Eden Garden Co Operative Housing Society Ltd vs M/s Mahaveer Builders

Subhash Chandra, Presiding Member

This consumer complaint under Section 21 (a) (i) of the Consumer Protection Act, 1986 (in short, ‘the Act’) has been filed by the complainant society which is a Co-operative Housing Society registered under the Maharashtra Co-operative Societies Act, 1960 and was registered on 03.12.2008. The complainant alleged deficiency in service on the part of the opposite party in not providing maintenance / amenities as agreed to in the Agreement for Sale arising on account of non-refund of the deposits received by the opposite party from the members of the complainant society and not providing proper books of accounts for the utilization of the same.

The facts of the case, in brief as stated by the complainant, are that the Eden Garden project comprising of 12 buildings having 315 flats was constructed in three phases commencing from 1997-98 and completed in 2003. The opposite party, Mahaveer Builders, had collected various amounts as security deposit for life time maintenance @ Rs.45 per sq. ft., security deposit for amenities, maintenance @ Rs.15 per sq. ft., M.S.E.B. charges @ Rs. 15 per sq. ft., society shares, legal fee, society deposit and telephone deposit for EPABX.  The Agreement for Sale in Clause 4 (c) (i) mentioned that the purchaser will deposit, seven days prior to the delivery of possession, Rs.30 per sq. ft. as security for due for observance and performance of their obligations by way of contribution towards the fund.  Further, Clause 4 (c) (ii) of the agreement mentioned that the fund so collected shall be invested by the promoters in any reputed Co-operative Bank or prescribed security or other secured investments yielding maximum return by way of interest / dividend for the purpose of utilizing the interest / earnings for meeting expenses relating to operation, maintenance, repairs, renovations, etc. of the buildings.  Any shortfall in this fund was proposed to be collected on a pro-rata basis, based on the area of the premises from the flat owners on monthly / quarterly / half-yearly basis.  It was also stated that vide Clause 4(c) (iii) the fund so constituted would be transferred to and be held by the body / bodies to be formed by the premises holders of different buildings in the said complex or the Apex body, if constituted, so that the management of these funds and expenditure therefrom be controlled by the owners through their respective body / bodies.  As per Clause 4 (f), it was agreed that the opposite party shall maintain a separate account in respect of the deposits towards this fund and shall utilize the amounts only for the purpose for which it was intended.  The complainants state that while the allottees paid the respective amounts prior to possession, the opposite party did not utilize the funds collected for the purpose of maintenance and provision of facilities and have not furnished proper accounts of this amount.  The complainants are stated to be consumers within the meaning of Section 2 (d) of the Act who have availed services of the opposite party.  The complainants state that it is a matter of record that the opposite party never called upon the flat owners for any payments above the amounts deposited by them and that there was no default of any payment on the part of the flat owners/members of the complainant society.  It is stated that while the opposite party was legally bound to form an Apex body of residents / flat owners, it was only after pressure from the residents that the complainant society was registered as a Co-operative Housing Society on 03.12.2008.  However, management and maintenance was not handed over to the society by the promoters on 22.03.2009 who at the General Body Meeting announced the setting up of a Provisional Management Committee to take over the management / maintenance of the society.  As funds of the corpus amount were not transferred, the Provisional Management Committee (PMC) gave notice on 18.04.2009 to the opposite party seeking audit of books of accounts, which were submitted for the period 01.04.1997 to 31.03.2009 vide letter dated 08.05.2009.  These accounts were submitted by the complainants to a certified Auditor who in his report dated 27.11.2009 pointed out various irregularities, discrepancies and illegalities including the fact that the major expenditure had been indicated in cash.  It is contended that the books of accounts are neither in conformity with the principle of accounting of Co-operative Societies Act nor the accounting standards of the Institute of Chartered Accountants of India (ICAI).  Therefore, it is stated that there is a clear deficiency in service on the part of the opposite party in the transactions relating to the maintenance of the society.  A notice was served on 20.01.2010 to the opposite party to refund security deposit for life time maintenance @ Rs.45 per sq. ft. and security deposit for amenities maintenance @ of Rs.15 per sq. ft. etc. It was contended that the opposite party was only a custodian of the deposits provided to it and that only interest accruing should have been used for the purpose of expenditure on maintenance. According to the complainants, as per the audit report submitted by the opposite party, Rs.2,13,13,800/- was the amount received towards this corpus fund.  The complainant submitted that the claim is limited to this account even though the amount deposited was higher.  The promoter assured at a meeting on 25.02.2010 to resolve the issue but despite follow up meetings the same was not done and the corpus account was not transferred to the complainant society.  It is also alleged that the opposite party has also not executed the final Deed of Conveyance which is pending before the District Consumer Forum, Pune in C.C. No. 387 of 2011.  The complainants are before this Commission with the prayer to direct that:

