Despite Offering Alternate Flat To Homebuyer, Builder Failed To Hand Over Possession On Time, Karnataka RERA Orders Refund

Background Facts

The homebuyers (Complainants) booked a flat in the builder's (Respondent no. 1) project named Mantri Webcity 2. On 12-04-2014, the builder and the homebuyers executed an agreement of sale. The sale of the flat was based on a 20:80 Pre-EMI scheme, requiring the homebuyers to pay 20% of the total consideration themselves, while the remaining 80% would be financed through bank loans. Accordingly, the homebuyers paid Rs. 17,78,851/- as their 20% contribution to the sale consideration and availed a bank loan of Rs. 64,86,447/- for the remaining 80%.

As per the agreement for sale, the builder was supposed to hand over the possession of the flat with common amenities to the homebuyer on or before 31.03.2017. However, the builder failed to hand over the possession as per the stipulated time period.

Furthermore, the builder agreed to provide an alternative flat instead of the flat initially booked by the homebuyers from their project named Mantri Manyata Energia. Therefore, the builder and the homebuyers entered into a separate Agreement of Sale which stipulated the date of possession as 31.12.2018. However, the builder again failed to hand over the possession of the flat on time. Therefore, aggrieved by the delay, the homebuyers filed a complaint before the Authority seeking a refund with interest.

Observation and Direction by Authority

The Authority observed that despite entering into agreements of sale and receiving a substantial amount from the homebuyers, the builders failed to deliver possession of the flat or refund the amount with interest. Furthermore, the Authority noted that the builders did not respond to the homebuyers' attempts at communication, including emails regarding their decision to withdraw from the project on 16.07.2022.

Further, The Authority referred to the Supreme Court decision in M/s Newtech Promoters and Developers Pvt. Ltd vs. State of Uttar Pradesh & Ors, wherein it was held that if the Promoter fails to give possession of the apartment, plot, or building within the time stipulated under the terms of the agreement, then the Allottee's right under the Act to seek a refund or claim interest for delay is unconditional and absolute, regardless of unforeseen events or stay orders of the Court/Tribunal.

The Authority also referred to Section 18(1) of the Real Estate Regulation and Development Act 2016, which reads as follows:

18. Return of amount and compensation.

(1) If the promoter fails to complete or is unable to give possession of an apartment, plot, or building, —

(a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or

(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act:

Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.

Therefore, Authority directed builder to refund the sum of Rs. 34,96,579 paid by homebuyers to purchase the flat with interest within 60 days. Further, authority also directed builder to clear the loan amount due from the homebuyers

Case – Devdas Pandurang Shetti & another Versus M/s Mantri Developers Pvt. Ltd. & others

Citation - COMPLAINT NO: CMP/00285/2023

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