Who is a Consumer? Parallel Proceedings under RERA and CPA

[Varda Saxena is a 3rd year B.A., LL.B. (Hons.) student at Jindal Global Law School in Sonipat]

Section 2(7) of the Consumer Protection Act, 2019 (“CPA“) mandates that a person who obtains goods for commercial purposes is not a consumer. This means that a person who obtains goods for reasons other than the sustenance of their livelihood or for reasons other than self-use is not considered a consumer within the meaning of this Act. Also, an allottee has been defined under section 2(d) of the Real Estate Regulations Act, 2016 (“RERA“) as someone to whom the promoter (builder or seller) transfers any flat, building or other real estate within the meaning of RERA. The preamble to RERA explicitly states that the statute has been specially created for consumers in the domain of real estate for the speedy redressal of complaints by such consumers (allottees). These allottees are entitled to compensation under section 18 of RERA due to delay in obtaining possession of the property in question, alongside other remedies mentioned in the Act.

Recently, the Supreme Court of India in Imperia Structures Ltd. v Anil Patni passed a judgment stating that allottees under RERA can be incorporated under the ambit of “consumers” mentioned within the CPA. Further, the Court observed that the consumer forums cannot be construed as “civil courts: under section 79 of RERA. This post intends to explore the misdirected approach of the Supreme Court while considering the inclusion of “other remedies” under section 18 of RERA. The author intends to highlight that allottees cannot be construed as “consumers” under section 2(7) of the CPA. It is further argued that consumer courts are essentially civil courts. Consequently, consumer courts do not have jurisdiction to provide redressal in complaints falling within the ambit of RERA. Hence, the inclusion of allottees within the category of consumers is not a legally sound remedy. 

Background of the Case

A housing scheme called ESFERA was launched by Imperia Structures Ltd, wherein Mr. Anil Patni and other allottees bought flats for commercial purposes. Hence, it was argued that the case could not fall within the category of a consumer dispute in accordance with section 2(d) of the CPA. When goods are purchased for the purpose of reselling or commercially exploiting them to gain extra profit, such buyer or user is not a consumer under the Act.

Due to the demonetisation exercise initiated by the Government, which was recognised as a force majeure event, the project incurred heavy losses and a shortage of labour. Subsequently, the possession of the flats was not handed over even after four years of execution of the Builder-Buyer Agreement. Imperia Structures offered separate residence to the allottees, which they refused due to the commercial nature of the sale and filed a representation in the Consumer Forum. Thereafter, the National Consumer Disputes Redressal Commission (“Commission”) ordered Imperia Structures to pay a refund with interest at the rate of 9% per annum according to the dates of deposits. Imperia Structure had registered their project under the RERA authority. It challenged the adjudication of the Consumer Forum based on the exclusion of allottees from the definition of consumers, which excludes sales for commercial purposes. 

Court’s Ruling

The Supreme Court ruled that the allottees will be considered consumers within the CPA, as section 18 of RERA does not bar the existence of other remedies. Further, the Court stated that section 71(1) of RERA only talks about the withdrawal of proceedings before legislation came into existence, and excludes those filed after the statute was enacted. The Court further went on to rely on the judgment in Secretary, Thirumurugan Cooperative Agricultural Credit Society v M. Lalitha (dead) through LRs, and stated that the provisions of the CPA could be considered “additional remedies” within the meaning of section 18 of RERA. Additionally, the Court relied on Malay Kumar Ganguli v Dr Sukumar Mukherjee and reiterated that National Commissions could not be construed as civil courts within the meaning of this CPA.

The Court went on to rely on Pioneer Urban Land and Infrastructure Limited v Union of India while specifying that the provisions of the Insolvency and Bankruptcy Code, RERA and the CPA should be construed harmoniously and the remedies should be available to all aggrieved allottees. 

Analysis

Although the Supreme Court referred to its judgment in Pioneer Urban Land, it failed to distinguish the fact that the allottees in that case were not transacting for commercial purposes. The present judgment clearly mentions that the allottees were offered alternate accommodation in “Takshila Heights, Gurgaon”. The developers also offered to pay the rent for such alternative accommodation; however, it was refused by the allottees, which indicated that the apartments were booked for personal profit only. Hence, the equation of an aggrieved consumer with a commercial buyer within the meaning of section 2(7) of the CPA is incoherent. Further, the case of Smt. Pushpa Meena v. Shah Enterprises (Rajasthan) Ltd. (1990 Raj LT 59) also reiterates the same position while specifying that a car bought for imparting taxi services inhibits the buyer from being called a “consumer”. Hence, as the facts state that the allottees bought the flats for the purpose of raising rent, they can only be classified as allottees. 

