Payment Of Assured Returns By Builder To Homebuyer Not Banned By Unregulated Deposit Schemes Act

Monthly assured returns projects are schemes where builders promise to pay a fixed amount to homebuyers at regular intervals (usually monthly) for a specified period.

Background Facts

The homebuyer (Complainant) booked a flat in the builder's (Respondent) project named Neo Square, situated in Sector 109, Gurugram. The homebuyer and builder entered into an agreement for the sale of the flat on 14.07.2016. As per the agreement, the builder was supposed to hand over the possession of the flat by 14.07.2019.

On the same day, 14.07.2016, a Memorandum of Understanding (MOU) was executed between the builder and the homebuyer. As per Clause 4 of the MOU, the total sale consideration of the flat was Rs. 47,25,000/-, of which the homebuyer paid Rs. 44,43,863/- to the builder. The clause also stipulated that the builder would pay a monthly assured return of Rs. 40,500/- on the total amount received from 14.07.2016.

The homebuyer contended that the builder kept delaying the monthly assured return payments until June 2019, and some of the cheques issued by the builder were dishonored. Furthermore, the builder's representatives assured the homebuyer that the delayed payments, along with interest, would be adjusted at the time of possession.

After the possession date passed, the homebuyers visited the builder's office in January 2020 to inquire about the possession and the pending payment of the monthly assured returns. They were informed that the possession of the flat would soon be handed over along with the adjustment of the delayed payment interest and monthly assured rentals.

After the assurances of possession and monthly returns turned out incorrect, the homebuyer filed a complaint before the Authority seeking interest for delayed possession, payment of monthly assured returns, and a refund of the VAT charges.

Contentions of Builder

The builder contended that the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS) came into effect in 2019. As a result, the builder was forced to stop all payments related to assured returns from 2016 onwards.

The builder further contended that the relief of assured returns is not maintainable before the Authority due to the enactment of the BUDS Act. Any direction to pay assured returns would violate the provisions of the BUDS Act.

Observation and Direction by Authority

The authority observed that the BUDS Act does not create a bar for the payment of assured returns after coming into operation and Additionally, the payment of assured return made by builder to homebuyer are protected under section 2(4)(iii) of the BUDS Act.

The authority referred relevant part of Section 2(4) of the Banning of Unregulated Deposit Schemes Act, 2019, which is read as follows:

(4). Deposit

“deposit” means an amount of money received by way of an advance or loan or in any other form, by any deposit taker with a promise to return whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or in any other form, but does not include-

(l) an amount received in the course of, or for the purpose of, business and bearing a genuine connection to such business including—

(ii) advance received in connection with consideration of an immovable property under an agreement or arrangement subject to the condition that such advance is adjusted against such immovable property as specified in terms of the agreement or arrangement.

The Authority further observed that the definition of "deposit" under the BUDS Act is similar to that given under Section 2(31) of the Companies Act, 2013, and Rule 2(c) of the Companies (Acceptance of Deposits) Rules, 2014.

The Authority noted that the Government of India introduced the BUDS Act in 2019 to stop unregulated deposit schemes and protect depositors. The Act does not apply to deposits taken during regular business activities.

The Authority held that the amount paid by the complainant to the builder is a regulated deposit, builder accepted this deposit from the homebuyer for the immovable property (flat) that would be transferred to them later. Therefore, the Authority directed the builder to pay the due assured returns to the homebuyer, as per the MOU entered on 14.07.2016, within 90 days.

Case – Renu Yadav & another Versus M/s. Neo Developers Private Ltd

Citation - Complaint No. 3976 of 2023