Advocate Selvakumar

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Monday 29 June 2015

How to file a Complaint before the Consumer Redressal Forum

How to file a Complaint before the Consumer Redressal Forum

The Consumer Protection act, 1986 came into force from July 1987 onwards. Immediately thereafter, cases against the Real estate builders were started to be filed before the concerned Consumer Redressal Forums set-up under this Act, all over the Country. These ‘Consumer Redressal Forums’ are modeled on the ‘Small Claims Court’ pattern and it incorporates safeguards for Consumers against ‘unfair trade practices’. Complaints against the builders could always be entertained in the ‘Consumer Redressal Forums’.

In order to straighten the things and to make the picture more clearer, the Government of India amended the ‘Consumer Protection Act’ in 1993. One of the amended portion is that the words ‘Housing Construction’ have been inserted in Clause 2 (1) (o) of the Consumer Protection Act, which defines ‘service’. Hence complaints against builders with regard to ‘housing construction’ can also be filed before the concerned ‘Consumer Redressal forums’.

A consumer can get redressal for his grievances, in the form of a ‘three-tier’ redressal machinery, as follows:

1. If the compensation claimed by a Consumer is less than Rs.20.00 lakhs, then the Complaint to be filed before the concerned District Consumer Redressal Forum.

2. In case the compensation claimed is above Rs.20.00 lakhs but below Rs.1.00 Crore, then the matter is required to be moved before the State Consumer Forum; and

3. In case the compensation claimed is above Rs.1.00 Crore, then the case has to be filed before the National Consumer Commission at New Delhi.

The clause for Appeal is also provided under the ‘Consumer Protection Act.’

Who can file a complaint:

In terms of Section 2 (1)(b) of the Consumer Protection Act, a ‘Complainant’ is:

(a) A Consumer; or

(b) Any voluntary consumer association registered under the Companies Act, 1956

(1 of 1956) or under any other Law for the time being in force; or

(d) One or more Consumers where there are numerous consumers having the same interest;

(e) In case of death of a Consumer, his legal heir or representative who and which make the complaint.

Group Complaints:

In case there are problems with a common builder, then by way of an amendment to the ‘Consumer Protection Act’ in 1993, all such persons who have purchased houses or flats and have complaint against such common builder can get together and form in to a group and can file a ‘consolidated complaint’ against the common builder. This is in view of the fact that the words ’one or more consumers’ where there are numerous consumers having the same interest’ have been inserted in the definition of ‘complainant’ in Section 2 (1) (b) as sub-clause (iv) thereof by the amendment.

However, a caution to be noted here, wherein, it may be noted that, in case the complainants are asking a builder to refund the money paid by one of the consumer for a flat on account of such complainant’s personal need for the money, then in such cases, the complainant may not win the case before the Consumer Redressal Forum.

To corroborate the above position, please find hereunder a case which clarifies the position:

A person did not pay the installments as she should have after she booked a flat with the builder, instead she complained to the Delhi State Commission for refund of the money she had already deposited with the builder. It appears that she had earlier written to the builder that she needed the money for her domestic reasons. It was not the case of her that she was asking for a refund because the flat was not being completed or given possession to her. In this case, the Delhi State Commission held that the client could not be allowed to wriggle out of the contract with the builder.

What is a complaint and the period of limitation:

At the outset, one should note that, while filing the Complaint before the Consumer Redressal Forum, it should be ensured that the complaint is well within a period of two years from the date on which the cause of action has arisen i.e., to say the limitation period for filing ‘Complaint’ before Consumer Redressal Forum, is two years only.

What constitutes a complaint:

In terms of Section 2 (1) © of the Consumer Protection Act, ‘Complaint’ means any allegation in writing made a complainant alleging that:

(i) an unfair trade practice or a restrictive trade practice has been adopted by any trader or service provider;

(ii) the goods bought by him or agreed to be bought by him, suffer from one or more defects;

(iii) the services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect;

(iv) a trader or the service provider, as the case may be, has charged for the goods or for the services mentioned in the complaint, a price in excess of the price;

(a) fixed or under any law for the time being in force;

(b) displayed on the goods or any package containing such goods;

(d) agreed to between the parties.

