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Delhi State Consumer Disputes Redressal Commission (DSCDRC): Coram of Dr Justice Sangita Dhingra Sehgal (President) and Anil Srivastava (Member)ordered the builder to refund the money deposited by the complainant, as a consequence of not being able to deliver the possession of flat on time. However, it was held that the builder was not liable to refund the EMI amount paid by the complainant towards loan sanctioned in favour of the complainant.

 Present consumer complaint was filed under Section 17 of the Consumer Protection Act, 1986 against OP 1 and OP 2.

Complainant had applied for booking of a flat in the OP 1’s project and was allotted a flat for the total sale consideration which was agreed at Rs 44,99,387.

Complainant and OP 1 entered into a Flat Buyers Agreement. It was stated in the agreement that the possession of the flat was to be delivered within 18 months from execution of the agreement along with a grace period of 6 months. Though, OP 1 failed to adhere to the stipulated time for delivery of possession and hence the complainant had to withdraw from the project.

Further, OP 1 informed the complainant regarding the deduction. Adding to this, it was submitted that the service tax paid on the entire transaction would also be forfeited.

Complainant got served a legal notice dated 03-10-2015, upon the OP 1 and sought refund of the amount deducted along with compensation for mental agony and harassment.

Alleging deficiency of service and unfair trade practice on the part of OP 1, the complainant approached this commission.

Analysis, Law and Decision

Territorial and Pecuniary Jurisdiction

Whether this commission has the jurisdiction to adjudicate the present complaint?

Coram on perusal of Section 17 of the Consumer Protection Act lead the Commission to the conclusion that it shall have the pecuniary jurisdiction in cases where the total claim including the compensation is more than twenty lakhs and less than One Crore. Moreover, clause 17(2) of the Act provides the extent of territorial jurisdiction, wherein it has been provided that the state commission shall have the jurisdiction to entertain cases where OP 1 at the time of the institution of the complaint, actually and voluntarily resides or carries on business or has a branch office or personally works for gain or the cause of action arose.

Hence, the commission has pecuniary jurisdiction in the present matter.

To strengthen the above finding, Coram relied on the Rohit Srivastava v. Paramount Villas (P) Ltd., 2017 SCC OnLine NCDRC 1198.

Further, the Coram stated that relying on the above case, this Commission has both territorial and pecuniary jurisdiction.

Deficiency of Service 

The stated expression of Deficiency of Service was dealt with by the Supreme Court in Arifur Rahman Khan v. DLF Southern Homes (P) Ltd., (2020) 16 SCC 512.

In Commission’s opinion, OP 1 was deficient in providing its services to the complainant since it had failed to handover the possession of the flat within the stipulated time period and the complainant was entitled to the refund of the money deposited to OP1.

OP 1’s deduction was not justified as the complainant had sought cancellation of the booking of the flat on account of deficient services provided by OP 1, hence the complainant was entitled to refund of the amount forfeited.

However, the Complainant was not entitled to receive an amount of Rs 6,33,289/- since this amount was paid as EMIs towards the loan sanctioned in favour of the Complainant. The OP 1 has no obligation to pay the EMI amount, since there exists no express agreement pertaining to the payment of EMIs to be done by the OP 1. [Kapila Narula v. Logix City Developers (P) Ltd., Complaint No. 149 of 2016, decided on 16-08-2021]


Advocates before the Court:

Ms. Suchita Sharma, Counsel for the Complainant.

Ms. Arushi Pathak, Counsel for the Opposite Party.

Banking Sector
COVID 19Op EdsOP. ED.

In order to soften the global impact of COVID-19 on the banking sector, Reserve Bank of India on 27-3-2020 announced a moratorium for a period of 3 months starting from 1-3-2020 to 31-5-2020 on repayment of all term loans by borrowers including individuals and companies. Clause 5 of RBI statement did not make the moratorium mandatory rather discretionary meaning thereby if a borrower wants, he can pay the EMI with interest and opt out of the moratorium option. On the other hand, if a borrower does avail such a moratorium then that would not lead to downgrading of the borrower’s credit rating or affect the risk classification of the loan. Further, availing the moratorium will not entail any change in the existing terms and conditions of the loan. The interest on EMI, however, shall continue to accrue on the outstanding amount and the collective interest for the 3 months shall become due and payable only after the expiry of deferment period.

This article addresses a set of peculiar issues that have arisen in view of the arrangement of repayment of loans in terms of RBI guidelines and the view taken by Courts in a few cases. The most glaring issue relates to the date of coinciding of an account becoming NPA with the declaration of 3 months moratorium period starting from 01.03.2020.

The Income Recognition and Asset Classification Guidelines (IRAC Guidelines) of RBI provide for a three-stage process before an account is declared as NPA. On default of the first 30 days, the borrower’s account is classified as Special Mention Account–1 (SMA-1) and if the instalment is overdue by 60 days, the account is classified as Special Mention Account–2 (SMA-2) and if the instalment is overdue by a period of 90 days, the account is classified as Non-performing Asset (NPA).

