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Consumer complaint by Allottee against Builders is not barred by RERA Act, 2016

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Consumer complaint by Allottee against Builders is not barred by RERA Act, 2016
By: Mr. M. GOVINDARAJAN
November 9, 2020
All Articles by: Mr. M. GOVINDARAJAN       View Profile
  • Contents

‘RERA’ Act

In terms of Section 18 of the RERA Act, if a promoter fails to complete or is unable to give possession of an apartment duly completed by the date specified in the agreement, the Promoter would be liable, on demand, to return the amount received by him in respect of that

Apartment if the allottee wishes to withdraw from the Project. Such right of an allottee is specifically made “without prejudice to any other remedy available to him”. The right so given to the allottee is unqualified and if availed, the money deposited by the allottee has to be refunded with interest at such rate as may be prescribed.  The proviso to Section 18(1) contemplates a situation where the allottee does not intend to withdraw from the Project. In that case he is entitled to and must be paid interest for every month of delay till the handing over of the possession. It is up to the allottee to proceed either under Section 18(1) or under proviso to Section 18(1). The RERA Act thus definitely provides a remedy to an allottee who wishes to withdraw from the Project or claim return on his investment.

Section 71 (1) of the Act provides that for the purpose of adjudging compensation, the Authority shall appoint in consultation with the appropriate Government one or more judicial officer as deemed necessary, who is or has been a District Judge to be an adjudicating officer for holding an inquiry in the prescribed manner, after giving any person concerned a reasonable opportunity of being heard.  The proviso to the said section provides that any person whose complaint in respect of matters covered under sections 12, 14, 18 and section 19 is pending before the Consumer Disputes Redressal Forum or the Consumer Disputes Redressal Commission or the National Consumer Redressal Commission, established under section 9 of the Consumer Protection Act, 1986, on or before the commencement of this Act, he may, with the permission of such Forum or Commission, as the case may be, withdraw the complaint pending before it and file an application before the adjudicating officer under this Act.

Issue

The issue to be discussed in this article is whether the remedy so provided under the RERA Act to an allottee is the only and exclusive modality to raise a grievance and whether the provisions of the RERA Act bar consideration of the grievance of an allottee by other for a, with reference to decided case law by Supreme Court recently.

Case law

In IMPERIA STRUCTURES LTD. VERSUS ANIL PATNI AND OTHERS - 2020 (11) TMI 189 - SUPREME COURT, the appellant launched a housing scheme called ESFERA in Gurgaon during the year 2011.  The respondents in the appeal booked apartments which amount to ₹ 76.43 lakhs including all costs.  The agreement made between the appellant and the respondents provides that Developer/Company abandoning the Scheme or becoming unable to give possession within three years from the date of execution of this Agreement to such extended periods as permitted under this Agreement, the Developer/Company shall be entitled to terminate this Agreement whereupon the Developer/Company’s liability shall be limited to the refund of the amounts paid by the Intending Allottee(s) with simple interest @ 9% per annum for the period such amounts we relying with the Developer/Company and to pay no other compensation whatsoever.

Clause 41 of the agreement provides that the Developer/Company shall not be held responsible or liable for not performing any of its obligations or undertakings provided for in this Agreement if such performance is prevented, delayed  or hindered by an act of God, fire, flood, explosion, war, riot, terrorist acts, sabotage, inability to procure or general shortage of energy, labour, equipment, facilities, materials or supplies, failure of transportation, strikes, lock outs, action of labour unions or any other cause (whether similar or dissimilar to the foregoing) not within the reasonable control of the Developer/Company.

Over a period of time the Respondents had paid ₹ 63,53,625/- out of the agreed sum of ₹ 76,43,000/-. However, even after four years there were no signs of the Project getting completed.  Therefore the respondents filed complaints before the National Consumer Disputes Redressal Commission.  The respondents claimed compensation to the tune of ₹ 40.42 lakhs.  The total amount claimed by each respondent comes to more than ₹ 1 crore and therefore the National Commission is having jurisdiction to entertain the complaints.   On 17.11.2017, the Project was registered with Haryana Real Estate Regulatory Authority, Panchkula.  The certificate of registration was granted to the appellant subject to the conditions as imposed by the Authority.

