HIGHLIGHTS OF THE MONTH
Person Involved in Joint Venture Agreement Arrangement with Developer Is Not a Homebuyer
[M. Marudhachalam Vs M/s. Harish Builders (S.R.No.41 of 2024)]
In a recent ruling, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) dismissed a complaint filed by M. Marudhachalam ("Complainant"), who claimed to be a homebuyer in a joint venture agreement concerning the "Uthra Flats" project in Madipakkam, Chennai. The bench determined that the Complainant's status as a party to the joint venture excluded him from being classified as a homebuyer under the Real Estate (Regulation & Development) Act, 2016 (RERA).
The case stemmed from the decision of flat owners to demolish an aging apartment building and construct a new one with a developer under a joint venture. The apartment owners and the builder entered in a sharing arrangement for construction of the new apartment. The construction was delayed, and the builder ("Respondent") failed to complete the flat in stipulated period.
TNRERA reviewed the circumstances surrounding the complaint and referenced key sections of RERA. Section 3(2) of RERA stipulates that registration of a real estate project is unnecessary if the project area is less than 500 square meters or comprises fewer than eight apartments. With the total project area being 4800 sq. ft. (approximately 445 sq. meters), the project was deemed exempt from registration. Furthermore, TNRERA invoked Section 2(zk) of RERA, which defines a promoter as a person who constructs buildings with the intent to sell. The authority clarified that the Respondent acted merely as a builder rather than a promoter, as they constructed the flats at their expense and offered them as consideration instead of cash payments. Consequently, the authority concluded that Complainant's involvement in the joint venture arrangement did not qualify him as a homebuyer or allottee, leading to the rejection of his complaint.
Delay Of 18 Years in Handing Over Possession of Plot: Haryana RERA Directs Ramprastha Promoters to Pay Interest
[Pranav Goel Vs M/s Ramprastha Promoters & Developers Pvt. Ltd (Complaint No. 2438 of 2023)]
In a notable ruling, the Haryana Real Estate Regulatory Authority (HRERA) has ordered M/s Ramprastha Promoters & Developers Pvt. Ltd. (the "Builder") to pay interest on the amount received from one, Pranav Goel (the "Complainant") due to an 18-year delay in handing over possession of a plot in the Ramprastha City project in Gurugram.
The Complainant booked the plot, for which he fully paid via cheque on September 4, 2006. The Builder had promised to deliver the possession within 30 months, with an extension of 180 days, making the due date for possession March 3, 2009. However, despite taking full payment, the Builder failed to provide the possession and did not execute a builder-buyer agreement, which the Complainant had repeatedly requested.
The HRERA examined the nature of the receipt provided by the Builder, referencing the Indian Contract Act, which defines agreements and contracts. It highlighted that the lack of a specific plot number and project details further complicated the Complainant's situation. Relying on the precedent of Nishant Bansal Vs M/s Parsvnath Developers Limited, HRERA ruled that if the Builder cannot provide the booked plot, it must find a similar plot from the open market at its own expense.
Consequently, the HRERA directed the Builder to allot a specific plot number and issue an allotment letter within 90 days. Additionally, due to the 18-year delay, the Builder was ordered to pay interest at a rate of 11.10% per annum for each month of delay, from the original due date until actual possession is handed over.
Bank Cannot Be Held Liable for Lapse in Coverage Unless Explicitly Agreed: National Consumer Disputes Redressal Commission (NCDRC)
[Canara Bank Vs. M/S. Shree Shakti Foam (F.A. No. 391/2023)]
In a significant ruling, the NCDRC established that a borrower is primarily responsible for insuring its goods. The NCDRC clarified that a bank cannot be held liable for any lapse in insurance coverage unless it has explicitly agreed to take on that responsibility.
The complainant in the instant case, engaged in the business of quilts and foams, secured a loan from Canara Bank, which also facilitated insurance for the stock and godown. The bank deducted the insurance premium from the complainant's account without disclosing which insurance company was involved. After a fire destroyed the goods stored in the godown, the complainant alleged that the bank had failed to renew the insurance timely. It claimed that the bank insured the already-damaged stock and godown without conducting an inspection.
