A Big Relief for Home Buyers – Supreme Court of India Settling the Important Issues (Case name- M/S Imperia Structures Ltd. v. Anil Patni, 2020)
Facts of the case
In the present case i.e. M/S Imperia Structures Ltd. v. Anil Patni, the appellant (builder) launched a housing scheme in Gurgaon, Haryana. The respondents (original complainants and the buyers) booked their respective apartments by paying booking amounts and executing the Builder-Buyer agreement (hereinafter Agreement) with the appellant. In the Agreement which was signed on 30th November, 2013, clause 11.4 dealt with the provision regarding “failure to deliver possession: remedy to the company” and the same could be made applicable if the developer/company is unable to give possession within three years from the date of execution of this Agreement. The suitable remedy which is mentioned in the said clause was that refund of the amounts paid by the Intending Allottee(s) with simple interest @ 9% per annum for the period such amounts or @ Rs.5/- per sq. ft. equal to Rs.53.8/- Per Sq. Meter of the super area of the said Apartment per month for the period of such delay beyond three & half years or such extended periods as permitted under this Agreement would be provided to the allottee in such circumstances.
However, clause 11.4 has to be read in consonance with clause 11.1, 11.2, and 41 which deals with ‘delay due to reasons beyond the control of the developer/ company’, ‘failure to deliver possession due to government rules, orders, notifications, etc.’, and ‘force majeure’ respectively.
In 2016, the Real Estate (Regulation and Development) Act (hereinafter RERA Act) came into force and on 17th November 2017, the developer got this project registered with Haryana Real Estate Regulatory Authority. The registration was approved and was valid till 31st December 2020. However, a month before this registration i.e. on 11th October, 2017, the respondents filed a complaint before National Consumer Dispute Redressal Commission (NCDRC) as four years have been completed and there were no signs for the Project getting finished thus there is a violation of the Agreement as there is no delivery of possession in the stipulated time period as per the Agreement. The respondents claimed that there was an ulterior motive of the developer to extract money from the innocent buyers fraudulently that demonstrates unfair trade practices and restrictive trade practices under the ambit of Consumer Protection Act, 1986 (hereinafter CPA).
As the case was filed before the NCDRC, the appellant challenged the jurisdiction of the Consumer forum to hear the matter as the appellant claimed that in the particular case, the respondent does not come under the scope of ‘consumer’ under section 2(d) of the CPA because the apartment was booked for commercial purposes, and it also denied that the appellant was bound to deliver possession by May, 2017.
Nonetheless, the consumer complaint was allowed and the NCDRC heard the matter in which it held that the appellant was deficient in rendering services and it admitted that there was incomplete construction, and the fact that some of the Complainants have also taken bank loans and are paying EMIs and considering the stipulation provided in Clause 11.4, therefore, the commission granted relief and ordered the appellant to refund the amounts deposited with simple interest @ 9% p.a. from the respective dates of deposits till the date of realization together with costs of Rs.50,000/- to be paid to each of the Complainants. Hence, aggrieved by the order passed by NCDRC, the appellant filed the instant appeal before the Supreme Court under Section 23 of the Consumer Protection Act, 1986.
Issues Raised
Pertinently, two important issues were raised before the Supreme Court that are-
- Whether RERA is the exclusive modality to hear such disputes or any other fora can also exercise jurisdiction to hear the matter? If there is a bar on other forums, whether such a bar is on Consumer forums as well?
- What date shall be taken into consideration while seeing the default in giving the possession of the project by the builder and for purposes of Section 18 of the RERA?
Court’s analysis
Issue 1
The appellant argued that firstly, after the RERA came into force, all questions which are concerned to the Project including the issue related to construction and completion would therefore be under the exclusive control and jurisdiction of the RERA Act and its authorities and secondly, the complainants were not covered under the scope of ‘consumers’ as per CPA because the apartments in the Project were booked with the profit motive and that appellant had offered alternative accommodation to the allottee which the complainant rejected thus indicative that apartments were booked only for investment purposes.
