Legal Boost to Unionisation of Consumers

Eight essential points to know

Corresponding with the increase in exploitation of flat buyers by several unscrupulous builders, a large number of buyers have commenced litigation against builders. Since it may be difficult to fight a builder alone, consumers have taken advantage of the provision under Section 12 (1) (b) of Consumer Protection Act, 1986, which allows a voluntary consumer association (VCA) to file a case on behalf of one or more consumers.

About 43 cases were filed by consumers at National Commission, against various builders including Unitech, BPTP, Parsvnath, Jaiprakash Associates, Supertech and TDI. The value of the disputes was clubbed to reach the pecuniary jurisdiction.

The builders had objected to cases being contested collectively by flat buyers. Apparently, the term ‘voluntary consumer association’ in Section 12 (1) (b) of Consumer Protection Act had not been interpreted either by the National Commission or by the Supreme Court of India. Subsequently, the National Consumer Disputes Redressal Commission (NCDRC) set up a special bench headed by justices VK Jain and Dr BC Gupta and Dr SM Kantikar to hear the matter. This bench dismissed the challenge by the builders on maintainability of the complaints filed by homebuyers under Section 12 (1) (b) of Consumer Protection Act, 1986, and held that a

voluntary consumer association could file a case on behalf of affected consumers. The bench heard about 35 lawyers, representing different VCAs who were complainants in these 43 different cases, along with 15 lawyers representing different builders.

The bench has laid down the following tests to judge which VCA can file cases under Section 12 (1) (b) collectively for consumers:

1. Registration: The VCA must be registered under the Companies Act or under any other law for the time being in force. An association of persons which is not registered as a recognised consumer association will not qualify to institute a consumer complaint under Section 12 (1) (b) of the Act.

2. Objectives of association: To protect, safeguard or watch the cause of consumers should be one of the main objectives of a voluntary consumer association. In fact, even a residents’ welfare association (RWA) can file a case if its main objective is to protect, preserve, advance and promote the cause of consumers in general or its members. The test is that so long as the association has an objective of safeguarding or redressal of consumer grievances and is registered, it will be covered as a voluntary consumer association under Section 12 (1) (b) of the Act. Also, Consumer Protection Act being a welfare legislation enacted for the advancement of rights and interests of consumers, a liberal and wider interpretation should be preferred over a narrow and technical interpretation to serve the intended purpose.

3. Association not for financial gains: Another test is that the members must come together voluntarily and not due to any pressure or influence, or without being involved because of financial considerations of earning profit or remuneration using such an association. It held that if the objective of the association is to get financial gain for its members it would not qualify as Voluntary Consumer Association.

4. VCA can be set up anytime: On the timing of forming of a voluntary consumer association, the bench relied upon Engineers India Ltd versus Ghaziabad Development Authority & Anr I (2000) CPJ 8 (NC) and came to this ruling: whether

Association members must come together voluntarily and not due to any pressure or influence, and not because of financial considerations of earning profit or remuneration using such an association.

the association was formed before or after the cause of action arose is not material. It followed the decision of a five-member bench in this case and held that even if the association was formed after the grievance arose, it would qualify as a voluntary consumer association. The association will be covered under the definition of Section 2 (b) (ii) of the Act even if it is formed after taking possession of the flats, in order to protect and promote the common interests of consumers.

5. Same relief claimed against same person: The bench relied upon the NCDRC judgement in Lotus Panache Welfare Association versus M/s Granite Gate Properties Pvt. Ltd, CC No. 120 of 2015. It was contended that a voluntary consumer organisation could only seek reliefs that were general in nature, and that a society that had no privity of contract with them could not claim reliefs such as delivery of possession of the apartment and payment of compensation to the individual allottees. The National Commission held that that if the reliefs claimed were of the same nature and against the same person, such an association was competent to file a complaint for and on behalf of the persons. The Commission said that the complaint by a recognised consumer association, such as the complainant in this case, was maintainable in respect of the reliefs sought in this complaint. This judgement of National Commission was unsuccessfully challenged before the Supreme Court, vide dismissal order dated 16.10. 2015.

6. Protecting the interests of consumers: The bench further relied upon the NCDRC judegment in Amrapali Sapphire Flat Buyers Welfare Association versus Amrapali Sapphire Developers Pvt. Ltd & Anr, CC No. 816 of 2016, where it was held that if the objective of the association included advocating the cause of its members to protect their interests, it would qualify as a voluntary consumer association. The Supreme Court had dismissed the challenge to this judgement vide its order dated 21.02.2017.

7. Trust is not VCA: Another decision given was that a charitable trust would not qualify as a VCA under Section 12 (1) (b) of the Act. The bench cited Pratibha Pratisthan & Ors versus Manager, Canara Bank & Ors, dated 07.03.2017, holding that a trust could not be a complainant under Sections 2 (b), 2 (c), 2 (d) and 2 (m) of the Act. Two of the 43 cases before this bench were filed by a trust, Consumer Online Foundation, against Supertech. Bejon Kumar Mishra, representing the trust, argued before the bench but the argument in favour of a trust being a voluntary consumer association was rejected. 8. Company can be individual consumer: The bench relied on Power Transmission Corporation versus Ashok Iron Works Pvt. Ltd (2009) 3 SCC 240 where it was held that a company could be a consumer u/s 2 (1) (a) and could file a case like any other individual.