Doctrine of Lis Pendens: Nothing new should be introduced into a pending litigation.

Lis pendens means a suit under consideration of any court of law. It is an action which is pending in any court. The doctrine is enshrined under Section 52 of the Transfer of Property Act, 1882. This section is based on the maxim ‘ut lite pendente nihil innovetur' which means that nothing new should be introduced into a pending litigation. Therefore, the property which is in dispute should not either be sold or otherwise dealt in by any party to the dispute during the pendency of the suit or proceeding. 

The doctrine of lis pendens incorporated under Section 52 of the 1929 Act, means to say that During the pendency of any suit or proceeding which is not collusive and in which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

The Supreme Court in Jayaram Mudaliar v. Ayyaswami AIR 1973 SC 569, para. 47 founded the following definition:

lis pendens literally means a pending suit, and the doctrine of lis pendens has been defined as the jurisdiction, power, or control which a court acquires over property involved in a suit pending the continuance of the action, and until final judgment therein.

As was observed by the Supreme Court in Jayaram's case:

Expositions of the doctrine indicate that the need for it arises from the very nature of the jurisdiction of Courts and their control over the subject-matter of litigation so that parties litigating before it may not remove any part of the subject-matter outside the power of the Court to deal with it and thus make the proceedings infructuous.

RERA has superseding powers on Directorate of Enforcement as far as protection of homebuyer rights are concerned

 Before Ld. RERA Rajasthan:

Hydepark landowners association V. Adarsh Buldestate Ltd. (ABL)and others Complaint No. RAJ-RERA-C-201 9-31 69

The Authority has ruled that RERA has superseding powers on Directorate of Enforcement as far as protection of homebuyer rights are concerned;

it has Also ruled that valuation of “proceeds of crime” connected to a project cannot be more than actual amount invested towards the construction. Such a valuation can be arrived at through a government approved valuer by already legally settled principles of calculation methodology.

The Complete order can be seen at 

https://rera.rajasthan.gov.in/Content/pdf/29352019-3169%20merged_compressed.pdf

Maharashtra Real Estate Regulatory Authority (MahaRERA) has refused to differentiate between an investor in a housing project and a homebuyer

 The Maharashtra Real Estate Regulatory Authority (MahaRERA) in the matter of Kamal Aggarwal V/s Sakla Enterprises Complaint No. CC006000000171603 has refused to differentiate between an investor in a housing project and a homebuyer and has directed a developer to honour contractual obligations.

Complete order can be seen at 

https://media-exp1.licdn.com/dms/document/C561FAQHuOUtaDbRVDA/feedshare-document-pdf-analyzed/0/1610797082012?e=1618682400&v=beta&t=4MhyLgKZFWL_FzuePp0A6QXc8nKPXC50OMKONxECUKw

The Allahabad High Court - A single member of RERA can also adjudicate the complaints of home buyer.

 The Allahabad High Court  in the Matter of M/S K.D.P. Build Well Pvt Ltd vs State Of U.P. And 4 Others WRIT - C No. - 2248 of 2020 Decided on 4 February, 2020 has held that a single member of RERA can also adjudicate the complaints of home buyer.

It was pleaded that one member of RERA has passed the order in violation of the provisions of the Act of 2016. Section 21 provides for formation of Authority consist of Chairperson along with two whole time Members. The impugned order is by one Member alone going against the mandate of Section 21 of the Act of 2016.

The Court refused to accept the submission of Petitioner Counsel that the Punjab and Haryana High Court has taken a different view. Further the court observed that the Petitioner did not raised any objection before the single Member about his competence to adjudicate the complaint. In absence of objection, the Authority proceeded with the matter. If the objection would have been taken and was sustainable, the complaint could have been decided by the Authority consisting of three Members. The petitioner has challenged the order in reference to the composition only when he lost in the complaint

Referring to Section 21, 29 and 30 of the Act observed that it is not necessary that the adjudication of the complaint has to be made by the composition of Authority, as given under Section 21 of the Act of 2016 though as per Section 29 also, it should be by two Members in absence of the Chairperson. Further Section 30 protects proceedings from invalidation due to any vacancy. 

it was held that 

"We are further not inclined to interfere in the impugned orders on the ground taken by the learned counsel for the petitioner that the order passed by a single member is without jurisdiction as contemplated under Section 21 of the Act and has not been passed in accordance with the provisions of Section 21 of the Act. The arguments of the learned counsel for the petitioner appears us to be misconceived. The proposition of Section 21 is not that the complaint could not be decided by a single member of the Authority, whereas it could be decided by a single member or by two members, whichever is better in the interest of justice as per availability of the members and we further observed that Section 81 of the Real Estate (Regulation and Development) Act, 2016 provides "delegation", which says that "The Authority may, by general or special order in writing, delegate to any member, officer of the Authority or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act ( except the power to make regulations under section 85), as it may deem necessary" and having regard to the provision of Section 81 of the Real Estate ( Regulation and Development) Act, 2016, the authority vide their 5th meeting dated 5.12.2018 as per Agenda 1 delegated the power to a single member to decide the cases in both the Benches sitting at Lucknow and Gautam Budh Nagar, the delegation of power of the 5th meeting dated 5.12.2018 of U.P. Real Estate Regulatory Authority is quoted as under:"

MINIMUM 100 HOMEBUYERS or 10% of the total allottees are REQUIRED TO INITIATE IBC CASE:SUPREME COURT AFFIRMS THE AMENDMENT

 In Manish Kumar v. Union of India & Ors., the Supreme Court of India rejected a writ petition challenging the constitutional validity of Section 3, 4 and 10 of Insolvency and Bankruptcy Code (Amendment) Act, 2020 (“IBC Amendment”), which prescribes the requirement of a minimum of 100 or not less than ten per cent of allottees of a real estate project acting as creditors in the same class, whichever is less, for initiating corporate insolvency resolution process against the developer company.

 The Court held that the IBC Amendment protects the interest of the allotees across the board and allowing a single allottee to move an application under IBC may put the interest of all other allottees in peril. 

This can also result in some allottees approaching the real estate regulating authority (RERA) while other may resort to the consumer forum. The Court said that the group of allottees in a real estate project are a heterogenous group and a vast majority of allottees may see reason in giving time and reposing faith in the existing management of real estate project, rather than bringing a complete overhaul or replacement of the developer’s company management. 

Therefore, the amendments provided under the IBC Amendment are not arbitrary in nature and are constitutionally valid

Land Owners can’t be Punished in Joint Ventures – Tamil Nadu RERA

 In a complaint filed by Shankari Sundararaman (“Complainant”) against Sree Vardhana Builders Private Limited (“Company”), 265 of 2020 its directors and landowners of the Project named ‘Vardhana Constellation’ in Coimbatore, for claiming refund of amounts paid towards the purchase of the flat under Real Estate (Regulation and Development) Act, 2016 (“Act”), the Tamil Nadu Real Estate Regulatory Authority, Chennai (“TNRERA”) stated that since directors are actively involved in the affairs of the Company and have received money and corresponded with the Complainant, they would be liable for violations under Section 69 the Act which deals with offences by companies and people responsible for the conduct/business of the company. 

