Arbitration Clause In Buyer's Agreement Does Not Bar Jurisdiction Of Consumer Fora: NCDRC

Brief Facts of the Case

The complainant, who owns a property in Bangalore, entered into a Memorandum of Understanding (MOU) with Nandi Builders/builder. According to the MOU, the developer was to construct residential apartments, with the complainant receiving 50% of the super built-up area and other benefits in exchange for transferring 50% ownership of the property. A Joint Development Agreement (JDA) was signed, incorporating the terms of the MOU. The complainant granted the developer a General Power of Attorney to facilitate construction. In return, the developer promised the complainant specific flats and parking areas. However, the developer failed to fulfill their obligations under the JDA and sharing agreement. They didn't pay the agreed amount with interest and breached the agreement by selling the property to third parties, including the apartment designated for the complainant. Consequently, the complainant filed a consumer complaint before the State Commission seeking the developer to deliver 50% of the super built-up area, parking space, garden area, and terrace as per the JDA. She also requested rent for each apartment, damages, and costs. The State Commission allowed the complaint, which the builder appealed to the National Commission.

Contentions of the Builder

The builder argued that the complainant deliberately concealed material facts and made false claims. They asserted that the complainant doesn't qualify as a consumer under Section 2(1)(d) of the Act due to her property ownership and voluntary agreement to the MOU. The builder stated they agreed to provide the complainant with her share of the property as per the JDA, despite delays caused by her in obtaining necessary documents and unforeseen events like a lorry driver strike. They completed the project and invited her for inspection, but she refused without discussing her concerns. The builder denied failing to complete construction within the agreed timeframe and disputed the complainant's proposed rent amount. They acknowledged their obligation under the sharing agreement but blamed the complainant's behavior for delays. Furthermore, the builder denied breaching the contract or selling their share of the property, arguing that the complainant had no grounds for the complaint and requested its dismissal.

Observations by the National Commission

The Commission observed that the builder's objection regarding jurisdiction and referring disputes to arbitration lacked merit. The Commission highlighted the Supreme Court's decision in M/s Imperia Structures Ltd. v. Anil Patni and Another, which held that remedies under the Consumer Protection Act are in addition to remedies available under special statutes, making the Commission a competent authority. The Commission emphasized its own order in Aftab Singh Vs. Emaar MGF Land Limited & Anr., upheld by the Supreme Court, wherein it was held that the arbitration clause in the buyer's agreement does not bar the jurisdiction of the consumer fora. Regarding the builder's contention that the delay was due to force majeure circumstances, the Commission cited its decision in Sivarama Sarma Jonnalagadda & Anr vs. M/s Maruthi Corporation Limited & Anr., where it held that the complainant cannot be made to wait indefinitely for possession delivery, and relying on the force majeure clause while retaining the deposited amounts is an act of deficiency in service and unfair trade practice. The Commission highlighted the Supreme Court's decision in Bunga Daniel Babu Vs. M/s. Sri Vasudeva Constructions & Ors., which held that the appellant was a consumer under the Act, even though the contract was a Joint Development Agreement (JDA), as the appellant had no say or control over the construction and was only entitled to a certain constructed area. The Commission emphasized that the State Commission considered the delay in handing over possession of the four flats and the shortfalls brought out in the Court Commissioner's report as a deficiency in service on the builder's part. While the State Commission determined the builder's liability based on the claimed rent, the Commission observed that nothing was on record to establish that the complainant had incurred such liability. Since the deficiencies listed by the Court Commissioner indicated that the flats were largely complete, the Commission believed that the builder's liability needed to be reviewed to the extent of payment of compensation in the form of rent.

The National Commission directed the builder to rectify all listed deficiencies and complete the project within two months. They were instructed to hand over 50% of the property to the complainant as per the agreement. The builder was also directed to compensate the complainant with rent at Rs. 10,000 per month per apartment until possession.

Case Title: M/S. Nandi Builders & Developers Vs. Saraswathamma

Case Number: F.A. No. 95/2017