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November 7, 2020

RERA does not bar remedies under the Consumer Protection Act – Supreme Court

by CA Shivam Jaiswal in Income Tax

RERA does not bar remedies under the Consumer Protection Act – Supreme Court

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 Consumer Protection Act, 2019 (CP Act) proposed a slew of measures and tightens the existing rules to further safeguard consumer rights. Introduction of a central regulator, strict penalties for misleading advertisements and guidelines for e-commerce and electronic service providers were some of the key highlights of the Act.

However, a court reject an appeal on the argument that RERA barred remedies under the Consumer Protection Act. Let us refer to the case of Imperia Structures Ltd vs Anil Patni to know about this issue more.

Facts of the Case:

  • A Housing Scheme Project was launched by the Appellant in 2011 and all the original Complainants booked their respective apartments by paying the booking amounts and thereafter each of them executed Builder Buyer Agreement with the Appellant.
  • The Respondents booked an apartment whose basic price was Rs.56,01,750 to which additional charges such as preferential location charges for “corner” “park facing” and for “higher floor” as well as charges for reserve parking, club membership and development were added, which made the aggregate price Rs.76,43,000.
  • The Agreement dated 30.11.2013 dealt with “delay due to reasons beyond the control of the Developer/Company” and “failure to deliver possession due to Government Rules, Orders, Notifications, etc.” respectively.
  • On 01.05.2016, the Real Estate (Regulation and Development) Act, 2016 (RERA Act) came into force.
  • Over a period of time the Respondents had paid Rs.63,53,625 out of the agreed sum. However, even after four years there were no signs of the Project getting completed.

Case before the Commission

  • In the circumstances a Consumer Case was preferred by the Respondents before the Commission
  • In its response to the Consumer Case, the Appellant challenged the jurisdiction of the Commission inter alia, on the ground that 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 CP Act.
  • No reference was however made to the fact that the Project was registered under the RERA Act
  • The Consumer Case was allowed by the Commission,concluding that the Appellant was deficient in rendering service.
  • The Commission granted relief to the Respondents of refund of the amounts deposited by each of the Complainants with simple interest @ 9% pa from the respective dates of deposits along with Rs.50,000 towards costs.
  • It was also directed that the amounts be deposited within 4 weeks, failing which the amounts would carry interest @ 12% p.a.

Appeal to Supreme Court (SC)

The Appellant being aggrieved preferred an appeal before the Supreme Court (SC).

At the outset, SC had to deal with two issues. It was concluded by the Commission that; (i) all the Complainants were ‘Consumers’ within the meaning of the Act and that; (ii) there was delay on part of the Appellant in completing the construction within time.

In the view of the SC, the conclusions drawn by the National Commission in relation to these issues were absolutely correct and did not call for any interference.

Observations of the SC on the remedies available to the consumers under the provisions of the CP Act

It was consistently held by the SC that the remedies available under the provisions of the CP Act were additional remedies over and above the other remedies including those made available under any special statutes and that the availability of an alternate remedy was no bar in entertaining a complaint under the CP Act.

Before SC considered whether the provisions of the RERA Act have made any change in the legal position stated in the preceding paragraph, SC noted that an allottee placed in circumstances similar to that of the Complainants, could have initiated following proceedings before the RERA Act came into force:

  • If he satisfied the requirements of being a “consumer” under the CP Act, he could have initiated proceedings under the CP Act in addition to normal civil remedies.
  • However, if he did not fulfil the requirements of being a “consumer”, he could initiate and avail only normal civil remedies.
  • If the agreement with the developer or the builder provided for arbitration:
  • in cases, he could initiate or could be called upon to invoke the remedies in arbitration
  • in other cases, he could still choose to proceed under the CP Act

Observations of the SC on the Provisions of the 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 was specifically made “without prejudice to any other remedy available to him”.
  • The right so given to the allottee was unqualified and if availed, the money deposited by the allottee had to be refunded with interest at such rate as may be prescribed.
  • The proviso to Section 18(1) contemplated a situation where the allottee does not intend to withdraw from the Project.
  • In that case he was entitled to and had to be paid interest for every month of delay till the handing over of the possession.
  • It was 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.

