Introduction
Real estate sector has proven to be a pivotal cog for India’s economic development. The increase in
population and people’s desire to move to cities in search of better standards of living has skyrocketed the demand for housing. The dreams of thousands of people to buy a home shatter when they are unable to get the possession for years, where their life savings are locked in, taking loans with the belief to fulfil their dream. Prior to 1986 the homebuyer could either file a civil suit for the breach of sale agreement or a criminal complaint for cheating or fraud committed by the builder. However, these remedies were not effective and often limited in providing speedy relief to the aggrieved home buyer. This prompted the legislature to provide a standardized legislation dealing with the real estate matters.
Consumer Protection Act 1986 (CPA)
According to Sec 2(d) of the 1986 Act, the homebuyer must be a consumer. As per Sec 7 of Consumer Protection Act 2019, anyone buying goods or services for commercial purpose cannot be termed as consumer. Hence, disputes regarding commercial property cannot be raised in Consumer forums. In the case of Ankur Goyal v. Rise Project (P) Ltd[1], wherein it was held that the onus of proving the buyer’s commercial motive is on the opposing party, that the buyer is buying and selling units.
Further, a home buyer can file a consumer complaint against the builder if the act of such builder falls
under Sec 2(47) of the Consumer Protection Act 2019[2] i.e., “unfair trade practices”. What amounts to unfair trade practices depends upon case to case. In the case of Pioneer Urban Land and Infrastructure
Ltd. v. Govindan Raghavan[3], it was observed that the inclusion of one-sided conditions in an agreement
between builders and flat purchasers constitutes an unfair commercial practise under Section 2 (r) of the 1986 Act. In the case of Lucknow Development Authority v. M.K. Gupta[4]it was held that the statutory housing authority was accountable for a lack of service in the construction of an apartment whose possession had been delayed
The homebuyer must file the case in respective consumer forums keeping in consideration the pecuniary
jurisdiction of the forum. The pecuniary jurisdiction of District Commission is one crore[5], ten crores for State Commission[6] and lastly if it exceeds ten crores then the jurisdiction falls before the National Commission[7].
Real Estate (Regulation and Development) Act, 2016 (RERA)
The said legislation came into force with the object to ensure accountability to allottees and protect
their interests, instil transparency, ensure fair-play, and reduce frauds and delays, introduce professionalism and pan-India standardisation, establish a fast-track dispute resolution mechanism and most importantly protect consumers’ interests in the real estate business.
Section 12 Provides that if the promoter commits a default, whether in relation to the information
contained in the notice, advertisement, or prospectus or based on the model flat, plot, or building, and the allottee/home buyer suffers loss or damage as a result of any incorrect or false statement or wishes to withdraw from the project, he shall be compensated by the promoter in the manner prescribed by
the Act. Further, as per Sec 14(3), if there is any structural defect, the promoter shall rectify such defects within thirty days without any charge. However, on failure to do so, the aggrieved home buyer shall be entitled to recover compensation. Sec 18 entails the consequence that if the promoter fails to complete or is unable to give possession of a flat, plot or building or to complete the project by the date specified therein, the home buyer has an unqualified right which are as follows:
(1) The allottee/home buyer can either request a refund or withdraw from the project.
(2) Such a refund could be provided with the appropriate interest;
(3) If the allottee does not plan to withdraw from the project, the promoter will be compelled to pay interest at the stipulated rates for each month’s delay in handing over ownership.
Apart from availing compensation, the home buyer has a right to seek information as well. One such
provision is Section 19(1) which provides homebuyers the right to access to all project-related information, such as project plans, layout, specifications, and approvals, among other things. Section 19(4) is nearly identical to Section 18(1) of the Act; both the provisions recognise an allottee’s right to two distinct remedies; refund of the amount plus interest or interest for delayed handing over of possession and compensation. In the event of any grievances or issues with developers or builders, Section 31 authorises homebuyers to file a complaint with the Authority or the adjudicating officer for the same. For this Sec 56 provides right to representation to the homebuyer through a chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Appellate Tribunal or the Regulatory Authority or the adjudicating officer. Simultaneously, Chapter VIII of the Act addresses offences, penalties, and adjudication. Sections 59 to 68 outline various penalties that must be assessed by the relevant authority.
Interplay of RERA and Consumer Protection Act
RERA is a specialized legislation dealing with the matters pertaining to real estate sector, laying down the right and duties of the promoter and various redressal mechanisms accordingly. Whereas, the CPA is a generalised legislation dealing with all the sectors. The most important aspect for a homebuyer to file complaint under CPA depends whether he is a consumer or not, if the homebuyer is not the consumer,
then the remedy can be availed under the RERA.
Section 88 states that the provisions of the RERA Act would be in addition to and not in derogation of the
provisions of any other law, whereas Section 89 states that the provisions of the RERA Act would have effect regardless of anything inconsistent contained in any other law currently in force. Further, Sec 79 of the RERA Act bars jurisdiction of a Civil Court to entertain any suit or proceeding in respect of any matter
which the Authority or the adjudicating officer or the Appellate Tribunal is empowered under the RERA Act to determine.
Imperia Structures Ltd. v. Anil Patni[8], it was held that the provisions of the RERA Act do not preclude the Commission or the Forum from hearing any consumer complaint under the provisions of the CP Act.
