Homebuyers and the law: India

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(Flats’ possession delayed: higher damages than offered in contract possible)
(2019/ Homebuyers given creditor status under IBC)
 
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Opposing the plea of companies, the homebuyers too filed a reply. “Objective of the instant legislation was never to liquidate the company but to restructure the company and come up with a resolution plan to correct the default committed. It is pertinent to mention here that homebuyers being the highest stakeholders in the project, their interests need to be safeguarded and the same is of paramount importance,” said advocate Aditya Parolia, who is representing a batch of homebuyers.
 
Opposing the plea of companies, the homebuyers too filed a reply. “Objective of the instant legislation was never to liquidate the company but to restructure the company and come up with a resolution plan to correct the default committed. It is pertinent to mention here that homebuyers being the highest stakeholders in the project, their interests need to be safeguarded and the same is of paramount importance,” said advocate Aditya Parolia, who is representing a batch of homebuyers.
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===Financial creditor status upheld by SC===
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[https://timesofindia.indiatimes.com/business/india-business/sc-upholds-ibc-amendment-that-gives-homebuyers-status-of-financial-creditors/articleshow/70599838.cms  Amit Anand Choudhary, SC upholds homebuyers’ status on par with lenders, August 10, 2019: ''The Times of India'']
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NEW DELHI: In a big relief to home-buyers, the Supreme Court upheld amendment in Insolvency and Bankruptcy Code (IBC) that gives them the status of financial creditors on par with lender banks and rejected the plea of around 200 real estate companies which had challenged its constitutional validity.
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A bench of Justices R F Nariman, Sanjiv Khanna and Surya Kant said IBC is a beneficial legislation to protect the interest of home-buyers who had invested their money to realise their dream of a house and there was no illegality in giving them a say in insolvency proceedings against a builder which failed to discharge its obligation to hand over possession of flats on time.
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The court held that IBC provided an additional forum for aggrieved home-buyers to take action against builders and if that status is taken away, they will not get anything in liquidation process against a defaulting company. It said there is no conflict between Real Estate (Regulation and Development ) Act and IBC and home-buyers could pursue parallel proceedings against builders under both the laws in addition to approaching consumer forum.
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“RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code,” the bench said.
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The court noted that the threshold limit to trigger the Code is purposely kept low — at only one lakh rupees — so that small individuals may also trigger the Code as financial creditors along with banks and financial institutions to whom crores of rupees may be due.
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“The Code is thus a beneficial legislation which can be triggered to put the corporate debtor back on its feet in the interest of unsecured creditors like allottees, who are vitally interested in the financial health of the corporate debtor, so that a replaced management may then carry out the real estate project as originally envisaged and deliver the flat/apartment as soon as possible and/or pay compensation in the event of late delivery, or non-delivery, or refund amounts advanced together with interest,” it said.
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Allaying fears of the real estate firms that the law can be used as a tool of blackmail by speculative investors, the court said the builders can also point out in the proceedings that the insolvency resolution process under the Code has been invoked fraudulently and with malicious intent.
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“This the real estate developer may do by pointing out, for example, that the allottee who has knocked at the doors of NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment,” it said.
  
 
=National Consumer Disputes Redressal Commission decisions=
 
=National Consumer Disputes Redressal Commission decisions=

Latest revision as of 21:28, 15 August 2019

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Contents

[edit] The legal position

[edit] 2019/ Homebuyers given creditor status under IBC

AmitAnand Choudhary, Law amended to help homebuyers, SC told, July 10, 2019: The Times of India


IBC Tweak Gives Them A Say In Insolvency Proceedings: Centre

Backing the homebuyers in their fight against builders, who duped them and are facing insolvency proceedings, the Centre on Tuesday told the Supreme Court that there was no illegality in amendment brought by it in the Insolvency and Bankruptcy Code (IBC) to give them a say in the proceedings by classifying them as financial creditors like banks.

Responding to a batch of more than 140 petitions filed by real estate companies challenging the constitutional validity of the amendment in IBC, the Centre filed its affidavit in the apex court and said the law was amended to protect the interests of lakhs of homebuyers who had paid money for flats but were cheated by the companies. It said the amendment was brought after the apex court itself had in 2017 expressed concern over the plight of homebuyers and had said that they should be represented in the Committee of Creditors under IBC.

