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

by cv | Sep 18, 2021 | Legal, Real Estate, resources

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

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.

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If there are deficiencies in your flat, complain within 2 Years of possession

by admin | Aug 1, 2021 | Real Estate

If there are deficiencies in your flat, complain within 2 Years of possession

Any complaint against the builder must be made within 2 years of taking possession of the flat. If the buyer delays in filing of case against the builder for late delivery or other shortcomings in the flat, it is bound to be dismissed on the grounds of limitation. The law prescribes two years’ limitation from the date on which the cause of action arises.This matter was settled in favour of DLF with regard to the flats in its Gurgaon township, called New Town Heights, at the National Consumer Commission. On 23 February 2018, the National Consumer Disputes Redressal Commission (NCDRC) dismissed two revision petitions seeking compensation from DLF Home Developers Ltd. Two appeals had been filed under Section 19, read with Section 21 (a) (ii) of Consumer Protection Act, 1986, against the impugned order dated 29.09.2016 passed by the Delhi State Consumer Disputes Redressal Commission.

The complaints

The complainant Piyush Goel had purchased a residential flat constructed by DLF Home Developers Ltd in their project New Town Heights at Gurgaon, Haryana, for which an apartmentbuyers’ agreement was entered into by the parties on 08.10.2008. The possession of the constructed flat was to be delivered within 36 months of the date of the agreement – that is, by 07.10.2011. As per the complainant’s claims, the actual delivery of the said flat took place on 11.10.2013. The conveyance deed for the property was executed on 10.09.2015.

Alleging unfair trade practice on the part of the OPs owing to the late delivery of the property, the complainant filed the consumer complaint in question, seeking compensation from DLF Home Developers Ltd by way of interest on the amount deposited for the period of delay and also claiming refund of the amount charged for increase in super area and parking space. The complainant demanded a sum of Rs 5,340,724 with future interest @18% p.a. and a sum of Rs 266,653 towards increase of super area and Rs 600,000 paid as parking charges.

In the second complaint, filed by Virendra Arya and others, possession of the flat was delivered on 15.10.2013 and the sale deed was executed on 15.03.2015. A sum of Rs 6,689,545 was demanded as interest on delayed payment, plus future interest @18% p.a. including a sum of Rs 100,000 for mental agony, etc. A sum of Rs 316,553.13 was demanded as refund for payment charged for increase in super area, in addition to Rs 600,000 for parking charges.

Thus, the complainants claimed compensation for the delay by over two years in possession of flats and also claimed a refund of the “amount charged for an increase in super area and parking space”. The developers, on the other hand, argued that the issue should have been raised before the possession was handed over to them; now, as the complainants were already in possession of the flats, they were not liable to claim compensation.

The builders further alleged that since possession had been duly taken over by the complainants and the sale deeds had also been executed, the relationship of customer and service provider between the parties had already come to an end.

The verdict

The State Commission, vide impugned order dated 29.09.2016, held that the complaints filed on 05.09.2016 were barred by limitation because the possession of the flats had been obtained by the complainants in the year 2013. Whatever lacunas there were in the said flats came to their knowledge at the time of delivery of possession and, hence, they should have filed the complaints within the period prescribed under Consumer Protection Act, 1986.

The National Commission said that the main consideration in these two cases was whether or not the consumer complaints were barred by limitation. It has been stated in the consumer complaints itself that the possession of the properties in question was delivered on 11.10.2013 and 15.10.2013, respectively. The sale deeds for the said properties were executed during the year 2015. The complainants in both the cases were not able to explain what prevented them from filing the complaints within the period of two years of the cause of action, as prescribed in Section 24A of Consumer Protection Act, 1986.

The National Commission stated that there was no reason to differ from the conclusion arrived at by the State Commission that at the time of taking possession of the flats, the complainants were expected to be well aware of any lacuna in the said properties. They should have taken steps to file the consumer complaints in question at that time. The National Commission concluded that both the complaints were barred by limitation and dismissed the complaints.

