Supreme Court settles the interplay between Consumer Protection Act and RERA Act in favor of Homebuyers: Imperia Structures Ltd. vs. Anil Patni (2 November 2020)

Date of the Judgment: 2 November 2020

Citation: (2020) INSC 778

Judges: Uday Umesh Lalit, J. and Vineet Saran, J.

Can a homebuyer seek a refund from a builder under the Consumer Protection Act (CPA) even if the project is registered under the Real Estate (Regulation and Development) Act (RERA)? The Supreme Court of India addressed this crucial question in a case involving M/s Imperia Structures Ltd. and several homebuyers. The court clarified that the remedies available under the CPA are additional and not in derogation of those under the RERA Act, thereby protecting homebuyers’ rights.

Case Background

In 2011, M/s Imperia Structures Ltd. launched a housing project named “The ESFERA” in Gurgaon, Haryana. The original complainants booked their respective apartments and entered into Builder Buyer Agreements with the Appellant. The Respondents in the lead appeal booked Apartment No. 1803 on the 18th Floor of Tower No. “C”. The basic price was Rs.56,01,750/-, with additional charges bringing the aggregate price to Rs.76,43,000/-. The agreement stipulated that the developer would complete the construction within three years from the date of execution of the agreement, with some extended periods permitted under the agreement.

Clause 11.4 of the agreement stated that if the developer abandoned the scheme or failed to give possession within three years, the developer’s liability would be limited to refunding the amount with 9% interest. However, the developer could also choose not to terminate the agreement and pay compensation of Rs. 5/- per sq. ft. per month for the delay beyond three and a half years. The agreement also included a force majeure clause (Clause 41) which excused the developer from liability for delays caused by events beyond their control.

Over time, the Respondents paid Rs. 63,53,625/- out of the total agreed amount. However, the project showed no signs of completion even after four years. This led the Respondents to file Consumer Case No. 3011 of 2017 before the National Consumer Disputes Redressal Commission (NCDRC) on 11.10.2017, alleging deficiency in service and unfair trade practices by the Appellant.

Timeline

Legal Framework

The Supreme Court examined the interplay between the Consumer Protection Act, 1986 (CP Act) and the Real Estate (Regulation and Development) Act, 2016 (RERA Act). The CP Act was enacted to provide better protection for consumers, with Section 3 stating that its provisions are in addition to, and not in derogation of, other laws. Section 12(4) of the CP Act specifies that once a complaint is admitted by the District Forum, it shall not be transferred to any other court or tribunal. Section 24 of the CP Act states that the orders of the District Forum, State Commission, or National Commission are final if no appeal is preferred.

The RERA Act, on the other hand, was enacted to regulate and promote the real estate sector. Key provisions include:

• Section 3: Requires prior registration of real estate projects with the Real Estate Regulatory Authority.
• Section 4: Specifies the process for application for registration of real estate projects.
• Section 5: Deals with the grant of registration.
• Section 18: Provides for the return of amount and compensation to allottees if the promoter fails to complete or give possession of the apartment. It states that this remedy is without prejudice to any other remedy available.
• Section 19: Outlines the rights and duties of allottees.
• Section 71: Empowers the Authority to adjudicate compensation.
• Section 79: Bars the jurisdiction of civil courts in matters that the Authority or adjudicating officer is empowered to determine.
• Section 88: States that the provisions of the RERA Act are in addition to, and not in derogation of, other laws.
• Section 89: States that the provisions of the RERA Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

The Court also noted the Consumer Protection Act, 2019, which was enacted to further protect consumer interests. Section 100 of the 2019 Act is similar to Section 3 of the CP Act, stating that its provisions are in addition to, and not in derogation of, other laws. Section 107 of the 2019 Act repeals the 1986 Act but saves all actions taken under the repealed Act.

Arguments

Appellant’s (M/s Imperia Structures Ltd.) Submissions:

• The Appellant argued that they had completed Phase-I of the Project on time, and Phase-II, which involved 437 allottees, was the matter in issue. They stated that only 59 of these allottees filed complaints under the CP Act, indicating that the majority of allottees still trusted the Appellant.
• The Appellant contended that they had offered alternative accommodation to all the allottees, but the offer was rejected, suggesting that the apartments were booked for investment purposes, not for self-use.
• The Appellant argued that the Complainants were not “Consumers” within the meaning of the CP Act, as the apartments were booked for profit.
• It was further argued that once the RERA Act came into force, all issues concerning the Project, including construction and completion, fell under the exclusive jurisdiction of the RERA authorities. Therefore, the NCDRC should not have entertained the consumer cases.
• The Appellant submitted that the registration certificate under RERA was valid till 31.12.2020, implying that there was no delay in construction and, consequently, no deficiency in service.
• The Appellant referred to an order in the case of Himanshu Giri, where the Haryana Authority directed payment of interest at 10.75% per annum without ordering a refund. They argued that this approach was more conducive to completing the project and balancing the interests of the allottees.
• The Appellant proposed that the NCDRC orders be set aside, and instead, the Complainants be granted interest at 10.75% per annum on the amounts deposited. This would allow the project to be completed without financial strain, while still providing a return on investment to the allottees.
• The Appellant also argued that the delay was due to force majeure events, such as demonetization, which caused a shortage of cash, affecting the construction process.

