Failure To Deliver Possession Of Flats, Central Delhi District Commission Holds Earth Infrastructures Limited Liable

Brief Facts:

In June 2011, an advertisement for flats/studio apartments in the 'Earth Studios' residential project prompted initial interest from Complainant no.1. Following this, persistent messages, calls, and personal visits from Earth Infrastructures representatives led to the Complainants booking a studio apartment measuring 465 sq. yards for Rs. 18,42,625/-. They paid an advance of Rs. 6,20,000/- and subsequently Rs. 11,70,000/- upon signing the MoU with the remaining amount due on possession, originally expected by June 2013. It was assured that on payment of Rs. 11,70,000, Earth Infrastructures would provide a monthly return of Rs. 11,700/-.

The Complainants argued that despite fulfilling their financial obligations, possession was delayed beyond June 2013, and when they visited the project site, construction had not even commenced. Earth Infrastructures informed them of a revised possession date in July 2015 and stopped the assured monthly returns from October 2015. Later, they proposed a one-time discount instead of continuing the returns, which the Complainants declined. Alleging a violation of the MoU and unfair trade practices, the Complainants sent a legal notice in November 2016 seeking a refund with interest, which Earth Infrastructures did not honour. Feeling aggrieved, the Complainants filed a consumer complaint in the District Consumer Dispute Redressal Commission-VIII, Central Delhi (“District Commission”).

In response, Earth Infrastructures contended that the Complainants were not consumers but investors, as evidenced by their commercial intent to gain from assured returns on their investment. It argued that the Complainants failed to meet their payment obligations promptly, thus forfeiting their right to complain about delays in possession or cessation of returns.

Observations by the District Commission:

The District Commission noted that the MoU clearly indicated that the booking of the flat was for residential purposes. It held that Earth Infrastructures had the burden of proving otherwise but it failed to do so.

Further, the District Commission noted that the MoU had inconsistencies, particularly on the first page where the Complainants were referred to as 'investors,' but this term did not convert the booking's purpose to commercial. Throughout the MoU, the Complainants were consistently referred to as 'allottees' or 'applicants.' Earth Infrastructures' claim that the arbitration clause in the MoU barred the jurisdiction of the Consumer Forum was dismissed by the District Commission. It held that as per Section 3 of the Consumer Protection Act, 1986, the provisions of the Act are additional to other laws in force. This was supported by precedent from Skypak Courier Ltd. vs. Tata Chemicals [2000 5 SCC 294], which established that the presence of an arbitration clause does not bar a consumer complaint under the Consumer Protection Act. Therefore, the District Commission held that the Complainants were consumers and that the dispute was a consumer dispute.

Earth Infrastructures argued that the Complainants were required to pay the balance due amount by June 2013 or on the date of possession, whichever was earlier. However, the District Commission held that the MoU manually altered this clause to read 'whichever is later,' and Earth Infrastructures did not rebut this evidence. Thus, it held that the Complainants met their financial obligations. Despite the Complainants paying Rs. 11,70,000/- and being assured possession by June 2013 or by the extended period of July 2015, the District Commission held that Earth Infrastructures failed to deliver the flat. Therefore, the District Commission held Earth Infrastructures liable for deficiency in services.

Consequently, the District Commission ordered Earth Infrastructures to refund Rs. 11,70,000/- to the Complainant with 9% simple interest per annum. It was also directed to pay a compensation of Rs. 30,000/- to the Complainant and Rs. 10,000/- for the litigation costs incurred by the Complainant.

Case Title: Rajender Kumar & Anr. vs Earth Infrastructures Ltd.

Case Number: CC/48/2017

Date of Pronouncement: 3rd June 2024