Home-buyer Is a Consumer unless He Purchased the Flat for Selling: NCDRC
Moneylife Digital Team 08 November 2021
In a significant order, the National Consumer Disputes Redressal Commission (NCDRC) held that a home-buyer is a consumer within the meaning of Section 2 (1) (d) of the Consumer Protection Act since the developer had failed to prove that home-buyer (complainant) is indulging in the business of sale and purchase of the flats.
 
In an order issued earlier this month, the NCDRC bench of justice Deepa Sharma (presiding member) and Subhash Chandra (member) says, “... the burden is squarely upon the opposite party (IREO Pvt Ltd, High Responsible Realtors Pvt Ltd, Fiverivers Buildcon Pvt Ltd) to prove the fact that complainant is indulging in the business of sale and purchase of the flats. There is no contention in the written version that the complainant is indulging in the business of sale or purchase of the properties.  Since the opposite party has failed to discharge this burden, we hold that complainant is a consumer within the meaning of section 2 (1) (d) of the Act.”
 
The bench also directed IREO Pvt Ltd, High Responsible Realtors Pvt Ltd, Fiverivers Buildcon Pvt Ltd to refund the entire principal amount of Rs2.24 crore to complainant Aloke Anand along with compensation in the form of simple interest at the rate of 10.25% per annum (CONSUMER CASE NO. 1277 OF 2017).
 
The case related to delay in possession for a flat booked by Aloke Anand in the project ‘SKYON’ of the opposite party situated at Golf Course Extension Road at Gurugram. He made an initial payment of Rs15 lakh and was given an allotment letter on 14 January 2011 by the developer. Later on several dates, he paid Rs2,23,91,480 as the total consideration amount as per the builder-buyer agreement executed on 14 February 2012. He was also made to pay certain additional charges by the developer.
 
The due date of possession of the flat as per the agreement was 42 months, with a grace period of six months from the date of approval of the building plan. However, after not getting possession of his flat from the developer, Aloke Anand approached the NDDRC seeking possession and compensation for the delay from the developer.
 
In its contention, the developer stated that Aloke Anand, the complainant, is not a consumer since he already has two residential addresses from Delhi and Jaipur. Further, he is only an investor in the subject property and he has also invested in another developer’s project in Victory Valley and has been allotted apartment no. B-2801.
 
“It is contended that he has invested for commercial gains, i.e. either by way of income of rent and/or re-sell at an appreciated value. The reason for the delay in completing the construction is mentioned in detail in the complaint,” the developer stated.
 
Responding to this, Aloke Anand, submitted that he is not the owner of the properties mentioned by the developer in its written statement. “Rather those properties are owned by the other members of his extended family and it is submitted that he is a consumer within the meaning of Section 2 (1) (d) of the Act,” he stated.
 
He also referred to a judgement delivered by the NCDRC on 6 December 2019 against the developer. This judgement was challenged by the developer in the Supreme Court (SC). However, on 11 December 2020, the apex court dismissed the appeal. Aloke Anand submitted with the dismissal of the developer’s plea by the SC, the order issued by NCDRC has attained finality and it should pass similar order in his case too.
 
Arguing that Aloke Anand, the complainant, is not a consumer, the developer stated that he bought the flat not for residential purpose but for commercial purpose and since he is not a consumer, the complaint should be dismissed.
 
Based on admitted facts, the NCDRC bench observed that Aloke Anand had booked the flat with the developer and the developer had failed to deliver possession of the flat within the stipulated time. The bench then delved into the definition of consumer. It quoted Section 2(1) of the Act and a judgement by the SC in Laxmi Engineering Works vs PSG Industrial Institute (1995 AIR 1428) while discussing the scope of Section 2 (1) (d) of the Act.
 
The apex court, in its judgement, had stated, “The National Commission appears to have been taking a consistent view that where a person purchases goods ‘with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit’ he will not be a ‘consumer’ within the meaning of  Section 2(d)(i) of the Act. Broadly affirming the said view and more particularly with a view to obviate any confusion the expression ‘large-scale’ is not a very precise expression the Parliament stepped in and added the explanation to section 2(d)(i)  by ordinance or amendment act, 1993.”
 
“...if the buyer of goods uses them himself, i.e., by self-employment, for earning his livelihood, it would not be treated as a ‘commercial purpose’ and he does not cease to be a consumer for the purposes of the Act...a person who purchases an auto-rickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer. This is the necessary limitation flowing from the expressions ‘used by him’, and ‘by means of self-employment’ in the explanation. The ambiguity in the meaning of the words ‘for the purpose of earning his livelihood’ is explained and clarified by the other two sets of words,” the apex court had said.
 
Citing the judgement, the NCDRC bench says, “....(if a) person indulges itself in commercial activities qua the goods and in case of purchase of residential houses, it can be said that buyer is indulging into the activity of buying or selling the properties and purchased it for that purpose.”
 
However, it noted, “It is settled proposition that burden is upon the opposite party to prove that the complainant is indulging in commercial activities of sale and purchase of the flats and that he had booked the subject flat with the intention to sell it to earn profit as part of his commercial activities.”
 
“There is no contention in the written version that the complainant is indulging in the business of sale or purchase of the properties.  Since the opposite party has failed to discharge this burden, we hold that complainant is a consumer within the meaning of Section 2 (1) (d) of the Act,” it ruled.
 
The NCDRC then directed the developer to refund Rs2.24 crore with an interest of 10.25% to Aloke Anand. It also asked the developer to pay Rs25,000 as the cost of litigation to the home-buyer.
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