a) the opposite party and it's partners be held jointly and severally liable for the deficiency in service and for indulging in unfair trade practices;

b) the opposite party and its partners be jointly and severally ordered to furnish proper accounts for the deposit / amount admittedly received by them as corpus towards the maintenance / the amenities for the society and to refund the said deposit amounting to a sum of Rs.2,13,13,800/- (Rupees Two Crores Thirteen Lacs Thirteen Thousand Eight Hundred Only) along with interest @ 18% w.e.f. the date of deposit till the realization of the said amount;

c) the opposite party and its partners be jointly and severally directed to pay a compensation of Rs.1,57,50,000/- @Rs.50,000/- for 315 members of the complainant society on account of denial of proper maintenance of the society and deficiency in service arising due to non-refund of the deposit by the opposite party and the consequent poor maintenance of the society thereby causing mental agony, loss of peace and tension and the physical hardship suffered by the members of the society due to the various actions and inactions of the opposite party and its partners;

d) the opposite party and its partners be jointly and severally directed to pay a cost of Rs.2,00,000/- towards the cost of the present complaint.

The complaint was resisted by the opposite party by way of written arguments. It was stated that the partnership firm M/s Mahaveer Builders had been reconstituted and had been re-located to B-12, Eden Garden Co-operative Housing Society.  It is stated that the complaint is barred by limitation since the flat purchasers have been in possession of their respective flats since 2003 and the society was formed and registered on 03.12.2008 whereas the complaint has been filed on 26.03.2012 and therefore, is liable to be dismissed under Section 24 A of the Consumer Protection Act, 1986.  It is also stated that the complainant has filed C.C. No. 387 of 2011 before the District Consumer Forum, Pune, which is still pending.  Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of State Bank of India Vs. B.S. Agricultural Industries in Civil Appeal No. 2067 of 2002 decided on 20.03.2009 on the issue of limitation that the complaint be barred by limitation as neither any application for condonation of delay nor any sufficient cause for delay has been given. It is also stated that the opposite party is a proprietary concern and not a partnership firm as mentioned and, therefore, there is a wrong joinder of parties.  It is contended that the persons representing the complainant society are not representative members of the society and that only a resolution of the Managing Committee and not the General Body had been obtained. It is also stated that although the complaint is filed by the registered society as defined under Section 2(1) (m), the issues and relief sought is with regard to the affairs of the complainant society.  The complainants have filed an application under Section 12 (1) (c) conveying that the complaint is being made by more than one complainants having common interest in order to widen the scope of the complaint which cannot be entertained.  In view of the pendency of C.C. No. 387 of 2011 before the District Consumer Forum, Pune, this complaint cannot be entertained as it amounts to multiplicity of litigations.  On merits, it is stated that the amount of fund that was collected from the allottees of the flats was not sufficient to invest as a corpus from which the interest received could be utilized for maintenance.  Therefore, the said fund was being utilized as monthly maintenance was not being contributed by all members.  The formation of the society was delayed by the flat owners till 2008 and therefore the audit accounts were handed over to the complainant society on 08.05.2009.  As per the audited accounts, Rs.1.20 crore is still receivable by the opposite party from the members.  It is mentioned that the accounts reflect the interest on the income side from 1998 till 2009 and that the prayer for refund of Rs.2,13,13,800/- is unjustified.  The demand for refund of Rs.1,57,50,000/- is also without any basis since audited accounts reflected that the property and building was maintained between 1998 till 2009.  It is argued that the complaint be dismissed with costs since the complainant has suppressed material facts.  The number of members is 323 and not 315 and although the complainant has alleged lack of maintenance over the past 10 years, it has failed to prove who was maintaining the said property during this period.  The complainant has mentioned the crediting of interest on the said fund amount and stated that more than 35% of the flats have been rented out and, therefore, the application under Section 12 (1) (c) does not apply.  Reliance is placed on the order of this Commission in the case of United India Insurance Co. Ltd. Vs. Sri Dwarika Dhees Industries 2008(3) CPR 292 (NC) decided on 07.07.2008 which held that such matters could not be decided in summary proceedings under the Act.

