There are instances when a consumer changes his/her mind and terminates a contract, despite there being no deficiency in service on the part of the trader or service provider. Some agreements stipulate a penalty for such breach. Is this permissible? Or can it be challenged?
CASE STUDY 1
Madhu Babu booked a flat with Sahara India Commercial Corporation, costing Rs 5,61,000. He paid an advance of Rs 28,050.
Later, on learning that the building was to come up near a garbage dump, he cancelled the booking and sought a refund. Sahara replied confirming the cancellation, but forfeited the advance in line with Clause 8 of the terms and conditions of the application form, which provides for deduction of 10 per cent of the total cost of the unit and refund without interest, when the applicant cancels the booking on his/her accord.
Madhu filed a consumer complaint, alleging that Sahara had not explained the terms and conditions to him at the time of booking. He claimed that even otherwise such a clause would not be binding, since it is arbitrary, illegal, unilateral and meant to enrich Sahara without there being any corresponding liability, in case of default in construction and handing over possession of the flat.
The District Forum held that Clause 8 of the application form constituted an unfair trade practice. It allowed Madhu’s complaint and directed Sahara to refund the entire amount, along with 12 per cent interest and costs of Rs 2,000. Sahara’s appeal against this order was dismissed by the Andhra Pradesh State Commission, too. So, it filed a revision petition before the National Commission.
Sahara’s main argument was that refund would have to be in accordance with the terms and conditions agreed as in the application form, and Madhu could not escape by disowning the applicability of those terms. The National Commission upheld this argument. It observed that this was not a case of refusal to refund the amount, but a stipulation that refund would be subject to certain deductions, which was permissible as Madhu himself wanted to back out of the deal. Since the value of the flat was Rs 5,61,000, Sahara would be entitled to deduct 10 per cent of this amount, which would be Rs 56,100. However, as Madhu had paid only Rs 28,050, Sahara was entitled to forfeit the entire amount.
Accordingly, the National Commission set aside the orders of the district forum as well as the state commission and dismissed the complaint.
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CASE STUDY 2
Santosh Padiyar applied for admission of his daughter, Mithali, to the nursery class of Girton High School in Mumbai. Both parents had signed the application form, which clearly mentioned it was an unaided minority school and the fees charged at the time of admission would not be refunded.
After selection, Padiyar paid the fees of Rs 35,000 and secured his daughter’s admission. A fortnight later, he approached the school with a request to refund the fees, as he was being transferred out of Mumbai by his employer. The school agreed to consider his request as a special case on submission of documents to substantiate his transfer. However, instead of producing these, Padiyar filed a complaint before the South Mumbai District Forum.
During the proceedings, it was discovered that Padiyar had given a false excuse about his transfer. The truth was that his daughter had subsequently obtained admission to the nearby Queen Mary School.
The forum observed that Girton School had never refused to render services. It was Padiyar who had voluntarily sought withdrawal of admission. Since Padiyar was an educated person, who had signed the admission form that clearly stated the conditions, the forum held he was bound by this stipulation and would not be entitled to a refund of the fees. Accordingly, the forum dismissed the complaint.
IMPACT
To file a consumer complaint, there must be a deficiency in service or a fault attributable to the trader or service provider. If a consumer backs out of a contract for personal reasons, he/she would not be entitled to file a claim.
The author is a consumer activist
