TNRERA – Person Involved In Joint Venture Agreement Arrangement With Developer Is Not Homebuyer

Background Facts

The complainant is the owner of Flat in Project named "Uthra Flats," situated in Madipakkam, Chennai, which has a total area of 4800 sq. ft. Further when the apartment building became old, all the owners of project decided to demolish it and construct a new building through a common developer under a joint venture scheme.

The respondent was selected as the developer with an agreed share ratio of 60% for the owners and 40% for the developer. However, without the owner's consent and approval, the developer entered into a Joint Development Agreement with a changed ratio of 56% for the owners and 44% for the developer.

Initially, the complainant was allotted a Flat with a built-up area of 666 sq. ft. and 273 sq. ft. of UDS land. Given that the complainant had provided a larger extent of 302 sq. ft., he requested the developer to allot additional built-up area.

On 10.02.2021, Complaiannt paid Rs. 10,80,000 towards the sale consideration for an additional built-up area of 180 sq. ft. and UDS of land. Despite this, the developer did not start the construction work, which was due from December 2019, when the apartment was handed over for work.

Further, to expedite the work, all the flat owners executed a General Power of Attorney in favor of the developer on 03.07.2021. Despite this, the construction work proceeded very slowly.

Therefore, Complainant filed compliant before the authority seeking Rs.25,00,000/- as damages for the hardship, harassment and mental agony and Rs.1,00,000/- for litigation expenses.

Observation and Direction by Authority

To conclude whether complaint is maintainable as Subject matter arise out of the Joint Venture agreement between all Flat owners including complainant and developer, the Authority referred Section 3 & 2(zk) of Real Estate (Regulation & Development) Act, 2016, which is read as follows:

3. Prior registration of real estate project with Real Estate Regulatory Authority

(2) Notwithstanding anything contained in Sub-Section (1), no registration of the real estate project shall be required-

Where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases:

Provided that, if the appropriate Government considers it necessary, it may, reduce the threshold below five hundred square meters or eight apartments, as the case may be, inclusive of all phases, for exemption from registration under this Act.

Authority held that since the total extent of the project is 4800 sq. ft. which is less than 500 sq.mt. as prescribed under Section 3(2) of RERA, 2016. Therefore, the project is not required to be registered under Authority.

2(zk). Promoter

A person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees.

The Authority held that the respondent was only responsible for constructing the flats. The respondent acted as a builder, not a promoter, and instead of paying the landowner in cash, the respondent provided apartments as consideration. These apartments were built at the developer's own expense. Therefore, under Section 2(zk), the respondent is not a promoter.

Additionally, Authority held that the complainant is not an allottee or homebuyer but is involved in a joint venture arrangement. Therefore, Authority rejected the Complaint.

Case – M. Marudhachalam Vs M/s. Harish Builders

Citation – S.R.No.41 of 2024

Order Date – 25.09.24