Unilateral Payment Demands Amount to Unfair Trade Practice, Chandigarh District Commission Holds Indian Railway Welfare Organization Liable

Brief Facts of the Case:

Shyam Sunder Garg (“Complainant”) had booked a flat in the "Rail Vihar" housing project, a residential group housing project under the Railway Group Housing Scheme developed by the Indian Railway Welfare Organization (“IRWO”) in Zirakpur, Punjab. The Complainant had shown interest in the project based on the advertisement and subsequently booked flat No. A-4/201, Type Z-IV. The cost initially quoted for the flat was ₹42,00,000, but it was later increased to ₹46,80,000 by IRWO. The Complainant paid a total of ₹49,98,211, including interest on delayed payment. The possession of the flat was handed over to the Complainant with some delay.

The dispute arose when IRWO demanded an additional payment of ₹1,48,390 from the Complainant, citing reasons related to "demand of subsidy for EWS houses" and "additional demand for escalation in the prices of labour and material." The Complainant contended that this demand was raised unilaterally and without his consent, as he had already made full payment and taken possession of the flat. He argued that this demand was illegal, unwarranted, and amounted to unfair trade practice. As a result, he filed a consumer complaint in the Chandigarh District Consumer Disputes Redressal Commission-I (“District Commission”).

IRWO contested the complaint, initially raising preliminary objections related to maintainability, jurisdiction, and non-joinder of necessary parties, and suggesting that the matter should be referred to arbitration. However, they admitted that the subject flat was allotted to the Complainant and that possession was handed over. IRWO argued that the demand notices were sent to the Complainant, as claimed. They maintained that the demand for the additional payment was in line with the scheme and technical brochure and the undertaking given by the Complainant.

Observations by the Commission:

The District Commission noted that it was an undisputed fact that the Complainant had booked a flat in the "Rail Vihar" housing project and that the possession of the flat had been handed over to him. The District Commission also took into consideration that IRWO had received the full payment from the Complainant, including interest on delayed payment and additional maintenance charges, as corroborated by the possession letter. Thus, the subsequent demand for an additional payment without prior consultation or approval from the Complainant was deemed unfair and arbitrary.

Addressing IRWO's contention that the Complainant should have pursued arbitration and that the consumer complaint was not maintainable, the District Commission referred to the precedent set in the case of Aftab Singh Vs. Emmar MGF Land Limited & Anr. Case No.701 of 2015 where the Supreme Court held that the arbitration clauses in agreements between consumers and builders did not limit the jurisdiction of consumer forums.

Consequently, the District Commission ordered IRWO to refund the amount of ₹1,48,390 deposited by the Complainant, along with interest at a rate of 9% per annum from November 11, 2022, onwards. IRWO was also directed not to raise similar demands against the Complainant in the future. The Complainant was also awarded ₹20,000 as compensation for the mental agony and harassment he endured and ₹10,000 as litigation costs.

Case: Shyam Sunder Garg vs. Indian Railway Welfare Organization

Case No.: CC/354/2021

Advocate for the Complainant: Vijay Kumar Pal

Advocate for the Respondent: A.K. Tiwari