Consumer forum to the rescue: Beware of builders without sanctions

Collection of money from prospective buyers without obtaining permissions is unfair trade practice

Most builder do not bother about permissions. They feel that they can do whatever they want and get away with it. If problems arise later, it could be tackled either by bribing the authorities or applying for regularisation. The unaware consumer get trapped and becomes a victim as he can neither enjoy the use of the property he has purchased nor is the builder willing to refund his hard earned money. In such cases, the consumer forum can come to the aid of the aggrieved purchasers.

Kapil Properties, through its Proprietor Subhash, sold plots of land to gullible consumers for housing. He collected Rs 5 lakh to Rs 7 lakh from each customer while entering into an agreement for sale of the plots. Even though the plots were sold in the year 2008, the developer failed to execute the sale deed as he was unable to get the requisite permission from the Government of Haryana for change of land use. The developer also failed to refund the money.

The aggrieved consumers filed individual complaints before the Faridabad District Forum. The developer did not bother about the case. On the basis of the evidence produced by the consumers, the Forum proceeded ex parte and held the developer guilty of deficiency in service for selling plots without obtaining the necessary permissions. It ordered the developer to refund the amounts collected by him along with 9 per cent interest from the date of receipt, together with compensation and costs.

Kapil Properties challenged this order before the Haryana State Commission. As its appeal was dismissed, the developer approached the National Commission in revision. Kapil Properties tried to explain that the ex parte order was passed since they could not appear before the Forum as they were not served. The National Commission rejected this plea as both the Forum as well as the State Commission had recorded that the notice had been duly served. The Commission held that it was proper to proceed ex parte when a party does not appear despite service of notice.

On merits, the National Commission considered its own judgement in Kamal Sood v/s DLF Universal where it had taken a view that collection of money from prospective buyers without first obtaining the required permissions and sanctions would constitute an unfair trade practice on the part of a developer. In this case, Kapil Properties had failed to obtain the permission for change of land usage which ought to have been done prior to selling the plots. This would constitute not only a deficiency of service, but also an unfair trade practice.

Accordingly, by its order of January 31, 2017 delivered by M Shreesha, the National Commission confirmed the order holding the developer liable to refund the amounts to the consumers along with interest, compensation and costs (Kapil Properties & Anr v/s Om Prakash and other connected cases).

Beware of a builder who tries to make a sale in respect of any project without first obtaining the necessary sanctions, as he would be engaging in unfair trade practices.

The author is a consumer activist