Lack of statutory compliance by the builder: Not a justification for a delay in possession

Lack of statutory compliance by the builder: Not a justification for a delay in possession

Lack of statutory compliance by the builder: Not a justification for a delay in possession

On March 23, 2023, the National Commission reached a decision in the case of Naresh Garg and Sons VS CHD Developers Ltd. Consumer Case No. 1753 of 2018. The Developers’ argument that the National Green Tribunal’s rules weren’t followed was rejected by the Commission as the cause of the delay. The bench stated that the opposing party cannot be permitted to profit from his own fault of non-compliance and refused to accept his justification as force majeure. 

  Dr Prem Lata, Legal Head VOICE

  • Case Title: Naresh Garg and Sons vs CHD Developers Ltd.
  • CC No. 1753 of 2018, Decided on 23rd March 2023

Brief Facts

The complainant, Mr. Naresh Garg, applied to the Opposite Party, CHD Developers, for re-allotment of a unit near the Golf Course Avenue in Gurgaon by way of an application. The flat was earlier allotted to one Sh. Sarvesh Kumar Tiwari. The Opposite Party permitted the re-allotment, after all the necessary formalities and payment of charges, to the complainant. An apartment’s buyer agreement was also entered into between the parties and as per that, the possession of the unit was to be delivered by the opposite party within 42 months from the date of agreement. However, the Opposite Party failed to deliver the possession within the stipulated time. Hence, the Complainant filed this consumer complaint praying for a refund of the amount Rs. 79, 37,091/- with an interest and damages to the extent of Rs. 5 Lakhs.

Arguments extended by the Opposite Party

  • As stated in Section 2(1)(d) of the Consumer Protection Act of 1986, the complainant would not fit the definition of a “consumer” because the property was bought for investment and resale and has a commercial purpose.  
  • The complainant’s claim is inflated to bring the complaint within the pecuniary jurisdiction of NCDRC. 
  • That the delay was caused due to a notification by the National Green Tribunal, Delhi resulting in stopping all construction activities by OP for a few months. 

Observations of the National Commission

  • The Opposite Party failed to place on-record the updated status of construction & likely date of its completion. Reliance was placed on the Supreme Court’s decision in Wg. Cdr. Arifur Rahman Kgan and Aleya Sultana and Ors. vs DLF Southern Homes Pvt. Ltd. & ors. (2020) 16 SCC 512, wherein it was held that failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within the contractually stipulated period, amounts to deficiency. As per  order in case of Kolkata West international City Pvt. Ltd. vs Devasis (2020) 18 SCC 613, a buyer can be expected to wait for possession for a reasonable period but not an indefinite period.
  • The contention of the Opposite Party that Mr. Naresh is not a consumer was rejected, as no evidence was produced to corroborate the same. 
  • Perusal of the evidence showed that there was no blanket order of the NGT to stop construction activities. The direction to stop construction activities was only where the construction was being carried out in violation of the MOEF Guidelines 2010. No material was presented by the Opposite Party to know the exact nature of ban on construction activity under the NGT’s order and the period for which such ban was in force. 
  • The bench remarked that the Opposite Party cannot be allowed to reap benefits of his own wrongdoing of non-compliance. 

In light of the aforementioned discussion, the Opposite Party was ordered to refund the amount given by the Complainant along with compensation in the form of simple interest at 9% per annum from the date of each payment till the date of refund.

Similar cases decided by Hon’ble SC in similar matters 

  • DLF Universal Ltd and Another Versus Capital Greens Flat Buyers Association (SC) Civil Appeal No’s 3864-3889 of 2020
  • December 14, 2020

Facts: There was a substantial delay on the part of the developer in handing over possession of the apartments. OP took plea of force majeure conditions.

  1. Delay in the approval of building plans.
  2. Issuance of stop work orders in Covid situation. 
  3. The buyers of the flat received exit offers twice. When the developer learned that the delay had gone over the agreed time frame of 36 months, he offered the buyers refunds of the purchase price plus interest at a rate of 9% per year. 
  4. 45% of the flat buyers in the project have sold away their flats.
  5. The flat buyers have the benefit of an appreciation in the capital value of the apartments purchased.
  6.  The developer has extended the benefit of timely payment and goodwill rebates to the flat purchasers.

