Navigating Builder-Buyer Disputes in India: Insights into Forum Choices and Relative Restrictions

In these circumstances, however, educating customers better and managing expectations became crucial. To safeguard homebuyers and encourage real estate investments, the Parliament introduced The Real Estate (Regulation and Development) Act, 2016. This Act establishes the Real Estate Regulatory Authority to oversee and promote the real estate sector, ensuring transparent and efficient transactions. Its goals include protecting consumer interests, establishing a dispute resolution mechanism, and creating an Appellate Tribunal for related matters. As a result, increased regulatory oversight through RERA has played a significant role in instilling confidence among home buyers by removing unreliable developers from the real estate market.

However, it is important to note that these positive developments have been accompanied by a notable surge in builder-buyer disputes within the sector. These disputes can be broadly categorized as:

Delay in Possession:

Delay in flat possession is a common problem faced by Indian home buyers. The delay from the builder's side may be caused by any reason such as changes in weather, shortage in labour, project assessment mistakes, delay in grant of approvals from authorities or due to the restrictions and regulations imposed by the government. The onus of resolving these problems is with the home builder and not the buyer.

As per the provisions contained in section18 of the act, in the event that a promoter fails to fulfil the terms of the agreement for sale or is unable to provide possession of an apartment, plot, or building as specified in the agreement, the promoter is obligated to return the amount received for that particular property to the allottees along the interest and compensation. This obligation also applies if the failure to complete the project is due to the discontinuance of the promoter's business as a developer, whether because of the suspension or revocation of registration under the applicable Act or for any other reason. However, this provision does not prejudice any other remedies available to the allottees. If an allottee decides not to withdraw from the project, the promoter is still liable to pay interest for each month of delay until possession is handed over, at a rate specified by the Act.

Arbitrary Nature of Builder-Buyer Agreement:

A Builder-Buyer agreement is a legal contract between a real estate developer (builder) and a property buyer. This document encompasses essential details such as property specifications, pricing, and payment terms. It outlines the possession date and may include provisions for penalties in case of delays. The agreement also specifies construction quality, legal compliance, and the buyer's rights regarding common areas and amenities.

Additionally, it addresses default and termination conditions, maintenance charges, and mechanisms for dispute resolution. Thorough review and legal consultation are recommended for both parties before signing, as the agreement delineates the rights and responsibilities throughout the real estate transaction.

A common concern of home buyers pertains to one-sided builder-buyer agreements that are drafted primarily to safeguard the interests of the developers. Using their dominant position in the transaction, developers often insert clauses in the agreement that directly impact home buyers' interests.

Dealing with the issue, Hon'ble Supreme Court in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan^[2], held that a term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder terms of which are ex facie one-sided, unfair and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2(1)(r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the builder.

False and Misleading Advertisements:

In the realm of real estate transactions, false advertising pertains to the dissemination of an advertisement, whether through publication, transmission, or other means, that contains inaccurate claims or statements, intentionally or unintentionally, with the aim of promoting the sale of a property. The act defines Advertisement under section 2(b) as—

“…any document described or issued as advertisement through any medium and includes any notice, circular or other documents or publicity in any form, informing persons about a real estate project, or offering for sale of a plot, building or apartment or inviting persons to purchase in any manner such plot, building or apartment or to make advances or deposits for such purposes.”

The Authority, in accordance with section7 of the Act, is empowered to revoke the registration granted under section5 under various circumstances. This may occur upon receipt of a complaint, Suo motu action, or upon the recommendation of the competent authority. The revocation may be prompted by the promoter's violation of terms or conditions stipulated in the approval granted by the competent authority or their engagement in unfair practices or irregularities. The term "unfair practice" is explicitly defined in the explanation clause, encompassing practices aimed at promoting the sale or development of a real estate project through deceptive methods, including the publication of misleading advertisements or prospectuses that falsely represent services not intended to be offered.

Section12 mandates promoters to ensure the accuracy of advertisements and prospectuses. If an individual suffers financial loss due to incorrect information and wishes to withdraw from the project, the promoter must refund the entire investment with interest, as prescribed by the Act, along with compensation for the damages incurred.

Structural Defects in the Unit:

It includes deviation from sanctioned plans, layout plans and specifications as approved by the competent authorities and poor construction quality due to substandard workmanship or building material.

