THE BEGINNING OF CLASS ACTION LAWSUIT “REAL ESTATE”


  • All home buyers can join a existing complaint filed

  • Judgement of the case will be binding on all the buyers

  • Only one complaint to be filed against the Builder /Developer Under Section 12.1 C as a group of buyers

  • All other complainants can  join as a group after the Public Notice is served

  • Judgement to be based on Agreement Value and not Market Value

The NCDRC have clarified its position on Section 12 (1) (c) of Consumer Protection Act 1986.  NCDRC has allowed complaints by a group of buyers under Section 12 (1) (c).

If we have to go by layman’s interpretation, all builder related cases can by filed in NCDRC, thus skipping the lower forums.

There has been a lot of confusion and ambiguity in the interpretation of complaints filed under Section 12 (1) (c). Different benches of NCDRC had a different view on this section of the Act.

This led to the matter being referred to a three-member bench of NCDRC. These three question/issues arose in front of the commission: Whether complaint under Section 12 (1) (c) filed on behalf of or for the benefit of only some the numerous buyers are maintainable or it must be filed on behalf of all consumers having a common interest.

Where complaint under this section is maintainable where the value of goods, service, compensation in respect of none of the allottees exceeds rupees one crore.

Where complaint under this section is maintainable where the value of goods, service, compensation in respect to individual allottee exceeds rupees one crore.

Where complaint under this section is maintainable where the cost of the apartment, the area of the apartments is different and the apartments were booked on different dates.

Court’s observation

Here are the key observations in full bench judgement concerning the interpretation of Section 12 (1) (c) of the Consumer Protection Act. We have tried to explain court’s order in laymen’s terms.

  •  If a complaint is against a builder under Section 12 (1) (c), i.e by an unregistered group of persons, it can be filed only on behalf of or for the benefit of all buyers who have the same interest and grievance against the builder. It cannot be filed seeking relief for the benefit of only some of the buyers.
  •  A complaint under Section 12 (1) (c) is maintainable before the NCDRC where the aggregate value of the all the apartments combined and the total compensation claimed in respect of all the buyers exceeds Rs. 1 crore. The value of each individual apartment is wholly irrelevant in such a complaint.
  • So long as the grievance of the buyers is common and an identical relief is claimed for all of them, the cost, the size, area of the flat/plot and the date of booking/allotment/purchase would be wholly immaterial. The relief claimed will be the same if for example, in a case of delay in possession, refund, or possession or in the alternate refund, with or without compensation, is claimed for all the buyers. Different reliefs for one or more consumers on whose behalf or for whose benefit the complaint is filed cannot be claimed in such a complaint.
  • The jurisdiction of the NCDRC shall be decided on the agreed sale consideration ,i.e.value at the time of booking the apartment, not the market value of the apartment. e. A cooperative society or a group of cooperative societies, firms, an association shall not be entitled to file a complaint under Section 12 (1) (c) unless the cooperative society itself is the consumer.
  • The Act does not allow more than one complaints in a representative character. The decision in one complaint filed in a representative capacity will bind all the buyers of the project. Therefore once a complaint in a representative capacity is filed under Section 12 (1) (c), and requisite permission for filing the same is given by the consumer forum, the second complaint under Section 12 (1) (c) will not be maintainable for the same project for the same relief. A second complaint, if filed, having the same interest and seeking the same relief is liable to be dismissed with liberty to seek impleadment in the complaint already instituted.
  • Since a complaint in a representative capacity shall be binding on all the buyers, an individual complaint expressing the same grievance will not be maintainable and the only recourse available to such buyer is to seek impleadment in the complaint filed in the representative capacity. However, as far as individual complaints instituted prior to grant of requisite permission under Section 12 (1) (c) is concerned, such complainants cannot be compelled to withdraw their individual complaint.
  • The consumers who are already before the consumer forum when the requisite permission in terms of Section 12 (1) (c) is accorded, will be out of purview of the representative complaint. The order passed in the representative complaint will not be binding on them.
  • However, if such persons want to withdraw their pending complaints and join the complaint instituted in the representative capacity, there is no bar on their adopting such a course of action. h. Considering the binding effect of a decision rendered under Section 12 (1) (c) on all the consumers on whose behalf such a complaint is filed, even if they choose not to join as a party to the complaint, It is necessary to exercise due care and caution while considering such a complaint while granting the requisite permission under Section 12 (1) (c).
  • It would be necessary for the bench to either give individual notices or an adequate public notice of the institution of the complaints, to all the persons on whose behalf or for whose benefit the complaint is instituted. Such a notice should disclose the subject matter of the complaint including particulars of the project, class of persons on whose behalf or for whose benefit the complaint is filed, the common grievance is sought to be addressed, the alleged deficiency in the service and the reliefs claimed.
  • It will also be necessary to hear the opposite party before taking a final view on grant of necessary permission under Section 12 (1) (c).
  • Court’s observation on existing complaints Individual complaints filed prior to the grant of requisite permission under Section 12 (1) (c) have been validly instituted and they can not be compelled to withdraw their individual complaint and compelled to become a party of subsequent complaints filed in a representative capacity. If, however, such persons want to withdraw their individual complaints and join the representative suit, they shall be allowed.
  • JUDGEMENT CAN BE FOUND BELOW ON SECTION 12 (1) (c)
    ncdrc-full-bench-judgement-on-section-12-1-c
  • Example of a similar order pass by the consumer court in Case of Nitesh Caesars Palace :-
  • The instant complaint has been filed by Shri Vishwanath Shankar and 203 other complainants as a class action alleging deficiency in service on the part of the opposite party in respect of the builder buyer agreement executed by the complainants and other consumers with respect to the development project ‘Nitesh Caesar Palace’ undertaken by the opposite party. Along with the complaint an application under Section 12 (1) (c) of the Consumer Protection Act, 1986 seeking permission to proceed with the complaint as a class action, has been filed. The application is opposed on the ground that even among 204 complainants there are different groups of complainants having different interest.