Supreme Court held

  • On all counts—non-approval and a directive to halt work—the force majeure clause is unacceptable. The builder should have anticipated the possibility of rejection before starting this project. The state’s order to halt building was made in response to accidents that occurred due to safety carelessness. This resulted from inadequate safety precautions and poor building practises.  
  • Mere offer to exit option with interest at 9% would not disentitle the flat purchasers from claiming compensation.

In view of the above discussions it is clear that Apex Court reiterates its stand that builders are to bear the consequences for the delays caused due to their own mismanagements and if any order by any courts are passed subsequently, that cannot be treated as force majeure conditions.

The concept of “deficiency in service” under the Consumer Protection Act, 1986 must be distinguished from the criminal or tortious acts.

It is often noticed that complainants using words cheating, fraud or likewise words often used in criminal offences while complaining against financial institutes for deficiency in services. In return, banks and financial institutes also escape from their liability and suggest the consumer to file an FIR when the fraud if any is against bank or financial institute and not against consumer when the bank is the custodian for consumer’s money. Consumers can register complaints against banks for poor service, and the banks are responsible for looking into any fraud that occurred. But disputes over serious allegations of fraud or deceit are outside the purview of consumer courts.

The Chairman & Managing Director, City Union Bank Ltd. & Anr. Versus R. Chandramohan Civil Appeal No. 7289 of 2009 SC

Decided on 27.03.2023

Supreme Court reiterated in a case of The Chairman & Managing Director, City Union Bank Ltd. & Anr. Vs R. Chandramohan that the concept of “deficiency in service” under the Consumer Protection Act, 1986 must be distinguished from the criminal or tortious acts.

“The proceedings before the Commission being summary in nature, the complaints involving highly disputed questions of facts or the cases involving tortious acts or criminality like fraud or cheating, could not be decided by the Forum/Commission under the said Act. The “deficiency in service”, as well settled, has to be distinguished from the criminal acts or tortious acts. There could not be any presumption with regard to the wilful fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance in service, as contemplated in Section 2(1) (g) of the Act. The burden of proving the deficiency in service would always be upon the person alleging it,” a Bench of Justices Ajay Rastogi and Bela Trivedi explained.

“As emerging from the record, some disputes were going on amongst the Directors of the Company and one of the Directors, if allegedly had committed fraud or cheating, the employees of the bank could not be held liable, if they had acted bona fide and followed the due procedure,” the Court said.

Important Judgments of the Year 2022 (PART-2)

Important Judgments of the Year 2022 (PART-2)

We are presenting to you the top 10 judgements of the year 2022. This is the second part. This part has five summarised judgements. To read the full case and judgments, please subscribe to our buying guide for the details. You can find it in ‘Top 10 Judgements-2022’.

  Dr Prem Lata, Legal Head VOICE


Case: Bharmaputra Biochem Private Limited Vs New India Assurance Company & Anr. 

Civil Appeal No. 6943 of 2021/ Decided February 21, 2022

Head Note-The matter cannot be left unresolved because an unnecessary party was added. An unneeded party may be struck down by the court.

The National Consumer Disputes Redressal Commission issued an order on September 27, 2021, by which the complaint was returned unadjudicated for the reason that the surveyor was an unnecessary party in the insurance claim dispute. These facts served as the basis for the appeal before the SC. The claimant or appellant was granted the right to submit a new complaint within 30 days. The insurance company was to be the “sole opposite party for pursuing reparation” while being granted freedom.


Amit Katyal Vs Meera Ahuja & others

Civil appeal No. 3778 of 2020/ Decided March 03, 2022

Head Note- Corporate Insolvency Resolution Process (CIRP) proceedings against a builder can be withdrawn if parties settle the issue 

In the case of Amit Katyal Vs Meera Ahuja & others, home buyers in the housing project Krrish Provence Estate at Gurgaon had gone against Jasmine Buildmart Pvt. and invoked Section 7 of IBC 2016 before the Adjudicating Authority/NCLT. 

But later, the original applicants filed IA No. 18679 of 2022 under Article 142 of the Indian Constitution and Rules 11 and 12 of the National Company Law Tribunal Rules, 2016, requesting permission to end the CIRP proceedings upon receiving payment of Rs. 3, 36, 02,000/- plus applicable interest from the money the appellant had deposited in the registry of this court.


