Supreme Court asks for impact study of Consumer Protection Act, 2019

Supreme Court asks for impact study of Consumer Protection Act, 2019

Supreme Court asks for impact study of Consumer Protection Act, 2019

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Inaction of the governments in appointing president and members/staff of districts and state consumer disputes redressal commission and inadequate infrastructure across India has led Supreme Court to direct centre to conduct legislative impact study of Consumer Protection Act 2019.

Ankur Saha

The legislative intent behind the Consumer Protection Act, 2019 is empowerment of the consumers. However, the ground reality is quite different as there is little endeavor to translate this legislative intent into an administrative infrastructure with requisite facilities, members and staff to facilitate the decision on the consumer complaints.  Statistics can be deceptive but sometimes statistics reveal the truth. The position prevalent in the State Consumer Forums and the District Consumer Forums is best reflected by the statistics of existing vacancies, insofar as the chairman and the members are concerned.”

The Bench was addressing the inaction of the governments in appointing president and members/staff of districts and the State Consumer Disputes Redressal Commission and inadequate infrastructure across India. 

On failure of State Governments/UTs to notify rules

Observing the lackadaisical attitude of governments with regard to notifying rules under the Section 44 of the Consumer Protection Act, 2019, the Bench issued directions to all the states and union territories qua the issue of appointment of chairman and members of the state and district commissions and notify the rules within two weeks. The Bench made it clear that where the states still dilly dally on the issue of notifying the rules, the model rules framed by the Government of India will automatically kick off and apply to the concerned states and union territories i.e. Consumer Protection and (salary, allowances and conditions of service of president and members of the state commission and district commission) Model Rules, 2020.

Non-constitution of selection committees

Regarding the large number of existing vacancies, the Bench directed that all the existing and potential vacancies should be advertised, if not already advertised, within a period of two weeks. Noticing that some of the States and UTs had not constituted the selection committees in terms of Rule 6(1) of the Consumer Protection (Qualification for appointment, method of recruitment, procedure of appointment, term of office, resignation and removal of the President and members of the State Commission and District Commission) Rules, 2020 (“2020 Rules”), a direction was issued to the states/UTs concerned to constitute the selection committees within four weeks.

On vacant posts of president/members in consumer forums

Considering the excuse given by some states that the of selection was being held up because the number of posts had not been prescribed/sanctioned in consultation with the Central Government as mandated under Section 42(3)(b) of the said Act, the Bench stated that the mandate is of each State Commission to consist of a President and not less than four members i.e. insofar as the president and four members are concerned; it is only if the number of members have to be more than four, that such number of members may be prescribed in consultation with the Central Government. Therefore, the Bench stated that if the states feels that the numbers of members have to be more than four, that process of discussion cannot derail the process of appointment of president and four members in any case.

Accordingly, the Bench directed that all the vacancies whether for the post of president or members should be finally filled up by the 30 states and union territories within a maximum period of eight weeks.

On last minute filing of affidavits

Noticing that usually, most of the affidavits had been filed at the last minute resulting in the inability of the Amicus Curiae in presenting the appropriate picture before the Court, the Bench expressed that such last-minute rush of affidavits which derails the effective hearing before the Court could not be countenanced. The Bench came down heavily on the administration stating that the Court was spending time on aspects which administration should be doing. The Bench directed, “The States should give their inputs in time so that a picture up to date is presented before us by the Amicus Curiae and last-minute filing of the affidavits by the states is not acceptable.” Accordingly, the states and UTs were directed that updated position should be furnished to the Amicus within two weeks.

Lack of infrastructure and man power

So far as the aspect of infrastructure and man power was concerned, the Bench directed that wherever the Amicus Curiae requires the response in a particular format, the states are bound to respond in that format. Regarding the vacancies in NCDRC, the Bench was of the view that there was no reason why the Central Government should take more time to fill up the vacancies and thus, the schedule laid down for the State Governments to fill the vacancies was held to be applicable of Central Government as well. The information was also sought with regard to infrastructure as to whether the premises were rented or owned by the Government. If rented, the location of the rented premises.

Legislative impact study

On the issue of a Legislative Impact Study and whether the same was undertaken before the new Act of 2019 came into place, the Bench observed that through the new Act expanded the jurisdiction of the consumer forums which would result in the litigation shifting to the Consumer Tribunals apart from the aspect of the variation in the pecuniary jurisdiction by increasing the jurisdiction of the District and State forums, no legislative impact study had been done to ascertain how many more cases would arise in these foras to make necessary arrangements for infrastructure and man power.