However, with respect to landowners of the project site (being the other respondents), TNRERA stated that the landowners had just entered into joint venture agreements and had executed general power of attorney with the Company. The sale deeds for the undivided share of land was only executed by the Company and not the landowners. 

Further, it was stated that it was the Company that had launched the project and had entered into various agreements with the Complainant for construction and delivery of the constructed apartment on receiving consideration. 

Henceforth, the landowners would not come under the definition of “promoter” and only the Company would fall under the definition of “promoter” to be made liable for contravention under Section 31 read with Section 71 of the Act

Adjudicating Officer Under RERA is only Empowered to Adjudge Compensation Under Section 71 and Section 72 of the RERA and does not have Jurisdiction to decide Matters for Allowing Refund Under Section 18 of the RERA

The Maharashtra Real Estate Appellate Tribunal, Mumbai (“Appellate Tribunal”), in the matter of Xrbia Developers Ltd. v. Firoz Aziz Shaikh (“Appeal”), has, inter alia, held that the Adjudicating Officer (“AO”) under RERA is only empowered to adjudicate on the compensation to be granted under Section 71 and Section 72 of the RERA. 

The Hon’ble Appellate Tribunal has further held that the jurisdiction to adjudicate on the matters relating to refund with interest under Section 18 of RERA vests with Adjudicating Authority. 

The Hon’ble Appellate Tribunal, whilst deciding the issue of sustainability of the order passed by AO in the complaint preferred by the allottee seeking refund with interest along with other reliefs had held that, 

“11. Considering the legal position discussed and held as above, it is crystal clear that AO has powers only to adjudge compensation under Sections 71 read with 72 of RERA and has no jurisdiction to decide matters for allowing refund with interest under Section 18 which is vested with the Authority only. Consequently, the order passed by AO with regard to subject matter involved in the above complaint is obviously without jurisdiction as per provisions of RERA. It is a fundamental principle well established that an order passed by a forum having no jurisdiction over subject matter is a nullity. An objection to lts valldity can be raised at any time including the appeal proceedings. For the said reasons, the impugned order passed by AO cannot be sustained and therefore is liable to be quashed and set aside being a nulllty for lack of jurisdiction of subject matter as contended by Promoter, We answer the point accordingly.”

Decree holder cannot be classified as a financial creditor for the purpose of initiating Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”)

 The National Company Law Appellate Tribunal, New Delhi (“NCLAT”) has in its judgment dated August 14, 2020 (“Judgment”) in the matter of Sushil Ansal v. Ashok Tripathi and Others [Company Appeal (AT) (Insolvency) No. 452 of 2020], held that a decree holder cannot be classified as a financial creditor for the purpose of initiating Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

Facts

Brief facts of the case are that 

• on August 5, 2014, one Mr. Ashok Tripathi (“Respondent No. 1”) and Mr. Saurabh Tripathi (“Respondent No. 2”) (collectively, “Respondents”) had jointly booked a unit bearing No. 0073, admeasuring 3746 sq. ft., with M/s. Ansal Properties and Infrastructure Limited (“Corporate Debtor”) in one of their real estate projects namely, Sushant Golf City, in Lucknow, for a total consideration of INR 1,62,43,133/- by paying an amount of INR 8,37,300/- towards booking advance. 

• In a separate transaction, Respondent No. 2 had on July 16, 2014, booked another unit bearing No. B7/GF/01, admeasuring 1229 sq. ft. in the same project, by paying an amount of INR 1,63,994/- as booking advance. A joint “built up agreement/builder buyer agreement” dated September 12, 2014, in respect of the unit bearing No. 0073 and a “Flat Buyer Agreement” dated September 28, 2014 in respect of the unit bearing No. B7/GF/01 was executed between the respective Respondents with the Corporate Debtor. Pursuant to execution of the aforementioned agreements, allotment letters pertaining to the said units were issued by the Corporate Debtor to each of the Respondents.

• The Corporate Debtor undertook to complete the construction of the said units and to deliver possession thereof to the said Respondents within 2 years from the date of commencement of construction. Since the project commencement date notified on the website of RERA was September 22, 2015, the Corporate Debtor was required to deliver possession of the unit bearing No. 0073 to both the Respondents by September 22, 2017 and deliver possession of the unit bearing No. B7/GF/01 to the Respondent No. 2 within 36 months from the date of the building plan being sanctioned. 

• However, even after the passing of 5 years of the aforementioned time frame, the Corporate Debtor failed to complete the construction of the said units or refund the amounts paid as booking advance, to the Respondents.

• Whether this is a fit case for invoking Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 (“NCLAT Rules”) to allow the parties to settle the dispute?

• Whether the application filed by the Respondents under Section 7 of the IBC was not maintainable?

• The NCLAT observed that a Corporate Debtor was permitted to seek exit from CIRP at the pre-admission stage. It could also seek exit at the post admission stage, but before constitution of the Committee of Creditors. It was manifest that a party to CIRP could approach the adjudicating authority directly for exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016 for withdrawal of the application under Section 7 of the IBC or disposal of such application on the basis of a settlement worked out by the parties. 

• However, exercise of inherent power on the part of adjudicating authority or even by the NCLAT in appeal would depend on consideration of all relevant facts of the case. The adjudicating authority or the appellate tribunal would have to keep in view the interest of various stakeholders and claimants before allowing such withdrawal or settlement. 

• Admittedly, the interim resolution professional had received 283 claims against the Corporate Debtor from allottees of different projects, financial creditors, operational creditors, other creditors and employees. The Settlement Deed executed between the Respondents and the Corporate Debtor did not take into consideration the interest of such other claimants. Therefore, allowing the withdrawal of application under Section 7 of the IBC on the basis of such settlement between the Respondents and the Corporate Debtor was not all-encompassing and detrimental to the interests of the other claimants, including the other allottees, and accordingly would not be in consonance with the object of the IBC and the purpose of invoking of Rule 11 of the NCLAT Rules.

• With respect to maintainability of the application under Section 7 of the IBC, the NCLAT observed that the dictum of law was loud and clear. An application for initiating CIRP against the Corporate Debtor by allottees under a real estate project was required to be filed jointly by not less than one hundred of such allottees or not less than 10% of the total number of such allottees under the same real estate project. It is therefore clear that an application at the instance of a single allottee or by a group of allottees falling short of the prescribed threshold limit would not be maintainable.