Respondents’ (Homebuyers) Submissions:

• The Respondents argued that they had each purchased only one residential apartment for self-use and had taken home loans, except for one complainant who used his retirement dues. Therefore, they were rightly considered “Consumers” under the CP Act.
• The Respondents contended that the delay was not due to force majeure events and that no reasonable explanation was provided to justify the delay.
• They argued that the NCDRC was justified in accepting their claims and that the award of interest at 9% per annum was actually on the lower side.
• The Respondents pointed out that the Appellant never raised the issue of RERA registration or its effect before the NCDRC or in the appeal memo. Therefore, the Appellant should not be allowed to raise this issue now.
• The Respondents argued that the remedy under the CP Act is an additional remedy, as consistently held by the Supreme Court, and that this legal position remains unchanged even after the enactment of the RERA Act.

Submissions Table:

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the complainants were “Consumers” within the meaning of the Consumer Protection Act, 1986?
2. Whether there was a delay on part of the Appellant in completing the construction within time?
3. Whether the remedies available to the consumers under the provisions of the CP Act would be additional remedies?
4. Whether the provisions of the RERA Act bar consideration of the grievance of an allottee by other fora?
5. What is the effect of the registration of the Project under the RERA Act?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court relied on the following authorities:

Cases:

• Secretary, Thirumurugan Cooperative Agricultural Credit Society vs. M. Lalitha (dead) through LRs. and others [(2004) 1 SCC 305] – The Supreme Court held that the provisions of the CP Act are in addition to and not in derogation of the provisions of any other law.
• National Seeds Corporation Limited vs. M. Madhusudhan Reddy and another [(2012) 2 SCC 506] – The Court observed that the CP Act provides remedies to farmers who are consumers of seeds.
• Virender Jain vs. Alaknanda Cooperative Group Housing Society Limited and others [(2013) 9 SCC 383] – The Court held that the remedy under the CP Act is in addition to remedies available under other statutes.
• Emaar MGF Ltd and anr. Vs. Aftab Singh [(2019) 12 SCC 751] – The Court held that a consumer can still choose to proceed under the CP Act even if the agreement provides for arbitration.
• Malay Kumar Ganguli vs. Dr. Sukumar Mukherjee [(2009) 9 SCC 221] – The Court held that the proceedings before the National Commission are judicial proceedings but not a civil court.
• Pioneer Urban Land and Infrastructure Limited and another vs. Union of India and another [(2019) 8 SCC 416] – The Court held that remedies under the CP Act, RERA, and the Insolvency and Bankruptcy Code are concurrent.

Legal Provisions:

• Consumer Protection Act, 1986:
  • Section 3: States that the provisions of the Act are in addition to and not in derogation of any other law.
  • Section 12(4): Specifies that a complaint admitted by the District Forum shall not be transferred to any other court or tribunal.
  • Section 24: States that the orders of the District Forum, State Commission, or National Commission are final if no appeal is preferred.
• Real Estate (Regulation and Development) Act, 2016:
  • Section 18: Provides for the return of amount and compensation to allottees if the promoter fails to complete or give possession of the apartment.
  • Section 79: Bars the jurisdiction of civil courts in matters that the Authority or adjudicating officer is empowered to determine.
  • Section 88: States that the provisions of the RERA Act are in addition to, and not in derogation of, other laws.
  • Section 89: States that the provisions of the RERA Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
  • Section 71(1): Empowers the Authority to adjudicate compensation.
• Consumer Protection Act, 2019:
  • Section 100: States that the provisions of the Act are in addition to and not in derogation of any other law.
  • Section 107: Repeals the 1986 Act but saves all actions taken under the repealed Act.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court followed the precedent set in Secretary, Thirumurugan Cooperative Agricultural Credit Society vs. M. Lalitha [(2004) 1 SCC 305]* to state that the provisions of the CP Act are in addition to and not in derogation of the provisions of any other law.
• The Supreme Court followed the precedent set in National Seeds Corporation Limited vs. M. Madhusudhan Reddy [(2012) 2 SCC 506]* to state that the provisions of the Consumer Protection Act are available to the farmers who are otherwise covered by the wide definition of “consumer” under Section 2(1)(d) of the Consumer Protection Act.
• The Supreme Court followed the precedent set in Virender Jain vs. Alaknanda Cooperative Group Housing Society Limited [(2013) 9 SCC 383]* to reiterate that the remedy under the Act is in addition to the remedies available under other statutes and the availability of alternative remedies is not a bar to the entertaining of a complaint filed under the Act.
• The Supreme Court followed the precedent set in Emaar MGF Ltd and anr. Vs. Aftab Singh [(2019) 12 SCC 751]* to state that even if the agreement provides for arbitration, a consumer can still choose to proceed under the CP Act.
• The Supreme Court followed the precedent set in Malay Kumar Ganguli vs. Dr. Sukumar Mukherjee [(2009) 9 SCC 221]* to state that the proceedings before the National Commission are judicial proceedings but not a civil court.
• The Supreme Court followed the precedent set in Pioneer Urban Land and Infrastructure Limited and another vs. Union of India and another [(2019) 8 SCC 416]* to state that remedies under the CP Act, RERA, and the Insolvency and Bankruptcy Code are concurrent.
• The Supreme Court interpreted the Section 79 of the RERA Act to state that it does not bar the jurisdiction of the Commission or Forum under the CP Act, as they are not civil courts.
• The Supreme Court interpreted the Section 89 of the RERA Act to state that the provisions of the RERA Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
• The Supreme Court followed the Section 3 of the Consumer Protection Act, 1986 to interpret that the provisions of the Act shall be in addition to and not in derogation of any other provisions of any other law for the time being in force.
• The Supreme Court followed the Section 12(4) of the Consumer Protection Act, 1986 to state that where a complaint has been admitted by the District Forum, it shall not be transferred to any other court or tribunal or any authority set up by or under any other law for the time being in force.
• The Supreme Court followed the Section 24 of the Consumer Protection Act, 1986 to state that every order of a District Forum, the State Commission or the National Commission shall, if no appeal has been preferred against such order under the provisions of this Act, be final.
• The Supreme Court followed the Section 18 of the Real Estate (Regulation and Development) Act, 2016 to state that if a promoter fails to complete or is unable to give possession of an apartment, plot or building, he shall be liable on demand to the allottees to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act.
• The Supreme Court followed the Section 88 of the Real Estate (Regulation and Development) Act, 2016 to state that the provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.
• The Supreme Court followed the Section 100 of the Consumer Protection Act, 2019 to state that the provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.
• The Supreme Court followed the Section 107 of the Consumer Protection Act, 2019 to state that notwithstanding such repeal, anything done or any action taken or purported to have been done or taken under the Act hereby repealed shall, in so far as it Is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to protect consumer rights and ensure that remedies available under the CP Act remain accessible to homebuyers, despite the enactment of the RERA Act. The Courtemphasized that the CP Act provides additional remedies and does not bar consumers from seeking redressal under its provisions. The following factors weighed significantly in the Court’s reasoning:

