Clauses In Builder-Buyer Agreement Cannot Override Consumer Commission's Jurisdiction: NCDRC Holds Emaar India Liable For Deficiency In Service

Brief Facts of the Case

The complainants booked a flat in the “The Views” project by Emaar India/builder for a total sale consideration of Rs.41,36,550. They were allotted the flat, and the builder-buyer agreement was executed. The complainants paid Rs.37,75,900 as per the builder's demands. According to the agreement, the physical possession of the flat was to be handed over within 36 months from the date of the agreement, but the builder failed to deliver possession within the stipulated period. Due to this failure, the complainants sought a refund of the deposited amount and interest, but their requests were disregarded. Aggrieved by the situation, the complainants filed a complaint before the State Commission, and the Commission allowed the complaint.

Contentions of the Builder

The builder argued that the complainants were not consumers since they owned a house in New Delhi and had purchased the flat solely for profit, with no intention of residing there. Additionally, they claimed the complaint was barred by limitation. Following the enactment of the Real Estate (Regulation and Development) Act (RERA), they also argued that the proceedings before the State Commission were not maintainable due to sections 79 and 71 of RERA. The builder further asserted that in the sale of immovable property, time is not considered the essence of the contract, and there was no specific commitment to hand over possession within three years. They also cited the presence of an arbitration clause in the agreement, rendering the consumer complaint non-maintainable. They also argued that if a refund was sought, the earnest money would be forfeited per the agreement's terms and conditions.

Observations by the Commission

The Commission observed that the core issue before the Commission was whether there was a deficiency in service on the builder's part for failing to hand over physical possession of the flat to the complainants within the stipulated period. The commission found a clear deficiency by the builder in this regard. Regarding the arbitration clause, the commission rightly relied on established precedent that such a clause in the buyer-builder agreement cannot override or circumscribe the jurisdiction of a consumer forum. Furthermore, regarding the applicability of the RERA Act, the commission agreed with the complainants' counsel that since the transaction took place much before the enactment and enforcement of RERA provisions in 2017, and the possession was to be handed over before, the RERA Act did not apply to the present case. As for the contention that the complainants did not qualify as "consumers," the commission noted that the builder failed to produce any documentary evidence to substantiate their claim that the complainants owned property in Delhi or Gurugram. Merely making such an assertion was deemed insufficient to establish that the complainants did not fall within the definition of “consumer” under Section 2(1)(d) of the Act. The commission observed an unreasonable and inordinate delay in the construction of the project by the builder. Despite being allotted the flat in 2008 and the agreement executed then, with part payment of Rs. 37.75 lakhs made, the builder failed to deliver possession within the stipulated period, constituting a deficiency in service. The complainants were thus entitled to refund the deposited amount with reasonable interest, in line with the Supreme Court's judgments in Pioneer Urban Land vs. Govindan Raghavan and Ireo Grace Realtech vs. Abhishek Khanna & Anr. Further, referring to the Supreme Court's ruling in the DLF Homes Panchkula vs. D.S. Dhanda case, the commission held that granting multiple compensations for a singular deficiency was unjustified. Therefore, the compensation of Rs. 50,000 for mental agony/harassment and the cost of litigation awarded by the State Commission was set aside.

The commission modified the State Commission's award to direct the builder to refund the principal amount of Rs. 37.75 lakhs to the complainants along with compensation in the form of 9% simple interest calculated from the respective deposit dates till realization, without any TDS deduction.

Case Title: Emaar India Ltd. & Anr. Vs. Gaurav Singh Khurana

Case Number: F.A. No. 923/2021