The real estate companies have challenged the validity of Section 5(8)(f) of the IBC, 2016 which ensures inclusion of homebuyers as financial creditors. The Centre, however, said the amendment was brought to insert an explanation to the definition of financial debt to clear doubts on inclusion of homebuyers within the ambit of financial creditors. “It means that homebuyers and other financial creditors who have entered into purchase agreements having the commercial effect of borrowing were already covered under the code as it stood before the amendment. The explanation inserted under Section 5(8)(f) providing that the allottees under the real estate project are considered as financial creditors was only for the purpose of abundant clarity,” the affidavit said.

Countering the stand of companies that homebuyers should not be part of the proceedings under IBC as they can raise grievances before consumer courts and the authority under Real Estate (Regulation and Development) Act, the Centre said providing alternative remedy to them under a separate law does not violate any constitutional provisions and sought dismissal of all the petitions.

“The amendment is only aimed at real estate developers who default in payment of financial debt owed to financial creditors, be it homebuyers or other financial creditors. The amendment has no effect of driving solvent and healthy real estate developers to insolvency,” it said.

Opposing the plea of companies, the homebuyers too filed a reply. “Objective of the instant legislation was never to liquidate the company but to restructure the company and come up with a resolution plan to correct the default committed. It is pertinent to mention here that homebuyers being the highest stakeholders in the project, their interests need to be safeguarded and the same is of paramount importance,” said advocate Aditya Parolia, who is representing a batch of homebuyers.

[edit] Financial creditor status upheld by SC

Amit Anand Choudhary, SC upholds homebuyers’ status on par with lenders, August 10, 2019: The Times of India


NEW DELHI: In a big relief to home-buyers, the Supreme Court upheld amendment in Insolvency and Bankruptcy Code (IBC) that gives them the status of financial creditors on par with lender banks and rejected the plea of around 200 real estate companies which had challenged its constitutional validity.

A bench of Justices R F Nariman, Sanjiv Khanna and Surya Kant said IBC is a beneficial legislation to protect the interest of home-buyers who had invested their money to realise their dream of a house and there was no illegality in giving them a say in insolvency proceedings against a builder which failed to discharge its obligation to hand over possession of flats on time.


The court held that IBC provided an additional forum for aggrieved home-buyers to take action against builders and if that status is taken away, they will not get anything in liquidation process against a defaulting company. It said there is no conflict between Real Estate (Regulation and Development ) Act and IBC and home-buyers could pursue parallel proceedings against builders under both the laws in addition to approaching consumer forum.

“RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code,” the bench said.

The court noted that the threshold limit to trigger the Code is purposely kept low — at only one lakh rupees — so that small individuals may also trigger the Code as financial creditors along with banks and financial institutions to whom crores of rupees may be due. “The Code is thus a beneficial legislation which can be triggered to put the corporate debtor back on its feet in the interest of unsecured creditors like allottees, who are vitally interested in the financial health of the corporate debtor, so that a replaced management may then carry out the real estate project as originally envisaged and deliver the flat/apartment as soon as possible and/or pay compensation in the event of late delivery, or non-delivery, or refund amounts advanced together with interest,” it said.

Allaying fears of the real estate firms that the law can be used as a tool of blackmail by speculative investors, the court said the builders can also point out in the proceedings that the insolvency resolution process under the Code has been invoked fraudulently and with malicious intent.

“This the real estate developer may do by pointing out, for example, that the allottee who has knocked at the doors of NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment,” it said.

[edit] National Consumer Disputes Redressal Commission decisions

[edit] Defaults

[edit] Homebuyer, builder should pay same interest for default

Amit Anand Choudhary, Builder charging exorbitant interest from homebuyers on delayed payment is unfair: NCDRC, June 13, 2019: The Times of India


Forcing homebuyers to pay interest in the range of 18 per cent per annum for delay in payment of installment while the builders themselves pay a paltry 1.5-2 per cent for delay in project amounts to unfair trade practice by real estate companies which cannot be enforced, the apex consumer commission has ruled, bringing relief to homebuyers.

