The National Consumer Disputes Redressal Commission has set aside a State Commission order that treated cheques from a third party as refund of consideration under a flat sale agreement, holding that the burden of proving refund lies on the party asserting it and cannot be shifted to the complainant. The Commission directed specific performance of the agreement, requiring delivery of possession within three months upon payment of the balance consideration, with a fallback refund at 18% interest if the flat is unavailable.
Background & Facts
The Dispute
The appellants, Subhankar Bhattacharjee and Sutanuka Bhattacharya, entered into an Agreement for Sale dated 30.05.2010 with M/s. Progressive Developers (respondent no. 1) for purchase of a self-contained flat bearing no. 1B on the first floor south-west side in a G+3 storied building, measuring about 1100 sq. ft. super built-up area, along with one car parking space and common amenities, situated at premises no. 1/27, Khanpur Road, Kolkata-700047. The total consideration was Rs. 24,40,000/-, of which the appellants paid Rs. 9,80,000/- on different dates against proper receipts. As per clause 4 of the agreement, the respondents were obligated to complete construction fit for occupation on or before 01.02.2011.
Key Facts
- 30.05.2010: Agreement for Sale executed between appellants and respondents for flat at Rs. 24,40,000/-
- 01.02.2011: Stipulated date for completion of construction fit for occupation
- 01.04.2015: Appellants issued legal notice calling upon respondents to accept balance consideration of Rs. 14,60,000/- and execute deed of conveyance
- 22.04.2015: Respondents replied expressing inability to perform due to injunction order by a civil court; claimed refund of Rs. 6,00,000/- via two cheques of Rs. 3,00,000/- each from M/s. United Construction; asserted agreement stood cancelled
- 19.05.2015: Appellants replied denying refund and disputing respondents' claims
- 27.03.2019: NCDRC in FA/1291/2016 set aside State Commission's dismissal on maintainability and remanded for decision on merits
- 17.10.2019: State Commission passed impugned order directing refund of Rs. 3,80,000/- with 8% simple interest from 28.10.2015 and Rs. 10,000/- litigation costs; held appellants received Rs. 6,00,000/- from United Construction and ceased to be consumers
- 08.09.2026: NCDRC pronounced judgment in present appeal
Procedural History
- Complaint filed before State Consumer Disputes Redressal Commission, West Bengal (Complaint No. 413/2015) seeking specific performance, possession, completion certificate, compensation for mental agony, and litigation costs
- State Commission initially dismissed complaint on maintainability grounds
- Appellants filed appeal (FA/1291/2016) before NCDRC
- 27.03.2019: NCDRC set aside dismissal and remanded for merits hearing
- 17.10.2019: State Commission passed impugned order on remand
- Present appeal: First Appeal No. NC/FA/2275/2019 filed against impugned order
- 08.09.2026: Judgment delivered by NCDRC
The Parties' Positions
Appellants: Contended that the State Commission erred in treating payment by M/s. United Construction (a third party not party to the agreement) as refund without documentary evidence or legal basis; burden of proving refund lay on respondents; respondents admitted during cross-examination that separate financial transactions existed between appellants and United Construction; mere encashment of cheques does not amount to cancellation of contract absent agreement or acknowledgment.
Respondents: Contended appellants suppressed material fact of receipt of Rs. 6,00,000/-; encashment demonstrated acceptance of refund and intention to terminate agreement; proprietor of United Construction (Dipak Saha) is husband of respondent no. 2, establishing nexus; delay in asserting rights indicates abandonment.
Relief Sought
Appellants prayed for setting aside the impugned order dated 17.10.2019 and direction for specific performance of the agreement with delivery of possession, or alternatively, refund of Rs. 9,80,000/- with interest and compensation.
The Legal Issue
The central questions were: (1) Whether the State Commission erred in treating cheques issued by a third party (M/s. United Construction) as refund of consideration under the Agreement for Sale without proof of authorization or linkage to the agreement; (2) Whether the burden of proving refund was correctly placed on the appellants or lay on the respondents who asserted the plea; (3) Whether the State Commission exceeded its jurisdiction in granting refund instead of specific performance when the complaint sought execution of conveyance and possession.
Arguments Presented
For the Appellants
Counsel contended that the Agreement for Sale and payment of Rs. 9,80,000/- were admitted facts. The respondents failed to perform contractual obligations within stipulated time. The alleged payment of Rs. 6,00,000/- was made by M/s. United Construction, which had no privity of contract with appellants regarding the flat transaction. No documentary evidence established that United Construction was acting as agent or sister concern of respondents or was authorized to make payment on their behalf. Respondents admitted during cross-examination (Question 17) that Dipak Saha of United Construction had separate financial transactions with complainants. The burden of proving refund lay entirely on respondents, which they failed to discharge. Mere encashment of cheques does not amount to cancellation of contract absent any agreement or acknowledgment. The complaint sought specific performance; the State Commission exceeded jurisdiction in granting refund without cogent reasons.
For the Respondents
Counsel argued appellants did not approach the State Commission with clean hands and suppressed receipt of Rs. 6,00,000/-. Encashment of cheques demonstrated acceptance of refund and intention to terminate agreement. Relationship between respondents and United Construction was evident as Dipak Saha (proprietor) is husband of respondent no. 2. Delay of several years in asserting rights indicated appellants had accepted refund and abandoned agreement. The State Commission correctly appreciated evidence and passed a well-reasoned order.
