Recent Judgments on RERA ACT, 2016

Shruti Lamba

In India over the period of time, we have been habitual of listening people talking about Real Estate being a crooked area of business. People can be seen hesitant in investing as well as dealing with the Real Estate businessman and brokers. This conservative mindset led to unpredictable variations in the Real Estate Sector.

To revive and overcame the lopsided nature of this sector, Government came up with Real Estate (Regulation and Development) Bill, 2013 which was published on 14^th August 2013. The bill was later enacted by Parliament of India and was assented to on 25^th March, 2016 and Real Estate (Regulation and Development) Act, 2016 came into force. 59 of 92 sections notified were commenced with effect from 1^st May, 2016 and remaining were commenced with effect from 1^st May, 2017.

Real Estate (Regulation and Development) Act, 2016 (hereinafter as RERA) is an Act enacted to protect the buyers and investors of the real estate sector and well as benefit the developers. The Act aims at bringing transparency and eliminating the loopholes in the system and transactions of the real estate sector. This Act is a major reform for the real estate sector.

Now the problems of misleading facts, delayed possession to the buyers and crooked methods of developers are efficiently dealt by the provisions of RERA. Further, RERA rules and guidelines help the homebuyers as well as the developers and agents to navigate through the real estate sector easily.

The gist of the Act is to provide a transparent system of working in the real estate sector. RERA has aimed to ensure positive effect in every facet of the real estate sector whether it be delayed possession or developer not delivering what was agreed to. RERA also aims to boost investment in the real estate sector by ensuring transparent, equitable and fair system of working between the seller and buyers of the property.

RERA is applicable to both commercial as well as residential properties. RERA aims at regulating the sector by making provision for mandatory registration with the state regulation authority under RERA of all proposed projects exceeding an area of 500 sq.mt or more than 8 apartments. And also, one model sale agreement between all the builders and homebuyers has been provisioned under the act so as to ensure uniformity within the sector.

Under RERA, the states have been entrusted to enact their own set of rules and regulations for its respective sector, but the main spirit and provisions of the Central Act shall not be diluted.

Since commencement of the RERA in 2016, the Courts and the RERA Authorities have been approached by various complainants and various judgments passed by the Courts have simplified and broaden the horizon of RERA.

M/s Imperia Structures Ltd. V. Anil Patni And Anr. Etc.^[1]

Facts:

The facts of the case can be briefly outlined as the appellant launched a project named ‘The ESFERA’ in Gurgaon, Haryana in 2011 and all the complainants booked their apartments and paid the booking amount and later Builder Buyer Agreement was entered by all the complainants and the appellant.

Few clauses (namely clause 11.1 and 11.2) of the agreement provided as follows:

“On failure of company to deliver possession within 3 years from the date of execution of the agreement, the developer/company shall be entitled to terminate the agreement and shall be entitles to refund the amounts paid by the allotees with simple interest of 9% p.a for the period such amount were with the developer and no other compensation can be claimed.
It was totally on the discretion of the developer to cancel or terminate the agreement or not.”

Another clause 41 of the agreement provided for the provision of Force Majure as:

“Force Majure :The Developer/Company shall not be held responsible or liable for not performing any of its obligations or undertakings provided for in this Agreement if such performance is prevented, delayed or hindered by an act of God, fire, flood, explosion, war, riot, terrorist acts, sabotage, inability to procure or general shortage of energy, labour, equipment, facilities, materials or supplies, failure of transportation, strikes, lock outs, action of labour unions or any other cause (whether similar or dissimilar to the foregoing) not within the reasonable control of the Developer/Company.”

The developer failed to complete the construction and deliver the possession within 3 years of the decided time and a suit was filed by the complainants contending that the developer had ulterior motives and never intended to deliver the possession. The developer only intended to extract money from the innocent buyers and thus, stopped the construction as soon as he got the money.