Aggrieved by the above, the Respondents lodged a complaint before the Uttar Pradesh Real Estate Regulatory Authority (“UP RERA”) to establish the existence of a financial debt and liability of the Corporate Debtor to the tune of INR 73,35,686.43. Pursuant to this, on November 16, 2017, the UP RERA directed the Corporate Debtor to refund the amount repayable to the Respondents with respect to the unit bearing No. 0073 in 6 instalments within a period of 9 months. Subsequently, on December 13, 2018, the UP RERA further directed the Corporate Debtor to refund the amount paid with respect to the unit bearing No. B7/GF/01 to Respondent No.2 in 10 monthly instalments along with interest. 

Consequently, a Recovery Certificate dated August 10, 2019 (“Recovery Certificate”) was issued by the UP RERA in this regard and forwarded to the concerned authority for effecting the recovery of INR 73,35,686.43 from the Corporate Debtor. However, the Respondents chose to file an application under Section 7 of the IBC for initiation of CIRP before the National Company Law Tribunal, New Delhi (“NCLT”) even though they were entitled to seek disbursement of the above mentioned amount of INR 73,35,686.43 from UP RERA upon its recovery.

The NCLT observed that the claim of the allottees had arisen out of the aforementioned orders and Recovery Certificate issued by the UP RERA and termed such claim as an ‘adjudicated debt’. It therefore held that the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 (“Ordinance”) promulgated on December 28, 2019, which prescribes a minimum threshold limit of not less than 100 allottees or not less than 10% of the total number of allottees under the same real estate project, whichever is less, for initiation of CIRP at the instance of allottees of a real estate project, was not attracted in the present case, as the Respondents went before the NCLT as decree-holders and not as allottees. Thus, the NCLT, vide its impugned order dated March 17, 2020 (“NCLT Order”), admitted the application of the Respondents for initiating CIRP. Aggrieved by the said NCLT Order, Mr. Sushil Ansal, a former director and shareholder of the Corporate Debtor (“Appellant”), filed the present appeal before the NCLAT.

Issues

Arguments

Contentions raised by the Appellant:

The Appellant inter alia contended that the application filed by the Respondents under Section 7 of the IBC was not maintainable as the Respondents did not meet the required criteria of either constituting 100 allottees or 10% of the total allottees as mandated under the Ordinance, and therefore were ineligible to by themselves file an application under Section 7 of the IBC for initiation of CIRP against the Corporate Debtor. The Appellant argued that the Ordinance was promulgated and came into force during the pendency of the applications filed by the Respondents before the NCLT and therefore the NCLT should have insisted upon compliance with the mandate under the Ordinance regarding the threshold limit before proceeding to pass the impugned order. It was further argued that the Ordinance was followed by the passing of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 (“Amendment Act”) which incorporated the provisions of the Ordinance, and in effect crystallised the legal position pertaining to eligibility for initiating of CIRP, and therefore the application filed by the Respondents under Section 7 was not maintainable. It was also urged that classification of allottees as Financial Creditors was not permissible and merely because the Respondents had obtained a RERA decree in their favour, it did not alter their status. Therefore, the finding recorded by the NCLT that the allottees who have obtained a decree in their favour would not be hit by the requirement of threshold limit under the Ordinance followed by the Amendment Act was flawed. It was further submitted that the dispute stood settled between the Corporate Debtor and the Respondents in terms of an amicable settlement between the parties pursuant to which they had filed a joint application for withdrawal and termination of CIRP of the Corporate Debtor.

Contentions raised by the Respondents:

The Respondents on the other hand contended that they had settled all their disputes with the Appellant in relation to the unit bearing no. 0073 and they do not have any pending claims against the Corporate Debtor. The Respondents accordingly prayed for invoking Rule 11 of the NCLAT Rules to set aside the order of admission and terminate the CIRP against the Corporate Debtor. It was further submitted that the dispute was settled prior to constitution of a committee of creditors and therefore there was no legal impediment in allowing such settlement and permit withdrawal and termination of CIRP. In so far as the claims of other home buyers/ creditors was concerned, it was submitted that they could pursue their claims independently on their own merits through any remedy as may be available under law. As regards the instant appeal, it was submitted that the Respondents did not wish to contest the issue raised by the Appellant regarding maintainability of the application under Section 7 filed by them and, therefore, agreed and subscribed to the arguments advanced by the Appellant.

Observations of the National Company Law Appellate Tribunal, New Delhi:

It was further observed by the NCLAT that, the Respondents’ contention of coming within the purview of ‘financial creditors’ rested on strength of the definition of ‘creditor’ in terms of the provision under Section 3(10) of the IBC which includes a decree-holder within its fold. The question that arose for consideration was whether a decree-holder, though covered under the definition of ‘creditor’, fell within the definition of a ‘financial creditor’ as per of Section 5(7) of the IBC. On a plain reading of the provision, it is clear that ‘Financial Creditor’ encompasses any person to whom a financial debt is due. It would, therefore, be relevant to ascertain the nature of debt styled as ‘financial debt’ within the ambit of Section 5(8) of the IBC. Since the initial transaction was an allotment under a real estate project, there could be no doubt that such transaction had the contours of a borrowing as contemplated under Section 5(8)(f) of the IBC. However, the case set up by the Respondents before the NCLT was not on the strength of a transaction having the commercial effect of a borrowing thereby giving them the status of ‘financial creditors’ but on the strength of being ‘decree-holders’. It was noted that, the Respondents had staked claim as ‘decree-holders’ before the NCLT and therefore they could not later claim to be allottees, classifying the amounts raised from them to have the commercial effect of a borrowing, and hence, cloaking them with the capacity of being ‘financial creditors’. Hence, it was required to be determined whether a ‘decree-holder’ could maintain an application under Section 7 as a ‘financial creditor’.

The NCLAT further noted that a ‘decree-holder’ would undoubtedly be covered by the definition of ‘creditor’ under Section 3(10) of the IBC, but cannot be classified as a ‘Financial Creditor’, unless the debt was disbursed against the consideration for time value of money or falls within any of the provisions thereof, as the definition of ‘financial debt’ is inclusive in character. In the instant case, RERA had conducted the recovery proceedings at the instance of the Respondents against the Corporate Debtor which culminated in the issuance of the Recovery Certificate and passing of an order directing the concerned authority to recover an amount of INR 73,35,686.43 from the Corporate Debtor as arrears towards land revenue. However, instead of pursuing the matter before the competent authority, the Respondents sought to trigger CIRP against the Corporate Debtor. Therefore, the answer to the question on whether a decree-holder would fall within the definition of ‘Financial Creditor’ in such a scenario had to be an emphatic ‘No’ as the amount claimed under the decree was an adjudicated amount and not a debt disbursed against the consideration for the time value of money and therefore did not fall within the ambit of any of the provisions under Section 5(8) of the IBC. It was indisputable that the Recovery Certificate sought to be executed was the end product of an adjudicatory mechanism under the Real Estate (Regulation and Development) Act, 2016, and realisation of the amount due under the Recovery Certificate tantamount to recovery effected under a money decree, though the mode of execution was slightly different. In view of the aforesaid observations, the NCLAT was of the view that the application of the Respondents under Section 7 of the IBC was not maintainable.

