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Delayed Possession- MahaRERA awards Rs. 5 Crore to Allotee

October 12, 2020

By Lucy Rana & Shilpi Sharan

Renaissance Infrastructure vs. Parth B. Suchak

Factual Background:

M/s Renaissance Infrastructure, the Respondent herein, is the original complainant (hereinafter referred to as the Complainant) and Parth B. Suchak is the Appellant herein, originally the Respondent-promoter (hereinafter referred to as the Promoter). As per the agreement of sale (“the agreement”) dated December 10, 2009, the Complainant had bought six plots of land along with a warehousing building from the Respondent Promoter. According to the agreement, Promoter was supposed to provide possession of the suit property to the Complainant or allottee by March 9, 2010. It is pertinent to point out that, Complainant and Promoter were originally partners and on Complainant’s retirement from the partnership, his share was compensated by providing the suit property, as per the sale agreement. Subsequently, the Promoter failed to adhere to the conditions enumerated under the agreement and thereby, could not hand over possession of the suit property on time i.e. even after extension of further six months. As per the terms of the agreement, on failure to hand over possession on time, the Promoter would be liable to pay or compensate the Complainant/allottee for loss of rent i.e., Rs. 10/- per sq. ft. per month. Hence, a complaint was filed by the allottee for delay of possession of suit property before the Maharashtra RERA Authority.

RERA’s Order

The adjudicating authority passed the order in favor of the allottee, ordering the Promoter herein to compensate the Allottee/Complainant[1]. The adjudicating officer calculated total compensation amount to be Rs. 5.04 Crores upto June 30, 2018 i.e., till the time of filing of the complaint, including the period of six months extension from the agreed date of possession of the suit property (i.e., 80 months). Thus, the concerned adjudicating authority, by order dated March 20, 2019 directed the promoter to pay Rs. 6,30,000/- per month from September 9, 2010 (i.e., after the grace period of six months, from the agreed date of possession) till handing over the possession of suit property. The concerned authority also ordered to execute a conveyance deed.

Consequently, the Promoter challenged this order before the RERA Appellate Authority, However, the appellate authority, vide it’s orders dated January 9, 2020 and January 24, 2020 upheld the order passed by Maharashtra RERA Authority. The appellate authority held that, Promoter/Appellant herein was a promoter and hence was liable to deposit 50% of the compensation amount as per proviso to Section 43(5) of the Act. In view thereof, the concerned appeal was dismissed, and promoter was directed to pay the said compensation amount to allottee.

Subsequently, the three orders passed by the adjudicating authority and appellate authority dated March 20, 2019; January 9, 2020 and January 24, 2020 respectively, were challenged by the Appellant before the Hon’ble High Court of Bombay.

Bombay High Court’s order

The counsel for promoter/Appellant made the following assertions and challenged the previous orders[2]:

  • It was alleged that the Appellant was not the promoter as parties to dispute were partners before and the agreement between the parties resulted in the present complaint. Thus, the agreement in question was not agreement for sale per se, but an agreement in lieu of the Respondent’s share in the partnership with the Appellant. In other words, the said agreement was acted upon to compensate for the shares owned by the Respondent, as he was retiring from the partnership.
  • It was also contended by the Appellant that the original averment of the Respondent was pre-mature and Further, the Appellant also contended that the adjudicating officer do not have jurisdiction in the present case as the same was in the nature of liquidated damages.

The Hon’ble High Court of Bombay in view of facts and circumstances of the case and law prevailing on the subject, made the following observations and order in the case:

  • The Hon’ble Court noted that as the Appellant was involved in construction of a real estate project and selling of plots and flats, the Appellant was a Promoter. It was further observed by the Court that the agreement entered into between the parties to dispute, clearly enumerated sale of suit property and hence the same was an “agreement for sale”.
  • That as per the agreement for sale, promoter/Appellant was bound to hand over possession of the concerned property within the agreed time, i.e., till September 9, 2010 (including 6 months grace period). Reportedly, the promoter failed to adhere to the terms and conditions mentioned within the agreement, consequent to which, promoter was liable to compensate the allottee.
  • It was also pointed out by the Court that, consideration of an agreement for sale, instead of money could also be a valuable consideration, including satisfaction of the allottee’s share in the promoter’s partnership. Hence, the present case dealt with allotment and sale of constructed premises with land (i.e., the suit property), in lieu of allottee’s claim and shares in the business/assets of the partnership. It was therefore observed by the Court that the Appellant herein was in fact the promoter and thus the adjudicating authority had jurisdiction over the issue.
  • In view of the aforesaid observations, the Court pointed out that, as the Appellant was a promoter, he had to adhere to the proviso to Section 43(5) of the Act and accordingly pay 50% of the compensation as a condition precedent to filing an appeal. Thus, the Hon’ble Bombay High Court found no infirmity and illegality in the impugned orders passed by adjudicating authority and upheld the same.

The Court thereby dismissed both the appeals and directed the promoter to pay half of the compensation as directed by the adjudicating authority, within the stipulated time of 4 weeks and further instructed that no sale shall of the suit property shall take place until payment of compensation and failure to comply with the order would authorize the concerned tehsildar to commence sale of suit property.

Delayed possession of flats and compensation under RERA

The delayed possession of flats or plots to home buyers has emerged as one of the most crucial issues in the Real Estate sector in India. In the past few years, home buyers have several times approached Courts and Tribunals with the grievance of delayed possession of flats by promoters and developers.

Prior to 2016, lack of any specific law governing the Real estate sector in India rendered home buyers helpless and handicapped in such circumstances of delayed or non-possession of flats even after paying the entire consideration as per the terms of development agreement. However, the enactment of Real Estate (Regulation and Development) Act, 2016 and judiciary’s stringent approach against such builders has helped in contouring the law and legal implications pertaining to delayed possession of flats by promoters/builders in India.

[1] MANU/RT/0001/2020

[2] https://images.assettype.com/barandbench/2020-09/ebff8344-c294-42fe-adfa-a07f30f35be5/Gupte_J__SA_Order_28_09_2020.pdf

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