(v) goods which will be hazardous to life and safety when used are being offered for sale to the public;

(A) in contravention of any standards relating to safety when used are being offered for sale to the public;

(B) if the trader could have known with due diligence that the goods so offered are unsafe to the public.

(vi) Services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety; with a view to obtaining any relief provided by or under this Act.

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Saturday 27 June 2015

Prohibition on buying agricultural land

Prohibition on buying agricultural land

Two instances of forfeiture of prime plots in Bengaluru last month could well signal trouble for many landowners in and around the city. Revenue department officials tell that individuals and institutions have bought lands on city outskirts without reading the laws and rules governing land reforms.

In one case of violation, Bengaluru Urban district authorities took over 9.39 acres from the possession of Kumaran's English School in Uttarahalli hobli in Bengaluru South taluk. The other case involved taking away of 7.35 acre from Impact College of Engineering at Yelahanka hobli in Bengaluru North taluk.

The reports clubbing the takeover of plots of these two education institutions along with clearing other cases of encroachment might have conveyed an impression that the two institutions crouched on government land. That was, however, not the case. The two institutions in deed bought the plots they were in possession of but they paid a huge price for not reading the Karnataka Land Reforms Act, 1961, carefully.

The two institutions, according to Bengaluru Urban Deputy Commissioner V Shankar, were found to be in possession of agricultural land, and the Section 79 (A and (B) of the Act prohibits a non agriculturist from buying the farm land in Karnataka.

Many officials say the insertion of the Section was meant to protect farmers from losing their land to non agriculturists. Such a law does not exist in any other state, and many officials privately say it was outdated, and needed a pragmatic review.

Section 79(A), inserted by way of an amendment in 1974, bars individuals with an annual income of Rs 2 lakh and above from non-agriculture sources from buying land. The law empowers the revenue authorities to declare such purchase "null & void" and take away the ownership of the land.

Section 79B prohibits holding of farmland by entities such as educational, religious or charitable institutions or a society, trust, or a company. The law, however, provides a remedy.

Section 109 of the same Act empowers the revenue authorities to allow buying a piece of farmland for purposes like running an educational institution or to set up an industry. But the entity concerned must first apply to the Deputy Commissioner asking for exemption. An institution or a society can buy land without seeking exemption under Section 109 with prior government approval. The Deputy Commissioner said, he has the authority to permit purchase of land for educational institutions.

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Transaction not covered under the Act:

Friday 26 June 2015

Housing Loan Banks can Attach & Sell Property of Defaulters

Housing Loan Banks can Attach & Sell Property of Defaulters

It is not very easy to default to defraud the banks and financial institution by the defaulting borrower since various statutory protections are provided to the lending banks and financial institutions. The activities of borrowing and lending are inseparable and there is a change from savings based economy to credit based economy not only in individual's budget but also in the budget of a country.

When a person borrows money, a duty is cast on him not only to repay the money borrowed but also to pay interest in time at the agreed rate on the amount borrowed. Therefore so long as the amount due is not repaid there remains a liability on the borrower.

A duty is cast on the lender also to realize the money lent with interest. In spite of the fact that the lending institution take precautions and take sufficient security for the money lent, some debts become bad and irrecoverable in the ordinary course of business.

Bad debt or non-performing asset would mean an asset or account of a borrower which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset in accordance with the direction or guidelines relating to asset classification issued by the Reserve Bank of India.

DRT Act, 1993 and SRFAESI Act 2002

Recovery of debts has become a very difficult task for the banks and financial institutions and their bad debts or non-performing assets are on the rise. The process of realization or Recovery of non-performing assets (NPA) through the normal process is time consuming.

To hasten or speed up the recovery process and keeping in view the alarming increase in NPAs, the Government of India has enacted the Recovery of Debts Due to Banks and Financial Institutions Act 1993 Popularly known as DRT Act. The DRT Act had some deficiencies inasmuch as it did not provide for assignment of debt to securitization companies and the secured assets could not be liquidated in time.

