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Legal limits & liability of homebuyers’ associations

Posted on by Track2Realty
Track2Realty Investigation Part-II

Bottom Line: What are the legal limits & liabilities of homebuyers’ associations when they try to function like a judicial authority? Ravi Sinha takes a look.

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India PropertyThe homebuyers’ acting as de facto consumer courts raises a fundamental question as to whether any of these buyers’ associations have any legal right to intervene suo motto and address the grievances of the buyers. The legal opinion is pretty clear on this.

Advocate Aditya Pratap of Bombay High Court categorically says that the homebuyer associations do not have the legal authority of consumer courts to decide disputes. Further, even if the by-laws of these associations contain dispute resolution mechanisms, they cannot bar any person from availing his statutory remedies under the law. If the by-laws of a homebuyer Association restrict a member from approaching the courts, it would amount to being an agreement in restraint of legal proceedings, which is void under Section 28 of the Indian Contract Act, 1872.

“While a homebuyer association may publish advertisements inviting consumers to share their grievances and seek advice, it may not serve the purpose as the litigants have to be limited to that particular project in respect of which consumer rights have been violated,” says Aditya.

Legal teeth with homebuyers’ associations? 

Homebuyers’ associations are not consumer courts; can only arrange legal help, protest & get media spotlight

If not satisfied with buyers’ associations, a homebuyer can approach the court

No association can restrict or bar consumers with their legal rights 

While class actions are allowed in India, they must conform to the requirements of Section 12(1)(c) of the Consumer Protection Act, 1986. As per Section 12(1)(c) one or more consumers, having the same interest and with permission of District Forum, can file a complaint on behalf of all interested consumers. It may be noted that the term ‘Consumer Association’ is used in Section 12(1)(b) but not in 12(1)(c). Further, the definition of the term ‘Consumer’ in Section 2(d) does not include any Association.

This means that a class action under Section 12(1)(c) can be filed only by all homebuyers together and not through a homebuyers association. This has been explained by the NCDRC (National Consumer Disputes Redressal Commission), in a reference made to it has held, “Complaint under Section 12(1)(c) can be filed only on behalf or for benefit of all consumers, having common interest and grievance. No society, firm, association or group of societies can file a complaint under Section 12(1)(c) because the term ‘consumer’ doesn’t include them.”

Therefore, while homebuyer associations may be gung-ho about class action consumer complaints, the truth is that they are legally incompetent to file them. A class action under 12(1)(c) can be filed only by all homebuyers having common interest in the project, not part. No homebuyers association can file a class action under 12(1)(c).

Next: Is media fuelling homebuyers’ associations?

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