This article has been published by the Realtyplus Magazine at 01252025213500-Final-Jan-Issue-2025_Final.pdf

A.      Introduction

• In this article, we have analyzed the provisions of (i) Real Estate (Regulation and Development) Act, 2016 (“RERA Act”); (ii) Consumer Protection Act, 2019 (“CP Act”); and (iii) the Insolvency and Bankruptcy Code, 2016 (“IBC“), in relation to the recourses available with an allottee or buyer in the event of delay in handing over the project to them. In pursuance to the laws, a buyer or allottee can file complaints before the concerned consumer forum or the Real Estate Regulatory Authority (“RERA Authority”) or initiate insolvency proceedings under the IBC against developers for default in delivering promised housing units within the agreed project timelines.
• We have in this article analysed the recourses available with the allottee or buyer which inter-alia includes (i) withdrawal from the project by the buyer; (ii) seeking a full refund and interest if the developer fails to deliver the property within the agreed timeline; (iii) demanding compensation for the delay from the promoter; (iv) demanding cancellation of the builder-buyer agreement; and, or (v) file complaints in consumer courts for deficiency in service, leading to monetary compensation or other remedies.

  B. Relevant Legal Provisions

We hereinbelow analyze certain protections and recourses available to the buyers in the event of delayed real estate projects:

1. RERA Act:

RERA mandates the registration of real estate projects and agents, ensuring that developers adhere to project timelines and specifications and provides a dedicated platform for aggrieved buyers to address grievances, promoting fair practices and protecting consumer interests. An aggrieved buyer can file a complaint with RERA Authority, if the project is registered under the RERA Authority. The buyer can file a complaint to seek compensation or a refund. We hereinbelow provide certain relevant provisions of RERA Act in this regard:

• Section 18 of RERA Act:

Section 18 (Return of amount and compensation) of the RERA Act provides for the rights of the buyers and provides recourse to the buyers if there is a delay in delivering the property or project. The buyers are entitled to compensation as per the provisions of Section 18 of RERA. In the event the promoter fails to complete or is unable to give possession of an apartment or building, (i) the allotee may withdraw from the project; and (ii) return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under RERA Act.

Provided that if an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed. Further, if the promoter fails to discharge any other obligations imposed on him under RERA Act or the rules or regulations made thereunder or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under RERA Act.

• Section 31 of RERA Act:

As per Section 31 (Filing of complaints with the Authority or the adjudicating officer) of the RERA Act, a buyer can file a complaint with the RERA Authority or an adjudicating officer for any violation or contravention of the provisions of RERA Act or the rules and regulations made thereunder against any promoter allottee or real estate agent, as the case may be.

• Section 71 of the RERA Act:

Section 71 (Power to adjudicate) provides that for the purpose of adjudicating compensation, the RERA Authority shall appoint one or more judicial officer as deemed necessary, for holding an inquiry, after giving any person concerned a reasonable opportunity of being heard. The proviso to the Section 71 (1) provides that any person whose complaint in respect of matters covered under Sections 12, 14, 18 and Section 19 is pending before the concerned consumer forum, established under Section 9 of the CP Act, on or before the commencement of RERA Act, he may, with the permission of such consumer forum, withdraw the complaint pending before it and file an application before the adjudicating officer under RERA Act. Further Section 71 (2) of the RERA Act, provides that application for adjudging compensation under Section 71 (1), shall be dealt with by the adjudicating officer as expeditiously as possible and dispose of the same within a period of sixty days from the date of receipt of the application.

• Section 72 of the RERA Act:

Section 72 (Factors to be taken into account by the adjudicating officer) of the RERA Act lays down the factors to be considered by the RERA Authority while adjudging the quantum of compensation or interest, under Section 71 of the RERA Act. The factors are (i) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (ii) the amount of loss caused as a result of the default;

(iii) the repetitive nature of the default; (iv) such other factors which the adjudicating officer considers necessary to the case in furtherance of justice.