A bench of National Consumer Disputes Redressal Commission’s president Justice R K Agrawal and member M Shreesha said that such provisions in builder-buyer agreement are unfair and unreasonable and real estate company could not be allowed to bind home-buyers with one-sided contractual terms which protect the interests of the company at the cost of the buyers.

It said that there should be parity in the rate of interest to be paid by builders and homebuyers for not complying with the terms of agreement and suggested that the builders should be compelled to pay the same rate of interest as compensation for delay in project which they demand from buyers in case of delay in payment.

The court passed the order on a plea of a homebuyer who had booked a flat in 2012 in ‘Winter Hills 77’ residential housing project in Gurugram which was being developed by a real estate company Umang Realtech Pvt Ltd. The buyer was promised possession of the flat by December 2015 and had paid around Rs 83 lakh to the builder in different instalments. As the builder failed to deliver the project even four years after the promised dateline, the buyer sought refund of the money with 18 per cent interest per annum, at a rate at which he had paid penalty to builder for delay in payment on his part.

The company, however, said that it was liable to pay compensation at the rate of Rs 5 per square feet for delay as per the agreement. Rejecting its contention, the commission said, “It is also an admitted fact that the opposite party (the company) charged interest at the rate 18 per cent per annum for any delayed payments made by the purchasers and there is no justification in offering a meager Rs 5- per square feet, which comes to approximately 1.4 per cent per annum which is only a paltry percentage of what the company was charging for any delayed payments”.

“In any case, such a clause, where the seller, in case of default on the part of the buyer seeks to recover interest a 18 per cent per annum but offers only Rs 5 per square feet for any delay in delivery of possession, amounts to unfair trade practice since it gives an unfair advantage to seller over the buyer. We are of the view that such terms in clauses are extremely unfair and one-sided and fall within the definition of unfair trade practice,” the commission said.

Although the commission said if the seller is charging interest of 18 per cent per annum from buyer then logically buyer should also be paid at the same rate, it, however, directed the company to refund the money with 12 per cent interest taking into account that banks have lowered the interest rate in recent years. It also directed the company to pay compensation of Rs 1 lakh to the buyer.

[edit] NCDRC rules: Value of flat eligible for approaching NCDRC

[edit] Flat owners can jointly exceed Rs 1 crore value

Dhananjay Mahapatra, SC lifts Rs 1cr bar, allows homebuyers' joint plea, Feb 22 2017: The Times of India


The Supreme Court has ruled that flat owners can join hands to directly approach the National Consumer Disputes Redressal Commission (NCDRC) against builders.

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. Amrapali Sapphire Developers had cited this rule to plead that 43 flat buyers, who had together moved the apex consumer forum against it for delay in handing over possession, were disqualified from filing a joint plea.

On August 30, 2016, NCDRC member Justice V K Jain had ruled in favour of the flat owners, saying they could form an association to achieve the pecuniary limit of Rs 1 crore for approaching the NCDRC directly . The builder told the apex court bench of Justices Dipak Misra, A M Khanwilkar and M M Shantanagoudar that the cost of each flat was way below Rs 1 crore, thus the owners were individually ineligible to approach NCDRC directly . “By joining hands, they have shown that the cost of their flats was above Rs 1 crore to maintain their plea in NCDRC, which was against the rule,“ the builder's counsel said.

The SC's rejection of Am rapali Sapphire Developers' plea will come as a boon to middle-class flat owners.

Responding to the SC ruling, Confederation of Real Estate Developers' Associations of India (Credai) president Getamber Anand, who is also CMD of ATS Infrastructure, said, “Such broad directives can be misused also. This will adversely affect the sector, which is already facing a tough time.“

NCDRC member Justice Jain had said, “Once it is accepted that a consumer complaint on behalf of more than one consumer can be filed by a recognised consumer association, it can hardly be disputed that it is the aggregate value of the services which has to be taken for the purpose of determining the pecuniary jurisdiction of the consumer forum before which the complaint is filed.“

Referring to the 43 flat owners' joint plea through an association, the NCDRC had said that if the aggregate value of services in respect of the flat buyers, on whose behalf this complaint was filed, was taken, then it exceeded Rs 1 crore and hence NCDRC has jurisdiction to entertain their plea.

