Introduction

The case of Mehnga Singh Khera And Another Complainant(S) v. Unitech Ltd. adjudicated by the National Consumer Disputes Redressal Commission (NCDRC) in New Delhi on December 18, 2019, marks a significant precedent in the realm of consumer protection within the real estate sector. The complainants, Mehnga Singh Khera and Surinderjeet Khera, entered into an agreement with Unitech Ltd. for the purchase of a residential unit in Unitech Vistas, Sector 70, Gurgaon. The crux of the dispute centered on Unitech's failure to deliver possession of the property within the stipulated 36-month period, despite receiving substantial payments from the buyers.

Summary of the Judgment

The complainants sought a refund of ₹5,166,700 along with 18% interest, compensation for mental agony, and litigation costs due to Unitech's non-fulfillment of the Apartment Allotment Agreement. Unitech contested the complaint on two primary grounds:

• The complaint was time-barred under Section 24A of the Consumer Protection Act, 1986, as it was filed beyond the two-year limitation period.
• The pecuniary value of the complaint exceeded the commission's jurisdiction, alleging inflated claims to fit within the jurisdictional limits.

Initially, the Commission dismissed the complaint based on these grounds. However, upon further deliberation, it recognized that the cause of action persisted due to the ongoing deficiency in service—Unitech's failure to hand over the possession. Consequently, the Commission overruled the initial dismissal and ruled in favor of the complainants, directing Unitech to refund the paid amount with 10% simple interest and cover litigation costs.

Analysis

Precedents Cited

The judgment references several pivotal Supreme Court rulings that underscore the enforceability of contractual terms and the assessment of damages:

• Bharathi Knitting Company v. DHL Worldwide Express Courier Division: Affirmed that the National Commission rightfully limits liability based on contractual obligations.
• Sir Chunilal V Mehta and Sons Ltd. v. Century Spinning and Manufacturing Co. Ltd.: Established that liquidated damages specified in contracts are binding and not open to unilateral modifications.
• Fateh Chand v. Balkishan Dass: Clarified that damages for breach should be reasonable and not exceed stipulated penalties.
• Laxmi Engineering Works Vs. P.S.G. Industrial Institute: Emphasized interpreting "commercial purpose" based on ordinary dictionary meanings in the absence of statutory definitions.
• State Bank of India Vs. B.S. Agricultural Industries: Highlighted the peremptory nature of Section 24A, mandating adherence to limitation periods unless exceptions apply.

Legal Reasoning

The Commission's legal reasoning pivoted on the interpretation of the Consumer Protection Act, specifically concerning the limitation period and the definition of a "consumer." Initially siding with Unitech's argument on limitation, the Commission reassessed the ongoing nature of the deficiency in service. It recognized that as long as Unitech failed to provide possession, the cause of action remained active, thereby resetting the limitation period. Furthermore, the Commission refuted Unitech's claim that the buyers were commercial entities, establishing that the complainants were genuine consumers as their purchase was investment-driven without engaging in regular trading activities.

The Court also scrutinized the contractual terms, particularly the disproportionate penalty clauses favoring Unitech. While acknowledging the legitimacy of agreed-upon liquidated damages, it deemed the 18% compound interest imposed on buyers as unreasonable, especially when juxtaposed against the minimal ₹5 per square foot compensation offered by Unitech for delays.

Impact

This judgment serves as a crucial precedent in consumer law, particularly in the real estate sector. It reinforces the principle that complaint filers retain the right to approach consumer forums as long as the deficiency in service persists, effectively extending the limitation period in ongoing disputes. Additionally, it underscores the need for contractual clauses to maintain fairness and reasonableness, preventing undue advantages by service providers over consumers. Builders and real estate developers are thereby reminded to reassess their contractual terms to ensure compliance with equitable principles, potentially avoiding similar litigations in the future.

Complex Concepts Simplified

Section 24A of the Consumer Protection Act, 1986

This section specifies the time limit within which a consumer can file a complaint—typically two years from the date the cause of action arises. However, if the deficiency in service continues, the limitation period can be extended, allowing consumers to file a complaint at any point until the issue is resolved.

Deficiency in Service

Under the Consumer Protection Act, a deficiency in service refers to any fault, imperfection, or inadequacy in the quality, nature, or manner of performance of a service that falls below the standards promised in the contract.

Pecuniary Jurisdiction

Consumer forums have jurisdiction based on the monetary value of the claim. If the claimed amount exceeds the forum's pecuniary limit, the complaint cannot be entertained unless specific conditions apply.

Liquidated Damages

These are pre-determined damages stipulated within a contract that a party agrees to pay if they breach certain terms. Courts may enforce these clauses if they are reasonable and not punitive.

Conclusion

The NCDRC's judgment in the Mehnga Singh Khera case underscores the enduring rights of consumers in the face of service deficiencies, particularly within the real estate sector. By invalidating inflated jurisdictional objections and recognizing the continuous nature of the deficiency in service, the Commission reinforced the protective umbrella of the Consumer Protection Act. This ruling not only aids the complainants in securing rightful compensation but also sets a benchmark for fairness and accountability among real estate developers. Consumers are thereby empowered to seek justice without being unduly restricted by procedural technicalities, fostering a more equitable marketplace.