Case: Mahaveer Stone Crushing Co Vs Tata Motors Ltd 

Civil appeal No 6730 of 2010/ Decided on March 24, 2022 

Head Note-Selling Repainted & Repaired vehicles, deficiency of services  

Complaint before District Forum Gurgaon under CP Act 1986 

  1. That new vehicle was purchased on 10.2.1999 
  2. When taken to workshop after five months of purchase, it was observed that vehicle had an accident and was repainted and claimed relief for replacement. 
  3. Dealer as well as manufacturer were made parties. Expert on 27.1.2000 confirmed the fact. District forum ordered for replacement with cost of litigation.


Experion Developers Pvt. Ltd. Vs Sushma Ashok Shiroor

Civil Appeal No. 6044 of 2019 with Civil Appeal No. 7149 of 2019/ Decided on April 07, 2022 

Head Note- SC allowed three fold choices to the home buyer, not been given possession of dwelling within stipulated time 

In a case resolved on April 7, 2022, the SC adopts a very lenient stance in favour of homebuyers who put their hard-earned money into a developer’s project but did not receive possession by the deadline.


Medicos Legal Action Group Vs Union of India| 

SLP (Civil) 19374/2021/Decided on April 22, 2022 

Head Note –Speech during Parliament debate is of little relevance

SC Re-affirms its stand on Healthcare service under Consumer law 

An organization “Medicos Legal Action Group” had filed a writ petition before the High Court of Bombay as Public Interest Litigation No. 58 of 2021 and prayed before the court to declare that services performed by healthcare service providers are not included within the purview of the Consumer Protection Act 2019.

Pecuniary Jurisdiction under Consumer Protection Act, 2019

Pecuniary Jurisdiction under Consumer Protection Act, 2019

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 for a and the value of the goods “paid” as consideration has to be taken and not the value of goods or services “purchased”. It was observed by the court that the case being governed under the Consumer Protection Act, 1986, NCDRC would have jurisdiction in the matter since pecuniary jurisdiction thereunder was determined by taking the “value of the goods or services and compensation”. Meaning thereby that the value of the goods or services as also the compensation would be added to arrive at a conclusion as to whether the National Commission has the jurisdiction or not.  It was further observed by the court that under the new law, the NCDRC has jurisdiction to entertain complaints where the “value of the goods or services paid” as consideration exceeds R. 10,00,00,000.

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.”

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

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.

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. They explained the term voluntary consumer association as 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 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.

Written by: Ankur Saha, Head- Legal, VOICE

Case Study: Consumer can’t claim compensation if the “Necessary Parties” are not included in the Consumer Court Case

Case Study: Consumer can’t claim compensation if the “Necessary Parties” are not included in the Consumer Court Case

Before filing their case at the consumer court, consumers should get the facts very clear and include all necessary/proper parties in the complaint to avoid dismissal of the same. Non-inclusion of necessary/proper parties can turn out be grounds for dismissal of the complaint even if all others facts are proven. It is absolutely necessary for a complainant to implead any party that is responsible for the cause of action.

You May Be Deprived of Any Relief for Non-Inclusion of Necessary Parties

A necessary party is a person in whose absence no effective decree can be passed by the court. If a necessary party is not impleaded, the suit itself is liable to be dismissed. The National Commission in the matter of Jet Airways (India) Limited versus Ethelwad O. Mendes (First Appeal No. 432 of 2012), vide its order dated 12.02.2018, allowed the appeal against the order of the State Commission filed by the respondent/complainant at the State Commission under Complaint No. 06/2010 against the appellant/ opposite party Jet Airways (India) Limited.

Let’s retrace the case.

The respondent/complainant had purchased air tickets from an agent, M/s Trade Wings Limited, for himself and his family (four persons) to travel to Toronto, Canada, from Mumbai via London-Heathrow. The tickets were for a Jet Airways flight, having arrangements for code-sharing with Air Canada. The journeys were to be happen between 10.05.2008 and 15.06.2008. On reaching Toronto by Air Canada, the said family discovered that their baggage had not yet arrived. This caused much inconvenience and they also had to incur costs in purchasing toiletries, etc.