Parties led their evidences way of affidavit and filed their written statements, rejoinder and written synopsis.

I have heard the learned counsel for both the parties and given thoughtful consideration to the material on record.

The case of the complainant is that the opposite party failed to create the corpus fund for the maintenance of the society and that it has failed to render proper audit of accounts to the complainant society which was formed by the flat owners of the Eden Garden Co-operative Housing Society.  It is averred that even though the project was completed in 2003, the society was constituted in 2008.  However, this is a case of continuous cause of action and, therefore, the complaint does not attract the provisions of Section 24 A of the Act to be barred on the ground of limitation.  It is contended that the opposite party was in default of the agreement under which it had collected various deposits on the assurance that the same would be parked in a separate account and only the interest / dividend earned thereon by way of investment would be used towards the maintenance of the society premises.  It is stated that as per the audit books of accounts for the period 1997 to 2003 provided by the opposite party, the corpus itself had been utilized and therefore there was a clear shortfall of Rs.2,13,13,800/- as per the report of the Auditor.  It is stated that the violation of this condition amounts to deficiency in service on the part of the opposite party for which the opposite party needs to compensate the complainant society.  In view of the fact that neither any demands were raised on account of non-payment of deposits by allottees, the opposite party could not now claim that the corpus was utilized by it on account of default by the members of the complainant society.  It is, therefore, argued that since the opposite party itself did not raise this issue earlier, it was being done with a mischievous intent. In view of the fact that the complaint was admitted and the cause of complaint is a continuing cause, the preliminary objection of the opposite party cannot be considered.  As regards the application under Section 12 (1) (c), reliance is placed on the order of this Commission in the case of United India Insurance Co. Ltd. Vs. Sri Dwarika Dhees Industries 2008(3) CPR 292 (NC) decided on 07.07.2008 which held that such matters could not be decided in summary proceedings under the Act.

On merits, the crux of the issue is whether there is a deficiency in service with regard to the service promised by the opposite party builder to the complainants / allottees of flats with regard to the Clauses 4 (c) (i) to (iii) & (f) of the Agreement to Sell which was signed between the opposite party and the allottees.  It is evident from this Agreement that the opposite party had collected a certain amount based upon the floor area of the allottees and had promised to create a corpus fund which would utilize the interest / dividend thereon as a sinking fund to defray the cost of maintenance and up keep of the society.  Even though the society was constructed in the year 2003, the opposite party constituted a Provisional Management Committee only in 2008.  It is only thereafter that the details of accounts pertaining to the said corpus were not available to members of the complainant society who could subject the same to detailed scrutiny and audit.  It is not denied by the opposite party that some amount of the corpus fund was also used for the purpose of maintenance although it is justified by him on the ground that certain members did not pay the maintenance amount.  Be that as it may be, it is apparent that the entire amount collected was not escrowed in the corpus fund from which only the interest / dividend amount was to be utilized.  This is a clear deficiency in service on the part of the opposite party for which the opposite party cannot seek to take shelter under procedural or legal issues when it itself undertook to utilize the fund in the manner in which the fund would remain intact and only the interest earning thereon would be utilized.  He cannot also resile from its responsibility now since the onus of creating the society is on him under the Agreement.

In view of the above, the complaint is liable to succeed.  Accordingly, the complaint is allowed.  The opposite party is directed to refund the amount of Rs.2,13,13,800/- admittedly received by the opposite party to the complainant society along with interest of 6% p.a. w.e.f. the date of deposit till realization of the said amount along with litigation cost of Rs.25,000/-.  This order shall be complied within eight weeks, failing which the rate of interest applicable shall be 9%.

The Consumer Complaint is disposed of with this order.