Subsequent Possession Of Property Doesn't Extinguish Allottee's Right To Seek Compensation For Delay: Supreme Court

The Court was hearing a civil appeal challenging the National Consumer Disputes Redressal Commission's order dismissing a revision petition arising out of proceedings in which the District Forum and the State Commission had referred a consumer complaint to arbitration. The complaint alleged a deficiency in service on account of the delay in handing over possession of a residential flat.

A Bench of Justice Vikram Nath and Justice V. Mohana, while examining the legality of the National Commission's approach, observed: "The reasoning adopted by the National Commission cannot be sustained. The appellant’s complaint was not for delivery of possession simpliciter. His grievance was that there had been delay in handing over possession of the flat and that he was entitled to compensation for such delay. A claim for compensation for delayed possession necessarily arises from the period prior to the actual delivery of possession. The subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay."

The appellant appeared in person, while Advocate Chandrachur Bhattacharyya appeared for the respondent society with Advocates Sahil Tagotra, AOR, and Shreya Kasera.

Background

The dispute arose from a consumer complaint filed by an allottee alleging a deficiency in service on account of the delay in handing over possession of a residential flat. The complainant sought compensation for the alleged delay.

After the complaint was admitted, the respondent invoked Section 8 of the Arbitration and Conciliation Act, 1996, contending that the agreement between the parties contained an arbitration clause. While the District Forum initially rejected the application, the matter was remitted for reconsideration, and the parties were eventually referred to arbitration. The State Commission affirmed the order.

The revision petition challenging those orders was dismissed by the National Commission, which held that since possession of the flat had already been taken before the filing of the complaint, the complainant was no longer a consumer. Aggrieved thereby, the appellant approached the Supreme Court.

Court's Observations

The Apex Court first examined the statutory scheme of the Consumer Protection Act, 1986. Referring to Section 3 of the Act, the Bench reiterated that the remedy under the consumer law is an additional remedy and does not derogate from any other remedy available under law. The existence of an arbitration clause, therefore, does not automatically oust the jurisdiction of consumer fora.

The Court relied upon a consistent line of precedents, including Fair Air Engineers Pvt. Ltd. v. N.K. Modi (1996), Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha (2004), National Seeds Corporation Ltd. v. M. Madhusudhan Reddy (2012) and Emaar MGF Land Ltd. v. Aftab Singh (2019), all of which recognised that consumer remedies remain available notwithstanding the existence of arbitration agreements. The Court noted that the jurisdiction conferred upon consumer fora by beneficial legislation cannot be displaced merely because parties have agreed to arbitrate disputes.

Examining Section 12(4) of the 1986 Act, the Bench observed that the provision establishes a statutory sequence whereby, once a complaint is admitted and permitted to proceed, the consumer forum is required to adjudicate it in accordance with the Act.

The Court emphasised: "The significance of the proviso lies not merely in its text, but also in the statutory policy which it reflects. The 1986 Act creates a special adjudicatory mechanism for consumer disputes. Once that mechanism is validly invoked and the complaint is admitted, the consumer cannot be driven out of that forum merely because the agreement between the parties contains an arbitration clause."

The Court further observed: "A private contractual clause cannot be permitted to defeat the continued operation of a statutory remedy which Parliament has expressly made additional to other remedies under Section 3 of the 1986 Act."

After analysing the statutory framework, the Court found that the District Forum and the State Commission had failed to give due effect to the scheme of the Consumer Protection Act and the settled principle that an arbitration clause, by itself, does not oust the jurisdiction of consumer fora.

The Bench then turned to the reasoning adopted by the National Commission and found it fundamentally flawed. The Court noted that the principal question before the National Commission was whether the District Forum and State Commission were justified in referring the dispute to arbitration. Instead of addressing that jurisdictional issue, the National Commission dismissed the revision petition on the ground that the complainant was no longer a consumer because possession had already been delivered.

The Court observed: "The order of the National Commission suffers from an additional infirmity. The principal issue before the National Commission was whether the District Forum and the State Commission were justified in referring the complaint to arbitration. The National Commission, however, dismissed the revision petition on the ground that the appellant was not a consumer at the time of filing the complaint, since he had already taken possession of the flat without protest. In doing so, the National Commission failed to address the central jurisdictional question arising from the orders passed by the District Forum and the State Commission."

The Court held that the National Commission's approach overlooked the true nature of the grievance raised in the complaint. The claim was not for delivery of possession but for compensation arising out of the alleged delay in handing over possession. Such a claim necessarily concerns events preceding delivery and therefore survives subsequent possession.

The Bench further emphasised that the dispute had never been adjudicated on merits at any stage. Neither the claim for compensation nor the respondent's defence had been examined after evidence. The Court therefore held: "Whether there was in fact any delay, whether such delay was attributable to the respondent, whether the appellant had accepted possession unconditionally, and whether any compensation is payable are all matters which require adjudication on merits."

The Court continued: "The consumer complaint has not been adjudicated on the merits at any stage. The claim of the appellant for compensation on account of the alleged delay in handing over possession has neither been accepted nor rejected after evidence. Equally, the defence of the respondent society has also not been examined on merits."

Holding that these issues could not be concluded at the threshold, the Court observed: "These issues could not have been concluded at the threshold by holding that the appellant ceased to be a consumer merely because possession had been delivered before the complaint was filed."

The Bench ultimately concluded that the proper course was to restore the complaint for adjudication on the merits so that both parties could be afforded a full opportunity of hearing and of leading evidence.

All questions relating to deficiency in service, delay, waiver, acceptance of possession and entitlement to compensation were left open for determination by the competent consumer forum.

Conclusion

Allowing the appeal, the Supreme Court set aside the orders passed by the National Commission, the State Commission and the District Forum. The Court restored the consumer complaint for adjudication on merits before the competent consumer forum and directed that both parties be afforded due opportunity of hearing and of leading evidence. The Court further directed that all issues concerning deficiency in service, delay and compensation remain open for determination in accordance with the law.

Cause Title: T.K.A. Padmanabhan v. Abhiyan Cooperative Group Housing Society Ltd. Through Its Secretary

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