LANDMARK JUDGEMENTS UNDER RERA ACT
The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which seeks to protect home-buyers as well as help boost investments in the real estate industry. The Act came into force from 1 May 2016 to bring in transparency and accountability in the real estate sector by creating a mechanism to address issues such as delay in project completion and delivery, full disclosure of all the details, and grievance redressal by safeguarding the interests of buyers as well as the developers. Factly had earlier published an explainer on the rights of homebuyers under the RERA Act. In this story, we look at some of the important rulings of the various state Real Estate Regulatory Authorities (RERA) across the country.
- Avinash Saraf, Neha Saraf Vs. Runwal Homes Pvt. Ltd ( MAHARERA, Mumbai)
In, Avinash Saraf versus Runwal Homes Private Limited case, the landmark judgment given by MAHARERA, Mumbai, having complaint number 32, Dated 13th October 2017. Final judgement was given by Honorable Shri B. D.KAPADNIS.
The complainants contended that they have paid 97% of total consideration of the flat. The date of possession of the flat was August, 2016, as per the agreement of sale executed in November 2014, but the respondent failed to give the Possession in time. And hence the complainant demanded the amount of consideration with interest @ 21% p.a. from the respondent with compensation for amount expended towards stamp duty and registration charges.
The respondent contended that MAHARERA has come into effect from 1st May 2017. Therefore MAHARERA has no jurisdiction entertain this complaint. The date of possession was delayed due to delay in getting permission for constructing parking from MCGM (Municipal Corporation of Greater Mumbai), for the reasons beyond control of the respondent. Now point for consideration before The Honorable judge was whether the complainant is entitled to get back the amount paid to respondent with interest and compensation? He answered affirmatively with the following reasons. The cause of action for claiming possession after the lapse of agreed date of possession becomes recurring course of action. Therefore MAHARERA has the jurisdiction under section 79 of the Act. The reasons given by respondent for delay in possession is also not acceptable, since the agreement was executed in November 2014 it means the respondent was aware of the time for giving possession. Finally honorable judge has delivered the following judgment.
“To refund entire amount paid to the respondent till date with interest and compensation for amount paid towards stamp duty and registration charges. Rate of interest upto the date of 30th April 2017 was decided @9% per annum. And from 1st May 2017 the rate of interest was decided to be the interest at SBI’s highest marginal cost of lending rate + 2% p.a. till the date of final payment to the complainant”
- Vinod Kumar Agarwal vs. Jaipur Development Authority (Rajasthan RERA)
In a landmark decision, the Rajasthan Real Estate Regulatory Authority (‘RERA”) on September 22, 2020 has held that Section 13 of the RERA Act, 2016 is mandatory in nature. A bench comprising of Chairman Shri N.C. Goel, Shri Shailendra Agarwal and Shri S.S. Sohata passed the judgment
in the case of Vinod Agarwal V. Jaipur Development Authority and Another.
The Authority directed the Respondents, Jaipur Development Authority and Jaipur Metro Rail Corporation, to execute an Agreement for Sale for a property sold jointly by auction. Pranjul Chopra, Advocate, appearing for the Petitioner argued that the project of the Respondents was registered with the Authority and therefore demand note of more than 10% of the sale consideration of plot raised by the Respondents without first executing and registering an agreement for sale was against Section 13 of the Act. Section 13 states that the promoter of a real estate project shall not accept amount of more than 10% of the cost of the plots as advance payment without first entering into a written agreement for sale and registering the same.
Jaipur Development Authority, was represented by CA Mitesh Rathore, contended that it being a statutory development authority, is guided by the Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974 framed in that regard. It was further contended that the auction conditions did not stipulate any specific requirement for execution of agreement for sale and that the plot was auctioned on as-is-where-is basis.
Furthermore, the Respondents had not committed for any development work to the auction purchasers. The Petitioner countered by contending that the Act being a Central Legislation ought to prevail over the rules framed by the State Government. It was further contended that while registering with the Authority, the Respondents have promised development work in the application and advertising the RERA registration to prospective buyers indicated a promise for such developmental work. The Rajasthan RERA concurred with the Petitioner submissions held that the respondents had submitted a draft agreement for sale at the time of application before the Authority and the auction had been conducted by announcing that the project has been registered with RERA.
