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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Complaints can be instituted against promoters in relation to both projects which have been registered with the authority or which are not registered with the authority

Simmi Sikka V/s M/S EMAAR MGF LAND LTD Complaint number RERA-GRG-7-2018

Haryana Real Estate Regulatory Authority Gurugram 

The judgement contains the following conclusions

• The RERA Act, nowhere mentions anywhere that it is applicable only for the registered projects.

• The RERA Act, provides certain categories of projects which are not required to be registered but these are within the ambit of the Act. These projects mentioned in section 3(2) have been taken out of the registration requirement but not out of the purview of other provisions of the Act.

• The provisions regarding registration and obligation during registration are applicable only for the registered projects.

• The obligations of the promoter’s post expiry of the validity of the registration provided in the Act are applicable to even the real estate projects exempted from the registration.

• The projects which were completed and handed over during the last 5 years are 

covered for the purpose of workmanship and structural defect liability.  A complaint may be filed by the allottee in such matter in case the possession of the real estate was within 5 years prior to the date of the complaint.

• All real estate projects are covered for land title defect liability

• A complaint pertaining to violation of the provisions of RERA Act, Haryana RERA Rules, and regulations thereunder, may be filed by any aggrieved person in respect of any real estate project as per the definition given in section 2(zn) of RERA Act.

Based on the above judgment, it may be concluded that registration of project and filing RERA complaint, both are separate activities. A RERA case can be filed even against the non-registered projects.

In the Absence of Builder Buyer agreement, the Allotment letter if having all the Important details will serve as valid Contract and the complainant can ask for the refund under section 18 also.

 In the Matter of Nikhil Chopra V/s JVPD Properties Pvt. Ltd. Complaint number CC005000000001348 The Maha RERA observed That 

• “The complainant has filed this complaint under Section 18 to claim refund of his amount from the respondents with interest. 

• The respondents issued a letter dated 24.07.2017 expressing their inability to complete the project. 

• The respondents in their reply contended that the complainant is an investor and therefore, the Authority has no jurisdiction to entertain this complaint. 

• The respondent further contended that for the application under Section 18 of RERA, there must be agreement for sale and the complainant does not have it. 

• The Authority observed that lt is a fundamental principle of law of contract that once a proposal is accepted; it becomes a contract, provided  it is coupled with lawful consideration and lawful object and it is not specifically barred by any statute. There can be oral agreement for sale or it can be also in written form. in this case the complainant has relied upon an allotment letter, admittedly issued by the respondents on 11.07.2014.

• The Authority observed that It is the contention of the respondents that there is no concluded contract. Hence, it is necessary to look at the allotment letter. On its perusal it becomes clear that the complainant agreed to purchase the flats and the respondents agreed to sell them for the consideration mentioned in the letter.

•  The respondents agreed to deliver the possession of the flats within 42 months from receipt of final commencement certificate from plinth level. All these terms and conditions have been accepted and signed by both the parties. Therefore, there remains no doubt that it is a concluded contract which has taken place on 11.07.2014.” 

• The Authority therefore ordered 

• “The respondents shall refund the amount mentioned in Para-l0 of this order.

• The respondents shall pay the complainant Rs. 20,000/- towards the cost of the complaint.. 

• The respondents shall pay simple interest at the rate of 10.05% from the dates of receipts of the amount till they are refunded.. 

• The charge of aforesaid amount shall be on the respondents’ property under project bearing C.T.S. No. 634/5 and 64D “S” ward of village Tirandaz, Taluka Kurla, Mumbai, till the complainant’s claim is satisfied.”

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Open Car Parking can not be Sold, Open Car Parking is for all the residents

 In the Matter of Sanjeev Dharkar V/s M/s. Arkade Realty Complaint number CC006000000001135 The Maharashtra Real Estate Regulatory Authority Ruled the Followings

The complainant, who is a resident in a completed building in the registered project, has filed this complaint seeking directions of Maha RERA to the respondent to allow him to park his vehicle inside the compound wall of the building. The Complainant has further alleged that the Respondent is selling open car parking by collecting in cash without any documentation.