The Court's Analysis
The Commission examined the affidavit of appellant no. 1 filed on 01.12.2020, which detailed a trustworthy relationship with Dipak Saha of United Construction (husband of respondent no. 2). Appellants stated they gave financial assistance of Rs. 6,00,000/- in cash to Dipak Saha for his business against proper receipts, and also lent Rs. 4,00,000/- by cheque dated 30.05.2010. The Rs. 6,00,000/- returned via two cheques (nos. 830769 dated 09.03.2012 and 830780 dated 11.04.2012, both drawn on Punjab and Sind Bank) was towards refund of that separate financial assistance, not consideration for the flat. The receipt for Rs. 6,00,000/- was returned to Dipak Saha upon refund.
"From the aforesaid answers given to the questions raised by the Complainants, we are of the view that their version of the transaction pertaining to two cheques amounting to Rs. 6.00 lakhs paid by Mr. Dipak Saha on behalf of M/s. United Constructions is not entirely credible. This is especially so considering the answer 'Yes' given by the Respondent No. 2 to Question No. 17 in which she was asked to admit that Mr. Dipak Saha of M/s. United Constructions (i.e. her own husband) had separate financial transactions with the Complainants. The answer 'Yes' to this question virtually amounts to an admission of the Complainants' version of the disputed transaction."
The Commission found respondent no. 2's answer to Question 18 contradictory - she admitted Rs. 4,00,000/- was paid to United Construction but claimed it was from the advance of Rs. 9,80,000/-, while simultaneously stating in answer to Question 5 that the sale agreement did not mention United Construction as an ancillary company. Answers to Questions 20-22 showed no denial, only "no idea" about transactions with her own husband.
"Suffice it to say, had the Sale Agreement been actually cancelled as claimed by the Respondents, they would be surely expected to have such development recorded at the relevant stage itself, in returning the amount of Rs.6.00 lakhs by way of two separate cheques, on behalf of M/s. United Constructions, and Mr. Dipak Saha, husband of the Respondent No. 2 ought to have at least delivered such cheques under a forwarding letter to clarify that such payments were not being made by him on behalf of M/s. United Constructions towards discharge of any loans amount from the Complainants, but by way of partial refund of the consideration price paid to Mr. Saha's wife representing a different legal entity namely Ms. Progressive Developers, which however they failed to do."
The Commission held the State Commission erred in shifting the burden of proof to appellants to show the Rs. 6,00,000/- was not refund of consideration. The burden lay squarely on respondents to prove the payment was a partial return of consideration by an entity stranger to the sale agreement, which they failed to discharge. The balance of probabilities overwhelmingly favored appellants.
The Verdict
The appeal was allowed. The impugned order dated 17.10.2019 was set aside. The Commission directed: (i) Respondents shall deliver lawful possession of the apartment to appellants within three months from the date of the order (08.09.2026) after receiving the balance amount of Rs. 14,60,000/-; (ii) If the apartment is unavailable due to civil litigation or other genuine reason, respondents shall deliver an alternative dwelling unit of similar dimensions in a comparable area of Kolkata; (iii) If even an alternative apartment is genuinely unavailable, respondents shall refund the total amount of Rs. 9,80,000/- received as partial consideration along with interest at 18% p.a. (the rate stipulated in the agreement for delay by complainants) calculated from each respective date of deposit/payment; (iv) Additional litigation costs of Rs. 40,000/- awarded to appellants; (v) Compliance must be completed within three months, failing which outstanding dues shall attract interest at 21% p.a. till final realization.
What This Means For Similar Cases
Burden of Proof on Refund Cannot Be Shifted
The judgment reinforces that the party asserting a plea of refund bears the burden of proving it by cogent evidence. A consumer forum cannot shift this burden to the complainant to disprove a refund claim, especially when the alleged refund comes from a third party not privy to the agreement. Practitioners should:
- Insist on strict proof of authorization or agency when third-party payments are claimed as refund
- Highlight absence of forwarding letters, cancellation deeds, or acknowledgments linking third-party payments to the contract
- Object to any attempt to treat mere encashment of cheques as acceptance of refund or contract termination
Third-Party Payments Require Clear Nexus to Contract
Cheques issued by an entity not party to the agreement cannot be presumed as refund of consideration without documentary evidence establishing the nexus. The Commission relied on the respondent's own cross-examination admission (Question 17) that separate financial transactions existed. Key takeaways:
- Cross-examination admissions can decisively undermine a refund defence
- Contradictory pleadings (claiming United Construction is ancillary while agreement is silent) weaken credibility
- Separate financial relationships between parties must be clearly delineated in evidence
Specific Performance Remains Primary Relief for Homebuyers
Where a homebuyer has paid substantial consideration and remains ready and willing to pay the balance, specific performance with possession is the appropriate remedy, not refund. The Commission crafted a tiered remedy: (1) possession of agreed flat, (2) alternative comparable flat, (3) refund with contractual interest rate (18% p.a.) from respective payment dates. This structure:
- Prioritizes the homebuyer's legitimate expectation of a home
- Uses the agreement's own penalty clause (18% for delay by buyer) as the interest rate for seller's default
- Imposes a penal interest of 21% for non-compliance with the compliance deadline
- Provides a clear three-month timeline for execution
Consumer Status Not Lost by Third-Party Transactions
The State Commission's finding that appellants ceased to be consumers upon receiving money from United Construction was rejected. Consumer status under the Act is determined by the transaction in question - here, the agreement with Progressive Developers. Separate financial dealings with a related party do not extinguish consumer rights under the primary contract.