The respondents put their prayers before the National Commission-

  • to direct the appellant refund the entire amount collected from the complainants towards the consideration of the Flat along with interest @ 18% p.a. on the amount paid by them from the date of each deposit of the amount till it is actually returned to the complaints;
  • to Direct the O.P. to pay a sum of ₹ 50,000/-  to the complainants toward the cost of litigation;
  • Any other order(s) as may be deemed fit and appropriate may also kindly be passed.

The complaints were allowed by the Commission granting relief of refund of the amounts deposited by each of the Complainants with simple interest @ 9% per annum from the respective

dates of deposits along with ₹ 50,000/- towards costs. It was also directed that the amounts be deposited within four weeks, failing which the amounts would carry interest @ 12% per annum.

The appellant before the Supreme Court challenged orders passed by the National Commission and also challenged the jurisdiction of the National Commission.  The appellant submitted the following before the Supreme Court-

  • The apartment having been booked for commercial purposes, the Respondents would not come within the definition of ‘the consumer’ under Section 2(d) of the Consumer Protection Act.
  • The Commission failed to appreciate that the Policy of Demonetization introduced by the Government of India constituted as an event of Force Majeure since as a consequence of the said event, numerous persons including the Appellant suffered shortage of cash which resulted in delay in delivering possession to the Respondent.
  • The shortage of cash ensuing as a result of the Demonetization policy resulted in the stopping of work since the process of construction requires many payments to be made in cash on a day to day basis, for example, wages paid to daily wage workers, payments made against delivery of construction materials, etc.
  • In one complaint filed by Himanshu Giri before the Authority of RERA, the Authority passed an order directing the appellant to-
  • provide delay possession charges at the prescribed rate of 10.75% per annum for every month of delay with effect from  15.9.2016 as per the provisions of Section 18(1) of the Real Estate (Regulation and Development) Act, 2016.
  • pay the arrears of interest accrued so far to the complainant within 90 days from the date of the order and thereafter monthly payment of interest till handing over the possession shall be paid before 10th of subsequent month.
  • The Appellant had partially refunded the amounts in terms of the directions of the Commission.
  • A majority of the allottees had thus reposed faith in the appellant.
  • The Appellant had offered alternative accommodation to all the allottees. But the offer was rejected by all the Complainants which was indicative that the apartments were booked for investment purposes.
  • Once the RERA Act came into force, all questions concerning the Project including issues relating to construction and completion thereof, would be under the exclusive control and jurisdiction of the authorities under the RERA Act. The Commission, therefore, ought not to have entertained the Consumer Cases.
  • The Registration Certificate dated 17.11.2017 being valid up to 31.12.2020, the Appellant could not be said to have delayed the construction and consequently, there could be no finding that there was deficiency on part of the Appellant.
  • The order passed in the case of Himanshu Giri had directed payment of interest @ 10.75% per annum without issuing any direction for refund of money.
  • Considering the provisions of the RERA Act and the fact that the registration being valid up to 31.12.2020, the orders passed by the Commission be set aside and instead the Complainants be granted interest @ 10.75% p.a. on the amounts deposited; whereby the Project would be completed without putting the Appellant under any financial strain and at the same time the relief in the nature of interest on investment would also be accruable to the allottees.

The respondents submitted the following before the Supreme Court-

  • All the Complainants had purchased only one residential apartment each for self-use.
  • They had taken loan from banks for the purchase of apartment.
  • The National Commission rightly held that the complainants are consumers.
  • The National Commission also rightly held in favor of the complainants on the issue of force majeure as no reasonable explanation from the appellants on record to dislodge the said finding.
  • The National Commission, in fact, award the interest at lower rate i.e., @ 9%.
  • At no stage, any plea was taken before the Commission as well as before the Supreme Court that the Project was registered under the RERA Act or about the effect of the RERA Act.
  • The remedy afforded by the CP Act would be an additional remedy to a consumer and said legal position remained unchanged even after the enactment of the RERA Act.