Therefore, the union Government has brought in a legislation called the Securitization and Reconstruction of Financial Assets and Enforcement of security Interest Act 2002 to remedy the deficiency. It is generally referred to "mill as SRFAESI Act. The SRFAESIA Act is not in derogation of The DRT Act. The purpose of DRT Act as well as SRFAESI Act is recovery of debt through non-adjudicatory process *Pm and to provide cumulative remedies to the secured creditors.

The SRFAESI Act provides for setting up of asset reconstruction - companies, special purpose vehicles, asset management companies etc. by removing all fetters on the rights of the secured creditor, he is given rights `mg. of the secured creditor; he is given a right to choose one or more of the 6'1 cumulative remedies.

To give more teeth to the Act, the SRFAESI Act, 2002 has been amended in the year 2004 under the enforcement of security interest and Recovery of Debts Laws (Amendment) Act, 2004 Where under certain changes have been _ introduced in the act by insertion of amendment or addition to the

execution sections. It is made specific in the preamble that the Act undertakes to regulate

(1) securitization:

(2) reconstruction of financial assets and

(iii) enforcement of security interest all these three concepts are independent of each other.

Enforcement of Security Interest:

As far as the general public is concerned, Chapter III Enforcement of Security Interest contained in Sections 13 to 19 is very important. The following are the requirement for initiating action for enforcement of security under SRFAESI Act.

[1] the account of the borrower should have been classified as non¬_ performing asset strictly in accordance with the guidelines of the Reserve Bank of India and such other authority;

[2] Assets should not be those which have been accepted under sec.31 of the SRFAESI Act and security interest can be enforced only in respect of assets which are specifically charged;

[3] The action should be initiated well within the limitation period therefor and it will be proper to institute a suit in a civil court or DRT as per pecuniary limit applicable for such suits.

[4] Action can be initiated only where the N.P.A. is Rs 1 lakh and above.

Notice :

Section 13 of the Act empowers the secured creditor to enforce the security interest in case the borrower defaults in repayment of secured debts and whose accounts categorized as non-performing asset without the intervention of the court or tribunal. The secured creditors is required to give notice under sec. 13 (2) of the Act to the Borrower to discharge all his liabilities in full within 60 days from the date of notice.

The notice should be comprehensive furnishing full details of the amount due and secured assets intended to be enforced. Upon receipt of the notice under sec. 13(2) of the Act, no borrower shall transfer by way of sale, lease or otherwise any of his secured assets referred in the notice without prior written consent of the secured creditors. The notice may be served by delivering or transmitting at a place where the borrower or his agent is empowered to accept the notice or documents on behalf of the borrower.

It may also be delivered or transmitted where the borrower actually or voluntarily resides or carries on business or personally works for gain. The notice may be sent by registered post acknowledgment due, by speed post, by courier or any other means of message or electronic mail service.

If it is found that the borrower is avoiding and the service of notice cannot be made a copy of the demand notice may be affixed on the outer door or some other conspicuous part of the house or building of the borrower or his authorized agent. The demand notice may also be published in two leading newspapers having good circulation in the area, out of which one shall be in local language.

Under section 13(3A) If on receipt of the notice under sub-sec. (2) the borrower makes any representation or raises objection and if the secured creditor come to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection to the

borrower, provided that the reasons so communicated or likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the debt recovery Tribunal under sec. 17 or the Court of District Judge under sec. 17A. Similarly Sec. 19 of the principal Act has been substituted with the following.

19. Right of borrower to receive compensation and costs in certain cases.

If the debt Recovery Tribunal or the Court of District Judge, on an application made under sec.17 or sec 17 A or the appellate Tribunal or the High Court on an appeal preferred under sec. 18 or sec 18A holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of the Act and rules and directs the secured creditors to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such compensation and cost as may be determined by such tribunal or Court of District Judge or Appellate Tribunal or High Court referred to in sec.18B.

If the borrower / guarantor pays the dues in full no further action under the Act is necessary. If dues are paid only partly and the borrower/guarantor seeks further time, the authority may decide further time, the authority may decide with due consideration of law of limitation and the borrower or guarantor intimated accordingly. If the borrower / guarantor fails to meet their liabilities in full within 60 days from the date of the notice, the bank! financial institution can initiate action to enforce the security rights conferred on it by the Act.

