Source: Supreme Court 

Why in News? 

Recently, the Supreme Court in the matter of Omkar Realtors and Developers Pvt. Ltd. v. Kushalraj Land Developers Pvt. Ltd. & Anr.  has held that to determine the applicability of Section 2(7) of the Consumer Protection Act, 2019 (CPA) the intent of the parties to be determined on case-to-case basis. 

What was the Background of the Omkar Realtors and Developers Pvt. Ltd. v. Kushalraj Land Developers Pvt. Ltd. & Anr. Case? 

• In the present case, the respondent is a private limited company engaged in the business of real estate development. 
• The respondent booked a flat for the residential use of one of its directors and his family members with the appellant in the project ‘Omkar 1973 Worli’ by paying a booking amount of Rs. 51,00,000/-. 
• Subsequently, the respondent paid a part of the consideration, i.e., Rs. 6,79,971/-, to the appellant. 
• The respondent was issued an allotment letter, which specified that the date of possession would be no later than 31st December 2018. 
• The respondent was asked to take early possession of the flat by paying the remaining amount within 30 days. 
• The respondent attempted to arrange the amount but later discovered that the allotted flat had already been booked for someone else, namely Mr. Nakul Arya. 
• As a result, the respondent refused to pay the remaining amount and declined to take possession. 
• The appellant then issued a termination letter on 31st August 2017. 
• The respondent requested a refund of the amount paid along with interest, while the appellant forfeited the amount. 
• The respondent then approached the National Consumer Disputes Redressal Commission (NCDRC), complaining about the deficiency in services and alleging the adoption of unfair trade practices. 
• The respondent also sought a refund of the entire amount deposited, with 18% interest, along with litigation expenses and compensation for mental harassment and torture. 
• The appellant argued that the respondent is not a consumer under Section 2(7) of the Consumer Protection Act, as the respondent was in the real estate business and purchased the flat for commercial purposes. 
• The appellant further argued that there was no deficiency in service, as he would have allotted the flat to the respondent if the full amount had been paid. 
• The NCDRC held that there was a deficiency in service by the appellant, as the appellant was not justified in canceling the respondent's allotment and forfeiting the amount deposited before resolving the issue of double allotment. 
• Aggrieved by the decision of the NCDRC, the appellant filed a civil appeal before the Supreme Court. 

What were the Court’s Observations? 

• The Supreme Court observed that, through various precedents, it is clear that to determine whether a person is a consumer or not, the purpose of the purchase must be considered. 
• The Supreme Court placed the burden of proof on the appellant to demonstrate that the respondent's purpose in purchasing the flat was commercial, which the appellant failed to do. 
• The Supreme Court held that the flat purchased by the respondent was for residential purposes, as it was bought for the director and his family. 
• The Supreme Court further observed that the appellant, without resolving the dispute of double allotment, denied the allotment and forfeited the amount paid by the respondent. 
• The Supreme Court deemed this to be a deficiency in service and an unfair trade practice on the part of the appellant. 
• The Supreme Court, therefore, confirmed the NCDRC's order and rejected the appeal. 

What is Consumer Protection Act, 2019?  

• This act helps to protect consumers against the ill practices of service providers or suppliers. 
• The act provides a framework through which a consumer can file cases before the Consumer Forums. 
• The Forum after necessary considerations provides reliefs to the consumer. 

Who is a Consumer? 

About 

• Any person who is the end user of a product is a consumer. 
• A consumer is the one who buys any goods or service for his own use and not for any commercial purpose. 
• As per Section 2 (7) of the CPA Consumer is defined as: 
  • any person who—  
    • buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose. 
    • hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose. 

Rights of Consumer 

• As per Section 2 (9) of CPA consumer rights includes — 
  • The right to be protected against the marketing of goods, products or services which are hazardous to life and property. 
  • The right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, to protect the consumer against unfair trade practices. 
  • The right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices. 
  • The right to be heard and to be assured that consumer's interests will receive due consideration at appropriate for. 
  • The right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers. 
  • The right to consumer awareness. 

What is Deficiency of Service? 

• The concept of "deficiency of services" encompasses any failure, lack, or shortfall in the expected standard of services provided to consumers. 
• It covers instances where the service rendered falls short of the legal requirements, contractual obligations, or reasonable expectations of the consumer. 
• Deficiency can arise due to negligence, intentional acts, or omissions by the service provider, leading to consumer dissatisfaction, inconvenience, or harm. 
• Section 2(11) of CPA defines "deficiency" as any fault, imperfection, shortcoming, or inadequacy in the quality, nature, and manner of performance required to be maintained under any law or undertaken to be performed by a person under a contract or otherwise in relation to any service. It includes: 
  • Any act of negligence or omission or commission by the service provider, which causes loss or injury to the consumer. 
  • Deliberate withholding of relevant information by the service provider from the consumer. 

Landmark Cases 

• Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Others (2019): In this case the houses purchased by the Medical Trust for the nurses were not held as commercial transactions and the trust was considered Consumer under the CPA. 
• Crompton Greaves Limited and Others v. Daimler Chrysler India Private Limited (2016): in this case the director availed certain services for his personal use, so he was considered as consumer under CPA.