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Ajay Nagpal v. Today Homes: More Confusion Than Clarity in the Application of the RERA?

June 3, 2019

[Vrinda Vinayak is a fifth-year student at National Law University, Delhi.]

 

Ajay Nagpal v. Today Homes is a case decided by the National Consumer Disputes Redressal Commission (NCDRC) on 17 April 2019, dealing with the long-standing tussle between the Real Estate (Regulation and Development) Act 2016 (RERA) and the Consumer Protection Act 1986 (CPA) regarding whether the former excludes the jurisdiction of the consumer forums constituted under the latter.

 

The facts were that despite the expiry of eight years from the date of payment of 92% consideration for allotment of a flat in a housing project, the developer had not handed over possession and had abandoned the construction site. The complainant sought a refund of the entire booking amount paid to the developer, with interest and compensation for delay as contractually agreed, under Section 22(b) read with 14 of the CPA. The developer contested the claim on the main ground that as per the provisions of the RERA, the complaint was not maintainable before the NCDRC since the project falls under the definition of an ‘ongoing project’ registered before the Haryana Real Estate Regulatory Authority. The crux of the argument was that the RERA excluded the jurisdiction of the consumer forums and hence, the NCDRC could not adjudicate the matter.

 

The issue stems from Section 79 of the RERA, which states that, “No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.” On one hand, the RERA has been argued to be a complete code in itself and a specific law overriding any other legislation, while on the other, the CPA has been demonstrated as providing supplemental and additional remedies, the operation of which has not been excluded by the RERA. This case intended to resolve the controversy for the benefit of homebuyers and other parties in real estate transactions by clarifying the forums empowered to adjudicate disputes.

 

Arguments of the Developer

 

The developer relied on Section 3 of the CPA, which states 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”, and argued that the jurisdiction of the consumer forums stands displaced since the RERA is a special legislation that has created a special right and independent remedy. Several provisions of the RERA were  highlighted to supplement this argument. The Statement of Objects and Reasons and the Preamble of the RERA indicate that it is envisaged to serve the need of both, industry and consumers, and that the remedy under the CPA is inadequate for real estate concerns. Sections 12 (obligations of a promoter regarding veracity of advertisement), 14 (adherence to sanctioned plans and specifications by the promoter) and 18 (return of amount of compensation) of the RERA reflect common concerns brought by persons before consumer forums. Section 19 statutorily and expressly provides rights which were only recognized in equity by the consumer forums, and the remedy sought by the complainant in this case was covered under this section. Several procedural sections establishing the adjudicatory mechanism under the RERA including enforcement and appeal were also mentioned.

 

Innovatively, the developer took recourse to Article 79 of the RERA to argue that if the bar on the jurisdiction of civil courts was taken not to apply to consumer forums, then a proceeding could be initiated before them under the CPA framework. However, the latter portion of this section bars any “court or authority” from granting an injunction in any action taken or to be taken under the powers granted by RERA. The developer interpreted this to mean that even in proceedings before the consumer forums, the authorities would be barred from granting injunctions if the same remedy is available under the RERA, rendering the consumer forums’ powers toothless. The developer also argued that allowing concurrent jurisdiction would enable allottees aggrieved from the same project to approach different forums and potentially avail different remedies against the same developer.

 

Arguments of the Complainant

 

The complainant’s argument, based on Section 3 of the CPA and relevant cases, was that the CPA provides an additional remedy for consumers that cannot be excluded either through an arbitration agreement or through another statute. Section 88 of the RERA is also similar to Section 3 of the CPA, providing that the RERA is in addition to and not in derogation of any other applicable law. A concrete manifestation of legislative intent is found in FAQ 85 on the website of the Ministry of Housing and Urban Property Alleviation, which clarifies that, “… consumer forums (National, State or District) have not been barred from the ambit of the Act”. The complainant also argued that the proviso to Section 71 of the RERA recognises the doctrine of election.

 

The complaint also argued that Section 79 of the RERA bars the jurisdiction of civil courts only and not that of consumer forums – the latter are quasi-judicial authorities established under a special legislation following a procedure difference from that of a civil court. Lastly, it was argued that the CPA recognises class actions, representative suits and suits by third parties such as governments or voluntary consumer associations which are not envisaged by the RERA and hence, these remedies must be interpreted as concurrent.

 

Holding of the NCDRC

 

The NCDRC quoted from several cases about the object of the CPA and its role as a welfare legislation to protect the interests of consumers, explaining that consumer forums are judicial authorities providing additional remedies. It reaffirmed that since the CPA provides specific remedies for consumer disputes, arbitration agreements cannot oust this jurisdiction despite the principle of party autonomy, and imported this logic to the present fact situation.

