Consumer protection: Flat sale to third party illegal if agreement valid

The State Commission found that termination of the agreement through a lawyer's notice was illegal; a registered agreement can only be annulled through another registered document

Subhash Ramjag Chourasiya booked a flat with Sai Krupa Builders. The agreement to sell was registered on August 2, 2007. According to the agreement, the total consideration payable was Rs 7,50,000. The date of possession was left blank, but Chourasiya stated that he was told the flat would be ready within 18 months, with a further grace period of three months.

 

Chourasiya claimed he paid Rs 6 lakh through cheques and Rs 45,000 in cash. The builder admitted receiving the cheque payments but denied receiving any cash payment. The balance amount was payable at the time of possession.

 

The assured date of delivery, including the grace period, expired in December 2009, but the flat was not ready. However, the builder made an illegal demand for the balance amount, even though the flat was not ready for possession, so Chourasiya refused to pay. The builder sent a legal notice dated April 8, 2010, through its lawyers, intimating Chourasiya that the agreement was being terminated due to his failure to make the payment. The builder then sold the flat to Subhash Tilakdhari Pathak on April 12, 2011, by executing another agreement, which was registered in January 2012.

 

Chourasiya filed a complaint before the Thane District Forum on April 21, 2011, unaware that the flat had already been sold to a third party. He pointed out that due to the delay in delivery, he had to hire accommodation on a Leave and Licence basis and claimed reimbursement of the amount he had incurred for rental accommodation. He also sought a direction to the builder to either give him possession of the flat or provide permanent alternative accommodation. Additionally, he applied for an injunction restraining the builder from creating a third-party interest in the flat. This complaint was withdrawn as it was beyond the Forum’s pecuniary jurisdiction and was subsequently filed before the Maharashtra State Commission.

 

The builder contested the case, arguing that the complaint was barred by limitation. Chourasiya’s advocate, Mohit Bhansali, countered that the law was well settled — since possession of the flat was not given, alternative premises were not offered, and the money was not refunded, the cause of action would continue.

 

The law also stipulated that in the absence of an Occupancy Certificate, the cause of action would persist.

 

On merits, it was observed that the builder had not legally terminated the agreement. Instead, the termination was communicated through a lawyer’s notice, which was deemed illegal and improper. It was further observed that the annulment of a registered document must be executed through another registered document, which had not been done. Therefore, the termination of the agreement was illegal. As a result, the agreement between the builder and Chourasiya remained valid and had not been dissolved.

 

The State Commission agreed with Bhansali’s arguments and concluded that the sale of the flat to a third party was illegal and constituted an unfair trade practice. It directed that Chourasiya be given possession of the flat and awarded 9 per cent interest for delay in possession. Additionally,  compensation of Rs 5 lakh and litigation cost of Rs 50,000 was awarded.

 

The builder challenged the order by filing an appeal before the National Commission. The builder’s offer to refund the money was rejected, as the price of real estate had increased over the years, making it impossible to purchase another similar flat in the vicinity. In its order dated October 3, 2024, delivered by Inder Jit Singh, the National Commission dismissed the builder’s appeal and confirmed the order in Chourasiya’s favour.

 

The writer is a consumer activist