The Central Government was stated to be assisting the States by a Scheme titled as, Computerization and Computer Networking of Consumer Commissions” (CONFONET) which provided the ICT infrastructure to Consumer Commissions and replaced old infrastructure, provided HR support by deployment of technical man power to enable/monitor computer based system in each and every Consumer Commission in India; provided an online module of case monitoring system, facilitated reporting and monitoring at all levels, strengthened transparency and accountability in judicial system etc. The scheme was stated to be fully funded by the Central Government and was being implemented through the NIC. The Court asked the states whether they had utilized the opportunity and the funding provided by the Central Government and in what manner.

The states were directed to furnish the information to the National Commission within two weeks about position of vacancies so the same could be uploaded on the website of the National Commission failing to which they will be treated as in breach of the Court’s directions. In order to ensure that all the aforesaid directions are complied with, the Bench directed that the concerned Chief Secretaries of the States in case of non-compliance within the time frame stipulated will attend the virtual Court proceedings and so would be the position for Union of India where the concerned secretary would be the Secretary, Consumer Affairs.


National Commission nullified builders sale agreement on not handing over timely possession

National Commission nullified builders sale agreement on not handing over timely possession

National Commission nullified builders sale agreement on not handing over timely possession


If a builder is unable to give possession of a flat within the agreed time, then he is liable to pay interest to the purchaser until the handover, the National Consumer Disputes Redressal Commission (NCRDC) ordered Runwal Homes to hand over a 1,215-square-foot Nahur flat to a Kemp’s Corner family and also pay them around Rs 69 lakh interest on the amount paid so far. The commission said the builder may adjust the interest amount against the family’s balance payment for the flat.

Ankur Saha

In 2013, complainants approached the builder and booked a residential flat for purchase and deposited booking charges, in the office of the builder. In June, 2013, a registered sale agreement was executed between the parties. By that time the complainant had deposited an amount of Rs 73,51,426 to the builder. The balance amount was to be paid in instalments.

What went wrong?

Complainants paid the amounts of instalments as mentioned in the agreement as and when it was demanded by the builder. According to the complainants, thereafter they neither received any demand letter nor possession of the allotted flat was handed to them till March, 2016. They received a demand letter but as in this letter no date of delivery of possession was mentioned as such, they did not deposit the amount demanded in it, rather wrote letters requesting to handover possession over the flat allotted to them.

It was also stated that the complainants were not allowed to go to the site and verify the progress in construction. The builder assured the complainants that they would be given possession within a short time. When the registered notice was served to the builder, they unilaterally cancelled the agreement, mentioning therein that in spite of the demand letter, they had not deposited the instalment as fixed in the agreement.

The builder failed to complete the construction till March 2016 and in order to cover its default, the agreement was cancelled in a high-handed manner, to harass the complainants and divert their mind from asking possession.

The Commission said that it was imperative for the builder to complete the construction and obtain the completion certificate and hand over possession to the flat allottee till March 2016. From the additional evidence, it is proved that the Building Completion Certificate was issued on July 17, 2019. Neither any allegation nor any proof has been filed to show that due to force majeure or for the reasons mentioned in the agreement, the construction could not be completed within the stipulated period.

When the agreement stands mala fide

The builder had terminated the agreement after the complainants, Arun Kedia and his family, who had already paid Rs 2.3 crore of the total value of Rs 2.5 crore until August 2015, did not want to pay further until the builder assured possession after the March 2016 deadline lapsed. “Due to lapses on the part of the opposite party (builder), the complainants are suffering a loss. The agreement for sale has been cancelled illegally and is mala fide,” the commission said.

The commission pointed out the agreement fixed reciprocal liabilities upon both the parties. It said, “If the builder has not abided by the terms of the agreement and committed a serious breach, then it cannot blame the complainants that they have not deposited the instalments well within time or within seven days of the issue of the letter of demand.” The commission further said there was nothing on record to prove the letters demanding the instalments were actually issued to the flat owners before March 2016. It said, through the letters issued in February, March and September 2016, excessive demands were made.

Commission held that there was nothing on record to prove that the demand letters were actually issued to the complainants. Therefore, the allegation that the complainants committed default in payment on instalment for which the agreement was cancelled was not proved.

It said the agreement required that the flat buyers be given 30 days’ notice in writing before terminating the agreement. “No such notice was issued. Cancellation of agreement, of which the intimation was given through a letter dated March 15, 2017, was illegal,” it said. Due to latches on the party of the builder, the complainants suffered a loss. The agreement for sale had been cancelled illegally and mala fide, in a high-handed manner and the complainants were forced into litigation.


National Commission nullified builders sale agreement on not handing over timely possession

Developer can’t push the apartment buyers to be in unreasonable contract

Developer can’t push the apartment buyers to be in unreasonable contract

With this new verdict there will be much clarity and a sigh of relief among the homebuyers/consumers. However, what it actually brings to the table for a common man aka consumer examines our legal expert Ankur Saha.