• Section 79 of RERA Act:

Section 79 (Bar of jurisdiction) of RERA Act provides that civil courts cannot handle suit or proceeding in respect of any matter which the RERA Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under RERA Act to determine. However, consumers forums are still allowed to handle complaints.

2. CP Act:

If the project is not under RERA Act or buyer is dissatisfied with the RERA resolution, the aggrieved buyer can file a complaint in consumer court in case of any “deficiency”, i.e., fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service. The court can order compensation for delays, interest on the amount paid, or even a refund. The aggrieved buyer can approach the consumer forums to seek redressal for issues like delayed possession, defective construction, or false promises by developers. The consumer forums have the authority to adjudicate complaints involving significant monetary claims, offering a legal avenue for consumers to enforce their rights.

• Section 17 of CPA:

Section 17 (Complaints to authorities) of the CP Act provides that a complaint relating to violation of consumer rights, may be forwarded either in writing or in electronic mode, to any one of the authorities, namely, the District Collector or the Commissioner of regional office or the Central Authority.

• Forums for filing complaints:

Buyers can approach consumer courts at the district, state, or national levels based on the property’s value: (i) as per Section 34 (Jurisdiction of District Commission) of the CP Act District Commission for properties valued up to Rs. 1,00,00,000/-; (ii) as per Section 47 (Jurisdiction of State Commission) of the CP Act, State Commission for properties valued between Rs. 1,00,00,000/- and Rs. 10,00,00,000/-; and (iii) as per Section 58 (Jurisdiction of National Commission) of the CP Act, National Consumer Disputes Redressal Commission (“NCDRC“) for properties valued over Rs. 10,00,00,000/-

• RERA Act does not bar the jurisdiction of the CP Act to deal with the complaints filed by consumers who are buyers or allottees of real estate projects registered under RERA Act^[1]. In the case of Imperial Structures Limited v. Surinder Anil Patni and Another, SC elaborated on the jurisdiction of the CP Act and the RERA Act to deal with the complaints filed by consumers. The relevant paragraphs from the said judgement are reproduced hereinbelow:

“On the strength of the law so declared, Section 79 of the RERA Act does not in any way bar the commission or forum under the provisions of the CP Act to entertain any complaint.”

“Again, 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. Further, 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.”

3. IBC:

Under the IBC, an allottee of a real estate project has the right to file an application as a financial creditor against a real estate developer for delayed or stalled projects. Allottees are recognized as financial creditors, which enables them to initiate insolvency proceedings against developers for default in delivering promised housing units. On December 28, 2019, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, was promulgated which was replaced by Insolvency and Bankruptcy Code (Amendment) Act, 2020 (“2020 Amendment Act“), inter-alia inserting provisos to Section 7 of the IBC. The second proviso to Section 7 states that in case of allottee, an application for initiating CIRP under Section 7 of the IBC is to be filed jointly by at least 100 allottees or 10% of the total allottees under the said project, whichever is lesser. The third proviso further stated that matters already filed by financial creditors such as allottee but not yet admitted by the adjudicating authority before the commencement of the 2020 Amendment Act shall be dismissed if they are not modified to fulfil the minimum threshold requirement as stated above within 30 days from the commencement of the 2020 Amendment Act. The constitutional validity of the 2020 Amendment Act was upheld by the Supreme Court in the case of Manish Kumar v. Union of India^[2].

4. Further, in several cases, where the builder has fraudulently withheld possession, buyers can file criminal cases as well. Under the Indian Penal Code, now known as Bhartiya Nyay Sanhita, 2023, offenses like fraud, criminal breach of trust, and cheating can be applied. Criminal cases might lead to severe penalties or imprisonment for the builder. A criminal complaint is usually filed if there is clear evidence that the builder intentionally deceived buyers, misappropriated funds, or falsely promised possession. Buyers may file an FIR with the police or approach the magistrate if the police fail to act.

