Supreme Court clarifies powers of National Commission on pre-deposit for appeals under Consumer Protection Act: Manohar Infrastructure vs. Sanjeev Kumar (2021) INSC 714 (7 December 2021)

Date of the Judgment: 7 December 2021

Citation: (2021) INSC 714

Judges: M.R. Shah, J. and B.V. Nagarathna, J.

Can the National Consumer Disputes Redressal Commission (NCDRC) mandate a deposit of the entire decretal amount, or an amount exceeding 50%, as a condition for staying an order of the State Commission? The Supreme Court of India addressed this critical question in a batch of appeals concerning the interpretation of Section 51 of the Consumer Protection Act, 2019. The core issue revolved around the extent of the NCDRC’s powers to impose deposit conditions while considering stay applications in consumer disputes. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice B.V. Nagarathna, with Justice M.R. Shah authoring the opinion.

Case Background

Several appeals were filed before the National Consumer Disputes Redressal Commission (NCDRC) by builders, M/s. Manohar Infrastructure and Constructions Private Limited and M/s. TDI Infrastructure Ltd., against orders passed by various State Consumer Disputes Redressal Commissions. These State Commissions had directed the builders to refund amounts to home buyers with interest. The builders, as appellants, sought a stay on these orders from the NCDRC. The NCDRC, while granting a stay, directed the builders to deposit the entire decretal amount with interest. This led to the builders filing appeals before the Supreme Court, challenging the NCDRC’s order to deposit the entire amount.

Timeline

Course of Proceedings

The State Consumer Disputes Redressal Commissions ordered the builders to refund amounts to home buyers with interest. The builders then appealed to the National Consumer Disputes Redressal Commission (NCDRC) under Section 51 of the Consumer Protection Act, 2019. The NCDRC initially stayed the State Commissions’ orders on the condition that the builders deposit the entire decretal amount with interest. The builders then filed applications to modify this condition, which the NCDRC rejected. The builders then approached the Supreme Court, challenging the NCDRC’s order to deposit the entire amount, arguing that it exceeded the statutory requirement of 50% under Section 51 of the Consumer Protection Act, 2019.

Legal Framework

The core legal provision under consideration was Section 51 of the Consumer Protection Act, 2019, which governs appeals to the National Commission. Specifically, the second proviso of Section 51 states:

“Provided further that no appeal by a person, who is required to pay any amount in terms of an order of the State Commission, shall be entertained by the National Commission unless the appellant has deposited fifty per cent of that amount in the manner as may be prescribed.”

This provision mandates a pre-deposit of 50% of the amount ordered by the State Commission before an appeal can be entertained by the National Commission. The Supreme Court had to interpret whether this provision limits the National Commission’s power to order a higher deposit while granting a stay on the State Commission’s order.

Arguments

Arguments by the Appellants (Builders):

• The appellants argued that the National Commission cannot order a deposit exceeding 50% of the decretal amount, relying on the second proviso to Section 51 of the Consumer Protection Act, 2019. They contended that the statutory intent limits the deposit requirement to a maximum of 50%.
• They further submitted that the power to grant a stay is similar to the power of a Civil Court under Order XLI Rule 5 of the Civil Procedure Code, 1908, requiring a speaking order with reasons if the National Commission intends to order a deposit higher than 50%.
• The appellants argued that directing the deposit of the entire decretal amount is unreasonable and infringes on their right to appeal.

Arguments by the Respondents (Home Buyers):

