ARTICLE
5 October 2022

Extension Of Real Estate Project Completion Date By Developer Not Binding On Homebuyers

DV
Dhaval Vussonji & Associates
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The Maharashtra Real Estate Appellate Tribunal ("MREAT") in a recent judgment has reiterated several principles of The Maharashtra Real Estate (Regulation and Development) Act, 2016...
India Real Estate and Construction
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Introduction 

The Maharashtra Real Estate Appellate Tribunal (“MREAT”) in a recent judgment1 has reiterated several principles of The Maharashtra Real Estate (Regulation and Development) Act, 2016 (“the Act”) applicable when a promoter delays in handing over possession to an allottee beyond a date committed to such allottee.    

Background

The Allottees had purchased a flat (“the said Flat”) in a project being developed by S.R. & Shah Developers (“Developer”). The allottees had booked the said Flat for a total consideration of Rs.22,75,000/- (Rupees Twenty Two Lakhs and Seventy Five Thousand) (“Total Consideration”) and on receipt of the payment of the Total Consideration, an Allotment Letter dated 10th February, 2013 (“Allotment Letter”) was issued by the Developer. In terms of the Allotment Letter, the possession of the said Flat would be delivered in 18 to 24 months from the date of work commencement. The Developer received the commencement certificate on 15th April, 2014 and thereby, the possession of the said Flat was agreed to be delivered by 14th April, 2016. However, while registering the project with the Maharashtra Real Estate Regulatory Authority (“MahaRERA”), the Developer revised the possession date of the said Flat as 31st December 2020.

Upon not receiving possession of the said Flat before the agreed date and upon the inability of the Developer to provide any specific time for the completion of the project, the Allottees cancelled their booking and demanded a refund of the entire consideration amount paid by them with compensation.

The Developer had allegedly agreed to refund the paid amount to the Allottees, but refunded only a part of the Total Consideration. Pursuant to this, the Allottees filed a complaint before the MahaRERA seeking refund of the remaining paid amount together with interest and costs under the Act.  

MahaRERA Order

MahaRERA passed the impugned order dated 18th February, 2020 holding inter alia that: 

Since, no agreement for sale has been executed and registered between the parties, provisions of Section 18 of the act do not apply to the present case. In view of these facts, the refund amount, if any, shall be as per the terms and conditions of the said allotment letter or as agreed between the parties.”

Section 18 of the Act inter-alia states that if the promoter fails to complete or is unable to give possession of an apartment, plot or building in accordance with the terms of the agreement for sale or as the case may be, duly completed by the date specified therein then the developer 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 or building, as the case may be, with interest at such rates as may be prescribed in this behalf including compensation in the manner as provided in the Act .

Aggrieved by this order of MahaRERA, the Allottees preferred an appeal before the MREAT.

Contentions before MREAT

Contention of Allottees

  1. The Allottees relied on the judgement of MREAT in the case of Manjit Singh Dhaliwal and Ors. Vs. JVPD Properties Pvt. Ltd. 2 wherein, it was held that “section 2(c) of the act deals with agreement for sale, which means an agreement entered into between the developers and homebuyers. It is only the difference of nomenclature; one may call it a letter for allotment or an agreement or may call it an acceptance letter. It will not cancel the terms settled between the parties of a purchaser, seller of property and price agreed upon in schedule and details of the property.”
  1. It was also held in Manjit Singh Dhaliwal, that as long as the terms of the allotment letter are clear between both the parties, it is the right of the Allottees to receive interest and compensation as per the Act.

Project completion date in the present case has been revised to December, 2020 which is beyond the agreed date of delivery of possession and the developer has already agreed for refund with interest.

Contention of Developer

  1. The construction of the said project was delayed due to genuine reasons which were beyond the control of the Developer. The homebuyers have been kept informed about these delays well in advance.
  1. MahaRERA has granted the extension of the project completion date and the revised project completion date is December, 2020 which is reflected on the MahaRERA website.
  1. The Allottees had accepted part refund and therefore waived off their rights to be allotees of the Project.

Judgment:

MREAT in its order has held:

  • Allotment letter already issued in the present case reflects agreed positions between the parties and contains important ingredients of the agreement for sale. Therefore, the provisions of Sections 12 and 18 of the Act continue to be applicable.
  • The revised possession delivery date would not be maintainable in light of the judgement of the Hon'ble Bombay High Court in the case of Neelkamal Realtors Suburban Pvt. Ltd vs UOI & Ors, 3 which clarifies that “The RERA does not contemplate rewriting of contract between the flat purchaser and the developer”, it is further clarified that “ by giving opportunity to the developer to prescribe fresh time line, he is not absolved of the liability under the agreement for sale”.
  • The delivery date mentioned on MahaRERA's website is revised without the consent of the homebuyer. Therefore, it is not binding on the homebuyer.
  • Accordingly, the project completion date mentioned on the MahaRERA website cannot be taken as the agreed possession delivery date.
  • The Developer was directed to refund the remaining paid amount to the homebuyers together with interest thereon, from the date of receipts of respective payments at 2% per annum above the State Bank of India's highest marginal cost of lending rate.

Conclusion:

In conclusion, in the absence an agreement for sale, the terms and conditions in the allotment letter will be considered as binding and a possession date agreed between promoter and allottee is not overridden by any extension in the project completion date reflected on the RERA website.

Footnotes

1 Mrs. Chandrika Chowatia and Anr. v. S.R. & Shah Developers (Appeal No. AT06000000052650)

2 AT006000000000017

3 1 AIR Bom R 558

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
5 October 2022

Extension Of Real Estate Project Completion Date By Developer Not Binding On Homebuyers

India Real Estate and Construction
Contributor
Our Firm was established in 2013 in Mumbai. Today, we have a team of over 60 lawyers in Mumbai with offices in Bengaluru and Delhi. We are a full service dynamic law firm with remarkable progress owing to our unparalleled commitment to quality. Professionalism, effectiveness and quick turnaround are the cornerstones of our service. Our work ethic and the accomplished legal advice is why we are trusted advisors to our clients.  
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