As a result, the complainant approached the State Commission of Uttar Pradesh, seeking compensation for the loss of stock, damages for mental agony, and litigation costs, citing "deficiency in service" by the bank. The State Commission ruled in favor of the complainant, ordering the bank to pay the insured amount, along with Rs. 20,000 for mental, physical, and economic damages. The bank subsequently appealed to the NCDRC. In its appeal, the bank acknowledged that it held the insurance documents but emphasized that it acted based on the complainant's instructions. The bank contended that it was the complainant's duty to inform them about policy renewals and to provide the necessary receipts.
The NCDRC assessed whether the bank was liable for failing to insure the complainant's goods. The agreement executed between the parties explicitly stated that the bank was not obligated to insure the goods. Furthermore, the NCDRC highlighted the absence of substantial proof regarding the complainant's claimed losses, apart from letters sent to the police and the bank. It reiterated the principle established in "Oriental Bank of Commerce vs. HS Traders & Ors.," which emphasized that the borrower bears the primary responsibility for insurance.
Ultimately, the NCDRC concluded that the bank was not deficient in service under the Consumer Protection Act, 2019. As a result, the State Commission's order was overturned, and the bank's appeal was upheld.
Registrar Can Set Aside Sale of Property on Grounds Other Than Those Raised by Decree Holder: Kerala HC
[The West Chalakudy Service Co-Operative Bank Ltd V The Special Sale Officer (W.P.(C) No. 23060 of 2024)]
In a recent ruling, the Kerala High Court clarified the Registrar's authority to set aside sale of a property based on grounds beyond those presented by the decree-holder. The Court highlighted that individuals affected by a property sale must approach the Registrar within 30 days if they believe there has been a material irregularity, mistake, or fraud, as outlined in Rule 83 of the Kerala Co-operative Societies Rules.
The case involved the West Chalakudy Service Co-operative Bank Ltd., which purchased property at a public auction after the original owners defaulted on their loans. The bank sought confirmation of the sale but faced challenges when the Registrar insisted on obtaining a no-objection certificate (NOC) from the Tahsildar before confirming the sale.
The bank contested this requirement, arguing that the Registrar had no authority to demand such a NOC under the Co-operative Societies Act or the relevant rules. The court noted that if the sale is not challenged within 30 days, the Registrar is obligated to confirm it and issue a certificate.
Ultimately, the court ruled that the Registrar had not set aside the sale and therefore must confirm it. The demand for a no-objection certificate from the Tahsildar was deemed inappropriate. The petition was granted, and the court upheld the cooperative bank's rights regarding the confirmation of the sale.
Voidable Sale Deed Binding on Consolidation Authorities Unless Cancelled by Civil Court: Supreme Court
[Khursheed & Anr. v. Shaqoor (Neutral Citation: 2024 INSC 764)]
In a significant ruling, the Supreme Court clarified that a voidable sale deed remains binding on consolidation authorities until it is annulled by a competent Civil Court. The Court emphasized that there is no restriction on the Civil Court's jurisdiction to hear cases seeking the cancellation of such sale deeds.
The case arose from a dispute over agricultural land, where the mother of Petitioner No. 1 falsely claimed inheritance and sold the land. The Respondent filed a civil suit to cancel the sale deed, mentioning fraud. Initially, the Civil Court dismissed the suit under the U.P. Consolidation of Holdings Act, 1954 ("Consolidation Act") leading the Respondent to challenge this decision in the Uttarakhand High Court.
The High Court ruled that the suit for cancellation of a voidable sale deed due to fraud could proceed in Civil Court, despite the provisions of the Consolidation Act. The Petitioners moved to the Supreme Court against the High Court's order.
The Supreme Court analyzed the relevant sections of the Consolidation Act, particularly, Sections 5(2)(a) and 49. The Court aimed to determine whether the publication of a consolidation notification would result in the abatement of pending civil suits regarding fraudulent sale deeds.
Citing the landmark case, Ningawwa v. Byrappa (1968), the Court distinguished between "void" and "voidable" documents. It explained that while a fraudulent misrepresentation regarding the document's character renders it void, misrepresentation about its contents makes it merely voidable. The ruling further referred to Dularia Devi v. Janardan Singh (1990), establishing that voidable documents remain valid until a competent court sets them aside.
Ultimately, the Supreme Court dismissed the Special Leave Petition, affirming that voidable sale deeds are enforceable unless a court cancels them, thus allowing the Respondent's civil suit to proceed.
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