In a significant judgment delivered on August 23, 2024, the Supreme Court of India upheld the decision of the National Consumer Disputes Redressal Commission (NCDRC) in the case of Omkar Realtors and Developers Pvt. Ltd. vs. Kushalraj Land Developers Pvt. Ltd. The court reaffirmed the rights of consumers, while also addressing key aspects of real estate transactions, and defining the scope of "consumer" under the Consumer Protection Act, 2019.
Background of the Case
The dispute arose when Kushalraj Land Developers Pvt. Ltd., the respondent, booked a flat in Omkar Realtors’ high-end residential project, Omkar 1973 Worli. After an initial payment of ₹51 lakh in 2015, followed by further installments, Kushalraj Land Developers had deposited a total of ₹7.16 crores with Omkar Realtors. An allotment letter was issued in 2016, and the flat in question was assigned a possession date of December 31, 2018.
However, Omkar Realtors later advanced the possession date to the first quarter of 2017, asking the respondent to take possession and pay the remaining ₹28.87 crore within 30 days. The respondent, however, refused to comply due to financial difficulties and because it came to light that the flat had already been reserved for another individual, Nakul Arya. Consequently, Omkar Realtors canceled the booking and forfeited the amount paid by the respondent.
Issues Before the Court
Two key legal questions arose from the dispute:
Was the respondent a "consumer" under Section 2(7) of the Consumer Protection Act, 2019?
Did Omkar Realtors engage in deficiency in service or unfair trade practices by double-allotting the flat and canceling the respondent’s booking?
The Court's Findings
1. Consumer Status of the Respondent
Omkar Realtors contended that the respondent was not a "consumer" within the meaning of the Act, as it was a real estate company and had allegedly purchased the flat for commercial purposes. This argument was pivotal since only a consumer, as defined by the Act, can file a complaint before the NCDRC.
However, the Supreme Court rejected this contention. It ruled that the purchase of the flat was intended for the residential use of one of the respondent company’s directors and his family, and was not linked to any commercial purpose. Citing precedent cases such as Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers and Crompton Greaves Limited vs. Daimler Chrysler India Private Limited, the court clarified that a legal entity can be considered a consumer if the goods or services are for personal use and not for profit-making commercial activities.
2. Deficiency in Service and Unfair Trade Practice
On the second issue, the court scrutinized Omkar Realtors' actions of advancing the possession date and subsequently canceling the booking due to the respondent’s inability to arrange funds. The pivotal factor here was the double allotment of the same flat—first to Nakul Arya and then to the respondent. Although Omkar rectified this issue through a deed in 2018, the court noted that the confusion persisted during the period in question.
The court concluded that Omkar Realtors had indeed engaged in an unfair trade practice and was deficient in service. The double allotment created significant confusion for the respondent, justifying their refusal to take possession of the flat. Furthermore, the court ruled that the forfeiture of the amount deposited by the respondent was unlawful, as Omkar Realtors had acted prematurely in canceling the allotment before resolving the confusion surrounding the double allotment.
The Judgment
The Supreme Court upheld the NCDRC's order directing Omkar Realtors to refund ₹7.16 crores to the respondent along with delay compensation at 6% per annum from the respective dates of deposit until payment. If Omkar Realtors failed to comply within two months, the interest rate would escalate to 9% per annum. The court further directed Omkar Realtors to pay ₹3 crore within two weeks, with the balance to be refunded by December 31, 2024.
The court also dismissed Omkar Realtors' appeal, reaffirming the findings of the NCDRC and solidifying the principle that real estate developers cannot engage in unfair practices such as double allotment without facing legal consequences.
Conclusion
This judgment reinforces the legal protection afforded to consumers under the Consumer Protection Act, 2019. The Supreme Court’s decision emphasizes that the definition of "consumer" includes even companies or entities that purchase goods or services for personal use, not directly linked to profit-making activities. Furthermore, it underlines the responsibility of developers to act transparently and in good faith, ensuring that buyers are not misled or subjected to unfair trade practices.
For real estate developers and consumers alike, this ruling serves as a reminder of the legal safeguards in place to protect the interests of consumers and the stringent obligations on developers to deliver what is promised without engaging in malpractices.
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