“The said project was registered by RERA with clear commitment on the part of Respondent No.1 that it will abide by all the provisions of the Act and the rules and regulations made thereunder. Even a draft agreement was submitted as part of the application for registration The auction has been conducted by announcing that the project in question is a project registered with RERA and thereby informing and promising to the potential buyers that the provisions of the Act and the rules and regulations made thereunder would apply to this project and determine their relationship with Respondent No. 1 in respect of any plot purchased at the auction. Section 13 (1) of the Act provides for an agreement for sale to be executed and registered before the promoter accepts amount exceeding 10 per cent of the total cost of the plot. This a mandatory requirement of the Act and cannot be dispensed or compromised with.”
The Authority further directed the Jaipur Development Authority to align its land disposal rules and terms and conditions of auction/allotment with the provisions of the Act.
- Sushil Ansal vs. Ashok Tripati, Suarabh Tripathi 43 NCLAT
The factual matrix of the case was that Mr. Ashok Tripathi (Homebuyer) had purchased a flat under a real estate project developed by Ansal Properties and Infrastructure Limited (APIL). Owing to the failure of APIL to complete the project within stipulated time, the Homebuyer approached the Uttar Pradesh Real Estate Regulatory Authority (UP RERA). Thereafter, the UP RERA issued a Recovery Certificate (RC) in favor of the homebuyer, directing APIL to refund the money. As the APIL failed to refund the amount stipulated under the RC, the Homebuyer filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking initiation of Corporate Insolvency Resolution Process (CIRP) against APIL. Interestingly, the Homebuyer had filed the aforementioned application not in the capacity of a homebuyer but as a decree holder. Although the application under section 7 of the IBC was admitted by the New Delhi bench of the National Company Law Tribunal (NCLT), the same was set aside in appeal by the NCLAT. While setting aside the decision of the NCLT, the NCLAT categorically ruled that
“Decree-holder, though included in the definition of ‘Creditor’, does not fall within the definition of ‘Financial Creditor’ and cannot seek initiation [CIRP] as Financial Creditor”.
Analysis of the Case
The author contends that the NCLAT erred in categorically holding that decree holders are not financial creditors for two reasons:
1. By going against the precedents on the subject matter, the NCLAT has created a lacuna in law which hitherto did not exist.
2. The decision of the NCLAT has left the decree-holding homebuyers without remedy under IBC.
Experience has shown that even after getting a favorable order from a RERA, the homebuyers have not been able to materially execute such orders. Having been failed by the enforcement mechanism under Real Estate (Regulation and Development) Act, 2016, the homebuyers started approaching the NCLT in the capacity of a decree-holder. However, the decision in Sushil Ansal has placed an embargo on this practice. Now that if a holder of an arbitral award can seek initiation of CIRP as held in K. Kishan, then a decree-holding homebuyer must also be allowed to derive benefits under section 7 of the IBC.
Furthermore, given the conflicting decisions in Urgo Capital and Sushil Ansal, an authoritative ruling from a larger bench of the NCLAT or the Supreme Court is warranted to end the existential crisis being faced by the decree-holding homebuyers. Alternatively, a legislative clarification on the subject would also prove helpful.
Mr. Jatin Mavani Vs M/s. Rare Township Pvt. Ltd (MAHARERA, Mumbai)
In this case the issue is about filing of multiple proceeding under RERA on the same subject matter. Here in this case the complainant raised a plea that even after booking a flat and paying the required consideration he was not given the delivery on time, further the other buyers also seek redressal from the MahaRERA that is to give direction for non- payment of cancellation fee and refund of amount already paid.
The argument put by the respondent builder was that the first complainant never got the agreement registered and that never stood up for its execution. Even after the respondent was asking him to enter into a new agreement but he failed to do so and now he is coming up with other buyers with his plea, which should not stand as it would amount to multiple proceeding under the same authority.
Another disputed fact was the was also a member of the developing association and also a party to earlier proceeding, hence he cannot be a party to this claim.
The MahaRERA observed this fact and came to a conclusion that when the complainant approached the forum earlier her exhausted his remedy and now he has no locus standi in coming to the court, because if he is considered as allottee than it will be multiple proceeding before the same court which can’t be allowed.