Decision of the National Company Law Appellate Tribunal, New Delhi

In allowing the appeal, the NCLAT noted that the Respondents could not claim to be allottees of a real estate project after issuance of the Recovery Certificate by UP RERA directing recovery of INR 73,35,686.43 as arrears towards land revenue. The NCLAT stated that the Respondents were decree-holders seeking execution of money due under the Recovery Certificate, which is impermissible within the ambit of Section 7 of the IBC. Therefore, their application for triggering of CIRP was not maintainable as allottees. Decree-holders, though included in the definition of ‘creditor’, did not fall within the definition of ‘financial creditor’ and hence a ‘decree-holder’ could not seek initiation of CIRP as a ‘financial creditor’.

In view of the conclusion reached and findings on the issues recorded, the NCLAT was of the opinion that the impugned NCLT Order initiating CIRP against the Corporate Debtor was not sustainable. The NCLAT was also of the firm view that the application of Respondents was moved for execution/recovery of the amount due under the Recovery Certificate and not for insolvency resolution of the Corporate Debtor. The NCLAT was of the view that the said NCLT Order suffered from grave legal infirmity and could not be supported and accordingly set it aside.

SUPREME COURT in Consumer Protection Act: Flat buyers are entitled to just reasonable compensation on gross delay & execution of the Deed of Conveyance by a flat purchaser Does not precludes a consumer claim being raised for delayed possession

 IN THE MATTER OF: 

Wg. Cdr. Arifur Rahman Khan and Aleys Sultana and Ors. Vs. DLF Southern Homes Pvt. Ltd. (now known as BEGUR OMR Homes Pvt. Ltd.) & Ors. (Decided by Hon’ble Supreme Court of India on 24.08.2020)

Issues: 

Issue 1.Whether the flat buyers are entitled to compensation in excess of what was stipulated in the Apartment Buyers Agreement?

Issue 2.Whether the execution of the Deed of Conveyance by a flat purchaser precludes a consumer claim being raised for delayed possession?

Facts: 

1.The Complaint before the National Consumer Disputes Redressal Commission (NCDRC) was initially instituted by nine flat buyers. These Complainants had booked residential flats in a project called Westend Heights at New Town, DLF, BTM Extension at Begu, Bengaluru. The brochure of the first respondent advertised the nature of the project and the amenities which would be provided to buyers. Responding to the representation held out by the developer, the complainants booked flats in the residential project. The flat buyers entered into agreements with the developer. Clause 11(a) of the Apartment Buyer’s Agreement (ABA) indicated that the developer would endeavor to complete construction within a period of thirty-six months from the date of the execution of the agreement save and except for force majeure conditions. The developers issued various communications indicating the progress of the work and kept on changing the timeline of delivery of possession. Further, there was an admission of the fact that until 2015, the occupation certificate had not been received. Thus, the obligation to handover possession within a period of thirty-six months was not fulfilled.

2.The first batch of nine flat purchasers moved a consumer complaint before the NCDRC complaining of a breach by the developer of the obligation, contractually assumed, under the terms of the ABA. Since the nine complainants purported to represent the entire group of flat purchasers, a notice of the complaint under Section 12(1)(c) of the Consumer Protection Act 19863 was published in the newspapers. An I.A. was filed before the NCDRC under Section 12(1)(c) which was subsequently disposed of by NCDRC, which led to an appeal before the Apex Court. Procedural directions issued upon several impleadment applications resulted in a further order of the Apex Court reiterating that the complaint would be treated as having been filed on behalf of 339 persons. By the aforesaid order, the Apex Court had laid down a peremptory time schedule of six months for the disposal of the complaint.

3.The NCDRC divided the group of 339 flat buyers into six groups based on whether or not they had taken possession, executed deeds of conveyance, settled the dispute or sold the flats before or during the pendency of the complaint or their applications for impleadment. While recording a finding of fact that there was an admitted delay on the part of the developer, the NCDRC held that the agreements provided compensation at the rate of Rs.5/- per square foot of the super area for every month of delay. The NCDRC held that the flat purchasers who agreed to this stipulation in the agreements were not entitled to seek any amount in addition. Further, the execution of the Deed of Conveyance by a flat purchaser would preclude a consumer claim being raised for delayed possession.

4.The NCDRC dismissed the consumer complaint filed by 339 flat buyers, accepting the defense of DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. that there was no deficiency of service on their part in complying with their contractual obligations and, that despite a delay in handing over the possession ofthe residential flats, the purchasers were not entitled to compensation in excess of what was stipulated in the Apartment Buyers Agreement (ABA). Aggrieved by the order of the NCDRC, the Appellants have approached the Hon’ble Supreme Court.

Supreme Court’s Observations:

 ❑ The Counsel for Appellants submitted that – 

     i) There is a gross delay ranging between two and four years in handing over possession and the flat buyers ought not to be constrained by the terms of the agreement which are one-sided and unreasonable; 

(ii) The execution of conveyances or settlement deeds would not operate to preclude the flat buyers from claiming compensation; and 

(iii) The amenities which have been contracted for have not been provided by the developers. Pursuant to the aforesaid, the Counsel for Respondents submitted that –         i) No evidence has been led by the complainants to discharge the onus placed upon them to establish coercion or duress while executing conveyances or settlements; 

            (ii) Possession of the complex, comprising of 813 apartments in nineteen towers has been handed over between four to six years ago and the developer has transferred his right, title and interest to the Residents‟ Welfare Association (“RWA”); 

            (iii) Out of 171 applicants, 145 have received compensation at the agreed rate while handing over possession; and (iv) Under clause 14 of the ABA, the flat buyers have been compensated at the rate of Rs 5 per square foot per month. No proof or measure of actual loss suffered has been adduced. 

❑ The Court observed that the developer has accepted that there was a delay on his part which triggered of the liability to pay compensation. A failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. There is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. Under Section 14(1)(e), the jurisdiction of the consumer forum extends to directing the opposite party inter alia to remove the deficiency in the service in question. 

Further, in assessing the legal position, it is necessary to record that the ABA is clearly one-sided. Evidently, the terms of the agreement have been drafted by the Developer. They do not maintain a level platform as between the developer and purchaser. The stringency of the terms which bind the purchaser are not mirrored by the obligations for meeting times lines by the developer. The agreement does not reflect an even bargain. Where, as in the present case, there has been a gross delay in the handing over of possession beyond the contractually stipulated debt, the Court is clear of the view that the jurisdiction of the consumer forum to award just and reasonable compensation as an incident of its power to direct the removal of a deficiency in service is not constrained by the terms of a rate which is prescribed in an unfair bargain. 