• The respondents argued that the builders did not challenge the original order of the National Commission dated 04.02.2021, which mandated the deposit of the entire amount as a condition for stay. They also argued that the dismissal of the waiver application on 23.03.2021 was not challenged.
• They contended that the State Commission’s order was akin to a money decree, justifying the National Commission’s direction to deposit the entire amount. They emphasized that the amount to be refunded was the home buyers’ own money.
• The respondents cited the Supreme Court’s decision in Shreenath Corporation and Ors. Vs. Consumer Education and Research Society and Ors., (2014) 8 SCC 657, arguing that the pre-deposit condition has no nexus with the grant of an interim stay. They argued that the National Commission could order the deposit of the entire amount.
• They argued that the 50% deposit was only a pre-condition to entertain the appeal and not a limit on the amount to be deposited for a stay.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether in an appeal under Section 51 of the Consumer Protection Act, 2019, and while considering the stay application to stay the order passed by the State Commission, the National Commission can pass an order to deposit the entire amount and/or any amount higher than 50 per cent of the amount in terms of the order of the State Commission while entertaining the appeal under Section 51 of the Act, 2019?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Section 51 of the Consumer Protection Act, 2019, and the precedent set by Shreenath Corporation and Ors. Vs. Consumer Education and Research Society and Ors., (2014) 8 SCC 657. The Court emphasized that the pre-deposit of 50% is a condition for the appeal to be entertained, but it does not restrict the National Commission’s power to impose additional conditions for granting a stay. The Court also considered the nature of the State Commission’s orders, which were akin to money decrees, and the need to protect the interests of the home buyers. The Court also emphasized the need for the National Commission to provide reasons for ordering a full deposit.

Logical Reasoning

Judgment

The Supreme Court held that while a 50% pre-deposit is mandatory for entertaining an appeal by the National Commission, it does not limit the Commission’s power to order a higher deposit while considering a stay application. The Court emphasized that the National Commission must provide cogent reasons and pass a speaking order if it requires a deposit of the entire amount or an amount exceeding 50%. The Court stated that the National Commission’s order should reflect an application of mind as to why a conditional stay is being granted on such a high deposit. The Court remanded the cases back to the National Commission for fresh consideration of the stay applications.

“…the National Commission has to assign some cogent reasons and/or pass a speaking order when the conditional stay of the order passed by the State Commission is passed subject to deposit of the entire amount and/or any amount higher than 50 per cent of the amount either as an ex parte order or after hearing both sides and considering the facts and circumstances of the case.”

“…the object of the said pre-deposit condition is to avoid frivolous appeals.”

“…the said pre-deposit condition has no nexus with the grant of stay by the National Commission.”

The Court clarified that there is no discretion to stay the order passed by the State Commission subject to deposit of any amount less than 50 per cent of the amount, which is required to be deposited as a pre-deposit before the appeal is entertained as per second proviso to Section 51 of the Act, 2019.

Key Takeaways

• The National Commission can order a deposit exceeding 50% of the decretal amount while granting a stay on a State Commission’s order.
• The 50% pre-deposit is mandatory for the appeal to be entertained but does not limit the National Commission’s power to order a higher deposit for a stay.
• The National Commission must pass a speaking order with cogent reasons when ordering a full or higher deposit.
• The National Commission must reflect an application of mind as to why a conditional stay is being granted on deposit of the entire amount.
• Orders of the State Commission directing refunds are considered akin to money decrees.

Directions

The Supreme Court remanded the cases back to the National Commission to decide the stay applications afresh and pass appropriate orders in light of the observations made in the judgment. The National Commission was directed to pass speaking orders, providing reasons for the deposit conditions imposed. The respondents were directed not to take any coercive steps against the appellants until the National Commission reconsiders the applications.

Development of Law

The ratio decidendi of this case is that the National Commission has the power to order a deposit exceeding 50% of the decretal amount while granting a stay on a State Commission’s order, but it must provide cogent reasons for doing so. This clarifies the scope of Section 51 of the Consumer Protection Act, 2019, and reinforces the principle that pre-deposit requirements do not limit the power to impose conditions for a stay. The judgment also affirms the precedent set by Shreenath Corporation and Ors. Vs. Consumer Education and Research Society and Ors., (2014) 8 SCC 657, in interpreting the pre-deposit provisions of the Consumer Protection Act.

Conclusion

The Supreme Court’s judgment clarifies that the National Consumer Disputes Redressal Commission (NCDRC) has the authority to order deposits exceeding 50% of the decretal amount when granting a stay on orders from State Commissions. However, this power must be exercised judiciously, with the NCDRC providing clear reasons for imposing such conditions. This ruling ensures that while frivolous appeals are discouraged, the right to appeal is not unduly hampered.