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Refund an Absolute Right under RERA, if Builder goes Wrong!

March 1, 2022

By Lucy Rana and Nihit Nagpal

Homebuyers invest their hard earned savings into the real estate projects with a hope that they will own their dream house one day. However, their dreams gets shattered when the builders fail to deliver possession of their units even after a prolonged delay. The Consumer Protection Act, 2019 protects the home buyers (consumers) to get relief and compensation for deficiency in services and unfair trade practices against the builders, however redressal takes a long time. Thus, to provide speedy resolution to the home buyers against the delayed possession of their residential homes, the Real Estate (Regulation and Development) Act, 2016 was enacted by the parliament to protect and safeguard the investments made by the home buyers. The Act makes prior registration of a real estate project with the Real Estate Regulatory Authority mandatory, therefore, a project cannot be promoted or advertised for sale without registering the real estate project with the Authority.[1]

Any aggrieved person may file a complaint with the Authority or the Adjudicating Officer for any violation or contravention of the provisions of the Act including the Delay in Possession [2] The two remedies which can be availed by the buyers in case of delay of possession or any other violation are ‘refund of amount’ and ‘compensation’ under the Act.

The case of Compensation:

The allottee is entitled to receive compensation in the event there is any structural defect or any other defect in workmanship, etc.[3] The allottee is also entitled to receive compensation in case the loss is caused to allottee due to defective title of the land, on which the project is being developed or has been developed.[4]

The allottee is further entitled to receive compensation if the promoter fails to discharge any other obligation under the Act which includes the delay in possession, as the time of handing over the possession of the unit is prescribed in the terms and conditions of the agreement.[5]

The case of Refund:

The allottee or home buyer holds an unqualified right to seek refund of the amount with interest if the builder fails to complete or is unable to give possession of an apartment, plot or building either in terms of the agreement for sale or to complete the project by the date specified therein or on account of discontinuance of his business as a developer either on account of suspension or revocation of the registration under the Act.[6]

Challenges faced by Allottees or Buyers while fighting for Refund under the Real Estate (Regulation and Development) Act, 2016:

Challenges faced by Allottees Combatting the Challenges by Judiciary
1.      Refund cases linked to the stage of construction or obtaining of the occupation certificate.

 

Earlier cases of refund were contingent upon the stage of construction and refund was not given when the construction was at an advance stage.

It is now a settled position in law that the allottee holds an unqualified right to seek refund of the amount.

 

The Supreme Court of India vide its land mark judgement Newtech Promoters and Developers Pvt. Ltd. v. State of U.P.[7] dated November 11, 2021 held that the allottee holds the right of refund on demand as an unconditional absolute right, if the promoter fails to give possession of the unit within the time stipulated under the terms of the agreement regardless of unforeseen events or stay orders of the Court/Tribunal, provided that the allottee wishes to withdraw from the project.

Thus, the unqualified right of the allottee to seek refund is not dependent on any contingencies or stipulations.

2.      Ambiguity about the Powers of Authority and Adjudicating Officer for granting Refund.

 

Earlier cases of refund were delegated by the Authority to the Adjudicating Officer under their power to delegate their functions[8].

The Supreme Court of India vide its land mark judgement Newtech Promoters and Developers Pvt. Ltd. v. State of U.P.[9] dated November 11, 2021 cleared the ambiguity and held that it is the Regulatory Authority who has exclusive jurisdiction to direct refund to allottee, whereas the Adjudicating Officer only has the power to determine the compensation.

Further, the High Court of Punjab and Haryana vide its decision in Ramprastha Promoters and Developers Pvt. Ltd. v. Union of India[10] dated January 13, 2022 reiterated the judgement of the Supreme Court in Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. and held that the Regulatory Authority would have the jurisdiction to entertain a complaint seeking refund of the amount due to delay in possession.

Conclusion:

The allottees hold an unqualified and unconditional absolute right to seek refund of the amount, not dependent on any contingencies with interest, if the builder fails to complete or is unable to give possession of the apartment, plot or building, if the allottee wishes to withdraw from the project, and such power to direct such refund to allottees lies exclusively with the Authority. In view of the aforesaid judgements, the refund cases pending with the Adjudicating Officer are now being transferred to the Regulatory Authority.

Karanveer Singh, Junior Associate at S.S. Rana & Co. has assisted in the research of this article.

[1] Section 3. Prior registration of real estate project with Real Estate Regulatory Authority.

[2] Section 31. Filing of complaints with the Authority or the adjudicating officer.

[3] Section 14(3). In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter’s failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under this Act.

[4] Section 18(2). The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.

[5] Section 18(3). If the promoter fails to discharge any other obligations imposed on him under this Act or the rules or regulations made thereunder or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under this Act.

[6] Section 18(1). If the promoter fails to complete or is unable to give possession of an apartment, plot or building: (a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or (b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act: Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.

[7] MANU/SC/1056/2021

[8] Section 81. The Authority may, by general or special order in writing, delegate to any member, officer of the Authority or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act, as it may deem necessary.

[9] MANU/SC/1056/2021

[10] MANU/PH/0046/2022

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