Uniform Model Builder-Buyer Agreement Vital For Entire Country; Guarantees Check On Defrauding Builders : Supreme Court

The Supreme Court today (July 8) expressed the need for having a uniform model 'builder-buyer agreement' to keep defrauding builders within the check.

CJI underlined the necessity to 'prima facie' have a uniform model agreement in place across the states in the Country.

"Prima facie we should take these agreements on record and say that the states will have to implement because there has to be some uniformity."

Indicating the pressing urgency of the matter, the CJI remarked that in the absence of any uniform agreement, builders continue to defraud buyers and that the presence of such model agreements will ensure some restraint on indefinite exploitation by the builders.

"It (model agreement) is vital for the entire country, otherwise, buyers across the country are being defrauded by builders. Now if we have a model agreement there will be at least some guarantee, and there will be some uniformity on what builders impose on buyers."

The bench of CJI DY Chandrachud and Justices JB Pardiwala and Manoj Misra was hearing a petition seeking to direct the Central Government to establish a standardized 'Model Builder Buyer Agreement' and 'Model Agent Buyer Agreement.'

The petitioner argues that such agreements are crucial for ensuring transparency, and fairness, and reducing delays in real estate transactions. In doing so it aims to protect the rights and interests of customers under the Real Estate (Regulation and Development) Act, 2016 (RERA) and the constitutional rights under Articles 14, 15, and 21.

Senior Advocate Devashish Bharuka who is assisting the Court as an amicus curiae informed the bench that a detailed status report has been prepared after consultation with all the stakeholders and state governments. As per the report, 12 State governments filed their responses along with CREDAI, West Bengal. These states include- Karnataka, Himachal Pradesh, NCT of Delhi , Rajasthan, Punjab, Haryana, Jharkhand, Andhra Pradesh, Goa, West Bengal, Kerala ,Gujarat.

The Report places on record the final 'Part A Clauses of Builder-buyer Agreement'

It may be noted that Part A Clauses are the general agreement terms consistent with RERA, and Part B is state-specific conditions and laws Maharashtra's Slum Rehabilitation Authority etc.

One of the Counsels also informed the bench that the State of Nagaland may have some reservations about the application of the model agreement because of the embargo created by Article 371A of the Constitution. Article 371A (1)(a)(iv) states that no Act of Parliament will apply to the State of Nagaland relating to the ownership and transfer of land and its resources.

"There is one note from Nagaland that because of Article 371A, RERA would not apply at all"

However, the CJI reverted that an exception may be carved for Nagaland but in any event the crystalization of the model agreement for the rest of the Country shouldn't stop. The bench was also informed by Amicus that he is in touch with the Government of Nagaland and a solution would arise soon.

"You also take instructions on what is the way forward for Nagaland, we can create an exception for Nagaland that's all"

The matter will now be heard next Friday.

What Is The Petition About?

The petition highlights buyers' ongoing issues, including arbitrary and unfair practices by builders, promoters, and agents. These issues range from excessive delays in property handover to the use of one-sided agreements that disadvantage customers. The petitioner emphasized that such practices not only violate corporate laws but also fundamental human rights, including the right to life and dignity.

Furthermore, the petitioner points out the failure of states to enforce the RERA Act effectively. Despite deadlines, not a single state has developed the recommended agreements, which continues to leave buyers vulnerable to exploitation. The petition also seeks judicial directions for states to enforce these model agreements and establish mechanisms to prevent and penalize wrongful activities in the real estate sector.

In addition to regulatory reforms, the petitioner requests the court to order compensation for buyers who have suffered due to delays and malpractices by builders and agents. This includes recovery of their investments and additional relief for the mental, physical, and financial injuries incurred.

The following reliefs have been sought in the Petition

a) direct Centre to frame a 'Model Builder Buyer Agreement' & 'Model Agent Buyer Agreement' to infuse transparency, ensure fair-play, reduce frauds and deliberate delays, restrain Promoters and Agents from indulging into arbitrary unfair and restrictive trade practices and to protect the rights and interests of customers, in spirit of aims and objects of the RERA Act 2016 and the Articles 14, 15 and 21;

b) direct States to enforce 'Model Builder Buyer Agreement' and 'Model Agent Buyer Agreement and take appropriate steps to avoid mental physical financial injury, ensure accountability toward customers & develop an effective mechanism to weed-out criminal conspiracy for wrongful gain, criminal breach of trust, dishonest misappropriation of buyers' money, committed by Promoters and Agents;

c) pass direction(s) as the Court deems fit to compensate the buyers for losses incurred due to inordinate delays on the part of Promoters and to recover the money, misappropriated by Promoters & Agents under the garb of taxes, interests, penalties and other charges

Case Details : ASHWINI KUMAR UPADHYAY VS. UNION OF INDIA DIARY NO. - 22396/2020