Consumer Fora Not Competent to Adjudicate Disputes Involving Fraud and Complex Issues: NCDRC
Pranav B Prem
The National Consumer Disputes Redressal Commission (NCDRC), presided over by Mr. Inder Jit Singh and Dr. Sadhna Shanker, has reiterated that matters involving fraud and complex factual issues do not fall under the jurisdiction of consumer fora and should be agitated before civil or criminal courts. The Commission held that such disputes cannot be entertained under the Consumer Protection Act, 1986.
Background of the Case
The complainants, Mrs. Rajni Suryakant Gujar and Mr. Mukul Suryakant Gujar, had initially purchased a small plot of land admeasuring 3.5 Aars at Undri, Pune, from Shree Vinayaka Developers for a total consideration of ₹18,00,000, and a sale deed was duly executed in their favour. Subsequently, they agreed to purchase a larger plot measuring 7000 sq. ft. located at a nearby site and entered into a Memorandum of Understanding (MoU) dated 09.12.2010 with Mr. Kumar Sriniwas Mandera, one of the partners of the firm, for a total consideration of ₹50,00,000. The complainants claimed to have paid the entire amount in installments, but despite full payment, the sale deed was not executed.
The complainants approached the State Consumer Disputes Redressal Commission, Maharashtra, alleging deficiency in service and unfair trade practice. They sought execution of the sale deed, delivery of possession of the land, compensation of ₹62,05,000 along with 15% interest, proper demarcation and fencing of the property, and costs. The State Commission, however, dismissed the complaint on the ground that the complainants did not qualify as "consumers" under the Consumer Protection Act, 1986. Aggrieved by this decision, the complainants filed an appeal before the National Commission.
Contentions of the Respondent
The developer contended that the complainants were property brokers by profession and were engaged in real estate business for commercial gain. It was argued that the transaction in question was not for personal use but was a part of their regular business activity, and therefore, they did not fall within the definition of "consumer" under Section 2(1)(d) of the Consumer Protection Act, 1986.
It was further submitted that the MoU for the disputed Plot No. 2 was executed by Mr. Kumar Sriniwas Mandera in his individual capacity and not on behalf of the firm. Clause 4 of the MoU specifically indicated that the transaction was undertaken by Mr. Mandera to overcome his personal financial hardship. The respondents pointed out that the complainants had advanced amounts under hand loan agreements to Mr. Mandera, and these amounts were sought to be adjusted as sale consideration for the plot. The firm, Shree Vinayaka Developers, or its other partners were neither party to nor authorized the transaction.
The respondents also referred to the public notice published on 15.05.2012 wherein the firm declared that Mr. Mandera had ceased to be a partner. Additionally, the complainants themselves acknowledged the fraudulent conduct in a letter dated 25.05.2012 and lodged FIR No. 452/2012 against all partners of the firm. The complainants had admitted that they were aware of the terms of the partnership deed, which required all transactions to be conducted in the firm’s name, but they still chose to deal with Mr. Mandera in his personal capacity. Hence, the dispute, according to the respondents, involved issues of fraud and criminal breach of trust and was fit to be tried by a civil or criminal court, not a consumer forum.
Observations of the National Commission
The National Commission upheld the findings of the State Commission. Upon examination of the records and submissions, the Commission noted that the complainants were engaged in the business of real estate brokerage, and the disputed transaction was clearly part of their business activity for commercial gain. Therefore, they did not satisfy the definition of "consumer" under the Act.
The Commission emphasized that the MoU was signed solely by Mr. Mandera in his individual capacity, and Clause 4 of the MoU explicitly mentioned his personal financial hardship as the reason for the sale. There was no evidence to show that the firm or its other partners were involved or had authorized the transaction. The complainants had also admitted their awareness of the partnership deed, which required all firm-related transactions to be in the firm’s name.
The Commission referred to the Supreme Court's judgment in Laxmi Engineering Works v. P.S.G. Industrial Institute, (1995) 3 SCC 583, which held that transactions for commercial purposes fall outside the ambit of the Consumer Protection Act. The Commission also relied on Paramjeet Singh v. National Insurance Co. Ltd., (2019) 7 SCC 244, and Chetan Arvind Mehta v. Inspector General of Police, 2020 SCC OnLine NCDRC 325, to reiterate that disputes involving fraud and complex questions of fact are to be adjudicated by civil or criminal courts, not by consumer fora.
The Commission further noted that the complainants had voluntarily chosen to transact with Mr. Mandera in his personal capacity, ignoring the stipulations of the partnership deed. Additionally, since criminal proceedings regarding the alleged fraud were already underway, the consumer forum had no jurisdiction to entertain the matter.
Verdict
The National Commission found no infirmity in the order of the State Commission. It held that the appellants did not qualify as "consumers" under the Consumer Protection Act, 1986, and the dispute raised serious issues of fraud and breach of trust, which were beyond the jurisdiction of consumer fora. Accordingly, the appeal was dismissed, with liberty granted to the appellants to pursue their remedy before the appropriate civil or criminal court.
Appearance
For the Appellants: Mr. Dnyanaraj G. Sant, Advocate
For the. Respondents: Mr. Viraj Kadam, Advocate with Mr. Rahul Kumar, Advocate (R1(a) & R1(b) Respondent No. 1 (c) Ex-parte
Cause Title: Mrs. Rajni Suryakant Gujar & Anr. V. Shree Vinayaka Developers & Ors
Case No: F.A. No. 89 of 2017
Coram: Hon’ble Mr. Inder Jit Singh [Presiding Member], Hon’ble Dr. Sadhna Shanker [Member]
[Read/Download order]