❑ The Court further observed that the flat purchasers have invested their hard earned money. It is only reasonable to presume that the next logical step is for the purchaser to perfect the title to the premises which have been allotted under the terms of the ABA. But the submission of the developer is that the purchaser forsakes the remedy before the consumer forum by seeking a Deed of Conveyance. To accept such a construction would lead to an absurd consequence of requiring the purchaser either to abandon a just claim as a condition for obtaining the conveyance or to indefinitely delay the execution of the Deed of Conveyance pending protracted consumer litigation. 

Thus, disapproving the view of NCDRC, the Apex Court held that flat purchasers who obtained possession or executed Deeds of Conveyance have not lost their right to make a claim for compensation for the delayed handing over of the flats. After making the aforesaid observations, the Court has directed that - 

        i) Except for eleven appellants who entered into specific settlements with the developer and three appellants who have sold their right, title and interest under the ABA, the respondents shall, as a measure of compensation, pay an amount calculated at the rate of 6 per cent simple interest per annum to each of the appellants. The amount shall be computed on the total amounts paid towards the purchase of the respective flats with effect from the date of expiry of thirty-six months from the execution of the respective ABAs until the date of the offer of possession after the receipt of the occupation certificate; 

         ii) The above amount shall be in addition to the amounts which have been paid over or credited by the developer at the rate of Rs 5 per square foot per month at the time of the drawing of final accounts; and 

          iii) The amounts due and payable in terms of directions (i) and (ii) above shall be paid over within a period of one month from the date of this judgment failing which they shall carry interest at the rate of 9% p.a. until payment.

Promoters are NOT entitled to exemption from compliance of Proviso of Section 43(5) of the Real Estate (Regulation and Development) Act, 2016

 IN THE MATTER OF: 

M/s Mahanagar Reality & Ors. Vs. Dinesh Ramlal Oswal & Anr. (Decided by the Hon’ble Maharashtra Real Estate Appellate Tribunal, Mumbai) 

Issue: 

 Whether the Promoters are entitled for exemption to make compliance of Proviso of Section 43 (5) of the Real Estate (Regulation and Development), Act, 2016? 

Facts: 

 Promoters being the Applicant preferred an appeal against the impugned order dated 10.01.2019 wherein the promoter was directed to refund of the amount paid by the allottees along with the interest amounts. 

 Thereafter, the Promoters filed an application for waiver of pre-deposit mandated under Section 43(5) of Real Estate (Regulation and Development) Act, 2016 before the Hon’ble Appellate Tribunal. 

Observations and Findings of the Hon’ble Tribunal: 

 The Hon’ble Appellate Tribunal observed that, it is mandated under the Real Estate (Regulation and Development) Act, 2016 that the promoter who prefers an appeal has to deposit the amount(s) and comply with the Proviso of Section 43 (5) of the Real Estate (Regulation and Development) Act, 2016 for entertaining and hearing the appeal, and that deposit in respect of the same is a prerequisite. 

 The Hon’ble Tribunal also observed that the right to appeal can be conditional and quantified. 

 The Hon’ble Tribunal further observed that the Hon’ble Supreme Court has previously settled this principle that any statute has to be interpreted in the context in which the words by are used in that particular statute. 

 Real Estate (Regulation and Development) Act, 2016 being a special legislation enacted to protect to the interests of the allottees cannot grant any exemption/ waiver to the promoter from pre-deposit of the amounts to be made under Section 43(5) of Real Estate (Regulation and Development) Act, 2016

The provisions of the Real Estate (Regulation and Development) Act, 2016 can be invoked without entering into an agreement between the developer and the homebuyer

 IN THE MATTER OF: M/s Casa Grande Civil Engineering Pvt. Ltd. Vs. Mr. P. Govindraj, Mrs. Deeparaj (Decided by Hon’ble Tamil Nadu Real Estate Appellate Tribunal- TNREAT)

Issues: 

 Issue 1 - Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 can be invoked without entering into an agreement between the developer and the homebuyer? 

 Issue 2 -Whether the order of the Hon’ble Adjudicating Officer is an erroneous one? 

 Issue 3 -Whether the appeal deserves to be allowed or not?

Facts: 

 Promoters being the appellant preferred an appeal against the impugned order dated 31.07.2019 passed by the Hon’ble Adjudicating Officer in CCP.No. 78/2019 for settling of an issue pertaining to whether without entering into a contract the homebuyers have the locus standi to invoke the provisions of the Real Estate (Regulation and Development) Act, 2016? 

 The appellant/ promoter had advertised in newspaper sale of flats in the residential real estate project. 

 The homebuyer and the developer mutually agreed for consideration payable in respect of the same. The homebuyer was asked to pay amounts towards consideration in respect of the proposed purchase of the residential flat in the real estate project. Thereafter, an acknowledgment letter was issued by the appellant/ promoter acknowledging the receipt of payment and providing for other terms and conditions. 

 The terms and conditions of the said acknowledgment letter further provided for non-payment of goods and services tax that was subsequently asked to be paid by the homebuyer. Subsequently, the appellant/ promoter even reduced the area of residential flat proposed to be sold. Stemming from the above mentioned facts and events, the homebuyer decided not to sign any definitive agreement. 

 The homebuyer further appeared before the Hon’ble Adjudicating Officer complaining about of violation of Section 12 and 13 of Real Estate (Regulation and Development) Act, 2016. 

 The Hon’ble Adjudicating Officer ruled that the appellant/ promoter had violated the provisions of Section 12 and 13 of Real Estate (Regulation and Development) Act, 2016. Hence, in lieu of the same, an appeal was preferred by the appellant/ promoter.

Observations and Findings of the Hon’ble Tribunal: 

Findings on Issue 1- 

 The Hon’ble Tribunal observed that if the letter was only an acknowledgment of payment, why were certain terms and conditions mentioned in the same? The Hon’ble Tribunal even questioned the Appellant/ Promoter for incorporating terms and conditions before entering into any agreement. 

 The Hon’ble Tribunal further observed that the letter was relied on for repayment so the developer cannot say that it is not binding. 

 The Hon’ble Tribunal upheld the findings of the Hon’ble Adjudicating Officer that Section 12 and 13 of Real Estate (Regulation and Development) Act, 2016 were violated by the appellant/ promoter, as the project falls within the ambit of an ongoing project. 

 Thus, the Hon’ble Tribunal observed that the provisions of Real Estate (Regulation and Development) Act, 2016 can be invoked even without entering into an agreement.

Findings on Issue 2- 

 The Hon’ble Tribunal further modified the compensation to Rs.1,00,000/- awarded as opposed to 9% as awarded by the Hon’ble Adjudicating Officer. 

Findings on Issue 3- 

 As issue 1 was decided against the Appellant/ Promoter and issue 2 was modified by the Hon’ble Tribunal. 

Thus, the said appeal was allowed by the Hon’ble Tribunal, in part.

Consumer Protection Act: Entitlement of the Allottee / Homebuyer has to be reckoned in terms of the Date of the Agreement and not the RERA Registration date.

