NCDRC’s Judgment on Termination of Agreement between Home Buyer and Builder

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June 25, 2018

Case name: Ram Balakrishnan vs. Somitri Das 

This is indeed a very informative and important piece of judgment recently delivered by the National Consumer Dispute Redressal Commission (NCDRC) which renders legal propositions rudimentary in governing several aspects of Consumer Law like pecuniary jurisdiction of NCDRC, whether an NRI person is “consumer” under the Consumer Protection Act as well as Real Estate Law like compensation payable to home buyer in the event of termination of allotment. 

Brief facts of the case: The Complainant in the case is an NRI settled in the USA and had booked an Apartment in the opposite party’s project. The total consideration payable in respect of the said flat was Rs.98,13,760/-.The Complaint was aggrieved by the delay caused in delivering the possession of the apartment. The complainant stated that in all he has paid a sum of Rs.76,48,940/- against the consideration amount. In view of the undue delay being caused in construction, the complainant called upon the opposite party to cancel the contract and refund his money with interest. However, the opposite party did not cancel the contract and refund the claimed amount. Aggrieved by the same, the Complainant instituted a consumer complaint against the opposite party.

The opposite party refused in the caser replied that in view of Section 21 of the Consumer Protection Act, the NCDRC did not have the pecuniary jurisdiction to entertain the complaint. The Opposite party also contended that the complainant is an NRI and not a consumer as envisaged under Section 2 (1) (d) of the Act as he intended to sell the subject apartment on profit.

NCDRC’s Verdict

Pecuniary Jurisdiction of the NCDRC

The NCDRC made reference to Section 21 of the Consumer Protection Act and held that for the purpose of computing the pecuniary jurisdiction, the consumer fora has to take into account the value of the goods bought or services hired or availed plus compensation claimed by the complainant. 

Reference was also made to NCDRC’s judgment in the case of Ambrish Kumar Shukla & Ors. Vs Ferrous Infrastructure Pvt. Ltd[1], wherein the NCDRC observed that:

” It is evident from a bare perusal of Section 21, 17 and 11 of the Consumer Protection Act that it’s the value of the goods or services and the compensation, if any, claimed which determines the pecuniary jurisdiction of the Consumer Forum. The Act does not envisage determination of the pecuniary jurisdiction based upon the cost of removing the deficiencies in the goods purchased or the services to be rendered to the consumer.  Therefore, the cost of removing the defects or deficiencies in the goods or the services would have no bearing on the determination of the pecuniary jurisdiction.  If the aggregate of the value of the goods purchased or the services hired or availed of by a consumer, when added to the compensation, if any, claimed in the complaint by him, exceeds Rs. 1.00 crore, it is this Commission alone which would have the pecuniary jurisdiction to entertain the complaint.”

While referring to the facts of the instant case, the NCDRC observed that as per the agreement of sale, the agreed value of the apartment is Rs.98,13,760/-.  Perusal of the prayer clause would show that complainant has prayed for refund of sum of Rs. 78,48,940/- paid to the opposite party against the agreed consideration alongwith 18% interest thereon from the date of respective payment amounting to Rs.45,03,491/-.  If the aforesaid figures are added up, the value of the complaint for the purpose of pecuniary jurisdiction being the value of the service plus compensation is much more than Rs.1.00 crore.  Thus, the complaint is within the pecuniary jurisdiction of the NCDRC.

Whether an NRI person is a “Consumer” under the Consumer Protection Act?

In this context, the NCDRC observed that the perusal of the definition of ‘consumer’ as envisaged under Section 2 (1) (d) of the Act would show that for the purpose of definition, Act does not make any distinction between the buyers who are Indian citizens or NRIs. The Commission also observed that merely because the complainant is an NRI, it would not give rise to a presumption that he had booked the subject apartment with the intention to make profit by selling the same on a later date. 

Termination of Contract and Amount Payable by the Builder

The NCDRC referred to the Agreement which stated that the opposite party shall deliver possession of subject apartment to the complainant latest by 31.01.2010 inclusive of three months grace period subject to Force Majeure and in the event of any delay beyond the stipulated period, the developer shall pay to the purchaser an amount of Rs.5/- per square feet of the built up area for every month of delay upto a maximum of six months.

The NCDRC noted that the aforesaid stipulation in the contract was oppressive and highly tilted towards the builder.  It was observed that if the stipulation is enforced, then it would give unfair advantage to the developer over the consumer and he would delay the construction and utilize the money received against the consideration amount for other purpose without even paying the interest on the same.

Reference was also made to clause 7.7 of the agreement of sale which provided that on termination of agreement, developer shall not be liable to pay any interest on the amounts refunded and that on termination of contract, the opposite party is liable to refund the principal amount only.

With reference to the aforesaid clause, the NCDRC was of the view that such a condition would be applicable only in the cases where because of justifiable reason, the parties agree to terminate the contract and the said provision cannot be used by the opposite party to achieve undue advantage over the complainant.

The NCDRC hence stated that in view of deficiency in service committed by the opposite party, reasonable compensation has to be awarded to the complainant.

The NCDRC further stated that even if the Complainant fails to lead cogent evidence to show the extent of damage suffered by him, it cannot be assumed that the complainant did not suffer any loss.

The NCDRC remarked that if the complainant had deposited the amount paid against the consideration amount in the bank, he would earned interest on the same.  Observing the aforesaid, the NCDRC opined that taking into account the interest rates prevalent during the period w.e.f. date of allotment till date, 10% interest on the principal amount would be reasonable.

In view of the aforesaid observations, the NCDRC allowed the complaint and directed that:

  • The   Opposite   party   shall   refund   the   entire    amount   of Rs.76,48,940/- to the complainant alongwith compensation of simple interest  @ 10% per annum from the date of each payment till the realisation of the amount.
  • The Opposite party shall pay a sum of Rs.10,000/-  as cost of litigation to the complainant.

The entire case can be accessed here.

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[1] CC No. 97/2016