This article has been published by Sneha Mahawar.
Table of Contents
The real estate consumer has mainly two grievances, i.e. timely possession and fairly good quality of construction. The available remedies are Real Estate (Regulation and Development) Act, 2016 (RERA) and/or Consumer Protection Act, 2019 (CPA). One more remedy available is under Insolvency and Bankruptcy Code, 2016 (IBC) where the buyers are considered to be ‘creditors’. This article is going to talk about the pros and cons of the remedies available to a home buyer and also discuss which type of remedy will be appropriate in a given situation for the home buyer.
Overview of the Consumer Protection Act, 2019
The Act of 2019 was introduced with the purpose of safeguarding consumers against product marketing that proves to be hazardous to both life and property alongside providing the requisite information about the quality, potency, quantity, standard, purity, and price of goods that a consumer intending to purchase thereby restraining the scope of unfair trade practices.
CPA, 2019 has three distinct forums depending upon the pecuniary limits of consumer complaints. The NCDRC (available for disputes above Rs. 1 crore) is a general forum for all types of ‘goods’ and ‘services’. The ‘services’ under CPA include banking, insurance, telephone, housing, medical, transport, etc.
Advantages and limitations of CPA
There are district forums (about 3-4) in each district available and easily accessible to the consumers under the CPA. There are time limits set for disposal of grievances by the consumer forums and the complaints can be lodged online. The remedy available is compensation and the orders of the forum are binding in nature on the builders/developers if they do not provide timely possession/standard quality. Under the Act, ‘construction’ is defined as a service.
However, immovable property as such is not defined as ‘goods’ and the transactions of sale/purchase of properties, specific performance, and damages for non-performance are beyond the scope of this Act. Further, the complaint has to be filed on the CPA portal along with all the documentary proofs which become difficult at times. The pecuniary limitations of the forums is another disadvantage of this Act. If the cost of the property exceeds Rs. one crore, one has to go to Delhi to file the complaint before the NCDRC.
Overview of Real Estate Regulatory Authority (RERA), 2016
The main aim of RERA is to provide relief to homebuyers(allottees) from the malpractices of unfair builders, to bring accountability and transparency in real estate transactions. RERA specifies the creation of a Real Estate Authority and Appellate Tribunal for each state for the speedy redressal of any grievance of allottees.
Advantages and limitations of RERA
As per the provisions of this Act, the builders are mandated to upload the status of their projects on the RERA website every quarter. The remedies under RERA in the event of delays in completion are either to leave the project or stay in the project and claim losses. Due to mandatory status uploads of projects, there is more transparency and information is readily available on the RERA site. There is also a provision for appeal to the higher authority\Adjudicating Officer under the Act.
One of the main drawbacks of RERA in recent times is that although the Central Act has provisions for imprisonment and fines, the States usually prefer a clause for compounding of offences to avoid imprisonment at the State level. Also, RERA does not have a retrospective effect and hence projects before 2016 do not come under the purview of this Act.
Right choice of remedy
The landmark judgments by the courts in the administration of the CP Act AND RERA, over the years are as under:
- In the case of Experion Developers vs. Sushma Ashok Shiroor (Civil Appeal No. 6044 of 2019), the Apex court held on 7.4.2022 that the Appeal of the Developer against the orders of the NCDRC is dismissed. It was further held power to direct refund of the amounts paid by the Respondent to compensate for the deficiency in not delivering the possession of the flat as per the terms of the agreement is within the jurisdiction of the consumer courts. The consumer can also ask for possession and compensation.
- In the case of Veena Khanna vs. Ansal Properties & Industries Ltd., (NCDRC, 2007, CPJ 185) National Commission overturned a State Commission order observing that a refund of money with interest at the bank rate does not imply that the complainant has been adequately compensated for the builder’s delay in completing the flat. Due to delays in construction, it is practically impossible for a consumer to purchase a flat at market price. The Commission observed that adequate compensation should have been provided so that the complainant could purchase a new flat of the same size at the current market rate. The payment of interest alone is insufficient compensation.
- The constitutional validity of RERA was challenged in the case of Neelkamal Realtors Suburban Private Ltd. Vs. Union of India and Others (WP 2737 of 2017). In this case, it was held by the court that all the provisions of RERA are constitutionally valid.
- The issues raised in the Appeal filed by Ms. Newtech Promoters and Developers Private Limited vs. UPState RERA and Others (2021) were as follows
a) Whether RERA has a retrospective effect?
b) Whether RERA has powers under Section 81 to delegate the function of hearing?
c) Preconditions of pre-deposit under Section 43(5) are void?
The SC held on 11.11.2021 that RERA has no retrospective effect. Further, it can delegate the functions of hearing under the Act. Also, the precondition for the builders/developers to deposit 30% of the amount with RERA before filing their appeals is valid.
- In the case of Pioneer Urban Land Infrastructure Limited vs. Union of India and Others, the issue of declaring home buyers as financial creditors under the Insolvency and Bankruptcy Code, 2016 was challenged. It was held by the Apex court on 19.8.2019 that this was valid and there were concurrent remedies provided to the home buyers under the Consumer Protection Act, 1986, RERA 2016 and IBC 2016. One remedy does not prohibit the use of alternatives.
- The matter of non-registration of complaints by MahaRERA for unregistered building projects was raised by Mohd. Zain Khan in WP(L)908 of 2018. It was held on 31.7.2018 that non-registered projects are also covered under RERA. Following this judgment, MahaRERA modified its software to register complainants against non-registered projects in the state as per the procedure set out in the Act.
The concurrent remedies under CPA and RERA have increased the scope of remedies available to consumers. Both Acts have benefits as well as some drawbacks. The selection of the most effective remedy in the particular complaint is highly dependent on the facts of the case and the remedy that is most suitable to the aggrieved party. Under the CPA, compensation as well as the choice to take possession or leave the project is available. Under RERA also this is possible but RERA goes a step ahead and ensures that the quality of the structure provided is maintained by the builder/developer free of cost. Also, the compulsory registration of builders and status uploads of their projects every quarter provide much-needed transparency in the real estate sector. Further, the faith of the home buyers/consumers on the builders is getting consolidated over a period of time. Although the RERA complaints have come down post-COVID period, no such recession is found in complaints filed under CPA, 1986. Recently counselling set up for homebuyers/developers has been established by MahRERA. The Supreme Court is trying to handle the deviations/variations in the implementation of RERA in various states by trying to implement and advocate a Model Builder-Buyer Agreement across all states to bring about more transparency in real estate deals at the ground level.
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