 

On the issue of whether consumer forums are ‘civil courts’ for the purposes of Section 79 of the RERA to determine if their jurisdiction is excluded, the NCDRC stated that an action before consumer forums to enforce a civil right is a civil proceeding, but since they are specialised tribunals intended to alleviate the burden on civil courts, they are not per se ‘civil courts’ even though the procedure before both may be similar. Hence, under the RERA, the jurisdiction of these specialised tribunals is not barred. The NCDRC also relied on Section 88 to reinforce that the RERA is only in addition to and not in derogation of any other law.

 

The NCDRC also accepted the complainant’s argument that Section 71 of the RERA embodies the doctrine of election. Finally, in holding that the RERA and CPA are remedies in addition to one another, the NCDRC clarified that these channels must be elected between and cannot be pursued concurrently by the same aggrieved person.

 

Analysis and Suggestions

 

The author does not agree with the holding of the NCDRC. A very important argument put forth by the developer that was not considered was that concurrent jurisdiction of RERA authorities and consumer forums would allow different allottees of the same project to approach two separate forums and receive different remedies against the same developer. The NCDRC relied on the doctrine of election to avoid a simultaneous perusal of both remedies, but this only applies to a single person and not the class of persons suffering the same grievance in relation to the same project.

 

To overcome this anomaly, the NCDRC could have interpreted ‘inconsistent’ under Section 89 as including provisions even slightly at variance with the RERA, thus interpreting the RERA as overriding the CPA. The latter law only concerns itself with deficiency in goods and services, unfair trade practices et cetera generally, while the RERA in Section 19 confers specific rights on allottees. Further, the remedy under the CPA in the present case would be an order under Section 22(b) read with Section 14(1)(c) "to return to the complainant the price, or, as the case may be, the charges paid by the complainant" while the remedy under Section 19(4) read with Section 18 of the RERA is "The allottee shall be entitled to claim the refund of amount paid along with interest at such rate as may be prescribed and compensation in the manner as provided under this Act, from the promoter, if the promoter fails to comply or is unable to give possession of the apartment, plot or building, as the case may be, in accordance with the terms of agreement for sale…". These differences could have been interpreted by the NCDRC as ‘inconsistencies’ under Section 89 of the RERA. This becomes especially relevant in light of the fact that while this section clearly outlines the RERA’s overriding effect in the face of inconsistent legislation, the CPA has no provision. If the NCDRC had harmoniously constructed the provisions of the two Acts and had applied the principle lex specialis derogat legi generali, the consequent interpretation would have been that for rights of allottees specifically mentioned under Section 19 of the RERA, this act would override the CPA in accordance with Section 89. A second option was for the NCDRC to have suggested a legislative amendment to bring this anomaly to the notice of the legislature and motivate an amendment.

 

Further, the NCDRC places a lot of importance on the CPA being a welfare legislation intended to protect the interests of the consumers, which seems unnecessarily extensive in the present matter, and there is no reference to the Statement of Objects and Reasons of the RERA which specifically includes consumer welfare. It has also relied excessively on earlier case law holding that that an arbitration agreement does not exclude remedies under the CPA. The logic behind this line of cases is that since arbitration is a matter of party agreement, a statutory right for which there is a statutory remedy cannot be excluded by such agreement. This rationale cannot be imported to exclusion of certain statutory remedies by other statutes.

 

Furthermore, the NCDRC placed a lot of emphasis on the CPA offering ‘additional’ remedies as stated in Section 3. What this translates into is that this remedy can be pursued as an option in place of another remedy for the same cause of action in another statute. However, according to the author, the analysis of the NCDRC makes it seem like the CPA is an overriding remedy which cannot be excluded under any circumstance, which runs contrary to cases such as Chairman, Thiruvalluvar v. Consumer Protection Council and General Manager, Telecom v. Krishnan which have held that the CPA remedy can be excluded through other statutes or through interpretation.

 

The author concedes that not all arguments offered by the developer were legally sound, but the NCDRC missed the opportunity to counter them. First, where the developer relied on the proviso to Section 71 to argue that it indicates exclusive jurisdiction of RERA in Section 14, 15, 18 and 19 matters, the NCDRC could have interpreted the provision literally to hold that if the intent was for the RERA to have exclusive jurisdiction over consumer disputes covered by Sections 14, 15, 18 and 19, the language of the proviso to Section 71 would have been “any person…shall…withdraw” a complaint before the consumer forums after coming into effect of the RERA, but the language clearly says “may…withdraw”, offering a choice.

 

Second, when it was argued that under Section 79, bar of jurisdiction applying to ‘civil courts’ alone would lead to anomalous results since consumer forums would be unable to pass injunctions in matters before it, the NCDRC should have resorted to literal interpretation once again. Section 79 states that “…no injunction shall be granted… in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act,” implying that only once proceedings have been initiated under RERA would other civil authorities be barred from giving injunctions in the same matter.

 

In sum, the decision of the NCDRC does not seem well reasoned and is not likely to withstand the test of time either in judicial review, or in subsequent cases.

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