    We have heard the parties and perused the record. On careful perusal of the complaint we find that in para-1 the complainants have specifically mentioned that they wish to proceed with the complaint as a class action on behalf of themselves and other similarly placed consumers having the same interest and even in the prayer clause the complainants have sought similarly relief for all other consumers who are not party to the complaint. Therefore, in our view the complaint fits within the parameters of Section 12 (1) (c) of the Act. Accordingly, we grant permission under Section 12 (1) (c) of the Act to the complainants to proceed with the complaint as class action. As this is a class action complaint, issue public notice under Order 1 Rule 8 CPC in Deccan Herald (English) and Vijaya (Karnataka).

Builder has to pay compensation if project is delayed


Building projects are often delayed due to disputes between a builder, land owner and developer. Builders try to term these as force majeure, which means due to circumstances beyond their control, to avoid being held liable for deficiency in service. In a recent ruling, the National Commission has held that such disputes cannot be termed force majeure, and a consumer would be entitled to claim a refund along with interest and compensation when the builder is unable to complete the housing project in time. However, a builder can neither unilaterally extend the date of possession nor insist on allotting alternate flat or plot to escape refunding the amount.
Case Study: Shahin Mulla wanted to purchase a residential unit in “Amar Prem”, a housing project in Goa, to be developed by Utopia Projects. The entire consideration of Rs 30 lakh was paid in two instalments of Rs 15 lakh each.
The agreement for construction and sale was executed thereafter on February 24, 2012. It stipulated that possession would be given by September 2013, but the builder would be entitled to a grace period of four months, i.e. till January 2014.
When Mulla visited the site in August 2013, she found that even the foundation had not been laid. She got a legal notice issued to the builder, which was ignored. So she filed a complaint before the Goa State Commission.
The builder contested the complaint, explaining that they had been assigned development rights by RPC Builders and Developers, who had later committed various breaches and were also demanding extra payment for the property. As a result of the dispute, work could not commence. The builder termed the dispute as force majeure and not due to any wilful default. Utopia Projects also pointed out that the complaint was premature as it had been filed prior to January 2014, which was the date of possession inclusive of the grace period.
The state commission observed that the agreement provided that in case of any delay beyond the grace period, the builder would pay the purchaser a monthly compensation at Rs 50 per sq.ft. The defence of force majeure cannot be invoked as the agreement had not been terminated due to inability to perform it.
The state commission concluded that there was deficiency in service and ordered the builder to refund the amount of Rs 30 lakh along with 5% interest from the date of payment of each instalment till the extended date of possession. For the delay, the commission directed payment of a monthly compensation of Rs 50 per sq. ft. from February 1, 2014 till the date of payment. For mental agony, a further amount of Rs 1 lakh was awarded, which would carry 9% interest if not paid within 30 days.

Utopia Projects appealed to the National Commission, contending that the company had formulated a revised schedule, but Mulla was not willing to accept it. In its judgment of April 1, 2015 delivered by M Shreesha for the Bench along with Justice DK Jain and Vinay Kumar, the National Commission held that a consumer is not concerned with the internal disputes between the landowner, developer or contractor. A builder cannot take shelter by wrongly terming internal disputes as force majeure. It ruled that Mulla was well within her rights to demand possession within the stipulated time or else seek a refund along with compensation. Accordingly, the National Commission rejected the builder’s appeal, holding that the state commission had rightly allowed Mulla’s claim.

 Conclusion: The consumer has the right to refund along with compensation when a builder delays possession beyond the agreed time.

 

Advantages of filing case against builder as an association


Home Buyers are increasingly engaging builder on various issues related to projects. Builders also find it difficult to silence individuals when confronted as groups. Although social media and informal groups are good for raising collective voice, buyers should look forward to registering their associations.
Home buyers associations can file cases on behalf of its members at various forums including Consumer forums. Cumulative value of cases when filed by association can easily exceed one crore and case can directly be filed in NCDRC. A legally recognised and registered association gives an impression of seriousness of people involved. A legally recognised group can present the grievances of home buyers group at various forums.
It is also worthwhile to mention that various defamation cases are being filed by builders against individuals. A registered association can always stand up against such tactics by builders and back those who are targeted by builders.
To sum it up, it is very advantageous to form a legally registered association to file a case cumulatively against a builder.