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).

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.

PROMISES BROKEN, HOME DREAMS SHATTERED BY BENGALURU BUILDERS


Residents of Nitesh Forest Hills, an apartment complex owned by luxury estate brand Nitesh estates have gone to the consumer court over the issue of unfulfilled promises. The residents association is now hoping to make it a collective protest in order to truly make their ‘dream’ come true.

 

 

More home buyers are now willing to file cases against builders in NCDRC


NEW DELHI | MUMBAI: Lawyer Sahil Sethi has got over 25 calls since Tuesday morning from home buyers wanting to file cases against builders in the National Consumer Disputes Redressal Commission. They too want an order like the one Sethi got in a case he filed against builder Jaypee for delaying its Kalypso Court project in Noida

The commission asked Jaypee to pay 12% interest for the delay and to complete the project by July 21, failing which it will have to pay Rs 5,000 per day per home as a penalty till it hands over homes to the buyers.

In another order, the commission asked Mumbai-based builder Lodha group to refund Rs 1.02 crore to a buyer with 18% interest. On May 6, the court directed Parsvnath Developers to refund the entire amount paid by around 70 home buyers in its Parsvnath Exotica project in Ghazi ..

NCPBA is now registered


NCPBNCPBA is now registered and board objective will be –
1. To get the speedy delivery of NCP
2. To get compensation for Delay of project
3. To get Maintenance agreement for 2 years
NCPBA has already decided to go legal against NEL and we request all other members who are not registered to be part of NCPBA and provide the below mentioned documents to make our case more stronger –
1. Sale Agreement with NEL for their individual flat
2. Construction Agreement with NEL for their individual flat
3. Payment statement ( payment made to NEL, whether through bank loan or personally) 
NEL has already made lot of irregularities even in the Registered sale deed of the flat owners who have registered their flats.Hence , we request all flat owner to come forward and give strength to fight this injustice.We already have few members who have provided all the above documents to us , so we  request other members as well to join hands together and fight against NEL.
NCPBA Committee 

Banks Can Come After Your Assets If The Builder Defaults


reduce-the-tax-on-property-rentalLet’s say you’ve taken a loan for a house on the 10th floor of a building, under construction. Let’s say you’ve gone for the 80:20 scheme, where you’ve paid 20% and the builder says he’ll pay the EMI on the 80% until construction is complete. Let’s say that the builder runs out of money – maybe because interest rates are too high, maybe because he couldn’t sell the remaining flats, or maybe because of the Realty Ponzi scheme.

Either ways, he throws up his hands and says he can’t finish the property. Six months pass, and there’s no sign of any action. The bank now says you have to pay the EMI on the 80%. What happens now?

Many people believe the bank should take over the property and recover the money, and your EMI is no longer applicable. This is a gross misunderstanding.

You are fully responsible for the loan repayment.

Remember, the builder has taken his money. The bank has given it. The loan was given to you, not the builder, against your earning capacity and the collateral of the property.

When the builder was paying the EMI, the bank didn’t care – it had given you a loan, but the builder was paying interest.

When the builder stops paying interest, it will ask you to pay instead.

If you decide not to pay, the bank will attempt to sell the property. It is unlikely that people want to pay full price for a stalled project, and there will be a shortfall (auction amount could be less than the total loan). You have to now make up the difference, immediately, including all interest accrued in this sale/waiting period.

If you do not, you will be labelled a defaulter under CIBIL. (You might already be notified before the bank attempts to sell). This affects your ability to get a loan in the future.

And then, the bank can go after your other assets under the SARFAESI act. This includes all possessions you own like a car, another property or such. Further if the loan is taken jointly in the name of your wife or parents, their properties too are at stake. Personal/Home Loans in India are “full recourse” , where the bank or financial institution has full recourse to your other assets in case of a default.

The only thing a court cannot attach (to pay back such a loan) is your Provident Fund (PF) account. (I may not be legally up to date on this, though)

This applies to 80:20 loans (where the full amount has already been disbursed) and to regular home loans (where only partial disbursement has happened). This also applies to loans where you have been paying the EMI – you are still responsible for the rest of the loan.

Your options are to “settle”, hoping that the bank doesn’t want to go through the long legal process. The other option is to stall through the legal process, hoping that this will just go away, considering the extreme delays in our legal system. (This will still impact your CIBIL score) Since technically the builder defaulted to you, you have to take legal action against him for any further recovery.

(In one such case, a builder in Kolkata defaulted on a 176 cr. loan, and the bank is likely to take over the project and sell the flats. The case is still evolving.)

What this means is: Do not assume your responsibility ends if the builder defaults and bank takes over the house. You have a liability to pay anyway, your other assets can be attached and you will get a hit on your CIBIL score.

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