The Supreme Court comprising of a bench of Hon’ble Justice DY Chandrachud, Justice Indira Banerjee and Justice Indu Malhotra held that developer cannot push the apartment buyers to be in one-sided and unreasonable contract/agreement and if they do so, it will be considered as an unfair practice u/s 2(1)(r) of Consumer Protection Act. (Ireo Grace Realtech Pvt. Ltd. vs. Abhishek Khanna & others). The court disposed of an appeal that the developer had filed against the order that was passed by National Consumer Disputes Redressal Commission directing the developer to refund the amount due to the delay in completing the construction.

Issues raised in the appeal were:

  1. Determining the date from which the period of 42 months starts where possession is to be handed over under Clause 13.3.
  2. Whether apartment buyers would be bound by one-sided terms.
  3. Whether Real Estate (Regulation and Development) Act, 2016 should be given primacy over Consumer Protection Act, 1986.
  4. Whether inordinate delay would entitle the apartment buyers to terminate the agreement and get a refund.

Analysis of the Bench

  • Determining the date from which the period of 42 months starts where possession is to be handed over under Clause 13.3.

Bench made a pointwise analysis of the instant matter wherein in the first issue, the point of controversy was whether the 42 months’ period is to be calculated from the date when the Fire NOC was granted by the authority concerned as contended by the developer; or, the date on which the building plans were approved as contended by the apartment buyers.

In accordance with the Section 15 of the Haryana Fire Safety Act, 2009, it is mandatory for a builder/developer to obtain the approval of the firefighting scheme conforming to the National Building Code of India, and obtain a ‘No Objection Certificate’ before the commencement of construction.

Clause 13.3 of the apartment buyer’s agreement provides that the 42 months’ period has to be calculated from the date of approval of building plans and/or fulfilment of the pre-conditions imposed thereunder.

Bench opined that it was a mandatory requirement under the Haryana Fire Safety Act, 2009 to obtain the Fire NOC before the commencement of construction activity. The said requirement was stipulated in the sanctioned building plans, as also in the environment clearance.

The 42 months ‘period in Clause 13.3. of the agreement for handing over possession of the apartments would be required to be computed from the date on which Fire NOC was issued, and not from the date of the building plans being sanctioned.

In the instant matter, there was a delay of approximately 7 months in obtaining the fire NOC by the developer.

  • Whether the terms of the apartment buyer’s agreement are one-sided?

Court observed on perusal of the clauses mentioned in the agreement that the said clauses were wholly one-sided terms of the agreement buyer’s agreement, which were entirely loaded in favour of the developer and against the allottee at every step.

For the said issue, Court held that the terms of the apartment buyer‘s agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Consumer Protection Act, 1986. 

Incorporation of 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.

  • Whether primacy to be given to RERA over the Consumer Protection Act?

Bench expressed that this Court has upheld the applicability of provisions of Consumer Protection Act as an additional remedy, despite the existence of remedies under special statutes, including the Arbitration and Conciliation Act, 1996.

In the decision of Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751, it was held that the remedy under the Consumer Protection Act, 1986 is confined to the complaint filed by a consumer as defined by the Act, for defects and deficiency caused by the service provider.

In a recent decision of this Court in Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783, it was held that remedies under the Consumer Protection Act were in addition to the remedies available under special statutes. The absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read with Section 88 of the RERA Act makes the position clear. Section 18 of the RERA Act specifies that the remedies are “without prejudice to any other remedy available”.

  • Whether the apartment buyers are entitled to terminate the agreement or refund of the amount deposited with delay compensation?

 Answering this issue, the Court categorised the buyer/allottees into two categories:

  • Apartment buyers whose allotments fall in Phase 1 of the project comprised in Towers A6 to A10, B1 to B4, and C3 to C7, where the developer has been granted occupation certificate, and offer of possession has been made
  • Apartment buyers whose allotments fall in Phase 2 of the project, where the allotments are in Towers A1 to A5, B5 to B8, C8 to C11, where the Occupation Certificate has not been granted so far.

For category 1, it was held that such allottees (barring an exception) were obligated to take possession of the apartments, since the construction was completed, and possession offered on 28-06-2019, after the issuance of Occupation Certificate on 31-05-2019. The developer is however obligated to pay delay compensation for the period of delay which has occurred from 27-11-2018 till the date of the offer of possession was made to the allottees.

So far category 2 is concerned, it was held that such allottees are entitled to refund of entire amount deposited by them, along with compensation and interest.

In view of the above discussion, the Supreme Court said 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 the 1986 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 that are unfair, as null and void. This is a statutory recognition of a power that was implicit under the 1986 Act. In view of the above, we hold that the developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the apartment buyer’s agreement.”