The responsibility of the promoter, concerning the structural defect or any other defect shall extend for the period of five years from the date of handing over of the possession, even after the conveyance deed of all the apartments, plots or buildings, as the case may be, to the allottees are executed.

Section14 outlines the legal provisions pertaining to the adherence of promoters to sanctioned plans and project specifications. According to the provision, the promoter is obligated to develop and complete the proposed project in accordance with the plans and specifications approved by competent authorities. After disclosure to prospective buyers, the promoter is restricted from making any additions or alterations to the sanctioned plans, layout, or specifications without the previous consent of the buyer. However, minor changes are allowed with the consent of the allottee or for architectural and structural reasons, subject to declaration and intimation. Furthermore, any alterations or additions to the project's plans or common areas require the written consent of at least two-thirds of the allottees. If structural or workmanship defects are reported within five years of possession, the promoter must rectify them within 30 days at no extra cost. Failure to do so entitles aggrieved allottees to receive compensation as per the provisions of the Act.

Provisions Relating to Filling of Complaints and Subsequent Adjudication Under Real Estate (Regulation & Development) Act 2016:

Section31 of the act empowers any aggrieved individual to file a complaint with the Authority or the adjudicating officer against any violation of the provisions of the Real Estate (Regulation and Development) Act, along with its accompanying rules and regulations. This includes complaints against promoters, allottees, or real estate agents. The term "person" in this context includes both individuals and associations, such as the association of allottees or any voluntary consumer association registered under prevailing laws. The specific details regarding the form, manner, and fees for filing a complaint under this section are to be prescribed by the relevant authorities.

Section44 provides the mechanism for the settlement of disputes and appeals to the Appellate Tribunal under the Real Estate (Regulation and Development) Act. Any party, including the appropriate Government, competent authority, or an aggrieved individual, dissatisfied with a direction, order, or decision of the Authority or adjudicating officer, may file an appeal with the Appellate Tribunal. The appeal must be submitted within sixty days of receiving the direction, order, or decision, accompanied by the prescribed form and fee. The Tribunal may consider appeals beyond sixty days if it finds sufficient cause for the delay.

The Appellate Tribunal is required to expedite the appeal process, with a goal to dispose of the appeal within sixty days of receipt. In cases where this time frame cannot be met, the Tribunal must provide written reasons for the delay. Additionally, the Tribunal has the power to review the legality, propriety, or correctness of any order or decision by the Authority or adjudicating officer, and can call for relevant records to make appropriate orders.

Section71 empowers the Real Estate Regulatory Authority to adjudicate compensation matters under specific sections of the Act. To facilitate this, the Authority is authorized to appoint one or more judicial officers, with experience as a District Judge, as adjudicating officers. These officers conduct inquiries in the prescribed manner, providing a reasonable opportunity for the concerned parties to be heard.

The provision allows individuals with pending complaints related to sections 12, 14, 18, and 19 before consumer dispute forums established under the Consumer Protection Act, 1986, to withdraw their complaints and file applications before the adjudicating officer under the act, with the respective forum or commission's permission.

The adjudicating officer is mandated to handle compensation applications expeditiously, aiming to dispose of them within sixty days of receipt. If this timeframe cannot be met, the officer must provide written reasons for the delay.

Conciliation Forums Established Under the Act:

As provided under section 32 of Real Estate (Regulation and Development) Act 2016, Real Estate Regulatory Authorities of various states have established conciliation forums. The conciliation forum aims to facilitate the amicable settlement of disputes between the allottees and the promoters through a mechanism of free deliberations facilitated by the representative of Buyer Association, Promoter Association and RERA conciliation consultant. Every aggrieved party is given option to opt for conciliation before proceeding with formal complaint. The forum also aims at obviating the long run process of litigation for resolution of disputes.

Remedy Under Consumer Protection Act, 2019:

Section88 of the Real Estate (Regulation & Development) Act 2016 clarifies that the provisions of this Act are supplementary and do not override or diminish the applicability of any other existing laws. In other words, the regulations and requirements outlined in this Act are intended to complement, rather than supersede, the provisions of any concurrent laws in force at the time.

Thus, the remedies under RERA to allottees can be said to be additional and not exclusive remedies.

In this regard, the apex court in Pioneer Urban Land and Infrastructure Ltd. v. Union of India ^[3], has held that remedies given to allottees of flats/apartments are concurrent remedies. Such allottees are in a position to avail other remedies under the Consumer Protection Act, 1986, RERA, as well as the Insolvency and Bankruptcy Code.

