Builder’s Non-Delivery + Dishonoured Cheques = Deficiency in Service & Unfair Trade Practice | CPA 2019, Section 2(1)(o) & 2(1)(r) : Maharashtra SCDRC

The State Consumer Commission, Maharashtra, has delivered a decisive ruling affirming that developers who accept full payment for residential units but fail to deliver possession, transfer the unit to third parties, and issue dishonoured cheques to discharge admitted liabilities commit grave deficiency in service and unfair trade practices under the Consumer Protection Act, 2019. This judgment reinforces consumer rights against predatory real estate practices and establishes clear monetary remedies for prolonged financial exploitation.

Background & Facts

The Dispute

The complainants, Mr. Mohamed Jalil Abdulla Harnekar and his wife, Mrs. Asger Shabnam Mohamed Jalil Harnekar, invested their entire life savings to secure a residential flat in Mumbai. They were approached in 2013 by Opposite Parties Nos. 1 and 2 - Saquib Shaikh Ahmed Mukadam and Sajid Shaikh Ahmed Mukadam - who represented themselves as promoters of the "Dongri Project" under the name of Opposite Party No. 3, M/S. Universal Housing & Infrastructure Co. The complainants, who had no commercial interest in real estate, relied on these representations to book a 660 sq. ft. flat for Rs. 60,00,000.

Key Facts

• The complainants paid Rs. 30,00,000 via RTGS on 07.08.2013 as earnest money, acknowledged by an Allotment Letter dated 28.11.2013.
• An additional Rs. 10,00,000 was paid in cash in three instalments, with receipts issued.
• Despite repeated requests, the Opposite Parties refused to execute a registered Agreement for Sale as mandated under Section 4 of the Maharashtra Ownership Flats Act, 1963.
• The Dongri Project was never commenced, and no construction occurred.
• In 2016, the Opposite Parties proposed shifting the complainants to the "Bay View" project in Mazgaon, with a revised consideration of Rs. 90,00,000.
• The complainants paid the balance Rs. 40,00,000 between 15.01.2016 and 12.09.2018 via RTGS and cash.
• Despite full payment of Rs. 90,00,000, no Agreement for Sale was executed.
• The complainants later discovered that Flat No. 503 in the "Bay View" project had been sold to a third party.
• On 07.09.2019, the Opposite Parties admitted liability for Rs. 1,15,00,000 (Rs. 90,00,000 + Rs. 25,00,000 compensation) in writing.
• Three cheques dated 09.09.2019 for Rs. 1,15,00,000 were dishonoured on 17.10.2019 for "Insufficient Funds."
• A notarised Memorandum of Understanding dated 29.06.2021 admitted a total liability of Rs. 1,25,00,000 and issued four cheques for the same amount, all dishonoured on 24.09.2021.
• During police proceedings initiated on 25.05.2022, Opposite Party No. 2 paid Rs. 20,00,000, reducing the liability to Rs. 1,05,00,000.
• Cheque No. 0147 dated 31.12.2023 for Rs. 25,00,000 and Cheque No. 155 dated 30.04.2024 for Rs. 5,00,000 were also dishonoured.
• An undertaking dated 10.02.2023 admitted liability of Rs. 1,25,00,000 and stipulated 15% interest on default.
• The complainants, residing in Mangaon, Raigad (150 km from Mumbai), made repeated trips to Mumbai for follow-ups, with no response from the Opposite Parties.

Procedural History

• 28.11.2013: Allotment Letter executed for Dongri Project.
• 07.08.2013: First payment of Rs. 30,00,000 made.
• 15.01.2016 to 12.09.2018: Balance Rs. 40,00,000 paid for Mazgaon project.
• 07.09.2019: Written admission of liability for Rs. 1,15,00,000.
• 17.10.2019: Cheques dishonoured.
• 29.06.2021: Notarised MOU admitting Rs. 1,25,00,000 liability; cheques issued and dishonoured.
• 25.05.2022: Police complaint filed under IPC Sections 403, 406, 417, 418, 420 read with 34.
• 08.02.2023: Police statement recorded; partial payment of Rs. 20,00,000 received.
• 31.12.2023: Dishonoured cheque for Rs. 25,00,000 issued.
• 30.04.2024: Dishonoured cheque for Rs. 5,00,000 issued.
• 11.02.2025: Notice issued to Opposite Parties via publication.
• 22.09.2025: Proceedings proceeded ex-parte as Opposite Parties failed to appear.
• 17.06.2026: Judgment delivered by State Consumer Commission, Maharashtra.

Relief Sought

The complainants sought:

• Refund of Rs. 1,05,00,000 with 15% interest from 29.06.2021.
• Rs. 25,00,000 compensation for police station assurance (from January 2024).
• Alternative: Allotment and registration of a similar flat in the "Bay View" project.
• Rs. 20,00,000 compensation for mental agony and travel expenses.
• Rs. 5,00,000 as litigation costs.

