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Introduction
In a decisive ruling fortifying theroof to demonstrate speculative intent rests on the builder, and in this case, no documentary evidence was produced to substantiate such a claim. The complainants were therefore held to be "consumers" within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986.
On the second issue, the Commission observed that the builder had already received 95% of the total sale consideration, and all corresponding receipts explicitly mentioned "Zero" against the columns for Sales Tax and Service Tax. Neither the Allotment Agreement dated 26 April 2017 nor the Payment Schedule contained any clause authorizing the builder to levy additional taxes at the time of possession.
Despite this, the builder sought to impose a belated and arbitrary demand of ₹15,25,120, purportedly towards Service Tax and GST, and proceeded to cancel the flat when the complainants objected. The Commission found that the opposite parties had failed to produce any documentary evidence showing that such taxes were due or recoverable at a later stage. The demand, therefore, was held to be without legal or contractual basis.
The Commission concluded that the builder's conduct amounted to deficiency in service under Section 2(1)(g) of the Act, as it reflected clear fault and shortcoming in performance of contractual obligations. The arbitrary cancellation of the allotment was also found to be an unfair and unjust act causing mental and financial distress to the complainants.
Order Passed
- The complainants shall clear any legitimate outstanding dues (excluding the disputed tax demand) within the same period.
- Pay ₹3,00,000 as compensation for mental agony and harassment, and
- Pay ₹50,000 towards litigation costs.
In case of non-compliance, the complainants were granted liberty to initiate execution proceedings under Sections 25 and 27 of the Consumer Protection Act, 1986.
Legal Significance
This decision carries significant implications for homebuyers and real estate developers alike. The Commission reaffirmed that builders cannot impose arbitrary or retrospective financial demands under the pretext of statutory taxes such as GST or Service Tax, particularly when such charges are not explicitly stipulated in the Allotment Agreement or Payment Schedule.
By holding that the burden of proof lies on the builder to demonstrate any commercial intent or liability for additional taxes, the Commission strengthened consumer protection in property transactions. The judgment also reinforces that once a builder accepts substantial payment here, 95% of the total sale consideration the contractual terms cannot be unilaterally altered to the detriment of the buyer.
Moreover, the ruling highlights the scope of "deficiency in service" under Section 2(1)(g) of the Consumer Protection Act, 1986, emphasizing that deviation from contractual commitments, arbitrary cancellations, and lack of transparency in billing practices constitute actionable misconduct.
In essence, the judgment promotes fairness and accountability in the real estate sector, ensuring that homebuyers are protected from coercive demands and cancellations that are not grounded in law or agreement.
Author's View
The decision in Rajeev Menon & Ors. v. E-Homes Infrastructure Pvt. Ltd. is a commendable reiteration of the judiciary's commitment to safeguarding consumer interests in the real estate sector. The Commission's reasoning reflects a pragmatic and consumer-centric approach ensuring that developers remain bound by the financial and contractual transparency expected of them.
The case highlights that builders cannot retrospectively burden buyers with unforeseen tax liabilities or use such claims as a pretext to cancel allotments. The Commission rightly emphasized that contractual terms must be clear and enforceable, and any ambiguity should not be exploited to the disadvantage of the consumer.
Further, by recognizing the complainants as legitimate "consumers" despite their residence abroad, the ruling widens the protective ambit of the Consumer Protection Act to include non-resident Indians who invest in Indian housing projects for genuine residential purposes. Overall, this judgment strengthens the principle that trust and good faith are integral to real estate transactions and that developers must act with fairness, accountability, and adherence to statutory obligations.
Footnotes
1. COMPLAINT NO.-1450/2018
2. I (2017) CPJ 17(NC)
3. CC-1122/2018
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