Observations of the SC on whether RERA Act barred consideration of the grievance of an allottee by CP Act

  • It was, therefore, required to be considered whether the remedy so provided under the RERA Act to an allottee was the only and exclusive modality to raise a grievance and whether the provisions of the RERA Act barred consideration of the grievance of an allottee by other forums.
  • Section 79 of the RERA Act barred jurisdiction of a Civil Court to entertain any suit or proceeding in respect of any matter which the Authority, the adjudicating officer or the Appellate Tribunal is empowered under the RERA Act to determine.
  • Section 88 specifies that the provisions of the RERA Act would be in addition to and not in derogation of the provisions of any other law, while in terms of Section 89, the provisions of the RERA Act shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force.
  • On plain reading of Section 79 of the RERA Act, an allottee, would stand barred from invoking the jurisdiction of a Civil Court.
  • However, as regards the allottees who can be called “consumers” within the meaning of the CP Act, two questions would arise; a) whether the bar specified under Section 79 of the RERA Act would apply to proceedings initiated under the provisions of the CP Act; and b) whether there is anything inconsistent in the provisions of the CP Act with that of the RERA Act
  • In Malay Kumar Ganguli vs. Dr. Sukumar Mukherjee, it was held by the SC that 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.
  • Proviso to Section 71(1) of the RERA Act entitled a complainant who had initiated proceedings under the CP Act before the RERA Act came into force, to withdraw the proceedings under the CP 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 gave a right or an option to the concerned complainant but did 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.
  • As against that the mandate in Section 12(4) of the CP Act to the contrary was quite significant.
  • Again, insofar as cases where such proceedings under the CP Act were initiated after the provisions of the RERA Act came into force, there was nothing in the RERA Act which barred such initiation.
  • The absence of bar under Section 79 to the initiation of proceedings before a forum which cannot be called a Civil Court and express saving under Section 88 of the RERA Act, made the position quite clear.
  • Further, Section 18 itself specified that the remedy under said Section was “without prejudice to any other remedy available”.
  • Thus, the parliamentary intent was clear that a choice or discretion was given to the allottee whether he wished to initiate appropriate proceedings under the CP Act or file an application under the RERA Act.
  • It was true that some special authorities were created under the RERA Act for the regulation and promotion of the real estate sector and the issues concerning a registered project were specifically entrusted to functionaries under the RERA Act.
  • But for the present purposes, SC went by the purport of Section 18 of the RERA Act.
  • Since it gave a right “without prejudice to any other remedy available’, in effect, such other remedy was acknowledged and saved subject always to the applicability of Section 79.

Conclusion by the Supreme Court

  • SC, therefore, rejected the submissions advanced by the Appellant and answered the questions raised against the Appellant.
  • SCalso considered the effect of the registration of the Project under the RERA Act.
  • In the present case the apartments were booked by the Complainants in 2011-2012 and the Builder Buyer Agreements were entered into in November, 2013.
  • As promised, the construction should have been completed in 42 months.
  • The period had expired well before the Project was registered under the provisions of the RERA Act.
  • Merely because the registration under the RERA Act was valid till 31.12.2020 did not mean that the entitlement of the concerned allottees to maintain an action stands deferred.
  • It was 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.
  • Therefore, the entitlement of the Complainants had to be considered in the light of the terms of the Builder Buyer Agreements and was rightly dealt with by the Commission.
  • It had to be noted that the Consumer Protection Act was enacted by the Parliament “to provide for protection of the interests of consumers and for the said purpose, to establish authorities for timely and effectively administration and settlement of the consumers’ dispute and for matters connected therewith or incidental thereto”.
  • It was significant that Section 100 was enacted with an 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.
  • Therefore, the proceedings initiated by the complainants in the present cases and the resultant actions including the orders passed by the Commission were fully saved.
  • SC rejected all the submissions advanced by the Appellant.

Therefore, period for allotment of flat to a homebuyer has to be reckoned from the date of the buyer agreement and not from the date of the registration of the project under the Real Estate Regulation and Development Act (RERA Act).Also,RERA does not bar remedies under the Consumer Protection Act.

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