The Supreme Court upholds the decision by the National Consumer Disputes Redressal Commission (NCDRC) providing protection to consumer rights in real estate transaction. A private limited company that had booked a residential flat for personal use by one of its directors, only to face the forfeiture of the substantial amount it had already paid due to alleged deficiencies.
Background
On September 22, 2015, a commercial company, booked a luxurious flat with the purpose of using it for the residence of one of its directors and his family. A payment totaling ₹7,16,41,493 expecting to take possession of the flat by December 31, 2018, as per the allotment letter dated June 29, 2016. The complications arose when the possession date was postponed to July 2017 and a demand for the remainder of the payment was made. The respondent further discovered that the flat had already been reserved for another buyer, which led to the cancellation of the booking and forfeiture of the amount deposited by the respondent. Hence, a case was filed with the NCDRC for foul practices.
Judgement
The court stated that:
“In the case at hand, the complainant specifically mentions that the flat was being purchased for the purpose of residence of one of its Directors and his family and that the company is a family-owned company. The mere fact that the respondent-company is a real estate company, it does not mean that the flat was purchased by it for commercial purpose or for resale so as to earn profits.”
This finding reaffirmed that the intent behind the purchase was personal, not commercial, which brought the transaction under the protection of the Consumer Protection Act.
Clarification on Commercial Purpose: The judgment also provided clarity on what constitutes a "commercial purpose" within the meaning of the Act. The Court emphasized the need to examine the dominant purpose behind the transaction, stating:
“The dominant intention or the dominant purpose of the transaction is to be looked into to find out if it had any nexus with some kind of profit generation as part of the commercial activities.”
In this case, the Court determined that the flat was purchased for the personal use of the director and his family, not for commercial gain, making the complaint maintainable under consumer law.
Unfair Trade Practices and Deficiency in Service: The Court was critical of the developer’s actions, particularly the double allotment of the flat. The NCDRC had previously found that the developer “created confusion by double allotment of the flat in question” and held that the developer’s actions amounted to an unfair trade practice. The Supreme Court concurred, noting:
“Since the very cancellation/termination of the allotment of the respondents in the facts and circumstances of the case is not justified, consequently the forfeiture is also bad in law.”
This observation underscores the Court's commitment to protecting consumers from unethical practices in real estate transactions.
Implication
In the real estate sector this ruling is a significant affirmation of consumer rights on disputes over payment and allotments. It has set a precedent that consumer rights apply to all sectors and purchases whether personal or commercial. It has also sent a strong message to consumers to recognise their rights and to real estate agents regarding maintenance of transparency and fairness.
Conclusion
By upholding the decision of NCDRC the court has bolstered the clause of consumer protection laws providing relief to the respondent and setting a precedent for future decisions.
TAGS: Supreme Court NCDRC Consumer Protection Act real estate consumer rights unfair trade practices commercial purpose double allotment deficiency in service residential flat legal precedent