 Maha RERA  in its order observed on the facts mentioned above, and directed the Respondent to allow parking of Complainant’s vehicle in the premises, as is being done for other allottees. As per the Act, Rules and Regulations, the respondent cannot sell open parking space, which has to be handed over to the legal entity of the allottees when it is formed.

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Agriculture lands which have not received Non Agriculture permissions (N.A permission) are not a real estate project as defined under Section 2(zn) of the Act and the same cannot be registered under Section 3 of the Act.

In the Matter of Mohommed Zoin Khan Versus M/s. Emnoy Properties india &  Ors Complaint number SC 10000227 The Maharashtra Real Estate Regulatory Authority judgement contains the following conclusions :-

Agriculture lands which have not received Non Agriculture permissions, do not fall under the jurisdiction and need not register with RERA Authorities. Hon’ble Tribunal have upheld that Agriculture land and plots which have not received NA permissions are not Real Estate Projects and hence should not be registered.

The Hon’ble Tribunal observed ” We find that by applying the above observations to the facts of the case in hand, the Authority observes in para 10 of the order that the land under this Project is admittedly an agricultural land and till date no N.A. permission or order is granted by the competent Authority to develop the same. Consequently, the Authority has held that the subject project is not a real estate project as defined under Section 2(zn) of the Act and the same cannot be registered under Section 3 of the Act. ”

The Hon’ble Tribunal further added: “We have given a thoughtful consideration to the relevant provisions of the Act. In our view the real estate project as defined under Section 2(zn) contemplates development of land into plots or apartments. In case of an agricultural land, as is the case in the instant appeal, to be designated as a real estate project, necessary permissions are required to affect the development of the said land. Compliance of such a requirement also seems essential from the perspective of provisions under Section 11(4) detailing therein the obligations of a promoter and Section 4 for mandating the requirements of certain documents/ permissions necessary for registration of the project under Section 3 of the Act. In this regard, we note that Complainant has utterly failed to establish that the said land had all necessary N.A. or other permissions for its development and for undertaking its registration as real estate project under the Act.”

Only a reasonable amount can be forfeited as earnest money.

 In the Matter of DLF Ltd. v. Bhagwanti Narula, I (2015) CPJ 319(NC) the Hon’ble National Consumer Disputes Redressal Commission has clearly laid down that only a reasonable amount can be forfeited as earnest money in the event of default on the part of the purchaser and it is not permissible in law to forfeit any amount beyond a reasonable amount unless it is shown that the person forfeiting the said amount had actually suffered loss to the extent of the amount forfeited by him. Further, it was held that 20 % of the sale price cannot be said to be a reasonable amount which the petitioner company could have forfeited on account of default on the part of the complainant unless it can show it had suffered loss to the extent the amount was forfeited by it.

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’).

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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.”

Letter of allotment would tantamount to an agreement for sale

 In the Matter of Manjeet Singh dhaliwal versus Jvpd properties private Limited,the Maharashtra appellate Tribunal held that even a letter of allotment would tantamount to an agreement for sale under Section 2(c) of the ACT if the letter contains the description of the property, payment schedule and costs requisition of permissions, obligation to complete the project and getting Clarity to title. since nothing further was left to be agreed upon, the contract was concluded.

Only a nominal amount can be an earnest money

 In the Matter  of Bhuley Singh Vs. Khazan Singh & Ors. RFA No.422/2011 The Hon’ble Delhi High Court said  that nomenclature of a payment is not important and what is important is really the quantum of price which is paid. Only a nominal amount can be an earnest money, in as much as, the object of such a clause is to allow forfeiture of that amount to a nominal extent.

In the absence of completely formulated contract, earnest money is refundable.

In the Matter of  Commr of HR & CE Deptt v. S. Muthekrishnan AIR 2012 Mad 43, The Madras High Court observed that if the contract is not completely formulated between the parties but the earnest money is paid, the other party is not entitled to forfeit the amount and it stands refundable.

No provisions in RERA and rules there under to forfeit the earnest money.

