Introduction
In a recent decision1, the National Consumer Disputes Redressal Commission (NCDRC) held that an auction allottee of a property cannot be regarded as a 'consumer' under the Consumer Protection Act, 2019. The Commission observed that the transaction between the complainant and the Kanhangad Municipality, which had allotted the room through auction, did not establish a consumer-service provider relationship within the meaning of the Act.
Brief facts
Mr. K.M. George ("the complainant") participated in an auction conducted by the Kanhangad Municipality, represented through its Secretary and Chairman ("the opposite parties"), for Stall No. 8 and deposited a sum of Rs. 1,00,000 as earnest money on 28.11.2007. His bid was confirmed with the assurance that possession of the stall would be delivered by 15.12.2007. Relying upon this assurance, the complainant made necessary arrangements to establish a bakery and also paid advances for procurement of goods. However, possession was not handed over as undertaken. Upon issuing a notice on 05.01.2008, the complainant was informed that the delay was due to a pending writ petition filed by the previous tenant. Even after disposal of the said petition, the opposite parties failed to deliver possession. The complainant thereafter approached the High Court, which directed the municipality to consider his grievance. Instead of redressing the same, the opposite parties insisted that possession would be granted only upon execution of an agreement and cautioned that non-compliance would result in forfeiture of the earnest deposit. Faced with no viable alternative, the complainant was constrained to accept possession.
According to the complainant, the allotted room was unsuitable for conducting business and required substantial repairs. When he approached the opposite parties, they instructed him to undertake the repairs at his own expense, assuring that the costs would be adjusted subsequently. Acting on this assurance, the complainant spent Rs. 37,000 on repairs. Thereafter, the municipality demanded Rs. 1,69,332 as arrears of rent and even threatened prosecution. On 16.02.2009, the complainant executed an agreement and commenced his business operations. However, in May 2009, due to roof leakage, rainwater entered the premises and damaged his goods, compelling him to discontinue his business. When he sought a waiver of rent on account of these circumstances, the municipality instead cancelled his license. Alleging deficiency in service, the complainant lodged a consumer complaint. The Kerala State Commission partly allowed his claim, directing refund of the earnest deposit of Rs. 1,00,000 without any rent deduction and awarding Rs. 55,000 towards compensation and litigation costs. Dissatisfied with the limited relief, the complainant preferred an appeal before the NCDRC.
Contentions of the complainant
The complainant contended that, acting on the assurance of the opposite parties that possession would be delivered within the stipulated time, he had made requisite preparations to establish his bakery business. However, possession was handed over only after an inordinate delay and, even then, the premises were in a dilapidated state with a defective, leakage-prone roof, rendering them unfit for commercial use. Consequently, the complainant was compelled to incur substantial expenditure towards bakery equipment, inventory, and related arrangements.
It was further contended that although the State Commission directed refund of the amount of Rs. 1,00,000 deposited by him, it committed a grave error in failing to award interest on the said sum, notwithstanding the fact that the municipality had wrongfully withheld the money for over a decade. The complainant also highlighted that, in order to establish the bakery and meet the financial requirements of the venture, his wife was compelled to raise a loan of Rs. 5,60,000, thereby causing severe financial strain and hardship to the family.
Contentions of the opposite parties
According to the opposite parties, even after the disposal of the writ petition filed by the previous tenant, the complainant failed to approach them for taking possession and, instead, chose to institute another writ petition. They categorically denied the allegation that the premises were in a dilapidated or unfit condition, asserting that no such defects existed. It was further contended that, despite repeated reminders and opportunities, the complainant neglected to execute the requisite agreement and take possession in accordance with the prescribed procedure. Nonetheless, in an effort to resolve the matter, the municipal council passed a resolution permitting the complainant to take possession of the premises.
The opposite parties also contended that the alleged disruption in the complainant's business was not attributable to any lapse on their part but was solely the result of the complainant's own failure to pay rent despite having been served with due notice, which eventually compelled the municipality to cancel his license.
Observations of the NCDRC
The Bench, upon a careful examination of the facts on record and the rival submissions of the parties, observed that the dispute essentially arose out of an auction conducted by the municipality, in which the complainant voluntarily participated and was declared the successful bidder upon depositing the earnest money. It noted that the rights of the complainant were not founded on any service rendered by the municipality in the ordinary course but solely on the contractual obligations flowing from the auction process.
In this context, reliance was placed on the judgment of the Hon'ble Supreme Court in UT Chandigarh Administration v. Amarjeet Singh,2 wherein it was categorically held that an auction purchaser cannot be treated as a 'consumer' within the meaning of the Consumer Protection Act, as the relationship is not that of consumer and service provider but of a contractual/auction nature. Applying the said principle to the present case, the Bench held that since the complainant was only an auction allottee and therefore, he would not qualify as a consumer entitled to invoke the jurisdiction of the Consumer Forum. It was therefore concluded that the complaint before the State Commission, as well as the appeal preferred before the National Commission, were not maintainable in law and consequently stood dismissed.
Conclusion
In conclusion, the NCDRC reaffirmed the settled legal position that an auction purchaser does not fall within the definition of a "consumer" under the Consumer Protection Act, as the rights and obligations flow purely from contractual terms of the auction and not from any service rendered by the authority. Despite the hardships highlighted by the complainant, the Commission held that the remedy under the Consumer Protection Act was not available to him. The ruling underscores the principle that disputes emanating from auctions and allotments must be pursued through appropriate civil or contractual remedies, rather than the consumer fora.
Footnotes
1. KM George vs Secretary, Kanhangad municipality (First Appeal 1408 of 2021)
2. (2009) 4 SCC 660
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