2023 (9) TMI 1569 - SC - Indian Laws

Developer must refund buyers with 12% interest for delayed office space possession under Consumer Protection Act

Rohit Chaudhary and Ors. Versus Vipul Ltd.

The SC allowed the appeal and set aside the National Consumer Disputes Redressal Commission's order dated 11.05.2015. The Court held that appellants ... Interpretation of statute - word and expression 'Commercial Purpose' defined Under Section 2(1)(d) of the Consumer Protection Act, 1986 - whether the Appellants are 'Consumer' or not - HELD THAT:- A plain reading of the expression 'consumer' indicates that any person who buys any goods for consideration which has been paid or promised or partly paid and partly promised under any system of deferred payment and includes any user of such goods other than the person who buy such goods. Such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods or services for resale or for any commercial purpose - it is obvious, that Parliament intended to exclude from the scope of definition not merely persons who obtain goods for resale but also those who purchase goods with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit. Thus, persons buying goods either for resale or for use in large scale profit making activity will not be a consumer entitled to protection under the Act, which would be a plain interpretation of this definition clause. The intention of the Parliament as can be gathered from the definition Section is to deny the benefits of the Act to persons purchasing goods either for purpose of resale or for the purpose of being used in profit making activity engaged on a large scale. This Court in the case of LILAVATI KIRTILAL MEHTA MEDICAL TRUST VERSUS M/S. UNIQUE SHANTI DEVELOPERS & ORS. [2019 (11) TMI 1824 - SUPREME COURT], has held that a straight jacket formula cannot be adopted in every case and the broad principles which can be curled out for determining whether an activity or transaction is for a commercial purpose would depend on facts and circumstances of each case. Thus, if the dominant purpose of purchasing the goods or services is for a profit motive and this fact is evident from record, such purchaser would not fall within the four corners of the definition of 'consumer'. Clause 15 of the buyer's agreement would clearly indicate that the possession of the premises was agreed to be delivered within 24 months from the date of agreement which undisputedly had not taken place, or in other words the allotted office space was not delivered even after expiry of 24 months from the date of agreement. In fact, in the counter affidavit filed by the Respondent an evasive denial has been made by contending that permissive possession of the commercial space had been offered by the Respondent to the Appellants. However, it is not pleaded that the commercial space allotted to the Appellants is ready for occupation - On account of inaction of the Respondent in not complying with their demand, Appellants got issued a legal notice calling upon the Respondent to refund Rs. 93,62,025/- which is inclusive of the principal amount of Rs. 51,10,117/- and Rs. 42,52,143/- towards interests accrued thereon calculated @ 18% per annum and also demanded compensation of Rs. 50,00,000/- towards mental agony by terminating the agreement. There being no plea with regard to the building or commercial complex being ready for being occupied, having been raised by the Respondent in its counter affidavit and the communication dated 25.01.2016 also not disclosing that the office premises proposed to be sold in favour of the Appellants being ready to be occupied but only evidencing the fact that the permissive possession of premises was being offered, it cannot be presumed that possession of office premises which is ready to offer was being delivered to the Appellants. Hence, to balance the equities, it would be appropriate to direct the Respondent to refund the amount it has received from Appellants with interest calculated @ 12% per annum which would not only meet the ends of justice but would also offset the interest loss if at all, if any caused to the Respondent on account of delayed payments of the instalments by the Appellants and keeping in mind the appreciated value of the asset namely office premises which was proposed to be sold by the Respondent to the Appellant. The order dated 11.05.2015 passed by the National Consumer Disputes Redressal Commission set aside - appeal allowed. Issues Involved:1. Interpretation of 'Commercial Purpose' under Section 2(1)(d) of the Consumer Protection Act, 1986.2. Determination of whether the appellants qualify as 'consumers' under the Act.3. Evaluation of the appellants' claim for refund and compensation due to non-delivery of possession.Issue-Wise Detailed Analysis:1. Interpretation of 'Commercial Purpose':The central issue in this appeal was the interpretation of the term 'Commercial Purpose' as defined under Section 2(1)(d) of the Consumer Protection Act, 1986. The Act excludes individuals who obtain goods or services for resale or for any commercial purpose from the definition of 'consumer.' The Court referred to previous judgments, notably Laxmi Engineering Works v. P.S.G. Industrial Institute, which clarified that the term 'commercial purpose' is not explicitly defined in the Act and must be understood in its ordinary sense. The Court emphasized that goods or services purchased for self-employment to earn a livelihood do not fall under 'commercial purpose,' thus retaining the individual's status as a consumer.2. Determination of Consumer Status:The National Commission initially dismissed the complaint, deeming the appellants were not 'consumers' as they were engaged in business activities, suggesting a commercial intent behind the purchase. However, the Supreme Court examined whether the appellants purchased the commercial space for self-employment and livelihood. The appellants argued that their intent was to use the office space for self-employment and not for profit-making or resale. The Court noted that the appellants' statement did not explicitly indicate a profit motive or intent to resell, which is crucial in determining consumer status. The Court concluded that the appellants' purchase was for self-employment, thus qualifying them as consumers under the Act.3. Evaluation of Refund and Compensation:The appellants sought a refund of Rs. 51,10,117/- along with interest and compensation for mental agony due to the respondent's failure to deliver possession of the office space. The Court acknowledged that the respondent had agreed to deliver possession within 24 months, which did not occur. The appellants had already terminated the buyer's agreement and sought a refund. The Court found that the respondent's failure to deliver possession and the lack of readiness of the premises justified the appellants' demand for a refund. The Court directed the respondent to refund the amount with interest at 12% per annum from the date of the complaint until payment, along with litigation costs of Rs. one lakh.Conclusion:The appeal was allowed, overturning the National Commission's order. The Supreme Court recognized the appellants as consumers under the Act, entitled to a refund with interest due to the respondent's failure to deliver possession of the commercial space. The judgment clarified the interpretation of 'commercial purpose' and reinforced consumer rights under the Consumer Protection Act.