  In the Matter of Sumit Mukherjee Versus M/s. Rajsanket Realty Limited Complaint No. CC006000000057591 THE MAHARASHTRA REAL ESTATE REGULATORY AUTHORITY, MUMBAI observed that there is no provisions in RERA and rules there under to forfeit the earnest money.

In the dispute matter between builders and home buyers write petition under Article 32 not maintainable

 The Honorable Supreme Court of India,In the Matter of Upendra Chaudhary V. Bulandshahr Development Authority & Ors.Writ petition (Civil) No. 150 of 2021 Pertaining to the Real estate dispute between builders and home buyers stated that because of Availability of Statutory provisions including Consumer Protection Act 1986, and its successor legislation, Real Estate (Regulation and Development) Act 2016 and Insolvency and Bankruptcy code 2016, write petition under Article 32 not maintainable.

Escalation Cost in the Event of Delayed Possession are to be borne by the builder only

In the Matter of  Brig. (Retd.) Kamal Sood V/s DLF Universal Ltd.(FA /557 /2003)  Date of Order 02.04.2007 The NCDRC observed that

         “it was the duty of the builder to plan in advance, obtain necessary permission and thereafter, promise to deliver the possession of flat in the stipulated time. It is unfair trade practice on the part of the builder to collect money from the prospective buyers without obtaining the required permission.Secondly, in such a case, if there is any express promise that the premises would be delivered within the stipulated time, and, if not done so, escalation cost is required to be borne by the builder.”

In The Absence of Possession Clause in the Agreement, the Possession should be given in a reasonable time

 in the Matter of Fortune Infrastructure-v/s-Travor D’lima (2018) 5 SCC 442, the Honorable Supreme Court has ordered that when no date of possession is mentioned in the agreement the Promoter is expected to hand over the possession within reasonable time and the period of three years (3 yrs) is held to be reasonable time.

In the case, the Respondents were aggrieved that the appellants were not delivering the possession of flats and accordingly approached the NCDRC (National Consumer Dispute Redressal Commission) to hold that the appellants were guilty of deficiency in service and unfair trade practices as per the provisions of the Consumer Protection Act, 1986.

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Thereafter, the NCDRC directed the appellants to refund the amount of Rs.1,87,00,000/- and pay a sum of Rs. 3,65,46,000/- as to the complainants. Aggrieved by NCDRC’s order, the appellants approached the Supreme Court, the Appellants contended that they had transferred the project to a different company thereby they should be discharged from any liability for not handing over the disputed property to the answering respondents and also to consider the downward trends shown in the real estate market which mandates a lesser compensation, compared to the one awarded by the NCDRC.

The Court remarked that a person cannot be made to wait indefinitely for the possession of flats allotted to them and they were entitled to seek the refund of the amount paid by them, along with compensation. In such cases When no delivery period is stipulated the Court noted that a reasonable time has to be taken into consideration. In the facts and circumstances of this case, a time period of 3 years was deemed as reasonable for completion of the contract.

For the quantum of compensation on account of delay in delivery of flats, the Supreme Court made reference to the case of Ghaziabad Development Authority v. Balbir Singh , wherein the Court observed that there was no fixed formula for fixing damages. The Court stated that it is settled in law that whenever the builder has refused to perform the contract without valid justification, the buyer is entitled for compensation as she has been deprived of price escalation of the flat. Every breach of contract gives rise to an action for damages. Such amount of damages must be proved with reasonable certainty. Where a party sustains loss by reason of a breach of contract, the damages are to be granted so as to place the suffering party in the same position as if the contract had been performed. In light of the above, the damages other than consequential loss have to be measured at the time of the breach. However, the aforesaid rule is flexible and needs to be assessed in facts and circumstances of individual cases.

Reference may be drawn to the decision of Pannalal Jankidas v. Mohanlal, AIR 1951 SC 144, where the Supreme Court for the first time held that the party in breach must compensate in respect of the direct consequences flowing from the breach and not in respect of loss or damage indirectly or remotely caused. This rule is based on the broad principle that the party who has suffered the loss should be placed in the same position, as far as compensation in money can do it, as if the party in breach had performed his contract or fulfilled his duty.