Consumer voice’s advice to consumers

Homebuyers must raise issues pertaining to deficiencies in the flat at the time of possession or soon thereafter. They should note down the important points and do due diligence before taking the possession so that there is no room left for deficiencies after the possession. One way is to engage a chartered civil engineer to inspect the premises and provide a report on the deficiencies point by point. Such a report may cost a reasonable sum but can be helpful in explaining the deficiencies as well as the delay in filing the case. The buyer may be intimidated by the builder and/or feel that the conveyance deed may not be executed, or have other apprehensions if s/he goes to court. In such cases, it is advisable to write to the builder to bring the grievance on record and request for remedial action to be taken. It may be advisable to have the matter taken to mediation. This can help to explain the delay in filing the case. Each day of delay in filing the case beyond limitation has to be explained.

Such a situation can also be handled by filing a complaint under Real Estate Regulatory Authority (RERA). In the cases mentioned in this article, RERA was implemented after the cause of action arose and was therefore not applicable.

Case Studies: Flat buyers can unite as one party against builders under Section 12 of CPA Act

by admin | Aug 1, 2021 | Real Estate, resources

Case Studies: Flat buyers can unite as one party against builders under Section 12 of CPA Act

This article will showcase case studies on flat buyers who can unite as one party against builders under section 12 of CPA Act.In a major relief for aggrieved homebuyers, justices Dipak Misra, AM Khanwilkar and MM Shantanagoudar of the Supreme Court have ruled (in an order dated 21 February 2017) that flat buyers can now approach the National Commission in case of a dispute with a builder, where the aggregate value exceeds Rs 1 crore. This ruling should bring to an end the spell of contradictory orders that were being passed by various benches of the National Consumer Disputes Redressal Commission (NCDRC) on this subject in recent times.

Amrapali Sapphire Developers Pvt. Ltd had filed an application seeking dismissal of complaint primarily on the ground that since the sale consideration for each flat was lessthan Rs 1 crore, National Commission lacked the pecuniary jurisdiction to entertain the complaint. Another contention made by the builder was that the flat buyers could not club the individual causes of action. The Commission had taken the view that Section 12 (1) (b) of Consumer Protection Act did not preclude the recognised consumer association from filing a composite complaint on behalf of more than one consumer having a common interest or similar grievance against the builder. In fact, if they were allowed to file multiple complaints in respect of several consumers, that would result only in multiplicity of proceedings without serving any purpose.

ln this regard, National Commission had referred to the judgement passed by the Supreme Court in a civil appeal in Atharva Towers Owners Association versus Mis Raheja Developers Ltd, where it had ruled that it would not be correct to say that a complaint by a voluntary consumer association on behalf of more than one consumer, having a similar cause of action against the same seller of goods or provider of services, would not be maintainable. The only requirement would be to direct each and every allottee on whose behalf the complaint was filed to file an affidavit concerning the prayers to the extent that they pertained to his individual grievances.

The National Commission further said that once it was accepted that a consumer complaint on behalf of more than one consumer could be filed by a recognised consumer association, it could hardly be disputed that it was the aggregate value of the services which had to be taken for the purpose of determining the pecuniary jurisdiction of the consumer forum before which the complaint was filed. The Commission had further simplified the process of deciding pecuniary jurisdiction and said that the aggregate quantum of compensation claimed in the petition would determine the question of jurisdiction, and when the complaint was filed in representative capacity on behalf of severalconsumers, the total amount of compensation claimed by the representative body on behalf of all the persons whom it represented would govern the valuation of the complaint petition for the purposes of jurisdiction.

ln the order dated 30 August 2016, National Commission member Justice VK Jain had ruled in favour of the 43 flat owners in Amrapali’s Sapphire housing project and said that they could form an association to achieve the pecuniary limit of Rs 1 crore for approaching the Commission directly.

Talking of Rules

The above ruling of National Commission was challenged by Amrapali Sapphire Developers by taking the plea that as per the provisions of Consumer Protection Act, if the disputed amount was less than Rs1 crore, the complainant had to file the case in District Forum. Amrapali Sapphire Developers had taken shelter behind this rule to contend that the 43 flat buyers were not eligible to file a joint plea before the National Commission. The counsel for Amrapali Sapphire Developers argued that the 43 flat buyers had shown that the cost of flats was above Rs 1 crore by joining hands in order to maintain their plea in National Commission.This was against the rule, the counsel contended.