One of the complainants filed appeal with Consumer Disputes Redressal Commission, New Delhi (Civil Appeal Diary No. 9796 of 2019 CIVIL APPEAL NO. 3581-3590 OF 2020 @ CIVIL APPEAL DIARY NO.9796/2019 M/s Imperia Structures Ltd. vs. Anil Patni^[2])

The present appeal was brought in the hon’ble Supreme Court by the appellant on the contention that since the appellants have approached the Consumer Disputes Redressal Commission, they shall be barred from instituting suit and claiming benefits thereunder because there exists a special act to address this grievance and the NCDRC ought not have entertained the complaint.

Issue:

So, the important question arose before the Court was:

“Despite enactment of a special act RERA can home buyers still approach the consumer forum to seek remedies including refund and compensation from the developer for delayed possession of the property.”

Observations and Decision:

The court observed and held as follows:

The remedies under Consumer Protection Act are additional and are over and above other remedies available under any other Acts. The availability of any other alternate remedy under any special statute is no bar for claiming benefits under Consumer Protection Act.
A person if satisfies to be a ‘consumer’ under Consumer Protection Act shall be entitled have remedies and initiate proceedings under the Consumer Protection Act apart from the normal civil remedies available. If he does not satisfy to be ‘consumer’ then he is entitled to claim only normal civil remedies.
RERA ACT provides for the remedy to an allotee who on failure of the developer to deliver possession within the agreed period under Section 18 of the RERA ACT,2016. The section provides that on failure of the developer to deliver possession by the date specified in the agreement, the developer, if the allotee wishes to withdraw from the project, shall be liable to return the amount received by him with respect to the property and with such rate of interest as prescribed. And if allotee does not wish to withdraw from the project then the developer shall be liable to pay interest for every month of delay till the handing over of the possession. It is totally up to the discretion of the allotee to choose any option.
The right of allotee under Section 18 of the RERA ACT is an unqualified right and is made without “any prejudice to any other remedy available”. The intent of the lawmakers is clear in Section 18 that it is the discretion of allotee to choose to continue or exist. Thus, any clause inferring the discretion to the developer like in present case shall have no relevance and shall stand null and void.
The court held that even though special authorities to regulate and promote real estate sector are created under RERA ACT but by the virtue of Section 18 that gives right “without prejudice to any other remedy available”, any person cannot be barred from claiming other remedies available under any other laws.
Section 79 of the RERA ACT bars jurisdiction of Civil Court to entertain any suit or proceeding of a matter the authority under RERA ACT is empowered to deal. Thus, an allotee would stand barred from invoking jurisdiction of a Civil Court. The court observed by quoting the landmark decision of Malay Kumar Ganguli vs. Dr. Sukumar Mukherjee^[3] that although proceedings before NCDRC are of judicial nature but are not in nature of civil court proceedings within the meaning of Civil Procedure Code and thus, cannot be called a civil court. So, a person who can be called a ‘consumer’ under Consumer Protection Act cannot be barred by virtue of section 79 of RERA ACT.
The court observed that the developer is a service provider and shall be treated same as any other service provider within the scope of Consumer Protection Act and therefore, the buyer or allotee shall be treated as a consumer of the services of the developer. And thus it was held that,
“Section 79 of the RERA ACT Act does not in any way bar the Commission or Forum under the provisions of the CP Act to entertain any complain.”
Section 88 of RERA ACT specifies that provisions of RERA ACT would be in addition and not in derogation of the provisions of any other law.
The decision of Pioneer Urban Land And … vs Union Of India on 9 August^[4] was referred by the court wherein it was held that RERA ACT should be harmoniously read with the other code and laws for the time being in force. In event of conflict only the code shall prevail over RERA ACT.
It was held that merely on the ground of expiry of the registration of the project under RERA ACT, the allotee cannot be barred to maintain an action against the developer.