Thereafter, in the case of Arifur Rahman Khan v. DLF Southern Homes (P) Ltd ^[4], it the apex court observed that:

The failure of the developer to comply with the contractual obligation to provide the flat to a flat purchaser within a contractually stipulated period amounts to a deficiency. There is a fault, shortcoming or inadequacy in the nature and manner of performance which has been undertaken to be performed in pursuance of the contract in relation to the service. The expression “service” in Section 2(1)(o) means a service of any description which is made available to potential users including the provision of facilities in connection with (among other things) housing construction. Under Section 14(1)(e), the jurisdiction of the Consumer Forum extends to directing the opposite party inter alia to remove the deficiency in the service in question.

Thus, apart from the mechanism provided under the Real Estate (Regulation & Development) Act, 2016, a unit holder can additionally file a complaint with the consumer forum, alleging deficiency in service as outlined in section2(11) of the Consumer Protection Act (as amended), especially in the context of the builder-buyer issues discussed above.

Restriction on the Choice of Forums:

Hon'ble Supreme Court in Imperia Structures Ltd. v. Anil Patni ^[5], observed that a choice or discretion is given to an allottee to initiate proceeding either under the Consumer Protection Act, 2019 or under Real Estate (Regulation & Development) Act, 2016. However, it was held that an allottee may elect or opt for one out of the remedies provided by law for redressal of its injury or grievance.

Further, it is pertinent to mention the observation of National Consumer Dispute Redressal Commission in the case of A. Infrastructure Limited v. Macrotech Developers Ltd ^[6] wherein the commission exhaustively dealt with the issue that whether the expression “without prejudice to any other remedy available” used in section 18 of the Real Estate (Regulation and Development) Act, permits the complainant to avail remedy of claiming refund with interest along with compensation under the Consumer Protection Act, 2019, in spite of the fact that he is pursuing the same remedy on the same issue under the RERA in case he chooses to withdraw from the project.

The tribunal while deliberating over the issue held that section 18 provided a substantive legal provision which protects any other remedy available except the one provided under it, and for enforcement of such remedy, a complaint has to file complaint under section 31 of the act.

The tribunal further emphasised on the doctrine of estoppel by election and held that when two concurrent remedies are available and the aggrieved party chooses to exercise one, in such a case he loses his right to simultaneously exercise the other for the same cause of action. As in the present case, the allottee could either approach consumer forum of the real estate appellate tribunal and not both at once.

The Indian real estate sector stands at the forefront of economic growth, driven by rapid urbanization, changing consumer behaviour, and regulatory reforms. The introduction of The Real Estate (Regulation and Development) Act, 2016, marked a significant milestone in ensuring transparency and efficiency in real estate transactions, offering protection to homebuyers and boosting investor confidence. Despite these positive strides, the sector grapples with challenges such as delays in the possession, one-sided builder-buyer agreements, false advertising, and structural defects. The Act, with its provisions while addressing these issues, establishes a robust framework for adjudication and dispute resolution. This flexibility, accompanied by the establishment of conciliation forums and provisions for consumer forum recourse, adds layers to the avenues available for resolving disputes. Consequently, in case of Imperia Structures Ltd. v. Anil Patni (supra), the Hon'ble Supreme Court has elucidated the discretion granted to allottees, allowing them to initiate proceedings either under the Consumer Protection Act, 2019, or the Real Estate (Regulation & Development) Act, 2016. Thereby the court emphasized the allottee's right to elect a remedy for the redressal of grievances. Thereafter the National Consumer Dispute Redressal Commission, in A. Infrastructure Limited v. Macrotech Developers Ltd (supra), further clarified the interpretation of the phrase "without prejudice to any other remedy available" in Section 18 of the RERA. The commission held that while pursuing a remedy under RERA, an allottee cannot simultaneously seek refund, interest, and compensation under the Consumer Protection Act, 2019. The doctrine of estoppel by election was underscored, emphasizing that the choice of one remedy may preclude the simultaneous pursuit of another for the same cause of action. This legal framework ensures clarity and delineates the boundaries for allottees navigating the avenues for redressal in real estate disputes.

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[1] https://www.mordorintelligence.com/industry-reports/residential-real-estate-market-in-india