The Legal Issue

The central question was whether a developer’s failure to deliver possession after receiving full payment, coupled with the alienation of the allotted unit to a third party and repeated issuance of dishonoured cheques towards admitted liability, constitutes deficiency in service and unfair trade practice under the Consumer Protection Act, 2019, and whether the complainants are entitled to refund, interest, and compensation.

Arguments Presented

For the Appellant/Petitioner

The complainants’ advocate argued that:

• Housing construction is expressly defined as a "service" under Section 2(42) of the Consumer Protection Act, 2019.
• Failure to execute a registered Agreement for Sale under Section 4 of the Maharashtra Ownership Flats Act, 1963, is a statutory violation and per se deficiency in service.
• The transfer of the allotted flat to a third party after receipt of full consideration is a fraudulent act and an unfair trade practice under Section 2(47).
• The repeated issuance of cheques for admitted liabilities, all dishonoured, constitutes a continuing cause of action under Section 69 of the Act, saving the complaint from limitation.
• The written admissions through MOUs, undertakings, and police statements establish unequivocal liability.
• The complainants suffered mental agony, financial loss, and incurred substantial travel costs due to the Opposite Parties’ evasive conduct.

For the Respondent/State

No appearance or submission was made by any of the Opposite Parties. The matter proceeded ex-parte.

The Court's Analysis

The Commission conducted a meticulous review of the documentary evidence, including Allotment Letters, payment receipts, MOUs, dishonoured cheques, police complaints, and written admissions. It held that the Opposite Parties’ conduct was not merely a breach of contract but a systemic exploitation of consumers.

"A builder or developer accepting the entire sale consideration, failing to construct the project, failing to register the statutory agreement, selling the allotted flat to a third party, and subsequently issuing bogus cheques towards an admitted refund liability constitutes a case of Deficiency in Service under Section 2(11) and severe Unfair Trade Practice under Section 2(47) of the Consumer Protection Act, 2019."

The Commission emphasized that the complainants had paid 100% of the consideration, yet received neither possession nor a registered agreement. The alienation of the flat to a third party rendered the primary relief of allotment infructuous. The repeated issuance of cheques, all dishonoured, was not a mere financial default but a deliberate deception designed to delay and evade liability.

The Commission rejected the complainants’ prayer for 15% interest, noting that while the promissory note stipulated such a rate, the principles of restitution require a balanced approach. It held that 10% per annum was just and equitable, considering the prolonged deprivation of funds and the need to deter predatory practices without imposing punitive rates.

The Commission further observed that the complainants, who were non-residents of Mumbai, were compelled to make repeated trips over 150 km for over a decade, facing only evasive responses. This constituted severe mental agony and physical harassment, warranting a lump-sum compensation.

The Commission also noted that the Opposite Parties’ conduct, including the use of multiple corporate entities to obscure liability, demonstrated a pattern of deliberate evasion, justifying joint and several liability.

The Verdict

The complainants succeeded. The State Consumer Commission, Maharashtra, held that Opposite Parties Nos. 1 to 4 are jointly and severally guilty of deficiency in service and unfair trade practice. The Commission ordered:

• Refund of Rs. 1,05,00,000 with interest at 10% per annum from 29.06.2021 until actual realization.
• Compensation of Rs. 50,000 for mental agony, physical harassment, and financial distress.
• Litigation costs of Rs. 25,000.
• Compliance within 60 days of receipt of the order.
• Failure to comply will trigger an enhanced interest rate of 15% per annum on the principal amount from the date of default until realization.

What This Means For Similar Cases

Builders Cannot Evade Liability Through Corporate Structures

• Practitioners must now argue that promoters who operate through multiple entities to obscure liability are jointly and severally liable under the Consumer Protection Act.
• Evidence of shared management, control, and financial interlinking between entities is sufficient to pierce the corporate veil.

Dishonoured Cheques Are Not Just Criminal Offences - They Are Evidence of Unfair Trade Practice

• Issuing cheques to discharge admitted liabilities, even if later dishonoured, constitutes a continuing cause of action under Section 69 of the Consumer Protection Act.
• Such conduct, when repeated, strengthens the case for unfair trade practice under Section 2(47), independent of Section 138 NI Act proceedings.

Compensation Must Reflect the Human Cost of Real Estate Fraud

• Consumer forums must award compensation for mental agony and travel expenses when consumers are forced to travel long distances repeatedly due to developer evasion.

• A mere refund with interest is insufficient; the Act mandates restoration of the consumer’s dignity and peace of mind.

• Always document every written admission, email, MOU, or police statement - these are critical to proving liability.

• File police complaints early to create a formal record of admission and extend limitation.

• Seek compensation for emotional distress as a standalone claim, not merely as an add-on to refund.