Case Note & Summary
The appeal arises from a consumer complaint filed by tenants (appellants) against a partnership firm (respondents) concerning a redevelopment project in Mumbai. The appellants were tenants in two flats in a building named 'Madhav Baug' owned by the respondents. The respondents decided to demolish the building and construct a new one. A Permanent Alternate Accommodation Agreement was executed on 20th September 2013, allotting Flat No. 801 on the 8th floor of the new building, with a completion period of 24 months from the commencement certificate plus a 6-month grace period. The redevelopment could not be completed on time. On 10th January 2015, the respondents executed an 'Indemnity-cum-Undertaking' agreeing to allot two flats (Nos. 301 and 302) free of cost if necessary approvals were not obtained within six months. Vacant possession was handed over in December 2014, and monetary consideration was paid. The contractual period expired in December 2016. The respondents continued paying rent for alternate accommodation until January 2019. Several letters and meetings took place. The appellants wrote to the escrow agent on 13th August 2018 to release the escrow papers. After further delays, the flats in escrow were released to the appellants on 17th December 2018. The complaint was filed on 6th February 2019 seeking allotment of the flats or compensation. The NCDRC dismissed the complaint as time-barred, holding that the cause of action arose on 10th July 2015 (six months after the Indemnity-cum-Undertaking) and the complaint filed on 19th February 2019 was beyond the two-year limitation period under Section 24-A of the Consumer Protection Act, 1986. The Supreme Court allowed the appeal, holding that the NCDRC erred in dismissing the complaint on limitation. The Court observed that there was a continuing cause of action due to ongoing negotiations, correspondence, and the escrow arrangement. The escrow agent released the flats only on 17th December 2018, and the complaint was filed soon thereafter on 6th February 2019. The Court emphasized that limitation is not meant to defeat a substantive right and that the complaint sought registration of the flats already in possession, not the original allotment. The matter was remitted to the NCDRC for adjudication on merits.
Headnote
A) Limitation - Continuing Cause of Action - Consumer Complaint - Section 24-A, Consumer Protection Act, 1986 - The complaint was not barred by limitation as the cause of action was continuing due to ongoing negotiations, meetings, and correspondence between the parties and the escrow agent, culminating in the release of flats in escrow only on 17th December 2018. The NCDRC erred in holding that limitation began on 10th July 2015 without considering the subsequent conduct. (Paras 6-10) B) Consumer Protection - Redevelopment Agreement - Indemnity-cum-Undertaking - Section 2(1)(o), Consumer Protection Act, 1986 - The appellants, as tenants, were consumers under the Act, and the dispute arose from a redevelopment agreement where the respondent developer failed to complete construction within the stipulated time. The Indemnity-cum-Undertaking dated 10th January 2015 provided for allotment of alternative flats if approvals were not obtained within six months. (Paras 2-3) C) Limitation - Substantive Right - Section 24-A, Consumer Protection Act, 1986 - Limitation is not meant to defeat a substantive right. Where parties are in earnest efforts to secure performance, the limitation period cannot be rigidly applied to bar a complaint filed after the failure of such efforts. (Para 11)
Issue of Consideration
Whether the complaint filed before the National Consumer Disputes Redressal Commission was barred by limitation under Section 24-A of the Consumer Protection Act, 1986, given the ongoing negotiations and escrow arrangement between the parties.
Final Decision
The Supreme Court allowed the appeal, set aside the NCDRC order, and remitted the matter to the NCDRC for adjudication on merits, holding that the complaint was not barred by limitation.
Law Points
- Limitation
- Continuing cause of action
- Consumer Protection Act
- 1986
- Section 24-A
- Substantive right
- Escrow agreement
- Indemnity-cum-Undertaking
