NCDRC: Condemns Multiple Compensations for Single Default

June 15, 2024

The National Consumer Disputes Redressal Commission, headed by Subhash Chandra with
Sadhna Shanker as a member, recently ruled against M/S. Exact Developers & Promoters for
deficiency in service. However, they overturned the state commission’s decision to grant
compensation for mental agony, stating that multiple compensations cannot be awarded for a
single default.

BRIEF FACTS

The complainants had booked a commercial unit from Exact Developers with the intention to
operate a canteen for their livelihood. They paid ₹29,67,187 to the developer, who committed to
delivering possession of the unit within three years. However, the developer failed to fulfill this
promise. As per the agreement, in case of such a failure, the complainants were entitled to a
refund of the deposited amount with 18% interest per annum from the payment dates until
realization. Despite repeated requests, the developer did not refund the amount with interest.

Consequently, the complainants approached the State Commission seeking a refund of
₹29,67,187 with 18% interest per annum from the deposit date until realization. Additionally,
they requested ₹10,000 for the mental and physical agony caused by the developer’s actions and
₹33,000 for litigation expenses.

CONTENTION OF THE DEVELOPERS

The developer countered the complaint by arguing that the unit was not booked for the purpose
of running a canteen. They asserted that the complainants were not considered “consumers”
under the applicable Act since the unit was booked for commercial purposes. Additionally, the
developer claimed that the complainants were defaulters in making payments and had
intentionally not signed the agreement.

Furthermore, the developer argued that they had indeed offered possession of the unit and had
requested the complainants to complete the necessary formalities, which they allegedly failed to
do. They maintained that there was no deficiency in their services and urged the dismissal of the
complaint.

OBSERVATION OF THE COMMISSION

The Commission examined whether the complainants were entitled to relief under the Consumer
Protection Act and if the State Commission’s decision to award relief was justified. Referring to
the Supreme Court’s ruling in Laxmi Engineering Works Vs. P.S.G. Industrial Institute (1995), it
emphasized that determining whether the purpose was commercial should be done on a case-by-
case basis. As the developer failed to provide evidence that the unit was not booked for the
complainants’ livelihood, they were considered “consumers” under the Act, thus eligible for
relief.

Moreover, the unit was promised possession within three years, and the complainants paid
₹29,67,187 accordingly. Despite the developer’s claim of offering possession later, the legally
valid possession date was determined as when the Occupation Certificate was obtained. The
Commission noted the evident delay in possession and held the developer responsible for not
meeting the original deadline, thereby incurring a penalty of 18% per annum.

However, citing the Supreme Court’s decision in DLF Homes Panchkula Pvt. Ltd. Vs. D.S.
Dhanda (2019), the Commission highlighted that awarding multiple compensations for a single
default was unjustified. Therefore, additional compensation for mental agony couldn’t be upheld.
As for the interest awarded, following the precedent set in Experion Developers Pvt. Ltd. Vs.
Sushma Ashok Shiroor, the Commission deemed compensation at 9% simple interest as just and
equitable.

Following the deliberation, the commission panel upheld the State Commission’s order with
certain directives. It allowed the appeal and instructed the developer to refund Rs. 29,67,187
along with interest at a rate of 9% per annum. Additionally, the developer was mandated to cover
the litigation costs amounting to Rs. 33,000. However, the commission set aside the order for
compensation for mental agony.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

Human and Civil Rights Campaigner

President Citizens Justice Forum https://citizensjusticeforum.in