Bombay High Court - Where Part Occupancy Certificate of a Project was granted under the rules of the Authority, a flat owner can not seek cancellation of it on the ground of violation , affecting the other owners , who may not be a party to the case.

before The Bombay High Court

Sanjay Phulwaria And Others

vs

Mumbai Metropolitan Region Development Authority And Others

Writ Petition Lodging No. 2639 Of 2018 With Notice Of Motion Lodging No. 542 Of 2018, Chamber Summons No. 238 Of 2018

decided on 16-10-2018

Where Part Occupancy Certificate of a Project was granted under the rules of the Authority, a flat owner can not seek cancellation of it on the ground of violation , affecting the other owners , who may not be a party to the case.

Supreme Court : the banks had failed to comply with their duties, and had in fact colluded with the developer in committing a fraud on the home buyers, and breaching public trust.

 Bikram Chaterjee vs. Union of India, [2018]147 SCL 154 wherein the Apex Court took cognizance of the fact that the banks had failed to comply with their duties, and had in fact colluded with the developer in committing a fraud on the home buyers, and breaching public trust. It may be useful to refer to paragraphs 69 and 127 of the judgement, which reads as under-

“69. In the instant matter, the question of larger public importance is involved. It is a shocking and surprising state of affairs that such large scale cheating has taken place and middle and poor class home buyers have been duped and deprived of their hard-earned money and lifetime savings and some of them had taken a loan from the bank and they are not getting houses. Bank has made payment to the builder, owners have the liability of making payment of amount with interest, homebuyers are still waiting for their dream houses to be completed.

127. The Forensic Auditors’ report makes it apparent that Bankers have failed to ensure and oversee that the money was invested in the projects. It was diverted elsewhere as rightly found by the Forensic Auditors. Even what was paid by the home buyers, had not been used in the projects and stands diverted. There was, in fact, no necessity for raising the loans from the bank. The money borrowed from banks was used to create other assets worth thousands of crores. Thus, the banks can realise their money from those assets  and from guarantors and not from the investment of home buyers, not from the buildings in which loans granted by banks have not been invested, which have been erected partially or some are at the nascent stage, for which hard- earned money has been paid by the home buyers”

NCDRC - Wherever the builder commits a particular date or time frame for completion of the construction and offering possession to the buyer, he must necessarily honour the commitment made by him, If the builder can indefinitely postpone and delay the construction of the flat and the flat buyer has no option but to wait till the builder decides to complete the construction and offer possession to the buyer, that would be nothing but a travesty of justice.

 In the Matter of Pradeep Narula & Anr. Vs. M/s. Granite Gate Properties Pvt. Ltd. & Anr. Complaint no. Consumer Case No. 315 OF 2014 decided on 23.08.2016 before National Consumer Disputes Redressal Commission

The NCDRC in this case Observed that 

"10.   ...........  The primary purpose of a consumer in booking a residential flat which the builder is to construct for him, is to start living in that house on or about the date committed to him by the builder for delivering possession of the flat booked by him.  If the builder does not deliver upon his contractual obligation and at the same time, is unable to show that the delay in completion of the flat and offering its possession to the consumer was on account on circumstances beyond his control, this would constitute deficiency on the part of the builder / service provider in rendering services to the consumer.  If I accept the contention that the builder can indefinitely postpone and delay the construction of the flat and the flat buyer has no option but to wait till the builder decides to complete the construction and offer possession to the buyer, that would be nothing but a travesty of justice and result in a situation where the flat buyer is left at the mercy of the builder, without recourse to an appropriate legal remedy.  Such an interpretation, if taken, is bound to defeat the very objective behind the enactment of the Consumer Protection Act, as far as housing construction is concerned.  Therefore, I am unable to accept the contention advanced by the learned counsel for the opposite party.  In my view, wherever the builder commits a particular date or time frame for completion of the construction and offering possession to the buyer, he must necessarily honour the commitment made by him, though a minor delay may not constitute deficiency in the service rendered by him to the buyer.  Of course, if the builder is able to how that the delay in completion of the construction and offering possession to the buyer is attributable wholly to the circumstances beyond his control, that may not be a case of deficiency in the services rendered to the consumer".

NCDRC - The builder ought not to have accepted money and entered into agreement with the buyers without approval of the building plans

 In the Matter of Yogesh Sharma & Anr., vs M/S Unitech Limited Complaint no.Consumer Case No. 267 OF 2014  decided on 26.11.2015 before National Consumer Disputes Redressal Commission

The NCDRC in the case observed that the builder ought not to have accepted money and entered into agreement with the buyers without approval of the building plans by GNIDA (Greater Noida Development Authority). If the opposite party chose to accept money from the flat buyers and enter into agreements, undertaking to give possession within a particular time frame, without having possession of the land and without approval of the building plans, it is only itself to blame for a situation in which the construction got delayed on account of the delay in approval of building plans and physical delivery of the land to it on the spot.

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.

Courts will not enforce and will strike down an unfair and unreasonable contract when flat purchaser had no option but to sign on the dotted line

In the Matter of Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan 2019 (5) SCC 725,

The Hon'ble Supreme Court has laid down that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between the parties, who are not equal in bargaining power. A term of a contract will not be final and binding if it is shown that the flat purchaser had no option but to sign on the dotted line, on a contract framed by a builder. Further, incorporation of one-sided clauses in an agreement constitutes an unfair trade practice since it adopts unfair methods or practices for the purpose of selling the flat by the builder.

In the said case, the Buyer had deposited Rs. 4,83,25,280/- with the Builder for purchase of a flat in Araya Complex, Gurugram (the ‘Flat’), but the Builder had failed to obtain the occupancy certificate within the stipulated time period of 39 months with a grace period of 180 days and therefore, could not offer possession of the Flat to the Buyer within the time period agreed by them vide Agreement dated 08.05.2012.As a result, the Buyer had approached the National Consumer Disputes Redressal Commission (NCDRC), whereby the NCDRC directed the Builder to pay compensation to the Buyer and also awarded interest for a part of the period of delay, vide Order dated 23.10.2018.Meanwhile, the Builder obtained the Occupancy Certificate on 23.07.2018 and issued a Possession Letter to the Buyer on 28.08.2018. But the Buyer refused to accept the same as they were no longer interested to buy the said Flat and were looking for a flat elsewhere. Aggrieved by the Order dated 23.10.2018 of the NCDRC, the Builder filed an appeal before the Supreme Court (‘Appeal’).

x

The Supreme Court held that terms of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder. It further held that incorporation of one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the builder. The supreme court further added that The Builder cannot compel the Buyer to purchase the Flat after causing an inordinate delay of almost 3 years in handing over the possession of the Flat to the Buyer and the builder cannot seek to bind the Buyer with one-sided and unfair contractual terms of the Agreement.

Thus, the Apex Court directed the Builder to pay compensation and interest to the Buyer for the entire period of delay caused in handing over possession of the Flat to the Buyer.

The Apex court also was of view that “ It is difficult to accept the argument that RERA is a special enactment which deals with real estate development projects and must therefore be given precedence over the Code which is only a general enactment.  At the time of introduction of the explanation to Section 5(8)(f) of the IBC, Parliament was aware of RERA and applied some of the definition provisions to the Code.” It also held that “The fact that RERA is in addition to and not in derogation of other laws (Section 88) makes it clear that remedies under RERA to allottees were intended to be additional and not exclusive remedies”.

The Supreme court was of view that  “By the process of harmonious construction, RERA and Code must be held to co-exist and in the event of a clash, RERA must give way to the Code.  RERA therefore cannot be held to be a special statute which in the case of a conflict, would override the general statute viz. the Code.”