However, the bench consisting of justices Dipak Misra, AM Khanwilkar and MM Shantanagoudar observed the intention of the counsel for the builder group, who wanted the complainants to go through the lengthy process of approaching the District Forum, then the State Commission, and finally the National Commission. The bench saw through the mala fide intention, which was to delay the mechanism of justice so that they could buy time for completion of delayed housing projects.

The bench rejected the appeal of Amrapali Sapphire Developers challenging the NDCRC decision and thereby upheld the order of the National Consumer Disputes Redressal Commission (NCDRC) that flat buyers could jointly approach it in case of a dispute with a builder.

Contradictions in Orders

In the past, we have seen that many conflicting orders have been passed by the benches of the National Commission. Here’s an example, in Shubhechha Welfare Society versus Mls Earth Infrastructure Pvt. Ltd, the National Commission (in the order dated 6 December 2016) held that a recognised consumer association could file a complaint on behalf of a single consumer, whether or not that consumer was a member of that association, but a recognised consumer association could not file one complaint on behalf of many allottees by clubbing sale consideration for making pecuniary jurisdiction of the National Commission. Further, it was held that National Commission did not have pecuniary jurisdiction to entertain complaints, and that complaints had to be filed by complainant before the State Commission having pecuniary jurisdiction to entertain the complaint.

On the other hand, in Ambrish Kumar Shukla versus Ferrous Infrastructure Pvt. Ltd it was held that if the aggregate of the value of the goods purchased or the services hired or availed by all the consumers having the same interest and the total compensation, if any, claimed for all of them came to more than Rs 1 crore, the pecuniary jurisdiction would rest with the National Commission alone. The value of the goods purchased or the services hired or availed of and the quantum of compensation, if any, claimed in respect of one individual would be absolutely irrelevant for the purpose of determining the pecuniary jurisdiction in such a complaint.

In the case of ALP Social Welfare versus Mls Amrapali Leisure Valley Developers Pvt. Ltd, ALP Social Welfare had filed a case on behalf of 85 flat buyers. The subject was maintainability of the complaint – whether ALP Social Welfare was eligible to file the case on behalf of 85 flat buyers. The National Commission explained the purpose of Section 12 (1) (b) and said that only a recognised consumer association could file a complaint highlighting the grievance of aggrieved consumers. Further, the Commission explained the meaning of a ‘recognised’ consumer association and referred to the aims and objectives of ALP Social Welfare to ascertain whether the complainant was a voluntary association. On reading the aims and objectives, the Commission held that the complainant association had been formed and registered for social welfare programmes and for resolving common problems of the people. There was no reference to consumer welfare or consumer disputes in the aims and objectives; therefore, the association could not be termed as a voluntary consumer association and the complaint was not maintainable under Section 12 (1) (b). Unlike in the case of Shubhechha Welfare Society versus Mls Earth Infrastructure Pvt. Ltd, where the National Commission had held that a recognised consumer association could file a case on behalf of a single consumer and not numerous consumers, in thiscase it did not raise any issues on the representative capacity of the complainant – rather, it was on maintainability of the complaint under Section 12 (1) (b).

As is apparent, there has been inconsistencies in the orders passed by the National Commission.The latest order passed by Supreme Court in the case of Amrapali Sapphire Developers versus Amrapali Sapphire Flat Buyers Welfare Association clearly draws the line on the subject of pecuniary jurisdiction. The apex court’s ruling comes as a breather for flat buyers stuck with delayed flats, they now know that they can come together and approach the apex consumer commission. They can take on the resourceful realtors who use their money and power to exploit the common man.

CONFLICT BETWEEN THE PROVISIONS OF INSOLVENCY AND BANKRUPTCY CODE, 2016 AND REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

by admin | Jul 30, 2018 | Consumer Rights and Laws, Real Estate

CONFLICT BETWEEN THE PROVISIONS OF INSOLVENCY AND BANKRUPTCY CODE, 2016 AND REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

In recent years, multiple laws have been enacted to consolidate the various sectors and functioning of the country’s economy. Examples include Insolvency and Bankruptcy Code, 2016, Real Estate (Regulation and Development) Act, 2016 (RERA), and Goods and Services Tax Act, 2017. Quite inevitably, some provisions of the different laws are not in sync and may create a situation of conflict.