Possession and sale :

The secured creditor or his authorized officer may take recourse to one or more of the measures provided in sec. 13 (4) of the Act to recover his secured debt who has the 4, following options. He may take possession of the secured assets of the borrower including the rights to transfer by way of lease assignment or sale. He may take over the management of the secured assets of the borrower, including the right of transfer of lease assignment sale. He may appoint any person as manager - to manage the secured assets, the possession of which has been taken over.

The secured creditor may require by notice any person who has acquired any secured assets from the borrower and from whom any money is due or may become due to the borrower to pay the secured creditor so much of the money as is sufficient to cover the secured debt.

Both in the case of movable and immovable properties, it is obligatory to serve a notice of thirty days to the borrower about the sale. The notice o sale shall also be published in two leading widely circulated newspapers, of which one shall be of the local language. The public notice shall contain important details of the property, the amount of dept, reserve price, time and place of public auction earnest money to be deposited etc. The notice shall be affixed on the conspicuous part of the immovable property and may also be put on website. Sale by any other modes than auction / tender shall be on terms settled between the parties. After confirmation and completion of sale process, the authorized completion of sale process, the authorized officer shall issue a sale certificate in favor of the purchaser in the prescribed format.

If the secured assets are movable properties, the authorized officer shall take the possession in the presence of two witnesses and the panchanama is drawn and signed by the two witnesses. The Panchanama shall conform to the prescribed format. After taking possession, the authorized officer, shall prepare an inventory of the property as per the format prescribed and shall deliver a copy of such inventory to the borrower or his authorized agent.

If the property is subject to speedy or natural decay or expenses for keeping such property are likely to exceed the value of the property the authorized officer may sell it at once. It is the duty of the authorized officer to take proper care and take steps for preservation and protection of the assets. If necessary the assets may be insured until they are sold or disposed of.

While taking possession or sale of the secured asset, the secured creditor may request the help of Chief Metropolitan Magistrate or District Magistrate in whose jurisdiction the secured assets fall.

Right of appeal :

Under sec.17 of the Act the person aggrieved by the actions of the secured creditor as provided in sec13(4) may make an application to the Debt Recovery Tribunal having jurisdiction, within 45 days from the date on which action has been taken. Similarly any person aggrieved by the order made by DRT under section 17 may prefer an appeal to the appellate tribunal within 30 days from the date of the order.

The following transactions are excluded from the provisions of the SRFAESI Act.

Banking

a] A lien on any goods money or security given by or under the Indian Contract Act, Sale of Goods Actor Any other law for the time being in force;

b] Pledge of movables within the meaning of sec.172 of the Indian Contract Act.

c] Any conditional sale hire purchase or lease or any other contract in which no security interest has been created;

d] Any property not liable to attachment;

e] Any security interest created in agricultural land;

f] Any security interest for securing payment of any financial asset not exceeding rupees one lakh;

Limitation :

The provisions of the Limitation Act 1963 are applicable to the Act therefore taking possession of the property or appointing a management of the securities are to be carried out within the period stipulated in the Limitation Act 1963.

The housing loan borrower may note that if they default in payment of dues to banks and the loan account become NPA the banks can initiate action under the SRFAESI Act issue notice to the borrowers, take possession of the building and proceed to realize the dues by sale of the mortgaged property.

Therefore, it is suggested that the housing loan borrowers may repay the housing loan as per schedule to protect their property.

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Thursday 25 June 2015

Consumer Court can help in Real Estate issues 100

Consumer Court can help in Real Estate issues 100

When a New Delhi based Home buyer approached a consumer court to file a case against the developer who did not deliver the project on the promised date, she did not know that consumer courts to admit cases involving possession of property or any kind of delay in construction. These cases are taken up by the civil courts. In the above mentioned example, the customer has already paid 95% of the total cost of the property, but is still to get possession. The matter is sub judice.

Like our friend from New Delhi, many homebuyers do not know that such cases do not come under the purview of consumer courts. However, delay in construction is not the only problem that homebuyers face. There are other cases such as deficiency in services at various points even after possession of flat, where you can seek help of consumer courts. Here's a list of some such problems in which you can take the developer to the consumer court.