On the other hand, the respondent argued that the respondents have purchased only one resident apartment each for self-use and most of them have taken home loans as well to purchase the apartment. Therefore, it is evident that the respondents are under the purview of ‘consumers’ under the provision of CPA. The respondent also submitted that any remedy under CPA has to be construed as an additional remedy to a consumer and the said legal position remains unchanged even after the enactment of the RERA Act.
Finally, the court held that the observation made by NCDRC is correct, and in this, the respondents will be under the scope of ‘consumers’. The court held that remedies available under the provisions of the CPA are additional remedies and for this, the court relied on Secretary, Thirumugan Cooperative Agricultural Credit Society v. M. Lalitha[1] (2004) 1 SCC 305 in which the Court has held that “As per Section 3 of the Act, as already stated above, the provisions of the Act shall be in addition to and not in derogation of any other provisions of any other law for the time being in force unless there is a clear bar”. Similarly, other cases were also referred by the Court which stated the identical point [2]National Seeds Corporation Limited vs. M. Madhusudhan Reddy ((2012) 2 SCC 506); Virender Jain v. Alaknanda Cooperative Group Housing Society Limited ((2013) 9 SCC 383).
Therefore, the court came to a conclusion that in such circumstances, as per Section 79, the allottee would be barred from invoking the jurisdiction of a civil court, however, those allottees who are under the purview of ‘consumers’ even after the RERA Act came into force are in no way bar from approaching the Consumer Forum under the CPA because the Court in case of Malay Kumar Ganguli v. Dr. Sukumar Mukherjee[3](2009) 9 SCC 221
held that proceedings before NCDRC is a judicial proceeding but at the same time it is not a civil court within the meaning of Code of Civil procedure. Hence, it does not come under the trappings of a civil court. Therefore complaint before the Consumer forum is correct and within its jurisdiction.
Nevertheless, the Court was of the view that seeing the objective of the RERA Act which was enacted especially to deal with such matters, such authorities alone must be held entitled to decide all issues concerning the Project registered under the RERA Act. The complainant may exercise the right as provided under Section 71(1) of the RERA Act which entitles a complainant who had initiated the proceedings under CPA before RERA came into force to withdraw such proceedings before CPA and get it transferred before the adjudicating authority under RERA Act, however, there is no statutory compulsion to do the same. Therefore, the court finally held that the jurisdiction of consumer forum is in addition to and not in derogation of the provisions of RERA for the time being in force and therefore the complainant is at liberty to approach either consumer forum or RERA for remedying the grievances.
Issue 2
The Court clarified the position and held that merely because the registration under the RERA Act is valid till 31st December, 2020, it does not mean that the entitlement of the concerned allottees to maintain an action stands deferred. The Court upheld that the period has to be seen from the date and terms of the Builder-Buyer agreement and not from the RERA registration date. Therefore, the possession has to be delivered as per the terms mentioned in the Builder-Buyer agreement and that the Consumer forum has rightly dealt with the issue. The flat allotment date has to be seen from the effectiveness of builder-buyer agreement. Hence, the Court upheld the order of the NCDRC in toto.
Conclusion
Through this decision, the Court has restored the sanctity of the Builder-buyer agreement and has regained the lost confidence of the buyers who were being victimized by the malpractices of some of the builders who tries to get the registration delayed under RERA so that they could get an exemption from coming under the purview of default and can get their legal obligation linked with the date of RERA registration and not with the agreement. With the position being settled in favour of the Builder-Buyer agreement, that the period for allotment of flat to a homebuyer has to be reckoned from the date of the builder-buyer agreement and not from the date of the registration under RERA there are now more chances that the builders would complete their project within the deadline as mentioned in the agreement in order to avoid penalties.
Moreover, the judgment has also brought the different adjudicating authorities like RERA and Consumer Forums in harmony by clearing out the position regarding which and when a forum can exercise its jurisdiction. Through settling down this position, the homebuyers who are the victims would be able to take legal recourse without any difficulties that too in a prescribed time period without any delays. All in all, this judgment may positively impact consumer sentiments and shall boost the real estate sector.
