NCDRC full bench judgement on Section 12 (1) (b) – Associations can file cases against developers

The NCDRC’s larger bench has delivered its judgment on the maintainability of the complaints filed by homebuyer’s associations under Section 12 (1) (b) of the Consumer Protection Act.  The bench ruled that:

A voluntary Consumer Association can file a consumer complaint on behalf of a single consumer as well as on behalf of more than one consumers, having the identical grievance(s) and seeking identical relief(s) against the same service provider(s). A Voluntary Consumer Association, for the purpose of Section 12 of the Consumer Protection Act, can be summarized as under:

(a) It should be a body formed by a group of persons, coming together of their own will and without being motivated by any financial consideration;

(b) The sole or one of the main objectives of the body so formed should be to pursue, propagate, advance, safeguard or promote the interests of the consumers in general, or a class or sub-class of the consumers as defined in Section 2(1)(d) of the Consumer Protection Act;

(c) The body qualifying the conditions (a) and (b) above should be registered under the Companies Act or under any other law for the time being in force;

(d) A Residents Welfare Association, a cooperative society or an Association of Flat / Plot Buyers or a company, if it qualifies conditions (a) to (c) above also will be a Voluntary Consumer Association, within the meaning of Section 12 of the Consumer Protection Act;

(e) If a body is formed with the objective of making financial gains, and not to serve the cause of the consumer or the society in general, it will not qualify as a Voluntary Consumer Association, within the meaning of Section 12 of the Consumer Protection Act;

(f) A Trust cannot be said to be a Voluntary Consumer Association within the meaning of Section 12 of the Consumer Protection Act.

Background

Taking the advantage of loopholes in the decade-old Consumer Protection Act, developers had been unnecessarily dragging collective cases filed by homebuyer’s associations. We have explained in great length how collective cases by associations can be effective and economical ways to fight against the developers. Developers were challenging all the orders passed by NCDRC in the Supreme Court to delay the matter further.

Noticing that the term ‘Voluntary Consumer Association’ appearing in Section-12 of the Consumer Protection Act has not been interpreted so far either by this Commission or by the Hon’ble Supreme Court, Justice Jain referred the matter to a larger Bench to interpret the said term as used in Section 12 of the Act. Section 12 (1) (b) of the act read as:

“ (b) ‘Complainant’ means – (i) a consumer; or (ii) any voluntary consumer association registered under the Companies Act, 1956 (1 of 1956) or under any other law for the time being in force; or (iii) the Central Government or any State Government; or (iv) one or more consumer, where there are numerous consumers having the same interest; (v) in case of death of a consumer, his legal heir or representative, who or which makes a complaint”.

Larger Bench’s observation of Voluntary Consumer Associations

There is no reason to exclude such an association from the purview of Section 12 of the Consumer Protection Act, provided of course, that it also qualifies as a voluntary association and is duly registered under a statute providing for such a registration. Even if two interpretations in the matter are possible, Consumer Protection Act being a welfare Legislation enacted for the advancement of rights and interests of the consumers, a liberal and wider interpretation should be preferred over a narrow and technical interpretation, so as to advance the object of the statute and serve the intended purpose.

In Lotus Panache Welfare Association Vs. M/s. Granite Gate Properties Pvt. Ltd., CC No. 120 of 2015, the complainant before this Commission was a society consisting of apartment buyers of a project namely ‘Lotus Panache’ which a developer is developing in Sector 110 of Noida. An application, seeking dismissal of the complaint was filed by the opposite party primarily on the grounds that (i) a voluntary consumer organization can only seek reliefs which are general in nature and a society which has no privity of contract with them cannot claim reliefs such as delivery of possession of the apartment and payment of compensation to the individual allottees. Noticing that the complainant was duly registered under Societies Registration Act, and holding it to be a recognized consumer association, this Commission inter-alia observed and held as under:

We are of the opinion that the complaint by a recognized consumer association, such as the complainant before us, is maintainable in respect of the reliefs sought in this complaint”. [full text is in this order or can be read here: Maintainability of complaints by Home Buyers Associations – landmark judgment by NCDRC ]

Being aggrieved by the aforesaid order, the opposite party preferred an appeal being Civil Appeal No. 8423 of 2015 before the Hon’ble Supreme Court. The said appeal, however, was dismissed vide order dated 16.10.2015. Appeals filed by Amrapali Sapphire Flat Buyers Welfare Association Vs. Amrapali Sapphire Developers Pvt. Ltd. & Anr. CC No. 816 of 2016, met a similar fate and were rejected by the SC.

The bench also held that a Trust cannot be said to be a Voluntary Consumer Association for the purpose of Section 12 of the Act. It was already detailed out in this case: NCDRC differentiate between Association registered as Society and Trust

Pecuniary Jurisdiction on flats with cost less than 1 Cr

Once it is accepted that a consumer complaint on behalf of more than then consumers can be filed by a recognized consumer association, it can hardly be disputed that it is the aggregate value of the services which has to be taken for the purpose of determining the pecuniary jurisdiction of the consumer forum before which the complaint is filed.

If the aggregate value of the services in respect of the flat buyers on whose behalf this complaint is filed is taken exceeds Rs.1 crore. Therefore, this Commission does possession the requisite jurisdiction to entertain the complaint.”

The Order

For the reasons stated hereinabove, the essential characteristics of a Voluntary Consumer Association, for the purpose of Section 12 of the Consumer Protection Act, can be summarized as under:

(a) It should be a body formed by a group of persons, coming together of their own will and without being motivated by any financial consideration;

(b) The sole or one of the main objectives of the body so formed should be to pursue, propagate, advance, safeguard or promote the interests of the consumers in general, or a class or sub-class of the consumers as defined in Section 2(1)(d) of the Consumer Protection Act;

(c) The body qualifying the conditions (a) and (b) above should be registered under the Companies Act or under any other law for the time being in force;

(d) A Residents Welfare Association, a cooperative society or an Association of Flat / Plot Buyers or a company, if it qualifies conditions (a) to (c) above also will be a Voluntary Consumer Association, within the meaning of Section 12 of the Consumer Protection Act;

(e) If a body is formed with the objective of making financial gains, and not to serve the cause of the consumer or the society in general, it will not qualify as a Voluntary Consumer Association, within the meaning of Section 12 of the Consumer Protection Act;

(f) A Trust cannot be said to be a Voluntary Consumer Association within the meaning of Section 12 of the Consumer Protection Act.

We also hold that the Voluntary Consumer Association can file a consumer complaint on behalf of a single consumer as well as on behalf of more than one consumers, having an identical grievance(s) and seeking identical relief(s) against the same service provider(s).

Order Copy: NCDRC Larger Bench Judgement on 12 1 B

Conclusion

The NCDRC has finally cleared the air on the much-disputed matter. Associations across the country were waiting for this judgment. While we welcome the judgment of larger bench, is it time for the government to revise the decades-old Consumer Protection Act as per the current market scenarios.

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