 IN THE MATTER OF: M/s. Imperia Structures Ltd. Vs. Anil Patni and Another (Decided by Hon’ble Supreme Court of India on 02.11.2020) 

Issues: 

    1. Whether the remedies available to the consumers under provisions of the Consumer Protection Act, 1986 (“CP Act”) would be additional remedies, not barred by the coming in force of the Real Estate (Regulation and Development) Act, 2016 (“RERA Act”)? 

2. Whether the provisions of the RERA Act have made any change in the legal position with regards to remedies available to the Allottees? 

3. Whether the entitlement of the Allottee has to be reckoned in terms of the date of Agreement or the RERA registration date? 

Facts: 

    1. A Housing Scheme called “The ESFERA” in Gurgaon, Haryana was launched by the Appellant in 2011. All the Complainants booked their respective apartments by paying the requisite booking amounts and thereafter executed the Builder Buyer Agreement towards their individual units. The Agreement provided for delay due to reasons beyond the control of the Developer (Appellant) and failure to deliver possession due to Govt. Rules/Notifications, etc under the Force Majeure clause and the compensation thereof. Even after four yearsthere was no sign of Project getting completed. Thereafter, in 2017, the Project was registered with Haryana Real Estate Regulatory Authority, Panchkula (“HRERA”). 

2. The Consumer Complaint was filed by the Complainants for the delay in handing over of the possession of their respective apartments. In response, the Appellant challenged the jurisdiction of the National Consumer Dispute Redressal Commission (“National Commission”) on the ground that the Complainants/Respondents would not come within the definition of consumers. After having heard the submissions, the Commission allowed the Complaint and granted relief of refund to the Complainants/Respondents. 

3. The Appellant aggrieved by the order of the National Commission, preferred an appeal under Section 23 of the CP Act before the Hon’ble Supreme Court. Court’s Observations: 

• The Counsel for Appellants submitted that once the RERA Act came into force, all questions concerning the Project including issues relating to construction and completion thereof, would be under the exclusive control and jurisdiction of the authorities under RERA Act. The National Commission, therefore, ought not to have entertained the Consumer Complaint. Further, the Registration Certificate being valid upto 31.12.2020, the Appellant could not be said to have delayed the construction and consequently, there could be no finding that there was deficiency on part of the Appellant. The Counsel for the Respondents submitted that whether the delay occurred due to force majeure was already dealt by the National Commission and no reasonable explanation was available on record to dislodge that finding. It was further submitted that the remedy afforded by the CP Act would be an additional remedy to a consumer and such legal position remained unchained even after the enactment of the RERA Act. 

• The Court noted that conclusions drawn by the National Commission that – i) all the Complainants were consumers within the meaning of the Act; and ii) there was delay on part of the Appellant in completion the construction within time, are absolutely correct and does not call for interference of this Hon’ble Court. • While discussing various precedents, the Court observed that the Hon’ble Apex Court has consistently held that the remedies available under the provisions of the CP Act are additional remedies over and above the other remedies including those made available under any special statutes;and that the availability of an alternate remedy is no bar in entertaining a complaint under the CP Act. The Hon’ble court further observed that insofar as cases where such proceedings under the CP Act are initiated after the provisions of the RERA Act came into force, there is nothing in the RERA Act which bars such initiation. The absence of bar under Section 79 to the initiation of proceedings before a fora which cannot be called a Civil Court and express saving under Section 88 of the RERA Act, make the position quite clear. Furthermore, Section 18 itself specifies that the remedy under said Section is "without prejudice to any other remedy available". Thus, the parliamentary intent is clear that a choice or discretion is given to the allottee whether he wishes to initiate appropriate proceedings under the CP Act or file an application under the RERA Act. 

• The Court held that in the present case the apartments were booked by the Complainants in 2011-2012 and the Builder Buyer Agreements were entered into in November, 2013. As promised, the construction should have been completed in 42 months. The period had expired well before the Project was registered under the provisions of the RERA Act. Merely because the registration under the RERA Act is valid till 31.12.2020 does not mean that the entitlement of the concerned Allottees to maintain an action stands deferred. It is relevant to note that even for the purposes of Section 18, the period has to be reckoned in terms of the agreement and not the registration. Therefore, the entitlement of the Complainants must be considered in the light of the terms of the Builder Buyer Agreements and was rightly dealt with by the Commission. 

The Hon’ble Court dismissed the appeal, affirming the view taken by the National Commission.

There is no provision in the RERA Act which envisaged either the Authority or the Appellate Tribunal to function with a single member

 The Punjab & Haryana High Court vide its order Janta Land Promoters Pvt. Ltd vs Union Of India And Others CWP No. 8548 of 2020, dated 16.10.2020, ruled that there was no provision in the Real Estate (Regulation and Development) Act, 2016, (“RERA Act”) which envisaged either the Authority or the Appellate Tribunal to function with a single member while exercising quasi-judicial or adjudicatory functions.

The key points of this judgement are as follows:  

•  The High Court ruled that the adjudicatory power of the Authority could not be transferred to a single member without express provision in the RERA Act.

• While interpreting the provisions provided under Section 21 of the RERA Act, the court held that it is clear that the Authority is a multi member body and that it cannot be considered to be an Authority if it is not comprised of its Chairperson and at least two whole time members. This has to be read along with Section 29 of the RERA Act which deals with the meetings of the Authority.

• Similarly referring to Section 43 of the RERA Act, the Court declared that an Appellate Tribunal was required to have at least two members, out of which, one was to be a judicial and other a technical or administrative member.

•  The court went to hold that any order passed by such Single Member Bench of the Appellate Tribunal would be null and void in law.

RERA Act, being a special law for protection of interest of consumers in real estate sector, prevails over Companies Act

In the Matter of Kuldeep Kaur v. MVL Ltd., Complaint No. RAJ-RERA-C-2018-2127, decided on 09-05-2019 at The Rajasthan Real Estate Regulatory Authority: A Coram of Nihal Chand Goel (Chairman) and Rakesh Jain (Member), rejected an application for staying the proceedings filed under Section 279 of the Companies Act, 2013.

In the present order, the Authority was dealing with ten cases taken together, all against the company MVL Ltd. having a common case. An application was filed under Section 279 of the Companies Act, 2013 on the behalf of the non-complainant company requesting that the proceedings be stayed as the High Court of Delhi had admitted a winding-up petition against the non-complainant company and had appointed a provisional liquidator.

The learned counsel, Harshal Tholia, filed a reply to the said application and brought the Authority’s attention to Section 279 of the Act which contained two clearly separate provisions, one for the fresh institution or commencement of a new suit or other legal proceeding, and the other for proceeding with an already pending suit or other legal proceeding.

The Authority observed that no pending suit or other legal proceedings can be proceeded with when a winding order is passed and hence the appointment of a provisional liquidator was of no consequence when it came to staying or not staying a pending suit or other legal proceedings. 

Only the winding up order was relevant for staying a pending suit or other legal proceedings. As the winding-up order had not been made by the court till that time, the stage for staying the proceedings had not arrived yet.