Construction defects and maintenance:

There could be variations from what you were promised, in the final design of the apartment. If you do not get the same design or outlay as mentioned in the advertisements or shown in the sample flat, it is a deficiency in services on the developer's part.

Even poor construction quality can be the basis of a consumer complaint where you can drag the developer to a consumer court. "For the first year after possession, the builder is liable to take care of damages such as leaks in water pipes or cracks in the walls. If he refuses to do so, you can lodge a complaint with the consumer court." Says Rajesh Goyal, Managing Director, RG Group, a New Delhi-based real estate firm.

Also, it is the developer's responsibility to maintain parks, parking spaces, clubs and other such amenities for the first three-five years. However, in case he is not doing the same, you can ask for a refund of the amount that. you have already paid at the time of buying the property. Ifhe acts stubborn, you can drag the developer to the consumer court.

Clause:

The price of the flat can go up, though marginally, during the course of construction. This can happen any time during the construction. If you look at the agreement paper signed with the developer, you will find a rise-and-fall or alteration clause which allows the developer to take a unilateral decision on price change during the course of construction. Though price changes depend on various factors such as demand and supply in the housing sector, home loan rates or prices of raw materials, the clause doesn't mention the range of price rise. "There is nothing much that you can do about the change if you have signed the builder-buyer agreement." Says Snehdeep Agarwal, Director, Bhartiya Group, a real estate firm with projects in Bangalore. However, if the developer is not able to justify the reason for a hike in price, you can seek help.

Misuse of common areas:

The developer cannot sell the open spaces within the premise for setting shops and offices. Selling of common spaces of the complex may take away the extra space that you have paid for. It has been observed in the past that developers sell common spaces without the permission of the residents welfare association. Even setting up telecommunication towers on the roof of building need permission of the residents in writing.

Delay Compensation:

Although the property possession cases are taken up by civil courts, you can approach the consumer court if the developer fails to pay you the delay compensation charges in such cases. Most builder- buyer agreements have a delay- compensation clause. According to this clause, an amount at the rate of, say, Rs.5-7 per sq.ft has to be paid to the homebuyer in case the property is not delivered on scheduled date.

Case Hearing:

The hearing in consumer courts is taken on a fast-track basis. You may get a judgement in a single day if all the necessary documents are in place. If the court finds the developer guilty, it orders a compensation amount that he needs to pay to you. The Consumer Protection Act, 1986, provides a three-tier system of redressal agency - first, at the district level known as the district forum; second, at the state level known as the state commission; and third, at the national level known as the national commission. These forums deal in matters of real estate as well as consumer goods.

"A consumer can file complaint in the district forum of the district concerned where the value of goods, services and compensations, if any, up to Rs.20 lakh. He can approach the state commission for cases involving sums of money between Rs.20 lakh and Rs.l crore, and the national commission for more than Rs.1 crore." Says Sunder Khatri, a Delhi- based lawyer practicing in the Supreme Court.

There is provision for appeals against orders of a particular forum by the aggrieved party before the next higher forum / commission and even from the findings of the national commission before the Supreme Court.

How to go about it:

Approaching a consumer court is fairly simple. In fact you do not even need a lawyer for filing a case in a consumer court. You can write your problems in a piece of paper and send it to the court through post. In your note, you need to mention the problem and the name of the person who is responsible for the deficiency in service. Says Khatri, "While wntmg, you should address the particular court and mention the subject is one line at the start of your application. Following this you should mention all the facts of your complaints under section 12 of the Consumer Protection Act."

Most importantly, it is a must to mention the compensation amount in terms of money that you want as refund from the developer. However, you need to justify the amount with proper documents, adds Khatri. If you name the developer, the court will summon the same.

The developer may appoint a representative to appear in the court on his behalf. If your case is an old one, you can ask for an increased amount of compensation based on the fact that property rates have also increased over the period.

However, before you approach the consumer courts, discuss the issue with the developer. In most cases, developers would want to avoid legal battle and would want to solve the matter outside the court.

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