[edit] Possession delayed

[edit] Homebuyers get refund if delay is beyond one year

Amit Anand Choudhary, May 16, 2019: The Times of India

Compensation options for Homebuyers: NCDRC
From: Amit Anand Choudhary, May 16, 2019: The Times of India


In a relief to lakhs of aggrieved homebuyers who are forced to wait for possession of their flats for years, the apex consumer commission has quantified a time period of one year for delayed projects beyond which investors can claim refund from builders.

Judicial forums, including Supreme Court and consumer courts, have repeatedly held that homebuyers cannot be made to wait indefinitely, but it was not clarified when refund can be claimed in case of delay.

Now, the National Consumer Disputes Redressal Commission has held that buyers can seek refund if possession is delayed by one year beyond the date promised by the builder. “It is now established that allottees have the right to ask for refund if possession is inordinately delayed, particularly beyond one year,” a bench of Prem Narain said.

The court passed the order on a plea by Delhi resident Shalabh Nigam, who in 2012 bought a flat in the luxury housing project, Greenopolis, in Gurgaon being developed by Orris Infrastructure and 3C company.

Nigam had made a payment of around Rs 90 lakh against the total cost of around Rs 1 crore. As per the agreement, the flat was to be handed over within 36 months, with a grace period of six months, from the date of allotment. When the builders failed to complete the project, Nigam approached the commission through advocate Aditya Parolia, seeking its direction for either refund or time-bound possession of the flat.

As the buyer preferred to take possession of the flat, the commission directed the builder to complete the construction and hand over the flat, complete in all respects as per the agreement, by end of September 2019 after obtaining occupancy certificate.

The commission directed the builder to pay compensation at the rate of 6% per year on the total deposit for the delayed period even after handing over possession. In case of non-delivery of flat within the deadline prescribed by commission, NCDRC said the builder will have to refund the entire amount with 10% interest.

The builder had contended that the buyer had discontinued paying instalments and if refund is ordered, then there will be a forfeit of 10% of the amount as earnest money, as per the agreed clause. But the commission rejected the contention, saying instalments were paid up to the 7th stage and the payment was stopped later as there was no progress in the construction.

Though in cases of delayed projects, builders often pay compensation as per the clause in agreement which ranges from Rs 5-10 per sq feet per month, the sum is meagre in view of the large investments by buyers.

[edit] No forfeiture for cancelling delayed house

AmitAnand Choudhary, No forfeit for cancelling delayed house, says panel, June 4, 2019: The Times of India


Supertech Told To Return ₹1Cr To Buyer For 2-Year Delay

The apex consumer commission has held that a homebuyer cannot be forced to forfeit any amount deposited with a builder in case he seeks cancellation of allotment of flat to delay in construction and directed real estate major Supertech to refund the entire amount of over Rs one crore to a buyer for delay of two years in delivering the house.

In order to discourage homebuyers from cancelling allotment, builders always put stringent clauses in the agreement on forfeiture of a substantial amount deposited by buyers. But the National Consumer Disputes Redressal Commission (NCDRC) held that real estate companies cannot invoke such harsh clauses in cases where the buyers are forced to seek cancellation due to inordinate delay in completion of any project.

A bench of Justice V K Jain restrained Supertech from forfeiting 15% of the cost of the unit as cancellation charges after a buyer sought refund of money as the company failed to deliver the house in its Noida housing project by December 2016 as per the agreement.

The Commission passed the order in favour of complainant Chandan Gupta who had booked a residential flat with Supertech’s project ‘ORB Towers’ in Sector 74 of Noida for a consideration of Rs 2.36 crore. As per the agreement, the flat was to be delivered to him by June 2016 or latest by December 2016 after including the grace period of six months.

As the developer failed to hand over possession within the stipulated period, the homebuyer sought cancellation of allotment and approached the Commission after the developer refused to refund Rs 1.08 cr which he had deposited so far. As the Commission directed that the amount be refunded to the buyer, the developer contended that it was entitled to forfeit 15% of the cost of the unit as cancellation charges as per clause 37 of the agreement between the parties.