• Protection of Consumer Interests: The Court prioritized the protection of homebuyers’ interests, recognizing that they are often in a weaker position compared to developers.
• Additional Remedies under CP Act: The Court repeatedly emphasized that the remedies available under the CP Act are additional and not in derogation of other laws, including the RERA Act. This is evident from the interpretation of Section 3 of the CP Act and Section 100 of the CP Act, 2019.
• No Bar on Jurisdiction: The Court clarified that Section 79 of the RERA Act does not bar the jurisdiction of the Consumer Forums under the CP Act, as they are not civil courts.
• Delay and Deficiency in Service: The Court found that there was a clear delay in construction and a deficiency in service by the developer, which justified the NCDRC’s order for a refund with interest.
• Rejection of Force Majeure: The Court rejected the developer’s claim that the delay was due to force majeure events, such as demonetization, finding it to be an insufficient explanation.
• Concurrent Remedies: The Court reiterated that remedies under the CP Act, RERA, and other statutes are concurrent, allowing consumers to choose the forum that best suits their needs.
• No Effect of RERA Registration: The Court held that the registration of the project under the RERA Act does not defer the allottees’ entitlement to maintain an action based on the terms of the Builder Buyer Agreements.

Final Order

The Supreme Court dismissed the appeals filed by M/s Imperia Structures Ltd. and upheld the order of the National Consumer Disputes Redressal Commission (NCDRC). The Court directed the Appellant to comply with the NCDRC’s order to refund the amounts paid by the homebuyers, along with interest at the rate of 9% per annum. This decision affirmed the rights of homebuyers to seek remedies under the Consumer Protection Act, even if the project is registered under the Real Estate (Regulation and Development) Act.

Key Takeaways

The Supreme Court’s judgment in Imperia Structures Ltd. vs. Anil Patni is a landmark decision that clarifies the interplay between the Consumer Protection Act, 1986, and the Real Estate (Regulation and Development) Act, 2016. The key takeaways from this case are:

• Consumer Protection Act is Paramount: The Consumer Protection Act provides an additional remedy to homebuyers, and its provisions are not in derogation of other laws, including the RERA Act.
• Jurisdiction of Consumer Forums: Consumer Forums under the CP Act have the jurisdiction to hear complaints from homebuyers, even if the project is registered under the RERA Act.
• RERA Registration Does Not Bar Consumer Rights: Registration of a project under the RERA Act does not bar homebuyers from seeking remedies under the CP Act.
• Concurrent Remedies: Homebuyers can choose to pursue remedies under the CP Act, RERA, or other applicable laws concurrently.
• Protection of Homebuyers: The judgment underscores the importance of protecting the rights of homebuyers and ensuring that they have access to effective remedies against unfair practices by developers.
• No Force Majeure Excuse: Developers cannot use force majeure clauses as an excuse for delays without providing adequate justification.
• Importance of Timely Completion: Developers are obligated to complete projects within the agreed timelines and provide possession of the apartments to the homebuyers.

Flowchart of Remedies

Ratio of the Case

The ratio of the judgment can be summarized as follows: