Consumer Forum Orders Refund Of Sale Consideration In Favour Of Flat Buyer Due To Lack Of Building Permit

Posted On - 13 September, 2023 • By - King Stubb & Kasiva

Ernakulam District Consumer Disputes Redressal Commission bench comprising of D B Binu, Ramachandran V and Sreevidhia T N has issued a significant ruling that underscores the rights of home buyers when it comes to fair trade practices and valid building permits. This legal milestone came about when the Commission directed a construction company, Galaxy Homes Private Limited, to pay a compensation of fifty thousand rupees and refund two lakhs twenty-five thousand rupees at an interest rate of 9.5 per cent to a disgruntled flat buyer who had been adversely affected by the absence of a valid building permit.

The Commission’s decision was rooted in its determination that the construction company had engaged in both deficient service provision and unfair trade practices. The ruling expounded upon this stance, stating, “The opposing parties failed to adequately fulfill their contractual service obligations to the complainant, thus constituting a deficiency in service. This negligence and failure on their part to deliver the anticipated service has resulted in mental distress, hardship, and financial detriment to the complainant.”

The complainant, Jeko Antony, had initially entered into an agreement with Galaxy Homes Private Limited to acquire a two-bedroom apartment. To initiate the purchase, he made an advance payment of twenty-five thousand rupees, followed by a sale consideration of seven lakhs rupees. The construction company had assured Antony that all the requisite permits were in place for the construction of nine floors. However, when Antony’s loan application was rejected by a bank due to the company’s lack of permits for the eighth floor, Antony was prompted to seek a refund. The construction company refunded five lakhs rupees but withheld two lakhs twenty-five thousand rupees. Antony subsequently lodged a complaint with the District Consumer Disputes Redressal Commission, invoking Section 35 of the Consumer Protection Act, 2019, in pursuit of the remaining sum.

During the legal proceedings, Antony’s legal representative argued that the construction company had deceived Antony by falsely asserting possession of valid permits and agreements for the construction of nine floors. The representative contended that after the loan application’s rejection, the company had agreed to refund the entire amount, a promise they had failed to fulfill despite repeated requests. The construction company failed to appear in court, leading to an ex parte ruling.

In reaching its decision, the Commission referenced the Supreme Court’s judgment in Arifur Rahman Khan and Aleya Sultana & Ors. Vs. DLF Southern Homes Pvt. Ltd. (2019), which emphasized the rights of flat buyers to compensation for delayed possession and unmet amenities. This precedent-setting ruling laid the groundwork for the Commission’s stance.

The Commission’s assessment revealed that the construction company was indeed liable for deficient service and unfair trade practices. It noted that Antony had made his payments in good faith, under the assumption that the construction company possessed valid building permits. The Commission highlighted the construction company’s failure to refund the owed amount after the loan rejection, resulting in inconvenience, mental anguish, and financial setbacks for Antony.

Moreover, the Commission expressed concern over the trend of home buyers being deceived by unethical builders. It acknowledged that many buyers were unaware of their legal recourse and stressed that it could no longer stand idly by in such circumstances. The Commission emphasized, “In today’s world, home buyers are increasingly concerned about falling victim to dishonest builders… The commission cannot remain passive spectators against such builders any longer.”

Ultimately, the Commission’s verdict demanded that the construction company rectify their shortcomings by refunding the balance along with interest and compensating Antony with fifty thousand rupees for both the failure to provide services and the emotional distress caused. Additionally, a cost of ten thousand rupees was imposed for the legal proceedings.

This landmark ruling reinforces the significance of consumer protection in the real estate sector, signaling a shift toward greater accountability and transparency among builders and developers. Home buyers are now more empowered than ever to assert their rights and hold construction companies to higher standards of service and integrity.