Published On: Tue, Feb 10th, 2015

Bring Errant Builder to Book : Consumer Protection Act

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By Advocate Anju Agarwal

One has booked a flat and the builder / housing board has set the deadline for giving its possession. However, as the date approaches, one finds that the flat is nowhere near completion. Worse still, the builder/housing board may not have begun constructing yet. When one looks for explanations, the builder / housing board either replies evasively or simply ignores ones calls. Now one wants a refund of the money but that, too is in vain. So what do you do ? Perhaps seek redressal under the Consumer Protection Act (CPA) 1986.
Take a look at the landmark judgment in the field of housing construction given by the Supreme Court of India on November 5, 1992, in the case Lucknow Development Authority v/s M.K. Gupta. This judgement holds good even today and is widely quoted in the consumer forums. In this judgement, it has been held that ‘housing construction’ was covered by the Consumer protection Act even before its amendment in 1993 and that even bodies like the Bangalore or the Up Development Authority were to consider themselves under the purview of the Consumer Protection Act. By this decision, the Supreme Court again examined the various provisions of the Consumer protection Act and its conclusions. These have a far-reaching impact and are summed up below :
1. A government or semi-government body or a local authority is as much amenable to the Act as any other private body rendering similar service.
2. The jurisdiction of the for a cannot be limited on the ground that although it was service, it was related to immovable property.
3. Housing construction or building activity by a private or a statutory body is ‘service’ within the meaning of the Consumer Protection Act.
4. If a public functionary acts maliciously and this exercise of the power results in harassment and agony then it is not an exercise of the power results in harassment and agony then it is not an exercise of power but its abuse.
5. The for a can direct the department to pay compensation to the complainant immediately with further directions to recover the amount from those responsible for such behaviour.
The Consumer Protection Act, 1986, came into force from July 1987. Immediately thereafter, cases against builders were filed in the consumer forums set-up under this Act all over the country. The consumer forums are modeled on the ‘small claims court’ which one finds in UK, Hong Kong and Australia. It incorporates safeguards for consumers against unfair trade practices. Complaints against builders could always be entertained in the consumer forums. The authoritative decision given by the Supreme Court of India has already been explained above.
To make the picture clearer, the Government of India amended the Consumer Protection Act in 1993. One of the amended is that the words ‘housing construction’ have been inserted in clause 2(1) (o) of the Consumer Protection Act which defines ‘service’. Hence complaints against builders with regard to housing construction can be filed in the consumer forums.
Consumer can get redressal via a three-tier redressal machinery. If the compensation claimed by a consumer is below Rs. 20 lakhs, then the complaint has to be filed in the district forum. If the compensation claimed is between Rs. 20 lakhs and Rs. One crore, then the matter is filed in the Sate Commission and when the compensation claimed is over Rs. One crore, then the case has to be filed in the National Commission at New Delhi. Provision for appeal is also provided under the Consumer protection Act.
Who is complainant ? Who can file a complaint under the CPA? The law is very clear on this point. Under section 2(1)(b) of the CPA, a ‘complainant’ is :
(i) a consumer; or
(ii) any voluntary consumer association registered under the Companies Act, 1956 (1 of 1956) or under any other law for the time being in force; or
(iii) The Central Government or any State Government,
(iv) One or more consumers where there are numerous consumer having the same interest
(v) In case of death of a consumer, his legal heir or representative who and which make the complaint.
Group complaints :
If there are problems with a common builder then, by way of an amendment to the CPA in 1993, a number of you who have purchased houses or flats can get together to file a consolidated complaint against the common builder.
This is in view of the fact that the words ‘one or more consumers, where there are numerous consumers having the same interest’ have been inserted in the definition of complainant in section 2(1) (b) as sub-clause (iv) thereof by the amendment.
Caution : However, a word of caution for the reader. If your are asking a builder to refund the money you have paid for a flat on account of your personal need for the money, then you may not win the case in the consumer forum. In one case, a person did not pay the installments as she should have after she booked a flat with a builder. Instead she complained to the Delhi State Commission for the refund of the money she had already deposited with the builder. It appears that she had earlier written to the builder that she needed the money for domestic reasons. It was not her case that she was asking for a refund because the flat was not being completed.
