Karnataka RERA Grants Homebuyer Permission To Withdraw From Project Due To Delayed Possession

Background Fact

The Homebuyer (Complainant) entered into an agreement with the Builder (Respondent) on 14.06.2017 to purchase a flat, with a total payment of Rs. 11,605,863 made through various transactions. According to the agreement, the Builder promised to deliver possession of the flat by June 2020, with a grace period extending until December 2020.

Additionally, a tripartite agreement was signed between the homebuyer, the Builder, and IHFL for a home loan. Clause 17 of this agreement stipulates that in the event of flat cancellation, the Builder is obligated to refund the total amount due to IHFL.

Furthermore, the homebuyer executed a buyback agreement on 14.7.2017, guaranteeing profits upon the buyback agreement's expiry. The Builder was bound to pay a committed profit value of Rs. 4,120,354 if the homebuyer invoked the buyback option. Despite the homebuyer's notification via email dated 18.12.2019 expressing intent to invoke the buyback option, the Builder failed to execute the cancellation of the sale agreement and did not refund the initial payment along with the committed profit value.

Moreover, the Builder failed to provide possession of the flat within the agreed timeframe. As a result of the delay, the homebuyer filed a complaint with Karnataka RERA seeking withdrawal and a refund of Rs. 1,74,87,461 with interest.

Contention of the Builder

The Builder contended that the delay in the possession of the flat was a consequence of the Covid-19 pandemic, which inflicted financial strain on various sectors, including real estate. Furthermore, the Builder argued that the homebuyer's plea for withdrawal from the project and compensation, as specified in the agreement, lacks premise. Specifically, the homebuyer's request for delay compensation alongside interest is improper and ambiguous, diverging from the relief sought for withdrawal and compensation outlined in the agreement. The Builder contended that the relief sought by the homebuyer comprise of disparate statements rather than a coherent argument for either delay compensation or refund.

RERA Order

The Authority holds Builder in contravention of the Real Estate Regulation and Development Act, 2016 for its failure to deliver possession on time. Consequently, it granted the Homebuyer the right to withdraw and demand a refund with interest under Section 18(1) of the Act.

The Authority referred relevant part of Section 18 of The Real Estate (Regulation and Development) Act, 2016, which is read as follows:

Section 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.

Furthermore, Authority held that in case the homebuyer wishes to withdraw from the project, the builder is liable, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, or building with interest.

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

Therefore, Karnataka RERA directed the builder to pay the refund of Rs. 1,74,87,461 with 9% interest within 60 days.

Case: Anupkumar Shetty VS M/S Ozone Realtors Pvt. Ltd.

Citation: Complaint No. CMP/220121/0008845

Counsel for Homebuyer: Mr. Poornachandra B Pattar

Counsel for Builder: Mr. Deepak Bhaskar & associates.

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