The Supreme Court considered the submissions put forth by the parties to the appeal.  The Supreme Court observed that the stand taken by the Appellant at various stages, it acknowledged that there was delay but the Appellant tried to rely on certain events.  The Consumer Protection Act was enacted, inter alia, ‘to provide for better protection of the interest of the consumer’; to promote and protect the rights of consumers such as ‘the rights to seek redressal against unfair trade practices or unscrupulous exploitation of consumers’.

Section 3 of the Consumer Protection Act provides that the provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.  The Supreme Court analyzed the provisions of sections 3, 4, 5, 18, 19, 22, 46, 71, 79, 88 and 89 of RERA Act.

Section 79 of the RERA Act provides that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

Section 88 of the RERA Act provides that the provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.  Section 89 of the RERA Act provides that the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

It has consistently been held by the Supreme  Court that the remedies available under the provisions of the Consumer Protection Act are additional remedies over and above the other remedies including those made available under any special statutes; and that the availability of an alternate remedy is no bar in entertaining a complaint under the Consumer Protection  Act.

The Supreme Court has taken into consideration whether the remedy so provided under the RERA Act to an allottee is the only and exclusive modality to raise a grievance and whether the provisions of the RERA Act bar consideration of the grievance of an allottee by other fora.

The Supreme Court relied on its judgment in MALAY KUMAR GANGULY VERSUS DR. SUKUMAR MUKHERJEE AND ORS. [2009 (8) TMI 1229 - SUPREME COURT] in which it was held that the proceedings before the National Commission are although judicial proceedings, but at the same time it is not a civil court within the meaning of the provisions of the Code of Civil Procedure. It may have all the trappings of the civil court but yet it cannot be called a civil court.  The Supreme Court held that on the strength of the law so declared, Section 79 of the RERA Act does not in any way bar the Commission or Forum under the provisions of the CP Act to entertain any complaint.

The proviso to Section 71(1) of the RERA Act entitles a complainant who had initiated proceedings under the Consumer Protection Act before the RERA Act came into force, to withdraw the proceedings under the Consumer Protection Act with the permission of the Forum or Commission and file an appropriate application before the adjudicating officer under the RERA Act. The proviso thus gives a right or an option to the concerned complainant but does not statutorily force him to withdraw such complaint nor do the provisions of the RERA Act create any mechanism for transfer of such pending proceedings to authorities under the RERA Act.

Insofar as cases where such proceedings under the CP Act are initiated after the provisions of the RERA Act came into force, there is nothing in the RERA Act which bars such initiation.   Section 18 itself specifies that the remedy under said Section is ‘without prejudice to any other remedy available’. Thus, the parliamentary intent is clear that a choice or discretion is given to the allottee whether he wishes to initiate appropriate proceedings under the Consumer Protection Act or file an application under the RERA Act.

The Supreme Court relied on other judgment of Supreme Court in PIONEER URBAN LAND AND INFRASTRUCTURE LIMITED & ANOTHER VERSUS UNION OF INDIA & OTHERS [2019 (8) TMI 532 - SUPREME COURT] in which it was held that RERA is to be read harmoniously with the Insolvency and Bankruptcy Code, 2016,  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 Supreme Court further observed that merely because the registration under the RERA Act is valid till 31.12.2020 does not mean that the entitlement of the concerned allottees to maintain an action stands deferred. It is relevant to note that even for the purposes of Section 18, the period has to be reckoned in terms of the agreement and not the registration.

The Supreme Court held that Section 100 of the Consumer Protection Act, 2019 Act is akin to Section 3 of the Consumer Protection Act and Section 107 saves all actions taken or purported to have been taken under the Consumer Protection Act. It is significant that Section 100 is enacted with intent to secure the remedies under 2019 Act dealing with protection of the interests of Consumers, even after the RERA Act was brought into force.

The Supreme Court dismissed the appeal filed by the appellant.  The Supreme Court ordered to pay the cost of the case ₹ 50,000/- to each of the respondent over and above the amount payable as per the directions of the National Commission.

 

By: Mr. M. GOVINDARAJAN - November 9, 2020

 

 

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