Monday, October 13, 2014

Tenants can take builder complaints to consumer forums
Tenants harassed by builders in a development project can approach the consumer forums.
More and more old and dilapidated buildings are going in for redevelopment. The builder makes money by selling flats to new buyers, but considers it onerous to provide accommodation to the existing tenants without charging money. Since free services are excluded from the purview of the Consumer Protection Act, would the tenants be entitled to file a consumer complaint for deficiency in service against a builder? 

Case Study: Jagdishbhai had a tailoring shop on tenancy basis in Moon House. The landlord sold the property to Surbhih Realtors, which decided to demolish the old building and construct a commercial property. Jagdishbhai was to be given shop No. 1, measuring 26.29 sq m in the new property. An agreement was executed, under which the builder agreed to bear expenses of registration of the sale deed. Possession of the shop was to be given in a month. In case of delay, builder agreed to pay Rs 10,000 a month. 

The builder failed to give possession of the shop and offered an alternative one on the rear side of the complex. Since it was not acceptable to Jagdishbhai, he filed a complaint before the district forum for a direction to the builder to hand over shop No. 1 and to pay Rs 10,000 per month for the delay. The builder contended that Jagdishbhai was not a consumer since the transaction did not involve any payment or consideration and argued it was a landlord-tenant dispute and not maintainable before the forum.

A dilapidated house in Mumbai's Ghatkopar with residents living in it. (TOI file photo by Anil Shinde) 

The district forum overruled these objections and directed the builder to hand over shop No. 1 and execute the sale deed. If this was not complied with within 30 days, the builder would also be liable to pay Rs 10,000 per month. 

Both parties appealed to the Gujarat state commission. While Jagdishbhai wanted the compensation enhanced, the builder wanted the order set aside. The commission concluded that Jagdishbahi was not a consumer as the transaction was in respect to transfer of tenancy rights to ownership property and as the service was not hired for consideration. It allowed the builder's appeal and set aside the forum order. 

Jagdishbhai filed a revision before the national commission, pointing out that the earlier landlord-tenant relationship had ceased to exist with the execution of the agreement for allotment of the shop on ownership basis. He also argued that consideration need not be in cash but could be in kind.

A dilapidated house in Mumbai's Lower Parel. (TOI file photo by Uma Kadam)

So, handing over the old tenanted premises would form consideration for allotment and possession of the shop in the redeveloped property. The commission allowed his revision, holding that he was a consumer, entitled to file a complaint against the builder for deficiency in service. 

Since 10 years had gone by, it directed that the builder should either give possession of the shop to Jagdishbhai, else allot another shop of the same area at a prominent place in the complex. The builder was also asked to pay Rs 15 lakh, so that it would fetch a monthly interest of Rs 10,000. A compensation of Rs 2 lakh for harassment was also awarded. 

Impact: Tenants harassed by builders in a development project can approach the consumer forums. 

(The author is a consumer activist and has won the government of India's national youth award for consumer protection. His e-mail address is

Source: Times of india

Tagged: , , , , ,