The proviso to Section 71(1) of RERA entitles a complainant who had filed an appeal under the CPA before RERA came into force to withdraw their complaint and file a representation before the relevant RERA authority. While stating that its applicability is restricted to projects promulgated before RERA came into force, the Court not only failed to take the proviso to section 71 (1) into account, but it also failed to acknowledge the retrospective and retroactive nature of the legislation as stated in the case of Neelkamal Realtors Suburban Pvt. v. Union of India.  The judgment in this case clearly states the demerits of approaching different forums even when the remedy under RERA exists. The Court mentions that RERA was enacted so that complaints of allottees could be filed before a single tribunal to ease, simplify and expedite the process of seeking redressal. Hence, RERA should be upheld as the appropriate authority for adjudicating all real estate disputes instead of indulging in forum shopping by involving Consumer Forums. The judgment highlighted that the importance of distributing the jurisdiction and limiting RERA complaints to RERA tribunals was to organise the judicial system and provide speedy redressal. However, including allottees within the ambit of consumers negates the possibility of speedy redressal, making the process tedious for both promoters and allottees. 

Further, the Supreme Court held that the bar under section 79 of RERA states that civil courts cannot adjudicate on matters governed by RERA and, as Consumer Forums do not fall under the umbrella of civil courts, this section will not apply to proceedings initiated under the CPA, even if the subject matter relates to RERA. However, one needs to keep the case of Ethiopian Airlines vs Ganesh Narain Saboo in purview while taking a stance on this matter. The Supreme Court, in this case, specified how the term “suit” should be understood in its ordinary dictionary meaning, which includes all proceedings initiated for the realisation of a right provided by the law. The Court highlighted that the proceedings under Consumer Forums are summary proceedings that are referred to civil courts when complex contentions arise. 

Further, the judgment in Imperia Structures is silent on the fact that a complaint and a suit is one and the same, and the proceedings before a Consumer Court are in the nature of a suit. Hence, section 86 of the Civil Procedure Code (“CPC”) should ideally be applicable. Additionally, the judgments in Economic Transport Organisation, Delhi v. Charan Spinning Mills Private Limited and Patel Roadways Limited v. Birla Yamaha Limited have also concurred with the opinion that Consumer Forum proceedings are “suits” within the meaning of the CPC. 

Even in Kesoram Industries Ltd. v. Allahabad Bank, the Calcutta High Court specifically highlighted that Consumer Forums and Commissions are “courts” in terms of section 11 of the CPC. The judgment has also reiterated the precedent laid down in Harinagar Sugar Mills Limited v. Shyam Sundar Jhunjhunwala while stating that “court means court of Civil judicature and tribunals which decide controversies arising under certain special laws.” Further, in Ethiopian Airlines v Ganesh Narain Saboo, the Supreme Court stated: “The Consumer Protection Act clearly enumerates those provisions of the CPC that are applicable to proceedings before the consumer fora. Such provisions include 13(4), in which the Consumer Protection Act, 1986 vests those powers vested in a civil court under the CPC to the District Forum.” Therefore, it can logically be argued that the bar specified under section 79 of RERA should be applicable to the proceedings initiated under the CPA. Such proceedings will be considered civil proceedings under the said section. Additionally, it has been argued elsewhere that District Forums and Commissions ought to adopt and establish principles of the CPC to do complete justice as and when it is needed. 

It is notice-worthy that RERA entails special qualifications and thresholds for the appointment of chairpersons and the members of the Authority under section 22 and for the Appellant Tribunal under section 46 of the legislation. Hence, the institution of parallel proceedings before both tribunals will increase the financial drain of the promoter. Hence, provisions of RERA, including section 79 thereof, further the aim behind the creation of the legislation by restricting the adjudication of real estate disputes. The Supreme Court does not address this issue and instead states that the allottees can still go under section 18 of RERA while referring to “other remedies”. The judgment reflects an over-assumption while referring to section 100 of the CPA and stating that the section legitimises the initiation of RERA proceedings in Consumer Forums, as the CPA was passed after RERA. 

Lastly, the Supreme Court held in Global Energy Ltd. v. Central Electricity Regulatory Commission that the qualifications mentioned in statutes for specific judicial processes are important because they promote accountability and letting multiple agencies or fora do the same work acts against such accountability. Therefore, labelling allottees as “consumers” and divulging discretion to Consumer Forums and Commissions in respect of commercial real estate matters would abrogate the accountability of tribunals while assessing the cases. 

Conclusion

The present judgment reflects no distinction between commercial real estate transactions and those of personal nature. This distortion in the definition of consumers may benefit non-commercial allottees; however, it parallelly creates financial constraints on promoters or builders in states of duress. The judgment separates the Consumer Forums and Commissions from the umbrella of civil courts, without coherently ascribing the intent of both these legislation. Simultaneous litigation emanating due to this precedent will work against the speedy redressal of complaints filed in both these fora and will work against the aim of reducing the burden of the judiciary. 

– Varda Saxena

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