The Commission, however, rejected its claim saying there was no merit in the contention. “In my opinion, the aforesaid clause would apply to a case where the allottee, for his own reasons, seeks cancellation of the allotment and does not apply to a case where he is forced to seek cancellation of the allotment and refund of the amount paid by him to the developer on account of failure of the developer to deliver possession of the house within the time period committed. Had the complainant sought cancellation of the allotment before December 2016, by which the possession was to be delivered to him even after giving benefit of the grace period to the builder, there could have been some merit in the contention. But, he having filed the complaint after expiry of the aforesaid time-line, clause 37 of the agreement would have no application,” it said.

It directed Supertech Ltd to refund the buyer within three months the entire principal amount of Rs 1.08 crore along with compensation in the form of simple interest at 10% per annum from the date of each payment till the date of refund.

In order to discourage homebuyers from cancelling allotment, builders always add stringent clauses in the agreement on forfeiture of a substantial amount deposited by buyers


[edit] ‘Refund buyers with interest equal to home loan rate’

AmitAnand Choudhary, July 8, 2019: The Times of India


In order to ensure that homebuyers recover their money, including interest paid on home loans, the National Consumer Disputes Redressal Commission (NCDRC) has said builders should refund money for delayed projects with interest at the rate at which a nationalised bank like SBI gave home loan during the corresponding period.

The apex consumer commission has said builders have to pay compensation and litigation cost to homebuyers who seek refund. In the absence of uniformity in decisions by consumer forums on interest rate, the NCDRC has said linking it with rate of interest of home loan is “appropriate and logical”.


Firm fined ₹5L, told to deposit sum in 4 weeks

The commission passed the order on a plea of 20 homebuyers who had invested around Rs 10 crore in Wave Garden housing project in Mohali in 2012. The builder — Country Colonisers Pvt Ltd — had promised to hand over possession of flats within three years but failed to complete construction in the last seven years.

“In so far as refund of the amount deposited by the complainant with the builder is concerned, there can be no two opinions. The refund in full has necessarily to be made by the builder to the complainant. In respect of the interest on the amount deposited, it is always desirable and preferable, to the extent feasible and appropriate in the facts and specificities of a case,” a bench of S M Kantikar and Dinesh Singh said.

“The rate of interest cannot be arbitrary or whimsical, some reasonable and acceptable rationale has to be evident, subjectivity has to be minimised. In our considered view, bearing in mind that the subject unit in question is a residential dwelling unit, in a residential housing project, the rate of interest for house building loan for the corresponding period in a scheduled nationalised bank would be appropriate and logical, and, if floating/varying/different rates of interest were/are prescribed, the higher rate of interest should be taken for this instant computation,” it added.

It also directed the builder to pay Rs 1 lakh as compensation and Rs 1 lakh as cost of litigation to each homebuyer. The commission slapped a fine of Rs 5 lakh on the company for indulging in unfair trade practices and directed it to deposit all the money within four weeks.

[edit] Flats’ possession delayed: higher damages than offered in contract possible

Dipak Dash, NCDRC: For flat delay, you can seek higher damages than offered in contract, October 15, 2018: The Times of India


Builders can’t hide behind the clause in the builder-buyer agreement to pay Rs 5 per sq feet per month as compensation for delay in handing over flats for “unreasonable” period and the buyers have the option to seek higher compensation after taking possession of the property or seek refund of the amount paid, the NCDRC has ordered.

“The compensation for delay (Rs 5 per sq ft per month) cannot be for an unreasonably protracted period or indefinite; at best it can be for a short period that would appear to be reasonable and would be acceptable as such to a reasonable man... To say that possession can be delayed indefinitely or unreasonably and a token compensation for delay can be paid indefinitely or for an unreasonably protracted period is erroneous. Indefinite or unreasonable delay with token compensation for delay cannot continue forever without limit (such situation would be absurd),” a bench of Dr S M Kantikar and Dinesh Singh of National Consumer Disputes Redressal Commission (NCDRC) said while pronouncing order against Emaar MGF.

