23 August 2024 Civil Appeals >> Civil & Consumer Law   |   Consumer Law >> Civil & Consumer Law   |   Property/Real Estate Law >> Property & Real Estate  

In a notable decision in the matter of Omkar Realtors & Developers Pvt. Ltd. v/s Kushalraj Land Developers Pvt. Ltd. & Another concerning real estate transactions, the Supreme Court of India recently addressed a statutory appeal under Section 67 of the Consumer Protection Act, 2019. The case in question challenged the judgment and order passed by the National Consumer Disputes Redressal Commission (NCDRC) on December 23, 2022, in Consumer Complaint No.141 of 2020. This judgment held that the appellant, a real estate developer, was liable for refunding a substantial amount to the respondent, a private limited company engaged in real estate development, along with interest and compensation.

Case Background:

The respondent company had booked a residential flat in the appellant's project, 'Omkar 1973 Worli,' on September 22, 2015. The booking was accompanied by an initial payment of Rs. 51,00,000, and further payments totaling Rs. 6,79,97,071 were made. An allotment letter dated June 29, 2016, designated Flat No.5001 in Tower-B as the respondent’s property, with a possession date set for December 31, 2018. Subsequently, on March 8, 2017, the appellant advanced the possession date to the first quarter of 2017. The respondent, upon attempting to arrange financing, discovered that the flat was reserved for another individual, Mr. Nakul Arya. This confusion led the respondent to decline possession and payment, resulting in the appellant canceling the allotment and forfeiting the respondent's deposit in August 2017.

NCDRC’s Findings:

The respondent filed a complaint with the NCDRC, accusing the appellant of service deficiencies and unfair trade practices. The complaint sought a refund of Rs. 7,16,41,493, along with interest and compensation. The appellant contested the complaint, arguing that the respondent, being a real estate company, did not qualify as a 'consumer' under the Consumer Protection Act and that the flat's allotment was properly canceled due to non-payment.

The NCDRC ruled in favor of the respondent, determining that the respondent was indeed a 'consumer' as defined by Section 2(7) of the Act. The Commission based its judgment on precedents set in cases such as Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers and Crompton Greaves Limited vs. Daimler Chrysler India Private Limited. It was concluded that the flat was purchased for personal use rather than for commercial resale, thus qualifying the respondent as a consumer.

The NCDRC also found that the appellant's double allotment of the flat—first to Mr. Nakul Arya and subsequently to the respondent—constituted a deficiency in service. The confusion surrounding the allotment was not resolved until March 17, 2018, well after the appellant’s termination of the respondent’s allotment.

Supreme Court’s Decision:

On appeal, the Supreme Court upheld the NCDRC's decision. The Court affirmed that the respondent's complaint was maintainable, rejecting the appellant’s argument that the respondent was not a consumer. The judgment underscored that the real estate company's purchase of the flat was for the personal use of its director, not for commercial resale.

The Court agreed with the NCDRC's assessment of service deficiency, noting that the appellant’s actions—particularly the premature cancellation of the allotment and forfeiture of the deposit—were unjustified given the unresolved double allotment issue. In its ruling, the Supreme Court directed the appellant to refund Rs. 3,00,00,000 of the total amount within two weeks and the remaining balance by December 31, 2024. Failure to comply would allow for recovery of the amount as arrears of land revenue.

Conclusion:

This case highlights critical issues in real estate transactions, particularly concerning consumer rights and the obligations of developers. The Supreme Court’s decision reinforces the principle that consumer protection laws apply even in transactions involving companies, provided the purchase is for personal use rather than for commercial resale. The ruling also sets a precedent on how unfair trade practices and service deficiencies are adjudicated in the real estate sector.

  Consumer Protection Act, 1986