REAL ESTATE (PART-1)

Late possession/ No possession/ Defective dwelling/ Area less/ Cost escalation/ Forfeiture of registration fee in case of cancellation of flat/ Approach road dispute

Authority invited applications from home buyers, applications were more than flats available, draw, full payment made as per demand, possession not given as flats not ready.

• Consumer forum gave order in favour
• State commission held in favour
• Authority raised one more plea of jurisdiction of the commission –not consumer National commission held in favour.

Supreme Court along with many cases.   Laid down Law;

i) Purchaser is a consumer against board/construction Company for services hired

ii) Erring officer can be penalized with the payment of     compensation which is to be paid to the consumer

i) Order for interest on the amount deposited should be on the basis of facts of the case and not always @18% as ordered by National commission.

ii) If order for interest is given, there should not be any further order for compensation as both the things cannot go together

iii) In case where compensation for mental agony is given, there should not be any tax deduction at source as such compensation is not an income

Laws Laid Down;

i) Delay in delivery of the HIG houses / possession of the houses amounts to deficiency in services

ii) Interest granted on the price paid, at the bank rate from 01.01.1986 till date the delivery of the   houses

iii)  Reimbursement of the losses incurred on account of the non-delivery.-rent paid by the allottee during delay period

U.T Chandigarh Administration and Others V Amarjeet Singh and Others (SC)

It Was Held By The Apex Court:

“That where an auction is on ‘as is where is basis’ with reference to a public auction of the existing site ,the purchase /lessee is not a consumer ,the owner is not a service provider ”

Faqir Chand Gulati V/S Uppal Agencies Pvt. Ltd. & Anr.

Civil Appeal No. 3302 Of 2005 

Date of Judgment: July 10, 2008 SC

 “Land owner, who enters into an agreement with a builder, for construction of an Apartment Building and for sharing of the constructed area, is a `consumer’ entitled to maintain a complaint against the builder as a service-provider under the Consumer Protection Act, 1986.’

‘The District Forum, the State Commission and the National Commission committed a serious error in wrongly assuming that agreements of this nature being in the nature of joint venture are outside the scope of consumer disputes.’

 Nahal Chand Laloo Chand P. Ltd. vs. Panchal Co-Op. Housing Sty. Ltd

Dated .31.08.2010

On August 31, 2010, the Hon’ble Supreme Court of India, in the case of Nahal Chand Laloo Chand P. Ltd. vs. Panchali Co-Op. Housing Sty. Ltd. held that Portions of their flat complexes, usable as parking spaces, cannot be sold separately by flat builders/promoters/developers as “garage”. The court reasoned that these spaces are part of the “common areas” in flat complexes and are therefore not “saleable independently as a flat or along with a flat”.

“Open-to-sky” areas or “stilted” (covered) this is a landmark judgment, and the first to conclusively deal with this issue. .

 Neha Singhal VS M/s. Unitech Limited

‘ that fact alone cannot suffice to oust the territorial jurisdiction of the (Delhi) State Commission to adjudicate upon the complaint, in view of the specific provisions of section 11 (2) (b) of the Consumer Protection Act, 1986 (‘the Act’). To emphasise, the clause relating to jurisdiction of “courts” in the agreement between the parties cannot by itself over-ride the statutory right of the appellant/ complainant conferred by the above-mentioned provision of the Act – that would defeat the purpose and object of the Act. This view is also in accord with the provisions of section 28 of the Indian Contract Act, 1872 (as amended with effect from 8th January 1997).’

The 43 buyers got together and formed Amrapali Sapphire Flat Buyers Welfare Association, to file the complaint against the builder in May 2016, for delay in handing over possession of their flats.

The Supreme Court (SC) announced on Tuesday that flat owners can now join hands and directly approach the National Consumer Disputes Redressal Commission (NCDRC) against real estate developers for delay in handing over possession of their flats,

1. Flat buyers can come together to file complain against developers with NCDRC
2. The 43 buyers had complained against Amrapali Sapphire Developers to the Supreme Court for delay in handing over possession of their flats
3. As per the Consumer Protection Act, a plea can be filed in NCDRC directly only if the cost involved is more than Rs 1 crore

Realtors body CREDAI today expressed concern that the Supreme Court judgement that flat buyers can jointly approach the apex consumer commission NCDRC will open the floodgates of legal cases against builders

The Supreme Court in the case of Pioneer Urban Land and Infrastructure Limited & Anr v. Union of India & Ors. (Writ Petition (Civil) No. 43 of 2019) has held that the homebuyers from now onwards shall be considered as Financial Creditors under the Insolvency and Bankruptcy Code.

Various writ petitions were filed by Pioneer Urban Land And Infrastructure Limited (hereinafter referred to as “the Petitioner”) before the Supreme Court against Union of India  challenging the constitutional validity of the amendment, made under Section 5, 21 and 25 of I&B Code, 2016 in regards to the Insolvency Committee Report, which suggested “Home buyers” of the Real Estate projects to be considered as Financial Creditor and should be allowed to be represented in the Committee of Creditors by Authorized Representative.

Judgments considered for making amendments in the Insolvency Committee Section 5, 21 and 25 of I&B Code, 2016

NCLAT  in the case of Nikhil Mehta and Sons (HUF) v. AMR Infrastructure Ltd. held that

“The amount raised by developer from allottees under assured return scheme had the effect of “commercial effect of a borrowing”. Further, the amount so raised by developer was shown as “commitment charges” under the head “Financial Cost” in the annual return, which made it clear for the NCLAT to consider such allottees as “Financial Creditor” within the meaning of Section 5(7) of I&B Code.”

Supreme Court in the case of Chitra Sharma & Ors. v. Union of India allowed Home Buyers to participate in committee of creditor to protect their interest.

On the basis of the above judgments the Insolvency Committee Report suggested that there is need to make amendments to the I&B Code to clarify the position of Home Buyers under I&B Code. Therefore, amendment was made under Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 (hereinafter referred to as “The Amendment Ordinance”) which allowed Home Buyer to be considered as Financial Creditor and to be represented in Committee of Creditor by Authorized Representative.

Financial creditor cannot take over home belongings of homebuyers.-Supreme Court of India

IBC allows companies to file insolvency proceedings so that they can provide relief to the debtors or creditors

RERA was implemented with the sole motive of getting justice for aggrieved homebuyers and penalizing builders or developers if the project is delayed

These two laws contradict each other and the question is if developer defaults, whether the homebuyer should approach RERA or BIC.

Supreme Court in Amrapali case held that financial creditor cannot take over home belongings of homebuyers. In other words, the Supreme Court upheld the rights of home buyers ahead of the creditors.

Be noted,

Funds Utilization Norms set under New RERA ACT 2016

(Real Estate Regulators and Developers Act 2016)

“Developer obliged to park 70% of the project funds in a dedicated bank account to ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money for one project.’

The above clause comes to rescue the home buyers against BIC 2016

The Supreme Court, while delivering its judgement on 2nd April 2019, in the case of Pioneer Urban Land & Infrastructure Ltd VS Govindan Raghavan, has 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.