any liability for builder’s actions that occurs subsequent to the termination
  • that would not exclude the landowners’ liability for the agreements that the builder entered into with the buyers before the termination of JVA or revocation of Power of attorney

Purchaser of a property is liable to pay ‘Electricity dues’ of the previous owner of a property 

Purchaser of a property is liable to pay ‘Electricity dues’ of the previous owner of a property 

Case Title: M/s Pure & Cure Healthcare Pvt. Ltd V/s HPSEBL(Nine cases)

Bench Chief Justice of India DY Chandrachud, Justice PS Narasimha and Justice Hima Kohli 

Decided on 19 Apr 2024 

Issue: Whether electricity dues of the prior owner would constitute a charge on the property.

Facts 

The issue arose in the nineteen cases before the Court, in which the electric utilities refused to provide connection to new purchasers unless the dues of the previous owner M/s  Ankur   Drug Private   Ltd., to the tune of  Rs. 20,43,837/ were cleared. The premises were sold in auction on “as is where is basis” and the new owners who purchased the property in auction applied for electricity supply in the premises. 

The Sale Certificate issued to M/s Pure & Cure Healthcare Pvt. Ltd. clearly stated that the property was free from all encumbrances. the Himachal Pradesh State Electricity Board (HPSEBL) refused to grant a new electricity connection to the new owner

Law Point as per Electricity Act 2003 as Explained by Himachal Pradesh High Court 

  • Obligation under Section 43 of the Electricity Act 2003 is linked to premises where the connection is sought

The Court held that the duty to supply electricity under Section 43 of the Act is not absolute. The duty to supply electricity is with respect to the owner or occupier of the premises. The 2003 Act contemplates a synergy between the consumer and the premises. Under the Act, when Electricity is supplied, the owner or occupier becomes the consumer only with respect to those particular premises for which electricity supply is sought.

  • Electricity sought by the auction purchaser is a reconnection or a fresh connection.

Supreme Court’s judgment in K.C. Ninan Vs. Kerala State Electricity Board & Ors. (2023) the bench at the outset clarified that electricity dues are linked to the consumer, not the premises and added that a new owner or occupier applying for a connection is considered a fresh connection.

  1. An application by an auction purchase is to be held as reconnection even if the applicant has to seek connection to the same premises for which electricity was already provided. 
  2. Even if the consumer is the same and premises are different, it will be considered as a fresh connection and not a reconnection

  • What is the implication of auction sale of a premises on a “as is where is basis” with reference to electricity arrears.

The implication of the expression “as is where is basis” is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues.

Peculiar circumstances of the case in hands 

Held by Himachal Pradesh High Court In this particular case where transfer of property is not done 

The Himachal Pradesh High Court has ruled 

  • That electricity dues cannot be passed on to new occupants of a property if a charge wasn’t created following the Transfer of Property Act and Companies Act.

Even if the dues were to be attributed to the premises, a charge needs to be created following the Transfer of Property Act (Section 100) and the Companies Act (Sections 77 & 78) for the Electricity Board to claim them from the new owner.

  • The implication of the expression “as is where is basis” is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues.

Supreme Court views

“A condition enabling the distribution licensee to insist on the clearance of the arrears of electricity dues of the previous consumer before resuming electricity supply to the premises is valid and permissible under the scheme of the 2003 Act”,  

  • Agreed to the the implication of the expression “as is where is basis” is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues.
  • But Court invoked its special powers under Article 142 of the Constitution to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchaser. The Court passed this direction having regard to the fact that the cases were pending in the Supreme Court for nearly two decades.

Thus, ruling in favour of M/s Pure & Cure Healthcare Pvt. Ltd the order asking them to clear previous dues was quashed. HPSEBL was accordingly directed to consider their request for a new electricity connection without insisting on payment of outstanding dues from the former owner.

Supreme Court holds hospital liable for handing over the dead body of a deceased patient to a wrong family

Supreme Court holds hospital liable for handing over the dead body of a deceased patient to a wrong family

Family was at utter shock to know that they have been deprived of performing last rites and rituals  of their father as per their customs and traditions .It was not just an issue of judgment error but a very serious thing for the family members who believe and have faith in observing every ritual of a dead family member with love care and respect.”

Dr Prem Lata, Legal Head

Case Title – M/s Ernakulam Medical Centre & Anr. v. Dr. PR Jayasree & Anr.

Case no. – Special Leave To Appeal (C) No. 3545/2020

Date of Judgment 06th August, 2024

 Bench : Justice Hima Kohli and Justice Sandeep Mehta 

Facts :

On December 30, 2009, Shri R Purushothaman was who is the father of Dr. PR Jayasree & Anr.  was admitted to Ernakulam Medical Centre and died later the same night. His family requested that his body be kept in the hospital’s mortuary. Incidentally another patient, Mr AP Kanthy was also admitted to the same hospital on December 28, 2009, and passed away on December 31, 2009. His body was also placed in the hospital’s mortuary.

When Purushothaman’s family arrived at the hospital on January 1, 2010, to collect his body, they pointed out that the body in the mortuary was not of Purushothaman. It came to light that the hospital handed over Purushothaman’s body to Kanthy’s family, who had cremated it by then.

Family was at utter shock to know that they have been deprived of performing last rites and rituals  of their father as per their customs and traditions .It was not just an issue of judgment error but a very serious thing for the family members who believe and have faith in observing every ritual of a dead family member with love care and respect.