Thus, it was held by SC that “Despite RERA ACT, home buyers can pursue remedies against real estate firms at consumer fora”

Marvel Sigma Homes Private … vs Rustam Phiroze Mehta^[5]

Facts

The facts of the case can be briefly outlined as the petitioner filed complaint under section 12,14,18 and 19 of the RERA ACT complaining that he had paid the entire consideration for the apartment yet there has been gross delay in possession and he seeks to get refund of the paid amount and interest and compensation under aforesaid provisions of RERA Act.

By an order RERA allowed the complaint and on initiation of execution by the petitioner RERA issued a Recovery Certificate directing the Collector to execute the said certificate. The Collector further directed Tahsildar to execute the certificate. Both the Collector and the Tahsildar failed to perform their statutory duty to recover the amount. The petitioner then filed a writ petition before the Bombay High Court praying to issue a writ of Mandamus against Collector and the Tahsildar. In counter to this, respondent 4 filed another writ seeking quashing or setting aside the order passed to execute the recovery certificate.

Issue:

The main question that arises for consideration was: whether the said Order of the Adjudicating Officer directing return of the amount paid with interest is a direction to pay ‘compensation’ or a monetary claim of ‘compensation’ as understood by Section 40(1) of the Act?

Observations and Decision:

It was observed by the court as follows:
Section 18(a) of the Act provides for return of the money in case of failure of developer to deliver possession. So, return of the amount under Section 18(a) cannot be taken as mutually exclusive to the compensation. Both return of the amount and compensation are different categories.
But under 18 (b) provision provides for return of the amount with interest including compensation in manner provided by the act, so herein return of amount is mentioned as including compensation.

Thus, on combine reading of above two provisions it was held by the court that:

“It is thus clear that the expression ‘compensation’ does not stand apart from return of the amount, but the monetary amount represented by return of the consideration paid with interest is an aspect of compensation within the meaning of Section 18 of the Act.”“all the amounts that can be awarded to be paid by the promoter or that constitute the promoters’ liability under Section 18 of the Act, are collectively and generally referred to as ‘compensation’. This is a clear indication that there is no merit whatsoever in bifurcating the amounts that the promoter is liable to pay under Section 18 of the Act as ‘return of consideration’ on the one hand and ‘compensation’ on the other hand.”

Also, compensation word used under section 40(1) of RERA Act must be understood in sense of section 71 of RERA Act and shall include all the amount that the developer is liable to pay the allotee under section 12,14,18,19 of the act.
It was held that recovery covered under section 40(1) of the act shall be read with Rule 3 and order or execution covered by Section 40(2) shall be read with and governed by Rule 4.

Thus, it was held that recovery certificate was rightly issued by the Adjudicating Officer as per Section 40(1) of the Act read with Rule 3.

Wg. Cdr. Arifur Rahman Khan and Aleya Sultana and Ors. (2019)^[6]

Facts:

The facts of the case can be briefly outlined as the said appeal is filed before the hon’ble Supreme Court as against the verdict of National Consumer Disputes Redressal Commission dismissing the complaint of 339 flat buyers praying for compensation on failure of the developer to deliver possession within stipulated time of 3 years and also failure to fulfil the promises with respect to amenities.

The NCDRC rejected the complaint by holding that allotees are not entitled to claim compensation for delayed possession and lack of assured amenities in excess of what was stipulated in the sale agreement between the buyer and the developer.

Issue:

The main question of the concern was are the buyers entitled to compensation with respect to delayed possession and lack of assured amenities. To what extent the compensation can be claimed and if that claim can be in excess of what has already been stipulated in the contract.

Observations and Decision:

The Supreme Court held that the flat buyers are entitled to claim compensation in excess of stipulated compensation in the agreement. The buyer shall be entitled to refund of the money paid, and the interest and compensation money calculated on the money paid and with effect from date of expiry of the stipulated period of delivery of possession (3 years in present case) starting from the day of execution of the agreement and shall continue till date of the offer of possession after the receipt of the occupation certificate.
The compensation shall be in addition to the refund of the money paid by the allotee and shall be calculated at the rate of Rs. 5 per sq. ft. per month at the time of drawing final accounts.
The court ordered the developers to pay the above within one month of passing the judgment and cautioned that failure shall carry interest @ of 9% per annum until payment.