The commission directed the builder to pay Rs 5 lakh compensation to one Govid Paul of Punjab over and above the refund amount for inordinate delay in handing over a flat. It imposed Rs 50,000 litigation cost on the builder as well.

Almost all buyer-builder agreements have this compensation clause of “Rs 5 per sq feet” for delay in completion, which put consumers in a disadvantageous position vis-a-vis builders.

Paul had signed an agreement with Emaar MGF in September 2011 for a property, which was to be handed over in 36 months. After a delay of about 20 months, Paul approached the state consumer commission of Chandigarh seeking refund of his payment and compensation for the delay. The commission ordered refund of Rs 38.9 lakh at 15% interest compounded quarterly and Rs Rs 3 lakh compensation. It directed the builder to pay Rs 25,000 to the flat buyer as cost of litigation. The builder challenged the order in the NCDRC. The national commission observed that the builder did not offer possession even 23 months after the matter reached the state consumer commission and “such delay in offering possession cannot be said to be reasonable or normal”.

The national commission said the consumer has the fundamental option to obtain possession of the unit and in addition seek just compensation under the Consumer Protection Act for unreasonable delay. He has the other option to claim refund of the principal amount; interest thereon; compensation; and cost of litigation.

[edit] Buyer can’t be forced to accept delayed flat’

AmitAnand Choudhary, August 4, 2019: The Times of India


It is the choice of a homebuyer whether to take possession of his/her flat in a delayed housing project or seek refund of his/her money and a builder cannot refuse to return the amount on the ground that the flat is ready, the National Consumer Disputes Redressal Commission has ruled.

A bench of Justice V K Jain directed a Delhi-based builder, Pioneer Urban Land and Infrastructure, to refund an amount of Rs 4.43 crore to a homebuyer who had invested the money in 2012 for a flat in Gurgaon. The flat was to be delivered in 2015 but the builder failed to fulfil its promise and the homebuyer approached NCDRC in 2018 for refund of the amount.

Although the builder had constructed the flat and got an occupation certificate from the authority concerned just a fortnight before the homebuyer filed the complaint, the commission directed the builder to refund the money as there was a delay of more than two years.


Builder ordered to refund flat money with interest

Referring to the judgments of the Supreme Court, the commission said that the builder had to refund the money as it failed to fulfil its contractual obligation of obtaining the occupancy certificate and offering possession to the buyer within the time stipulated in the agreement or within a reasonable time thereafter. It said the flat purchaser could not be compelled to take possession of the flat as it was offered more than two years after the grace period under the agreement expired.

“More than two years and four months from the stipulated date had already expired by the time the occupancy certificate was obtained. Therefore, in this case as well the complainants were justified in terminating the agreement by instituting the consumer complaint... the complainants are justified in insisting upon refund of the amount paid by them to the opposite party,” Justice Jain said.

The builder contended that the buyer had no justification for refusing to take possession and insisting on a refund, and alleged that the buyer had booked the flat for a “speculative purpose”. The commission,

however, refused to give credence to its allegation as no evidence was placed before it to prove that the flat was not booked for residential purpose. It accepted with the contention of the homebuyer’s advocate Adity Parolia, who submitted that in case of unreasonable delay, the choice will be with the buyer whether to take a belated possession or to seek refund with appropriate compensation.

The commission directed the builder to refund the amount with a simple interest at the rate of 10.65% per annum.

[edit] House delayed, buyer can’t be forced to take possession: SC

Dipak Dash, House delayed, buyer can’t be forced to take possession: SC, August 5, 2019: The Times of India


SC: Builder Can Be Asked To Refund Money

A builder cannot “impose” upon a buyer to take possession of a ready house if it is delayed, and the customer is justified in seeking a refund, the Supreme Court has ordered.

Upholding an order of the National Consumer Disputes Redressal Commission to a Pune-based builder, an SC bench comprising Justices U U Lalit and Vineet Saran said, “Even assuming that the villa is now ready for occupation (as asserted by the appellants), the delay of almost five years is a crucial factor and the bargain cannot now be imposed upon the respondents. The respondents were, therefore, justified in seeking refund of the amounts that they had deposited with reasonable interest on said deposited amount. The findings rendered by the commission cannot, therefore, be said to be incorrect or unreasonable on any count.”