In these circumstances, the Delhi State Commission held that the client could not be allowed to wriggle out of the contract with the builder.
Here is another tip for the readers. While filing your complaint in the consumer forum take care to ensure that you file the case within two years from the date on which the cause of action has arisen.
What is a complaint ?
As detailed in Section 2(1)(c) of the CPA (a)
“Complaint” means any allegation in writing made by a complainant that –
5[(i) an unfair trade practice or a restrictive trade practice has been adopted by 6[any trader or service provider];]
(ii) 7[the goods bought by him or agreed to be bought by him] suffer from one or more defects;
(iii) 8[the services hired or availed of or agreed to be hired or availed of by him] suffer from deficiency in any respect;
9[(iv) a trader or the service provider, as the case may be, has charged for the goods or for the services mentioned in the complaint, a price in excess of the price –
(a) fixed by or under any law for the time being in force;
(b) displayed on the goods or any package containing such goods;
(c) displayed on the price list exhibited by him by or under any law for the time being in force;
(d) agreed between the parties;
(v) goods which will be hazardous to life and safety when used are being offered for sale to the public
(A) in contravention of any standards relating to safety when used are being offered for sale to the public –
(B) if the trader could have known with due diligence that the goods so offered are unsafe to the public;
(vi) services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety;] with a view to obtaining any relief provided by or under this Act;
Some questions often asked
Q. Can a builder delay in giving possession of the flat on the ground that the municipal corporation is not giving its clearance ?
Ans. It will amount to deficiency in service on the part of the builder. When the builder sold the scheme he would have estimated by when the flats would be ready. To do so, he should have made the necessary arrangements with the municipal corporation to ensure that the deadline was not defaulted.
Otherwise the consumer forums will definitely order compensation for the purchasers of the flats.
Q.Can a consumer complain about unreasonable delay in the construction of the house after taking possession ?
Ans. No, say the consumer forums.
Q.Housing and development boards are statutory bodies?
Ans. No. they are within the ambit of the CPA for they provide services for a consideration and those who are allotted plots or houses are consumers.
Q. Can a builder add a hitherto unspecified additional space as ‘super area’ and expect the buyer to pay up?
Ans. Not if it is more than a few square feet. Certainly not if it is 20 percent of the covered area.
Q. Is the failure of the builder to give flats to its purchasers with valid legal title cause for complaint under the CPA?
Ans. Yes, if the builder is not in a position to get this certificate then he may not have adhered to the conditions laid down by the municipality regarding FSI etc.
Q.Can a financing institution be made to pay compensation for not giving finance to purchasers of the flats on time ?
Ans. Definitely, Because they have clearly specified terms of borrowing such as more of payment and rate of interest.
Q. Is there any exception to the period of limitation which specifies that a complaint has to be filed within two years of the problem arising ?
Ans. Yes, if the district forum, the state commission or the national commission, as the case may be, is satisfied that there was sufficient cause for the delay. The concerned commission has to record its reasons for condoning such delay.
Addresses of the Consumer Forums :
The President, National Consumer Disputes Redressal Commission, National Commission, A Wing, Fifth floor, Janpath Bhawan, Janpath, New Delhi – 110001, Phone : 011-23329248; 23712459; 23712109, Fax : 011-23712456
The President, Maharashtra State Consumer Disputes Redressal Commission, (Maharashtra State Commission), Room no.1 and 2, Ground floor, Administrative Staff College Building, Hazarimal Somani Marg, Mumbai – 400001, Ph : 22072097
The President, Central Mumbai district Consumer Redressal Forum, 6th floor, Arun Chambers, Tardeo, Near A.C. Market, Mumbai – 400034, Ph : 022-23521770
The President, South Mumbai district Consumer Redressal Forum, Mumbai Central, Arun Chambers, Tardeo, 6th floor, Near A.C. Market, Mumbai – 400034, Ph : 022-23511737
The President, Mumbai Suburban district Consumer Redressal Forum, New Administrative Building, 3rd floor, Near Chetna College, Bandra (E), Mumbai – 400051, Ph : 022-26551625

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