Dr Jaishree, daughter of Shri R Purushothaman and other legal heirs filed a consumer complaint before the Kerala State Consumer Disputes Redressal Commission (SCDRC), seeking Rs. 1 crore in compensation for the hospital’s negligence. On October 5, 2016, the SCDRC ruled in the complainants’ favour, and ordered the hospital to pay Rs. 25 lakhs in compensation with 12 percent interest per annum from the date of the complaint to the state commission.

The hospital filed an appeal before the National Consumer Disputes Redressal Commission (NCDRC).

On July 4, 2019, the NCDRC reduced the compensation to Rs. 5 lakhs and directed the hospital to deposit Rs. 25 lakhs into the Consumer Legal Aid Account of the State Commission. 

The complainants as well as the hospital filed appeals against this decision before the Supreme Court

The Supreme Court held that the NCDRC had no justification for interfering with the SCDRC’s order

We are of the opinion that there was no justification for passing such an order. The SCDRC had applied its mind on entire conspectus of facts and the evidence produced by the parties and thereafter arrived at a conclusion that ₹ a sum of 25,00,000/- (Rupees Twenty Five Lakhs only) would be adequate compensation for the complainants”, the Court stated.

The Court set aside the NCDRC’s order and reinstated the SCDRC order awarding Rs. 25 lakhs to the complainants. However, it reduced the interest rate on the compensation from 12 percent to 7.5 percent per annum.

Questions and Answers June 2024

Questions and Answers June 2024

Law on forfeiture of earnest money: Real Estate

Question 1: How much deduction is reasonable and justifiable if the home buyer cancels the booking amount?

Answer: 

Case Law; Goutam Roy V/S Avalon Projects

CC No 1941 of 2018, Decided on 24.01.2023 (NC)

A landmark judgement National Commission (NCDRC)

Facts:

  • Builder and Home buyer signed an agreement having forfeiture clause. In case of cancelling the booking by Home Buyer, 20% of total basic sale price shall be forfeited.
  • Question before the National Commission was as to how much deduction is reasonable and justifiable

National commission while referring to number of SC cases on the issue relied upon section

74 of 1872 Contract Act that in case of breach of contract, actual damage is to be proved for

penalizing the other party. In such matters cancelling the booking flat or property by the

buyer, the property remains with builder only and there is hardly any loss to the builder

National commission ordered for forfeiture of 10% of the total sale cost of the property

Cases Referred:

Moula Bux V/S Union of India 1970 SC

Sirdar K B Ram Chandra Raj URS v/s SC 2015theory of actual damage as per section

74 of contract act

Question 2: Whether there can be any forfeiture of earnest money when agreement not signed ?

Answer: 

Case Law ; Amit Gupta & Anr. Versus. M/S. Vatika Limited ( National Commission) Consumer Case No. 425 Of 2018 

A landmark judgement National Commission (NCDRC)

Facts :

The OP sent the blank Builder Buyer Agreement to the complainants on 16.4.2015.  Some of the terms and conditions contained in the said agreement were not acceptable to the complainants.  Some of the objections raised by the complainants were as under:

  1. It appears that full land has not yet been acquired for the said housing colony. 
  2. Several exceptions including ‘specification and location’ of the flat as mentioned in the draft agreement  were not communicated earlier 
  3. . Vatika has mentioned about earnest money with its definition.  So far the definition of  EM was not communicated to me either by the vatika or involved broker.  

Since the issues raised by the complainants were not addressed, they, vide email dated 06.12.2017 sought refund of the amount which they had paid to the OP along with interest.

Commission directed refund of the entire amount of Rs.37,05,892/ which the said complainant had paid to the OP, along with interest on that amount @ 9% per annum.

Question 3: What are the unfair clauses in the buyer builder agreement?

Answer: 

Case Law: Pioneer Urban Land & Infrastructure Ltd. Vs. Govindan Raghavan

 (2019) 5 SCC 725 decided on 2nd April 2019

Such wholly one-sided agreements were termed as unfair and were not approved by the Hon’ble Supreme Court in Pioneer Urban Land & Infrastructure Ltd. Vs. Govindan Raghavan (2019) 5 SCC 725, decided on 2nd April 2019 which to the extent it is relevant reads as under:

“Incorporation of one-sided clauses in an agreement constitutes an unfair trade practice as per section 2®of consumer protection act. .”

Quoted law-Section 2 (r) of the Consumer Protection Act, 1986 defines ‘unfair trade practices’ in the following words :

“‘Unfair trade practice’ means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice …”, and includes any of the practices enumerated therein. The provision is illustrative, and not exhaustive.

Question 4: Can there be any Forfeiture of earnest Money when only booking done and no further transaction completed?

Answer:

Case Law; Mr Dinesh R Humane& Mrs  Ranjana D. humane  v/s Piramal estate Pvt. Ltd 

Decided on 16 March 2021

(RERA Estate Appellant Tribunal ,Maharashtra)

Held

“Transaction of sale and purchase of the flat is cancelled at initial stage Allottee Marely booked the flat and paid some money towards the booking on printed form. Thereafter there is no progressing of the transaction Parties never reached to execute agreement for sale. In this peculiar matter it cannot be ignored that the object of RERA is to protect interest of consumer, so whatever amount is paid by home buyer to the promoter should be refunded to the allottee on his withdrawal from the project”

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