The airline agreed to give them a mere US$ 100 and that too would be handed over only at the address in India. The respondent/complainant alleged that during the three days it took for the baggage to be delivered to them, they were unable to go anywhere and enjoy their holidays because they did not have any change of clothes. On the return journey on 31.05.2008, as stated by the respondent/complainant, the Air Canada flight was to depart at 0800 hours from Toronto for London. They were given boarding passes without seat numbers at Toronto Airport. When they reached the embarkment gate after going through the security checks, they were told that the said flight of Air Canada was overbooked and they could not be accommodated in the same. They were made to travel by a Lufthansa flight to Heathrow, London, via Frankfurt on the next date, 01.06.2008, and that too in the evening at 18:00 hours. They were given some vouchers for refreshments, etc., but the same was found to be inadequate. As the flight was changed, they could not reach London according to schedule, disturbing the arrangements made for pick-up. They had to hire two taxis to reach Nottingham. In addition, when their flight reached Heathrow Airport at London, they found that two pieces of their luggage had not arrived. The said luggage was delivered to them at Nottingham after a delay of 36 hours, causing great harassment/inconvenience to them.

On reaching India, the respondent/complainant filed a complaint before the State Commission against Jet Airways, from whom the air ticket had been purchased. The appellant/opposite party stated that the complaint was barred by limitation under Section 24A of Consumer Protection Act, 1986. The complainant was debarred under Section 30 (1) of Chapter III, Liability of the Carrier, IInd Schedule of Carriage, by Air Act, 1972, to make any claim for damages after two years from the date of travel. The State Commission, by its order dated 14.06.2012, allowed the complaint partly. The respondent/complainant was held entitled to a sum of 635.47 Canadian dollars (to be paid in equivalent Indian rupees as on the date of payment), as well as Rs 3,000 by way of pecuniary losses and Rs 2 lakh by way of non-pecuniary losses, in terms of Section (14) (1) (d) of Consumer Protection Act, 1986. The respondent/complainant was also held entitled to a sum of Rs 5,000 by way of cost of the complaint. The State Commission further directed that the amount shall be paid to the respondent/complainant within a period of four weeks and in case it was not paid, the same shall carry interest at the rate of 7% until it was paid. Aggrieved by the order of the State Commission, Jet Airways (India) Limited filed an appeal before the National Consumer Disputes Redressal Commission (NCDRC).

The main issue to consider before the National Commission was this: whether under the code sharing arrangement Jet Airways could be held accountable for any deficiency in service on the part of the participating airlines, which in this case were Air Canada and Lufthansa. In this regard, the National Commission referred to a document titled ‘Worldwide Slot Guidelines’, 8th Edition, English Version, effective from 1 January 2017, published by the International Air Transport Association (IATA). In clause 8.14, titled ‘Shared Operations’, this is stated: ‘The operating airline is responsible for all usage and performance requirements.’ From the above provision, an impression was gathered that the operating airlines – Air Canada and Lufthansa – where the alleged deficiency in service took place were responsible for the usage and performance requirements. In any case, for taking a just decision with regard to the consumer complaint at hand, it was absolutely necessary that the versions of the operating airlines should be on record, so that a rational assessment about their deficiency in service, if any, could be made.

So it was that the National Commission held that Air Canada and Lufthansa were necessary parties in the case and it was necessary to obtain their versions before taking any decision. The consumer complaint in its present form was dismissed. At the same time, liberty was given to the respondent/complainant to file a fresh complaint, if he desired to do so, by impleading the other airlines as necessary parties. There was no order as to costs. Had the complainant known, it would have been easy for him to implead Air Canada and Lufthansa as opposite parties in the original complaint. Of course he still has the option to file a fresh case but that will take considerable time and it may turn out to be an indefinite wait for a verdict.

In its order dated 02.02.2018 (WP [0C] 12006/2015 & CM No. 31848/2015 WP [C] 12006/2015 & CM No. 31848/2015), the High Court of Delhi has confirmed that the Civil Aviation Rules provide an immediate relief as compensation to domestic passengers who are denied boarding. DGCA 2010 Rules does not put a cap on the compensation that can be demanded from the airline in cases of overbooking. A passenger has full right to approach civil and consumer courts for relief. Domestic as well as international airlines are responsible for deficiency in service and can be sued in Indian consumer courts.

Earlier, in the case of Air France versus O.P. Srivastava & Others (First Appeal No. 310 of 2008), NCDRC held that not permitting a passenger holding a confirmed ticket to board a flight amounted to deficiency in service on the part of the airline. It directed the premier French national carrier to pay a compensation of Rs 400,000 each to three officials of the Sahara Group on the grounds of causing them inconvenience and harassment by denying boarding on a Paris–Delhi flight in 2002.

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