Legal Remedies for Homebuyers
Ritwika Nanda & Petal Chandhok, Partner at Trust Legal
Dilsheen Kaur, Associate at Trust Legal
Owning a home is a dream for many. With hopes and aspirations when one invests in buying a home, they wish to be residing in it with ease. However, the delay in delivery of possession is a huge deterrent for homebuyers. This hindrance has a new set of remedies now.
A recent ruling of the Supreme Court of India comes as a widely desired relief for many homebuyers who have faced delay in delivery of possession from the developers.
The Apex Court has clarified that the homebuyers aggrieved by delay in delivery of possession are at liberty to approach either the Consumer Forum or the Authorities under the Real Estate (Regulation and Development) Act, 2016 (“RERA”). While doing so, the Supreme Court held that the remedy under the Consumer Protection Act, 1986 (“CP Act”) is over and above the remedy under RERA.
A common grievance faced by all homebuyers was delay in the delivery of possession by the developers despite obtaining all the earnest money and deposits towards the project. This led to immense litigation flooding the civil courts with claims of homebuyers demanding either an alternative accommodation or refund of the amounts deposited by them.
In 2016, The RERA was enacted to protect the homebuyers and increase real estate investment. As per the scheme of RERA, a project has to mandatorily be registered with the local Real Estate Regulatory Authority along with all the accompanying documents. The act also consists of penal provisions for non-compliance by the developers.
However, existing remedy for homebuyers before the coming in of RERA was under the CP Act. All the homebuyers facing delay in delivery of possession would approach the Consumer Forums demanding refund of their monies. Therefore, after enactment of RERA an ambiguity resulted regarding the forum to be approached and many a times ill motivated lawyers misguided the homebuyers and entangled them in multiple litigations.
The developer M/s Imperia Structures Ltd. (“the developer”) had preferred an appeal before the Supreme Court challenging the decision of the National Consumer Disputes Redressal Commission (“NCDRC”) wherein the NCDRC had directed the developer to refund the amounts deposited by homebuyers along with interest owing to the delay in delivery of possession.
Grievance of the developer was that the project under question was registered under RERA and therefore, only authorities under RERA had exclusive control to decide the issues arising out of the project.
However, the Supreme Court while analysing the scheme of the two statutes held that a consideration of Sections 18, 79 and 88 of the RERA depicts that the Parliamentary intent was to give discretion to the homebuyer to decide whether it wishes to proceed under the RERA or the CP Act.
This verdict was supported by the precedent laid down in Pioneer Urban Land and Infrastructure Limited and another vs. Union of India and another wherein the Supreme Court had held that the provisions of RERA have to be read harmoniously with the provisions of Insolvency and Bankruptcy Code, 2016.
The decision highlights that the existence of an alternate remedy is not a bar to preferring a complaint under the CP Act. Hence, the homebuyers have been secured to a large extent by way of this ruling and such protection is likely to entail an upward trend in the investment in residential property.
However, this comes at a cost of increasing and prolonged litigation for the developers who are already grappling with retardation of the Real Estate Sector ever since the onset of the Covid-19 Pandemic. In fact, it can even be observed from the Judgment that the project, like many other real estate projects, also suffered on account of demonetization and the resultant cash crunch which hindered payments to labourers.
Looking forward, the Supreme Court has opened floodgates to the litigation before NCDRC and RERA since all the aggrieved homebuyers will be seeking the statutory remedy under the two acts. However, it is pertinent that the homebuyers are guided by the right legal advice regarding the forum they should approach since the scope of the two acts is different.
Under the CP Act, it is essential that the homebuyer has to fall within the definition of “Consumer” to be able to approach any Consumer forum seeking refund of the deposited amounts due to delay in delivery of possession. In addition to this, accessibility is also a core issue since there are only two authorities under the RERA in each State whereas the District Consumer forums are established in each District along with one State Consumer Commission within the State.
It is however reasonably apprehended that this verdict of the Supreme Court will lead to a boom in the Real Estate litigation as well as the Real Estate sector itself. Another interesting hypothesis will be the efficacy of the two legal remedies and which remedy supersedes the other.
Though the decision is based on facts and circumstances of each individual case, however, the Supreme Court has given an awaited clarification and addressed the difficulties of homebuyers to a magnanimous extent. It is yet to be seen whether the desire to purchase a home without any impediment is turned into a reality.
(2019) 8 SCC 416