Dwijendra Mohan Ganga Prasad Mishra v. M/S. Housing Development and Infrastructure Ltd.^[7]

Facts

The appeal is an appeal under section 44 of the RERA Act. The appellant (originally complainant) is allotee in a housing project whereby respondent is the promoter. The allotee made the full payment of his portion but the promoter failed to deliver the possession within the stipulated and agreed period. Being aggrieved the appellant filed a complaint before MahaRERA Authority under section 18 of the RERA Act. Adjudicating Officer passed the impugned order and permitted the allotee to withdraw from the project and directed the promoter to pay a certain amount along with interest and cost.

Feeling aggrieved by the order of Ld. Adjudicating officer appellant preferred the present appeal and mainly contended that the impugned order did not include the compensation of mental harassment and economical loss of the allotee. On the other hand, promoter contended that allotee never demanded claim for compensation of mental harassment and economical loss separately and hence, shall not be awarded the same.

Issue:

The main question to be addressed was can a person claim compensation on grounds of mental harassment and economic loss on account of delayed delivery of possession on behalf of developer. And can the same claim stands valid if the same has not been prayed before the Adjudicating Officer.

Observations and Decision:

The court held that the allotee was completely silent in his original complain about the appealed claims thus, the only factors for deciding the quantum of compensation shall be same as what are underlaid in the section 72 of the RERA Act. thus, the appellant cannot claim for compensation for mental harassment and economical loss, if the same was not claimed in the original complaint.
And it was also held that the impugned order to be modified to the extent that the portion of the order granting permission to allotee to withdraw from the project shall be deleted because section 18 of the RERA Act provides the provision to withdraw from the project as a right and thus requires no statutory permission to be granted by the Adjudicating Officer.

Conclusion

RERA Act,2016 is a major reform to the real estate sector of India. It aims at restoring the faith of the home buyers and investors in the real estate sector by ensuring transparent and loop free and fair practices on the developers or promoters end, so that the investments in the sector apparently rise and a boost is given to the sector. Since it is relatively a new law so various judgments are setting aside the confusions and even more stringent provisions are formulated in the judgments every now and then. Since the enactment of the RERA Act the courts have been approached by numerous home buyers, brokers and developers but still there is not much awareness about the act. So, pronouncement of judgments is also a way to aware the mass about their rights as a home buyer and the provisions of the Act.

References

M/s Imperia Structures Ltd. V. Anil Patni and Anr. On 2 Nov 2020 Civil Appeal No. 3581-3590/2020 ↑
M/S Imperia Structures Ltd. vs Anil Patni on 5 April ↑
Malay Kumar Ganguli vs. Dr. Sukumar Mukherjee,2005, CRIMINAL APPEAL NOS. 1191-1194 OF 2005 ↑
Pioneer Urban Land And … vs Union Of India on 9 August, 2019, WRIT PETITION (CIVIL) NO. 43 OF 2019 ↑
Marvel Sigma Homes Private … vs Rustam Phiroze Mehta on 9 March, 2021(INTERIM APPLICATION (ST) NO.2044 OF 2021 IN WRIT PETITION (L) NO.3221 OF 2020) ↑
Wg. Cdr. Arifur Rahman Khan and Aleya Sultana and Ors. (2019) (Civil Appeal No. 6239 of 2019) ↑
Dwijendra Mohan Ganga Prasad Mishra v. M/S. Housing Development and Infrastructure Ltd. On MAR 16, 2019 (MAHARASHTRA REAL ESTATE APPELLATE TRIBUNAL, APPEAL NO. O06o0o0o0o1 0794) ↑

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