Consider Insolvency and Bankruptcy Code (IBC) and Real Estate (Regulation and Development) Act, or RERA. Both enacted in 2016, these appear to be overlapping when it comes to resolving the interests of homebuyers. Both IBC and RERA have provisions where the probability for conflict in their operations is very high. IBC allows companies to file insolvency proceedings so that they can provide relief to the debtors or creditors. On the other hand, RERA was implemented with the sole motive of getting justice for aggrieved homebuyers and penalizing builders or developers if the project is delayed. Undoubtedly, some questions remain unanswered, such as whether these two laws contradict each other and in case of the developer defaulting, whether the homebuyer should approach RERA or IBC.

The two laws enacted in 2016 appear to be overlapping against each other when it comes to resolving interest of home-buyers. Both the IBC and RERA have provisions which are conflicting. IBC allows companies to file their insolvency proceedings and on the other hand RERA was implemented with the sole motive to bring the justice to the aggrieved home-buyers and penalize the builders or developers if the project is delayed. Seeing this from home-buyers perspective, still some questions remain unanswered like are these two laws contradicting each other and in case of default from developers side, the homebuyer should approach RERA or IBC.

If we compare the provisions of these two Acts simultaneously, scope for confusion prevails as for both RERA and IBC, the law states that it will prevail over other laws. Section 238 of IBC provides that in case of inconsistencies between any law and IBC, IBC would prevail. Similarly, Section 89 of RERA provides that in case of inconsistencies between any law and RERA, RERA would prevail.

Lately, in the Amrapali case, the Supreme Court held that financial creditors/secured creditors cannot take over homes belonging to the homebuyers. In other words, the Supreme Court upheld the rights of homebuyers ahead of the creditors. This amply shows the fundamental contradiction between IBC and RERA, while IBC is trying to give primacy to the creditors and RERA is trying to protect the interest of consumers.

The fundamental contradiction between these two may drag cases to judicial and legal forums. In light of the recent legislation of Bankruptcy Act, RERA may not create separate provisions to deal with bankruptcy. The best way to stay true to the purpose of RERA is to align with the provisions of the Insolvency Act.

While there is potential conflict between the IBC and RERA provisions, it cannot be denied that the implementation of RERA is the need of the hour as it will restore the faith of homebuyers and in the long run it will help the real estate market become organised and stable. At the same time, the IBC provisions are equally important to secure the interests of creditors. The central government should address the matter in such a way that the interests of creditors as well as homebuyers are protected.

Suggestion from Consumer VOICE:

It is recommended that builders should maintain Fixed Deposit account for the money collected from homebuyers so it can be used for that particular project. By doing so, the company will not go insolvent and this will also lessen the scope of conflict between IBC and RERA.

Arbitration agreements cannot oust the jurisdiction of consumer forums

by admin | Mar 6, 2018 | Consumer Rights and Laws, Real Estate

Arbitration agreements cannot oust the jurisdiction of consumer forums

In a recent judgement, the Supreme Court affirmed that arbitration agreements cannot oust the jurisdiction of consumer forums. The order will benefit homebuyers who usually have an arbitration clause in their agreements with the real estate companies. Such clauses lay down that in cases of disputes, aggrieved consumers will have to resort to arbitration before moving to civil courts.Emphasising upon consumers’ rights, a bench of justices Adarsh K Goel and Uday U Lalit has upheld the National Consumer Commission’s judegment that had maintained that despite an arbitration clause in the agreements, consumers could still knock on the doors of consumer forums to seek quick redressal. The apex court passed this order while dismissing several appeals that were filed by Emaar MGF Land Ltd. “In terms of the signed order, the appeals are dismissed. Pending applications, if any, shall also stand
disposed of,” stated the order.

Emaar MGF had challenged the National Commission’s full-bench verdict of July 2017 wherein the apex consumer forum ruled that authority and jurisdiction of consumer forum could not be circumscribed by any arbitration clause. According to the Commission, consumer disputes are not capable of being settled by arbitration and that the jurisdiction of the consumer fora to adjudicate upon consumer disputes is not affected by Section 8 (as amended) of the Arbitration and Conciliation Act, 1996, that mandates reference to arbitration.