Buying more than one flat does not indicate commercial purpose

Till recently, it was considered that a person can occupy only one flat. If he purchases more than one flat, it was presumed that the purchase was for the commercial purpose of investment, and complaints were dismissed. The National Commission has now clarified the law on the subject.

Case Study-1: Rajesh and Deepa Malhotra along with their sons Rohan and Parvan, all belonging to Gurgaon, booked two villas in Goa which were being constructed by Acron Developers. The villas were booked under two agreements, the first in the name of the parents with one son, and the second in the name of the parents with the other son. The total cost of both the villas was about Rs1.38 crores. Possession was to be given in April 2007.

When Malhotras inquired about the progress of the construction, the builder did not furnish this information, and instead threatened to terminate the agreements for non-payment of instalments. The builder also collected various additional amounts. Malhotras filed a complaint before the Goa State Commission against the developer and its directors for a refund of the wrongly collected amounts. The builder contested the complaint.

The State Commission concluded that thevillas were meant that they were purchased for commercial purpose. It also observed that there were two agreements in different names, so one combined complaint could not be filed for two separate transactions. It dismissed the complaint, and ordered Malhotras to pay Rs.10,000 for misusing the provisions of the Consumer Protection Act.

Malhotras challenged this order in appeal. The National Commission observed that commercial purpose would have to be determined on the basis of the primary motive of trading or business activity for the purpose of making profit.Mere assertion by the builder that the properties have been purchased for commercial purpose is not sufficient.The National Commission also observed that two villas were purchased by the parents, one for each son. Even if a residential house, flat, or villa is let out, it would not amount to commercial purpose. Accordingly, by order dated 5.11.2015 delivered by the Bench of Justice D.K. Jain and M. Shreesha, the National Commission allowed Malhotra’s appeal, held them to be consumers, and remanded the complaint back to the State Commission for decision on merits. Additionally, costs of Rs.25,000 was also awarded to the Malhotras. The same view was reiterated during a second round of appeal, where the same Bench passed an order on May 16 directing the State Commission to decide the complaint expeditiously on merits within six months.

Case Study-2: Similarly, in the case of Vimala Agarwal who had purchased two flats from Saijayini Housing Promoters, the Karnataka State Commission had refused to entertain the complaint, and dismissed it with the observation that the purchase of two flats made it evident that the investment made was for the commercial purpose. In an appeal, Justice D.K. Jain, president of the National Commission, through order dated August 19 held that a complaint cannot be dismissed on a presumption without considering this issue on the basis of evidence produced during the course of adjudication of the complaint.

Conclusion:A complaint cannot be mechanically dismissed merely since a person purchases more that on flat or villa.

(The author is a consumer activist and has won the Govt. of India's National Youth Award for Consumer Protection. His email is jehangir.gai.columnist@outlook.in)