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October 2, 2020

Bombay HC tells developer to pay Rs 5 crore for not giving property possession

by facelesscompliance in Compliance Law, Corporate Law

Bombay HC tells developer to pay Rs 5 crore for not giving property possession

The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which sought to protect home-buyers as well as help boost investments in the real estate industry.

The Act established a Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution. A regulation like RERA was needed in order to revive confidence in our country’s real estate sector. It is one of the leading revenue generators in our country and it is needed some transparent government authority to keep a check on developers.

The Bombay High Court in the case of M/s Renaissance Infrastructure and Others (Appellants) vs Shri Parth B. Suchak ordered the developer to pay Rs 5 crore compensation to a purchaser for failing to handover a property despite a delay of 80 months.  

Facts of the Case:

  • The complainant had purchased six plots of land together with pre-engineered steel portal framed rectangular building, termed as ‘warehousing building’, from the respondent promoter under an agreement for sale dated 10 December 2009.
  • The possession of the premises was to be handed over to the complainant-allottee on or before 9th March 2010.
  • It was submitted that since the possession was not so handed over, as per Condition No.4 of the agreement, the promoter was liable to compensate the complainant for loss of rent, which was agreed at the rate of Rs 10 per sq. ft. per month.
  • This compensation, according to the complainant, worked out to Rs.5.04 Crores, calculated up to 30th June 2018, after the grace period of six months of the agreed date of possession and till the time of filing of the complaint (i.e. for about 80 months).

Order by the Adjudicating Officer:

The Adjudicating Officer, ordered the Appellant herein to pay compensation to the complainant-allottee from 9th September 2010 and till handing over possession of the warehousing building at the rate of Rs 6,30,000 per month in addition to the direction for handing over possession of the plots with the warehousing building and execution of conveyance in favour of the applicants.

Order by the Appellate Tribunal

This order was carried by the Appellant before the Appellate Tribunal, who, by its orders, after considering the application of the Appellant-promoter herein for waiver of pre-deposit, as per proviso to Section 43(5) of the Real Estate Regulation and Development Act 2016, ordered the Appellant to deposit 50% of the amount computed as per the impugned order before the Appellate Tribunal as a condition for entertaining the appeal.

According to Section 43(5) of RERA, any person aggrieved by any direction or decision or order made by the Authority or by an adjudicating officer under this Act may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter after depositing with the Appellate Tribunal at least 30% of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.

The tribunal by an order calculated the compensation totally to Rs 5.4 crores, to be paid to the purchaser. Since this amount was not deposited by the Appellant herein, the appeal was dismissed by the Appellate Tribunal by its final order.

Submissions by Appellant

  • Appellant submitted that they were not liable to make any pre-deposit under the proviso to Section 43 (5).
  • The Appellant was not a promoter, since the agreement between the parties, which gave rise to the complaint, was not an agreement for sale, but an agreement in lieu of the Respondent’s share in the partnership of the Appellant.
  • Respondent was a partner in the Appellant firm and upon his retirement, the agreement of 10 December 2009 was executed in lieu of his share in the partnership.
  • Also, the original claim of the Respondent was pre-mature and devoid of merit.
  • The order was in the nature of liquidated damages and the adjudicating officer had no jurisdiction to order such damages.

Observations of the High Court (HC)

  • The Appellant was developing plots of land and entered into an agreement for allotment and sale of six plots within the project, together with a constructed building, to the Respondent.
  • Under this agreement, termed as “agreement for sale”, the Appellant was bound to hand over possession of the suit premises to the Respondent within an agreed period and execute a conveyance in respect of the same.
  • Prima facie this agreement was nothing, but an agreement for sale between a promoter and an allottee.
  • It may be that the allottee was a partner of the promoter firm and the agreement was executed with a view to satisfy the allottee’s claim towards his share in the partnership upon his retirement.
  • That did not, however, make the agreement any the less an agreement for sale.
  • Afterall, consideration of an agreement for sale, instead of money, may well be any valuable consideration, including satisfaction of the allottee’s share in the promoter’s partnership.
  • It was nevertheless an instance of allotment and sale of constructed premises with land, its consideration being satisfaction of the allottee’s claim in the business and assets of promoter partnership.
  • The project was very much a real estate project; it was being developed by the Appellant as a promoter and the Respondent is an allottee, to whom plots of land together with a building had been allotted and agreed to be sold (free-hold or leasehold) or otherwise transferred by the promoter.
  • Prima facie all ingredients of promotership of the Appellant were satisfied in the present case and there was no reason why its appeal before the Appellate Tribunal should not be treated as an appeal filed by a promoter.
  • The two other grounds urged by the appellant also did not support his case against pre-deposit under the proviso to Section 43(5).
  • Whether the original complaint before the adjudicating officer was premature and whether damages/compensation awarded by the adjudicating officer were within his jurisdiction, were matters of merit in the appeal.
  • These matters, even if some of them may go to the root of the order impugned in the appeal, did not call for dispension of pre-deposit under the proviso to Section 43(5), which was mandatory

The Appellant was given four weeks’ time to pay the amount ordered by the adjudicating authority, RERA, failing which the disputed property would be attached by the Tehsildar for sale.

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