TOI had reported another case on Sunday where the NCDRC had said that a homebuyer had full freedom on whether to take possession of his/her flat in a delayed housing project or seek refund and a builder could not refuse to return the amount on the ground that the flat was ready. This order was passed in a case involving a project in Gurgaon.

The SC order came on Tuesday with regard to a project in Pune, Marvel Selva Ridge Estate. The developer, Marvel Omega Builders, had sold a villa to one Shrihari Gokhale in July 2012 and the builder had promised to hand over the villa by December 31, 2014. Gokhale had filed a complaint with the NCDRC in 2016 seeking a refund of Rs 13.24 crore.

The builder had challenged the NCDRC order in the SC to refund Rs 8.14 crore principal amount with 10% annual interest to Gokhale. When the matter came up for hearing, the builder’s counsel said the villa was ready and the completion certificate would be obtained within 21 days. Observing that there was total failure on the builder’s part and deficiency in rendering services, the SC directed the builder not to sell the villa that Gokhale had booked nor create any third party rights till the order was executed. It also said the villa shall be under attachment till the order was fully complied with.

[edit] Court judgements

[edit] Builders to face separate trials in cases filed by buyers

Abhinav Garg, July 11, 2019: The Times of India


Builders who dupe thousands of homebuyers, or those accused of Ponzi schemes to defraud investors will now face multiple prosecutions in Delhi — based on complaints of individual victims — and can be awarded long and consecutive prison terms.

The Delhi HC ended the current practice of Delhi Police (mostly EOW and crime branch) of lodging a single FIR in cases of cheating of a large number of investors/ depositors where, for instance, a lone homebuyer is treated as the complainant while the others are shown as witnesses in a criminal case.

In such cases, many are left in the lurch if the sole complainant withdraws the case or reaches a settlement with the builder/accused.

A bench of Justices Vipin Sanghi and I S Mehta termed as “erroneous and not sustainable in law” the practice “of registering a single FIR on the basis of the complaint of one of the complainants/victims, and of treating the other complainants merely as witnesses.”

HC makes punishment for errant builders rigorous

Trial Courts Can Now Give Consecutive Prison Terms

The court said it “raises very serious issues with regard to deprivation of rights of such complainants to pursue their complaints, and to ensure that the culprits are brought to justice”.

Spelling out the law in this regard, HC was categorical that in a case of inducement, allurement and cheating of a large number of investors/ depositors, “each deposit by an investor constitutes a separate and individual transaction” and noted that “all such transactions cannot be amalgamated and clubbed into a single FIR by showing one investor as the complainant, and others as witnesses.”

“In respect of each such transaction, it is imperative for the state to register a separate FIR if the complainant discloses commission of a cognisable offence,” the court observed.

The court rejected the police’s stand that only a single FIR is required in cases where all investors/depositors were cheated in pursuance of a single conspiracy. The EOW argued that commission of multiple acts did not require the registration of separate FIRs for each victim.

In its ruling, the court highlighted how such a procedure denies other victims the right to “oppose, or to seek cancellation of bail that the accused may seek in relation to their particular transaction.”

The high court’s answer came on a reference sent to it by additional district and sessions judge Kamini Lau while dealing with a case involving 1,852 different victims cheated in a ponzi scheme.

In the process, the high court also made it clear that police or any investigating agency probing such an economic offence “cannot amalgamate the separate offences investigated under separate FIRs, into one chargesheet”, as is the current practice.

The high court also held that a limit on the quantum of sentence imposed by the CrPC (where courts award concurrent jail terms in a single trial for more than one IPC section) won’t apply in these cases, where an economic offender faces multiple trials that result in more than one conviction. This means trial courts can now give consecutive prison terms where the second term starts only once the first sentence ends, making the punishment much more rigorous.

[edit] See also

Consumer protection: India

Homebuyers and the law: India

Housing: India

Insolvency, bankruptcy: India

Land acquisition: India

Real Estate (Regulation & Development) Act (RERA)

Real estate: India

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