The case of Anant Raj Ltd. v. Yes Bank[1] filed before the Delhi High Court appears to be the first case on the issue as to whether an account having being declared SMA-2 on 01.03.2020 would be eligible to avail the moratorium period or not? The Delhi High Court interpreted the Guidelines in a manner that it provides a status quo even in the classification of any account which is already in default. The Court held that:

“The restriction on change in classification as mentioned in the regulatory package shows that RBI has stipulated that the account which has been classified as SMA-2 cannot further be classified as a non-performing asset in case the instalment is not paid during the moratorium period i.e. between 01.03.2020 and 31.05.2020 and status quo qua the classification as SMA-2 shall have to be maintained.

The Court further held that:

‘…for a period of three months there will be a moratorium from payment of that instalment. However, stipulated interest and penal charges shall continue to accrue on the outstanding payment even during the moratorium period. If post the moratorium period, borrower fails to pay the said instalment, classification would then automatically change as per the IRAC Guidelines.”

A similar proposition arose before the Bombay High Court in Transcon Sky City Pvt. Ltd. v. ICICI Bank [2], where the question for consideration was whether the moratorium period is excluded in the computation of the 90-day period for amounts that fell due prior to 1-3-2020 and which remain unpaid or in default. The Court prima facie held that the protection sought to be availed by Transcon Sky City by virtue of RBI circulars would clearly apply to all amounts due after 01.03.2020.

Another interesting yet distinct controversy has arisen before the Delhi High Court in Indiabulls Commercial Credit Ltd. v. SIDBI[3] where ICCL challenged the demand raised by Small Industrial Development Bank of India (SIDBI) for the month of April 2020. The Court considered whether the 3-months’ RBI moratorium is applicable to Non-Banking Financial Institutions (NBFC) or not? Unfortunately, RBI has not given any clarity on this issue and to twist the knife, the Indian Bank’s Association (IBA) circular leaves out NBFCs as beneficiaries of 3 month moratorium period. An indisputable argument of the NBFCs is that money is borrowed from the financial institutions in order to disburse loans to low income earners and smaller sectors. Naturally, these sectors will default in repayment by availing moratorium and if the financial institutions do not ease the repayment terms by NBFCs then it would be calamitous.

The orders passed by Delhi High Court and Bombay High Court have met with some criticism from the banking industry, apprehending its possible rippling effect on other accounts, and a possibility of other defaulters taking a shield of such orders to protect their accounts from any further downgrading.

The borrowers claim that the Courts have correctly interpreted RBI circulars to mean that status quo shall be maintained for all term loan accounts maintained with the banks as on 01.03.2020.

It would be interesting to see if the judgments are challenged by the banks or financial institutions, and what is the outcome. For the present however, the Courts have acted with a pragmatic approach to find a solution to the economic and financial difficulties of the borrowers.


*Arjun Garg is Advocate on Record and Partner at GSL Chambers

**Rati Tandon is an Advocate and Associate at GSL Chambers

[1] 2020 SCC OnLine Del 543 

[2] 2020 SCC OnLine Bom 626 

[3] 2020 SCC OnLine Del 573

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): A four-member bench comprising of Devender Kumar Sikri, Chairperson and Sudhir Mital, U.C. Nahata and G.P. Mittal, Members, directed closure of the matter alleging contravention of provisions of Sections 3 and 4 of the Competition Act 2002, by the Opposite Party 1 (OP 1)- Panchsheel Buildtech (P) Ltd. and Opposite Party 2 (OP 2)- Tata Capital Housing Finance Ltd.

The information was filed under Section 19(1)(a) by the informant stating that he had booked an apartment in one of the residential projects of OP 1. For payment of the same, the informant took loan from OP 2. A Tripartite Agreement was entered into between the informant and both the OPs, according to which OP 1 undertook to pay the loan installments (EMIs) to OP 2 till such time as the possession of the concerned apartment was not handed over to the informant. However, the informant alleged, OP 1 stopped paying EMI despite repeated communication. Further, he alleged, it was the duty of OP 2 to collect EMI from OP 1 but it failed to discharge its duty. Such non-payment of EMIs spoiled the informant’s CIBIL score. It was further alleged that OP 1 had arbitrarily cancelled allotment of the apartment made in favour of the informant and refused to return the down payment deposited by him. The informant averred that there was a nexus between the OPs and they indulged in illegal trade practices amounting to contravention of provisions of the Competition Act.

At the outset, the Commission noted that to prove an anti-competitive agreement under Section 3, the basic requirement to be fulfilled is the existence of an ‘agreement’. However, in the instant case, there was no evidence which could remotely suggest the existence of any agreement between the OPs. Moreover, the Commission noted that OP 1 was a real estate developer while OP 2 was a loan provider.  The two were not “engaged in similar or identical trade of goods or provision of services” or “at different stages or levels of production chain in different markets”. Since both the OPs were providing completely different services, they were neither horizontal competitors nor vertically integrated. As such their conduct could neither be examined under Section 3(3) or (4) of the Act. Furthermore, it was found that OP 1 was not a dominant player in the relevant market, thus, no contravention of Section 4 could be made out. Accordingly, the matter was directed to be closed under Section 26(2) of the Act. [Ashish Gupta v. Panchsheel Buildtech (P) Ltd.,2018 SCC OnLine CCI 45, order dated 11-06-2018]