Both the legislation provides the consumer to protect its right if an alternative remedy is available. The home buyer is bound within the pecuniary limits before filing the case before the respective forums unlike RERA. Further according to SEC 44(2) of RERA, an appeal must be heard and dispose of within sixty days and the same according to Sec 44(5) be disposed of within sixty days. The aggrieved homebuyer can file an appeal to the High Court within sixty days from receiving such decision or order of Appellate Tribunal. However as per Sec 51, an aggrieved buyer can make an appeal before National Commission with thirty days against the order of State Commission, which according to Sec 52 shall be disposed of within ninety days. It can be precluded that the aggrieved buyer will be able to avail the remedy faster if complaint is made under the RERA.
Further the Court fees for registering the complaint or filing for an appeal may depend upon the jurisdiction of the Court or the rules framed by the State legislature. For instance, in the case of Trehan Apna Ghar Buildwell Private Limited v. Munish Ranjan Sahay[9], the Rajasthan High Court held that in the absence of any specific provision for payment of Court fees on appeals filed under Section 58 of the RERA Act, 2016
before the High Court, the Court fees of Rs.5000/-, as required to be paid before the Appellate Tribunal under Rule 37 of the Rajasthan RERA Rules 2017.
The RERA does not any provision on the court fees that may be payable either on the complaint or on the note of appeal filed before the Appellate Tribunal or the High Court; nonetheless, the High Court of Allahabad held that the provisions of the Court Fees Act, 1870 may be made applicable[10]. The Court Fee for filing of a complaint under CPA depends upon the pecuniary jurisdiction of the consumer forums ranging from Rs. 500 to Rs. 1,00,000.
The Insolvency and Bankruptcy Code, 2016 (IBC)
For any homebuyer an investment in a real estate sector is a risky one. To buy the same they must take a loan from the financial institutions playing a role of financer, which put them in a riskier position. To overcome this weakness, the amendment to the Insolvency and Bankruptcy Code of 2018, categorised the home buyers as financial creditors. This enables the financial creditor i.e., the homebuyer to initiate a corporate insolvency resolution process against the builder before NCLT[11]. The said amendment was declared constitutionally valid in the case of Pioneer Urban Land and Infrastructure Limited v. Union of India[12], wherein the Supreme Court held that the said amendment does not infringe Article 14, 19(1)(g) read with 19(6) or 300-A of the Constitution of India.
Further the SC held that RERA and the Code is to be read harmoniously and if there is a conflict then the Code will prevail over RERA, where the position of homebuyer is concerned as a financial creditor. Such allottee/homebuyer now have concurrent remedies under RERA, Consumer Protection Act, and the IBC.
In case a homebuyer files a complaint against the registered builder under the RERA for delivery of
possession, and subsequently if a developer went into insolvency proceedings under IBC and subsequently Insolvency Resolution Professional (IRP) is appointed by the NCLT, they can file their claims before IRP as financial creditors and avail the remedy in the mean time the proceedings under RERA may be stayed as IBC will prevail over RERA.
The object of RERA is to ensure that real estate projects are completed within the specified time frame,
and that allottees of such projects are not left in the dark and can ultimately fulfil their ambition of owning a home. Whereas, If the allottee/home buyer wishes to have the corporate debtor’s management removed and replaced for the corporate debtor to be rehabilitated, he may elect to file an application Sec 7 under the Code, only when is a person against whom a financial debt is owned under Sec 5(8) of IBC and if the corporate debtor fails on a debt that equals or exceeds the minimum threshold value specified in Section 4 of the Code i.e., Rs 1 crores.
Criminal Complaint
A homebuyer can file a criminal complaint against the builder under Sec 415 of IPC for cheating, criminal breach of trust under Sec 406 of IPC and criminal conspiracy under Sec 120 B of IPC. In the case of Hridaya Ranjan Prasad Verma v. State of Bihar[13] it was held that a simple breach of contract cannot
give rise to criminal charges of cheating unless fraudulent or dishonest intent is shown right from the start of the transaction, when the offence is deemed to have been committed. It is pertinent to note that a mere failure on the part of the builder to fulfil his promise cannot be presumed as a dishonest intention
at the beginning of the transaction. To avail remedy under Sec 420 of IPC, the homebuyer has to establish false misrepresentation on the part of the builder[14].
However, to prevent fictitious civil cases in cloak of criminal offence has been condemned by the Supreme Court time and again[15].
Under Sec 482 of Crpc, the High Court has a power to quash criminal proceedings in order to secure ends of justice. Similarly, Sec 203 of Crpc empowers the Magistrate to dismiss the complaint if it is found to be purely civil in nature. However, in the case of Kamala devi Agarwal vs State of West Bengal and
Ors[16], the SC held that the criminal cases must be handled independently according to the procedure outlined in the Code of Criminal Procedure, and that the pending of civil proceedings in a different court, even if higher in status and authority, cannot be used to quash criminal proceedings.
Conclusion
There has been several instances of fraud and exploitation of homebuyers, for instance land not being
owned by the builder or misrepresentation of license by the builder, leading to long and tedious litigation proceedings. However, the homebuyer can avail the remedy as a ‘consumer’ under the Consumer Protection Act 1986 and its subsequent legislation of 2019, as an ‘allottee’ under RERA and as a ‘financial
creditor’ under IBC.
