Supreme Court clarifies criteria for class action suit

class action

The Supreme Court overruled a judgment passed by the National Consumer Disputes Redressal Commission (NCDRC) in holding that in class action suits, the oneness of the interest is akin to a common grievance against the same person.

In Anjum Hussain & Ors v Intellicity Business Park Pvt Ltd & Ors case, 44 persons including Anjum Hussain had booked office space in a project by Intellicity Business Park consisting of residential units, shops and offices. As the builder failed to deliver possession in four years, they approached the NCDRC seeking a refund of the amounts paid to the builder along with interest and compensation.

They also filed an application seeking permission under section 12(1)(c) of the Consumer Protection Act to institute this complaint on behalf of all such buyers of commercial units.

This application was dismissed by the NCDRC holding that the class action under section 12(1)(c) of the consumer protection act on behalf of not only the complainants but all the allottees of the commercial units in the project is not maintainable. The NCDRC observed that though all the appellants had a common grievance, the respondent had not delivered possession of the respective units booked by them and thus the respondent was deficient in rendering service, it was not shown how many of the allottees had booked the shops or commercial units solely for the purchase of earning their livelihood by way of self-employment.

In allowing the appeal against the NCDRC order, the Supreme Court observed that the primary objective behind permitting a class action such as a complaint under section 12(1)(c) of the consumer protection act was to facilitate the decision of a consumer dispute in which a large number of consumers are interested without each of them filing individual complaints. It is necessary that such a complaint is filed on behalf of or for the benefit of all the persons having such a community of interest.

A complaint on behalf of only some of them, therefore, will not be maintainable. If, for instance, 100 flat buyers in a project have a common grievance against the developer and a complaint under section 12(1)(c) is filed on behalf of or for the benefit of say 10 of them, the primary purpose behind permitting a class action will not be achieved since the remaining 90 aggrieved persons will be compelled to file individual complaints.

This, in the court’s view, could not have been the legislative intent. The term “persons so interested” and “persons having the same interest” used in section 12(1)(c) mean the persons having a common grievance against the same service provider.

In holding that the NCDRC had completely lost sight of the principles clearly laid down by the Supreme Court in the earlier decisions, it allowed the appeal and set aside the NCDRC’s order under appeal holding that the appellant’s application was maintainable.

The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at Readers should not act on the basis of this information without seeking professional legal advice.