It was further noted that the proceedings were pending under the Real Estate (Regulation and Development) Act, 2016 which was a special Act of the Parliament made much after the Companies Act, 2013. 

Referring to the Section 89 of the RERA Act, the Authority held that it prevailed over the Companies Act, 2013 and hence Section 279 of the Companies Act, 2013 did not come in the way of the Authority’s proceedings.

In view of the above, the application for staying the proceedings was rejected.

Whether the Commission or Forum under the CP Act is a civil court or not?

 in Malay Kumar Ganguli v. Dr. Sukumar Mukherjee, (2009) 9 SCC 221 ,  it was held that,

“The proceedings before the National Commission are although judicial proceedings, but at the same time it is not a civil court within the meaning of the provisions of the Code of Civil Procedure. It may have all the trappings of the civil court but yet it cannot be called a civil court.”

RERA is applicable to state run entities too

 In September 2020, the Rajasthan RERA in a landmark decision held that the RERA Act is mandatory in nature. 

In Vinod Agarwal Vs. Jaipur Development Authority (JDA) RAJ -RERA-C-2020 -3622, the complainant said that he had participated in an auction organized by JDA and was allotted a plot in the project. He had also deposited 15% of the amount with JDA. However, JDA further issued a demand note of 35% of the amount and 15% interest in case of delay, without executing the agreement for sale. 

As per RERA Act, the developer is not allowed to accept more than 10% of the cost without executing or getting an agreement of sale registered. 

The argument put forth by the respondent was that it is a statutory development authority, it is guided by Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974. Further, it was added that the auction conditions did not stipulate any specific requirement for executing an agreement of sale. Also, the auction of the plot took place on an as-is-where-is basis. 

However, RERA ruled that the project was registered under it and thus, all rules and regulations under the Act would be applicable to the project as well and directed JDA to execute the sale agreement before demanding an additional amount. Section 13 of the Act mandates the execution of the sale agreement. 

The Complete order can be found at https://rera.rajasthan.gov.in/Content/pdf/Vinod%20Agarwal.pdf

Cases pending or ongoing with other tribunals will not be entertained by RERA

 The authority in Gurugram, Haryana in Sh. Sukhbir Singh Grewal Vs. M/s MVL Ltd (Complaint no. 48 of 2018) reiterated that it will not entertain any case which is already pending in another tribunal or court. 

In this particular case, the buyer had filed a case against the builder for delay in giving possession of property beyond the date mentioned in the agreement. The builder submitted that the delay was a result of the interim order passed by SEBI. The builder had moved the Securities Appellate Tribunal (SAT) challenging SEBI’s decision.

 RERA stated that ‘As the matter is already with the SEBI/SAT, accordingly there is no case left for the present before this authority and to continue further proceedings in the matter. Let the issue be decided by the SEBI/SAT. Once the SAT set aside the order of the SEBI then the only allottee may come to us for proceedings under the RERA Act.’ 

Flat Owners’ Association That Are Formed Due to Mandate of Law Cannot File a Consumer Complaint: Supreme Court

 A bench of Justices Mohan M Shantanagoudar and R Subhash Reddy passed their judgement while dismissing a civil appeal filed by Sobha Hibiscus Condominium against Managing Director of M/s Sobha Developers Ltd. 

The Supreme Court in its verdict held that an association which consists of members of flat owners in a building, registered compulsorily under the provisions of Karnataka Apartment Ownership Act, 1972, cannot be said to be a voluntary organisation. Therefore it cannot file a complaint under the Consumer Protection Act against any deficiency in goods or services under the welfare legislation.

This order came when two judge bench was considering an appeal against the National Commission order which rejected the complaint filed by the Association on the ground that it has no locus standi to file the complaint since neither it is a ‘consumer’ nor it is a ‘recognised consumer association’ within the meaning of Section 12 of the Act.

    In the instant case, the complainant is a statutory body under the provisions of Karnataka Apartment Ownership Act. It consists of members, who are the owners of an apartment called “Shoba Hibiscus”. The Apex Court said that it is clear from the objects of the said Act that it was enacted with a view to provide for the ownership of an individual apartment in a building to make such apartment heritable and transferable property. Once the apartments are registered under this Act, the owners, among other rights, would also get an undivided interest in the common areas and facilities of the apartment complex.

However, the mandatory provision of the law for registration of the flat owners’ association takes away its voluntariness, precluding it to invoke the consumer law. Going through the provisions of the Consumer Protection Act, the court said the statute made it clear that any recognised consumer association could file a complaint but such a group had to be of voluntary nature, registered under the Companies Act, 1956 or any other law.

The Supreme Court said that a voluntary consumer association is a body formed by a group of persons coming together, of their own will and without any pressure or influence from anyone and without being mandated by any other provisions of law.

In the said instance therefore the association formed by the members of the “Shoba Hibiscus” cannot be recognised as a consumer association because it has come into existence pursuant to a declaration which is required to be made compulsorily under the provisions of 1972 Act. Since it is not a ‘consumer’ or a ‘recognised consumer association’ within the meaning of Section 12 of the Act, it cannot file a complaint.

Consumer Protection Act, 2019 - For determining pecuniary jurisdiction, value of the goods or services paid as consideration alone has to be taken

 The National Consumer Disputes Redressal Commission (NCDRC) in M/S Pyaridevi Chabiraj Steels Pvt. Ltd. V. National Insurance Company Ltd. & Ors. [Consumer Case No. 833 of 2020]  held that for determining the pecuniary jurisdiction of the Consumer. The value of the goods “paid” as consideration has to be taken and not the value of goods or services “purchased”.

It was held that, “It appears that the Parliament, while enacting the Act of 2019 was conscious of this fact and to ensure that Consumer should approach the appropriate Consumer Disputes Redressal Commission whether it is District, State or National only the value of the consideration paid should be taken into consideration while determining the pecuniary jurisdiction and not value of the goods or services and compensation, and that is why a specific provision has been made in Sections 34 (1), 47 (1) (a) (i) and 58 (1) (a) (i) providing for the pecuniary jurisdiction of the District Consumer Disputes Redressal Commission, State Consumer Disputes Redressal Commission and the National Commission respectively.”

SPECIFIED “DATE OF POSSESSION” IS BINDING ON THE DEVELOPER AND NOT AFFECTED BY “GRACE PERIOD” CLAUSES UNDER Agreement For Sales

 In Suryakant Yashwant Jadhav & Anr. v. Bellissimo Hi-Rise Builders Pvt. Ltd. & Ors., the MahaRera Appellate Tribunal has held that 

• where the promoters had agreed to give possession with occupancy certificate on a specified date, the promoters were obligated under Section 19(10) of RERA to offer physical possession with occupancy certificate to allottees and the allottees were obligated to take such physical possession with occupancy certificate within two months of such delivery. 
• The Court said that failure to handover physical possession of the flat with occupancy certificate, would attract Section 18 of RERA With respect to the clause of “grace period” of one year (which was provided irrespective of the force majeure events or situations beyond control of the parties) contained in the Agreement for Sale (AFS), 
• The Tribunal held that Section 18 of RERA is absolute on the point of "specified date" mentioned in the agreement for giving possession and cannot be extended on the basis of such grace period. 
• The Tribunal held that upholding the ‘grace period’ clause of the AFS would be against the spirit of Section 18 of RERA and consequently against the object of safeguarding interest of customers.