C.  Recourses offered vide judicial precedents.

Based on Section 18 of the RERA Act and the involvement of the consumer forums, following are inter-alia the recourses sought in relation to delay in handing over the property being plots or apartments, in a project, or any defects therein:

• Interest for Delay– In the case of Vidya and others v. M/S Parsvnath Developers Ltd.^[3],the Hon’ble Supreme Court of India (“SC“) observed that the NCDRC was not justified in awarding an interest rate of 9% per annum, which was below the rate agreed upon in the contract. It upheld the order of the NCDRC for the refund of the entire amount deposited by the complainants. However, it modified the interest rate directive, ruling that interest should be paid at the rate of 12% per annum from the date of the respective deposits until the date of refund. The SC partly allowed the appeal, ensuring the complainants received the agreed-upon rate of interest. In the case of Emaar MGF Land Limited and Ors. vs. Amit Puri^[4], NCDRC held that it is well within the complainant’s right to seek for refund of the principal amount with interest and compensation and that non-delivery of legal physical possession of the fully developed allotted plot to the allottee, after receipt of full consideration thereof, tantamount to deficiency in rendering service as also unfair trade practice on the part of the developer and therefore, the allottee was entirely justified in praying for refund of the amount deposited with interest for withholding the money for over seven years.
• Compensation for Delay– In the case of Arifur Rahman Khan and Ors. vs. DLF Southern Homes Pvt. Ltd. and Ors.^[5], SC held that the flat buyers are entitled to compensation for delayed handing over of possession and for the failure of the developer to fulfil the representations made to flat buyers in regard to the provision of amenities. Further, SC observed that where there is an existence of a one-sided contract, it eventually becomes arbitrary for the other side and therefore in such situations the court must act with reason to come to a correct conclusion. Moreover, SC also rejected the decision of the NCDRC and held that the execution of a conveyance deed cannot preclude a consumer from raising its claims against the builder.
• Refund of Amounts Paid– The High Court of Bombay in the case of Wadhwa Group Housing Private Ltd. v. Vijay Choksi and Another^[6] held that under Section 18(1)(b), the liability to return the amount received from the flat purchaser is on the Promoter. Even a Promoter who has not received any consideration from an allottee is also liable to give refund with interest under Section 18 of the RERA Act. Similarly, in the case of Laureate Buildwell Private Limited v. Chiranjeet Singh^[7], SC directed the developer to refund the principal amount paid along with an interest of 9% per annum.

D. Conclusion

As regards to the delays, RERA Act or CP Act enables an allottee to seek compensation or refunds, as mentioned above. The cases analyzed demonstrate a consistent judicial approach that emphasizes the protection of consumer rights in real estate transactions. Courts have upheld the principle of awarding interest on amounts deposited, or ensuring that developers honor the terms agreed upon in contracts. Furthermore, the courts have reinforced that the refund of amounts paid, along with appropriate interest, is the responsibility of the developer, irrespective of whether they have received full consideration from the allottee. These judgments also highlight the judicial commitment to holding developers accountable and ensuring that consumers receive fair treatment and compensation for any delays, deficiencies, or unfair practices in the real estate sector.

Footnotes:

[1] Imperial Structures Limited v. Surinder Anil Patni and Another, Civil Appeal No. 3581-3590 of 2020, dated November 2, 2020.

[2] Manish Kumar v. Union of India, 2021 SCC OnLine SC 30.

[3] Vidya and others v. M/S Parsvnath Developers Ltd., (2024) 9 SCC 651.

[4] Emaar MGF Land Limited and Ors. vs. Amit Puri, NCDRC, New Delhi, First Appeal No. 250 of 2014.

[5]Arifur Rahman Khan and Ors. vs. DLF Southern Homes Pvt. Ltd. and Ors., (2020)16 SCC5 12.

[6] Wadhwa Group Housing Private Ltd. v. Vijay Choksi and Another (2024 SCC OnLine Bom 660).

[7] Laureate Buildwell Private Limited v. Chiranjeet Singh (2021) 20 SCC 401.