He holds a Bachelor’s and Master’s Degree in Corporate Secretaryship and a Degree in Law. He is a Fellow member of the Institute of Company Secretaries of India and an Associate Member of the Corporate Governance Institute, UK and Ireland. He has also completed a program from ISB on ‘Value Creation through Mergers and Acquisitions.
Mr P Muthusamy is an Indian Revenue Service (IRS) officer with an outstanding career of 30+ years of experience and expertise in all niche areas of Indirect Taxes covering a wide spectrum including GST, Customs, GATT Valuation, Central Excise and Foreign Trade.
During his judicial role, he heard and decided a large number of cases, including some of the most sensitive, complicated, and high-stake matters on insolvency and bankruptcy, including many cases on resolution plans, shareholder disputes and Schemes of Amalgamation, De-mergers, restructuring etc.,
Ms. Sarah Abraham has been enrolled with the Bar Council of Tamil Nadu since 1998. Her areas of practice include Shareholder Disputes, Corporate Compliances, Mergers and Acquisitions, Private Equity/ Venture Capital Agreements and allied disputes, Information Technology Contracts, Intellectual Property, General Commercial Agreements, Litigation, Arbitration and Mediation.
A K Mylsamy is the Founder, Managing Partner and the anchor of the firm. He holds a Degree in law and a Degree in Literature. He is enrolled with the Bar Council of Tamil Nadu.
M Subathra holds a Degree in law and a Master’s Degree in International Business Law from the University of Manchester, United Kingdom. She is enrolled with the Bar Council of Tamil Nadu.
Mr. K Rajendran is a former Indian Revenue Service (IRS) officer with a distinguished service of 35 years in the Indirect Taxation Department with rich experience and expertise in the fields of Customs, Central Excise, Service Tax and GST. He possesses Master’s Degree in English literature. Prior to joining the Department, he served for the All India Radio, Coimbatore for a period of about 4 years.
An MBA from the Indian Institute of Management, Calcutta, and an M.Sc. in Tourism Management from the Scottish Hotel School, UK, Ashok Anantram was one fo the earliest IIM graduates to enter the Indian hospitality industry. He joined India Tourism Development Corporation (ITDC) in 1970 and after a brief stint proceeded to the UK on a scholarship. On his return to India, he joined ITC Hotels Limited in 1975. Over the 30 years in this Organisation, he held senior leadership positions in Sales & Marketing and was its Vice President – Sales & Marketing. He was closely involved in decision making at the corporate level and saw the chain grow from a single hotel in 1975 to a very large multi-brand professional hospitality group.
Mani holds a Bachelor Degree in Science and P.G. Diploma in Journalism and Public Relations. He has a rich and varied experience of over 4 decades in Banking, Finance, Hospitality and freelance Journalism. He began his career with Andhra Bank and had the benefit of several training programs in Banking.
Mr. Kailash Chandra Kala joined the Department of Revenue, Ministry of Finance as ‘Customs Appraiser’ at Mumbai in the year 1993.
S Ramanujam, is a Chartered Accountant with over 40 years of experience and specialization in areas of Corporate Tax, Mergers or Demergers, Restructuring and Acquisitions. He worked as the Executive Vice-President, Group Taxation of the UB Group, Bangalore.
K K Balu holds a degree in B.A and B.L and is a Corporate Lawyer having over 50 years of Legal, Teaching and Judicial experience.
Justice M. Jaichandren hails from an illustrious family of lawyers, academics and politicians. Justice Jaichandren majored in criminology and then qualified as a lawyer by securing a gold medal. He successfully practiced in the Madras High Court and appeared in several civil, criminal, consumer, labour, administrative and debt recovery tribunals. He held office as an Advocate for the Government (Writs Side) in Chennai and was on the panel of several government organizations as senior counsel. His true passion lay in practicing Constitutional laws with focus on writs in the Madras High Court. He was appointed Judge, High Court of Madras in December 2005 and retired in February 2017.
S Balasubramanian is a Commerce and Law Graduate. He is a member of the Delhi Bar Council, an associate Member of the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and Management Accountants of India.