The Order can be accessed at  https://maharera.mahaonline.gov.in/Upload/PDF/AT006-21407.pdf

ONE-SIDED AND UNREASONABLE CLAUSES IN APARTMENT BUYER’S AGREEMENT CONSTITUTES “UNFAIR TRADE PRACTICE” – SUPREME COURT

 In Ireo Grace RealTech Pvt. Ltd. v. Abhishek Khanna & Ors.,CIVIL APPEAL NO. 5785 OF 2019 the Supreme Court of India examined the clauses of the buyers’ agreement and inter alia observed that 

• the allottees are given a very limited right to cancel the agreement in the event of the clear and unambiguous failure of the warranties of the developers, which leads to frustration of the agreement on that account. 

• The Court held that the terms of the apartment buyer‘s agreement, having this limited right of cancellation by the buyers are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Section 2(1)(r) of the Consumer Protection Act, 2019 (CP Act).

The Court stated that term “unfair contract” is defined under the CP Act and the

conferment of powers on the State Consumer Fora and the National Commission to

declare contractual terms which are unfair, as null and void, is a statutory recognition of a power which was implicit under the CP Act. Hence, the buyers cannot be bound by such terms in the agreement. It is a welcome judgment to protect the helpless homebuyers who are left at vagaries of the developers who seek to mis-use the legal provisions.

When a person who sells the apartments is different than the one who Constructs it, then both are jointly liable

in  Maha Rera order dated 5th March 2021 in the case of Gauri Thatte V/s Nirmal Developers & Shapoorji Pallonji (COMPLAINT NO: CC006000000192458 ) 

Fact of the Case

• Nirmal Developers and Mr. Dharmesh Jain are the Promoters of the project known as Code Name-Mumbai Dreams situated at Mulund west. 

• They appointed shapoorji Pallonji Private Limited's subsidiary Lucrative Properties Private Limited as Development Manager for providing assistance in the management, planning, supervision of the project and use of their brand name for the fees to be paid and on the terms and conditions mentioned in the development management agreement dated 27.O4.2O18

• By that time, Nirmal Developers already sold 1.71 lakh sq. ft. or thereabout residential area to the prospective purchasers' 

• Lucrative Properties Private Limited undertook the responsibility of marketing and branding the project for fees.

• The name of Lucrative Properties Private Limited is mentioned in the category of "Other Professional" and not as promoter on the web page of the project.

• Clause 3.2.1 thereof provides that from condition precedent completion date, the development manager (Lucrative Properties Private Limited) wiil associate the Brand Name solely for the purpose of branding and Marketing the Project in its capacity as Development Manager for the Project.

• Clause 3.2.5 shows that they agreed that the name of the Development Manager and the Developer and their respective logos shall appear on all the brochures, pamphlets, handouts' websites' and all print and electronic media for Marketing the Project' as per branding policies in terms of the Brand Licensing Agreement and as may be approved by the Development Manager'

• Clause 4.2 provides that, during the term of the agreement' the development manager shall in addition to all other functions of development manager as contained in the agreement have the exclusive right to 

• 4.2.1-. manage, plan, supervise the project up to completion thereof and 

• 4.2.2 prepare the mutually agreed business plan in terms of the agreement

where it has been held that 

• development manager having exclusive right to sell the units of the project is included under the definition of the promoter. 

• when a person who sells the apartments is different than the one who Constructs it, then both are jointly liable

• It was argued that under Sec 2(zk) of RERA Act where the person who constructs a building into apartments or develops a plot for sale and the persons who sell apartments or plots are different Persons, both of them shall be deemed to be the Promoters and shall be jointly liable as such for the functions and responsibilities specified, under RERA law. 

• The learned Adjudicating Authority accepted this contention and held that the Development Manager is included in the definition of Promoter and directed that the Development Manager be added as promoter on the RERA web page within 30 days and 

• that Nirmal Developers and Lucrative (subsidiary of Shapoorji) shall refund the amounts of the complainants with simple interest at the rate of 9% per annum from the date of their receipt till their refund. 

Full text of the judgment is attached

https://media-exp1.licdn.com/dms/document/C4D1FAQFVTtwQRyJ-1w/feedshare-document-pdf-analyzed/0/1616418248675?e=1617728400&v=beta&t=UYChkxffBtL3u5aJ_1Gz4ZIY7sZ4O8jiijcQtpN1s34

    

Designated Tribunal under Section 43 of RERA ACT will function till such time a regular Tribunal is established

  In a judgment dated 17.09.2018 passed in Writ-C No. 31085 of 2018; Gardenia Aims Developers Pvt. Ltd. v. State of U.P., wherein The Honorable Allahabad High Court  has held that

 Section 43 of the Act prescribes a time of one year for establishment of the Tribunal but the proviso to the said Section says that till such time regular Tribunal is established the State Government will have power to designate any other existing Tribunal to hear the appeals. 

The Court held that in the said case the State Government by an order dated 24.01.2018 had designated the U.P. State Transport Appellate Tribunal as the Tribunal to hear the appeals and the proviso does not prescribe any time limit for functioning of the designated Tribunal, which says that the said designated Tribunal will function till such time a regular Tribunal is established and as the regular Tribunal had not been established till 17.09.2018, the designated Tribunal had jurisdiction. 

Section 43(5) i.e pre deposit of sum by Promoter filing Appeal against the impugned order

In a Landmark Judgement passed by Allahabad HC in the matter of Radicon Infrastructure and Housing Pivate Limited vs. Karan Dhyani (Second Appeal No. - 364 of 2018). passed on 26th July, 2019.

The Hon'ble High Court in para 26 has interpreted section 43(5) i.e pre deposit of sum by Promoter filing Appeal against the impugned order is required to deposit

•  30 % or such higher sum as may be determined by Tribunal with respect to penalty imposed upon promoter.

• 100 % of amount determined to be payable being refund of principal/ interest.

This judgment will come as a relief for lakhs of homebuyers across the country who after spending several years before RERA authority and managing to secure a favourable order were then made to suffer by the developer who then used to prefer Appeal and further delay the proceedings.
The Complete Judgement can be found at the Following link.

https://media-exp1.licdn.com/dms/document/C4D1FAQGOdR4_m4LTEw/feedshare-document-pdf-analyzed/0/1617626541425?e=1617728400&v=beta&t=z-Hd96USUusVgjXeXSQqrxs_HvABg2w1VpWdnFBIM_k
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