ARTICLE
23 April 2024

The Tussle Between Homebuyers And Developers: Relief Under The Consumer Protection Act

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Agama Law Associates

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ALA is a boutique commercial law practice offering end-to-end corporate-commercial legal solutions to Indian and foreign businesses. We offer a wide range of services tailored across sectors for private clients, startups and mature businesses. We have a cost-effective technology based model supported by a large network of associates. Commercial transactions and advisory is our forte, which includes contract management and standardization. Our disputes profile is advising and strategizing from a pre-dispute stage, and managing and driving the litigation across all courts and tribunals including the High Court, the NCLT and SAT
The real-estate sector has boomed in the past few years, however, delays in construction and completion of projects have been the norm, leaving the homebuyer in the lurch.
India Consumer Protection
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A. INTRODUCTION

The real-estate sector has boomed in the past few years, however, delays in construction and completion of projects have been the norm, leaving the homebuyer in the lurch. In such scenarios, homebuyers turn to judicial forums seeking either refund of booking amount or delivery of possession of the house, with payment of delayed interest.

Recently, in a case arising under Consumer Protection Act, 1986, i.e., Venkataraman Krishnamurthy & Anr. v. Lodha Crown Buildmart Private Limited1, the Hon'ble Supreme Court considered the right of homebuyers to terminate the Agreement to Sell and claim refund of booking amount with interest. The Hon'ble Supreme Court further analysed whether the Hon'ble National Consumer Dispute Redressal Commission ("NCDRC") could re-write the terms of contract while adjudicating the dispute.

The present Article seeks to analyse the decision of the Hon'ble Supreme Court in case of Venkataraman Krishnamurthy (supra) and the jurisprudence surrounding the same.

B. FACTS IN BRIEF:

Mr. Venkataraman Krishnamurthy and Ms. Gopi Venkataraman (collectively referred to as the "Appellants") entered into an Agreement to Sell dated 29 November 2013 ("Agreement") with Lodha Crown Buildmart Private Limited ("Respondent") pursuant to which an apartment in building named 'Lodha Evoq' was allotted to the Appellants. The total consideration was agreed to be Rs. 7,55,50,956/- wherein Rs. 2,25,31,148/- was paid by the Appellants towards the application money. It is admitted that the Appellants were not in default of the Agreement.

Pertinently, in the event of failure to handover the possession for fit outs as agreed, i.e., on or before 30 June 2017 (being the extended period), the Appellants had a right to terminate the Agreement within a period of 90 days from the expiry of the grace period.

The Respondent failed to handover the possession to the Appellants for fit outs by 30 June 2017. In view thereof, the Appellants elected to terminate the Agreement and called upon the Respondent to refund the amount so paid with interest. The Respondent disputed the termination and claimed that in view of right of forfeiture, no money is liable to be refunded. The Appellants were, therefore, constrained to file a Consumer Case No. 35 of 2018 before the NCDRC.

C. RULING OF NCDRC:

The NCDRC on 9 November 20222 held that the Appellants are consumer under the Consumer Protection Act, 1986. However, as regards the delay in handing over of possession, it was held that the delay was not unreasonable to an extent that would entitle the Appellants to terminate the Agreement and in the event the Appellants opt to terminate the Agreement, the Respondent was entitled to forfeit the earnest money.

D. REVERSAL BY THE HON'BLE SUPREME COURT:

The Order dated 9 November 2022 was impugned before the Hon'ble Supreme Court. The Court analysed the clauses of the Agreement, wherein on facts it was held that (1) grace period for handing over possession of apartment for fit outs ended on 30 June 2017; (2) delay in handing over possession of the apartment for fit outs entitles the Appellants to terminate the Agreement; and (3) procuring part occupancy certificate is irrelevant as the issue is w.r.t. 'date of offer of possession for fit outs' and not 'date of offer of possession', i.e., final possession.

In view of the aforesaid, the Court proceeded to reverse the ruling of NCDRC and held that it was not open to the NCDRC to rewrite the terms of the Agreement and apply its subjective criteria. It was noted that the parties having committed to a written contract are bound by the terms and conditions provided therein. Accordingly, when the Agreement entitles the Appellants to terminate the Agreement, the NCDRC could not have held that the delay was not unreasonable to warrant cancellation.

The Court relied on the judgments of General Assurance Society Limited v. Chandumull Jain3, Rajasthan State Industrial Development & Investment Corporation v. Diamond & Gem Development Corporation Limited4, Shree Ambica Medical Stores v. Surat People's Coop. Bank Limited5 and GMR Warora Energy Limited v. Central Electricity Regulatory Commission6 wherein it was held that explicit terms of the contract are final word, and the Court cannot make a new contract, no matter how reasonable. It was, therefore, noted that the NCDRC overstepped its power and jurisdiction by not giving effect to the binding provisions.

As regards the payment of interest, the Court noted that reliance on Ireo Grace Realtech Private Limited v. Abhishek Kumar7 is misplaced as the contract in that case did not contemplate payment of interest. On the contrary, the Agreement in the instant case stipulates that interest shall be paid at 12% per annum.

In view thereof, the Court upheld the termination and directed the Respondent to refund Rs. 2,25,31,148/- in twelve equal monthly instalments, with interest @ 12% per annum from date of receipt of amount till payment.

E. CONCLUSION

The tussle between the homebuyers and developers is a never-ending tale wherein the ruling in Venkataraman Krishnamurthy (supra) is crucial in ensuring that the developers will strictly implement the terms of the agreement to sell and handover possession of flats and apartments in timely manner.

The judgment also reiterates the well settled principle that the Courts/ Tribunals/ Commissions cannot re-write the terms of contract in the name of equity or reasonableness. The parties, therefore, ought to be conscious and aware of the terms, before signing on the dotted line.

In the past few years concentrated effort has been made to regulate the real-estate sector to protect the rights of the homebuyers wherein remedies available to homebuyers have evolved considerably. The instant judgment assists in further instilling faith that money invested in real-estate is not money lost.

Furthermore, in the event of genuine difficulty at the end of developers leading to delay in handover of possession, the parties may enter into supplemental agreement modifying the terms of the agreement to sell. Moreover, while the Maharashtra Real Estate Regulatory Authority has made certain clauses of the model form of agreement non-negotiable, including the right of promoter/ developer to terminate the Agreement to Sell, the terms in relation to extension of timelines and termination by the homebuyer may be suitably modified as per the understanding between the parties subject to Section 18 of the Real Estate (Regulation and Development) Act, 2016.

Footnotes

1. 2024 SCC Online SC 182.

2. 2022 SCC Online NCDRC 1135.

3. AIR 1966 SC 1644.

4. (2013) 5 SCC 470.

5. (2020) 13 SCC 564.

6. (2023) 10 SCC 401.

7. (2021) 3 SCC 241.

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.

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