RERA or Consumer Forum? – Home buyer’s choice!

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RERA or Consumer Forum? – Home buyer’s choice!

Real Estate (Regulation and Development) Act, 2016 (RERA) seeks to provide uniform laws throughout the country, for protecting the interest of home buyers and seeks to increase transparency in functioning of construction companies and reduce the chances of default or misappropriation of funds by Builders.

Consumer Protection Act, 1986 (CPA) was enacted to provide speedy Redressal mechanism to "CONSUMERS" who alleged Unfair Trade Practice or Deficiency with respect to Goods or Services - home buyers were also included within the purview of the Act by interpreting the word "Services" under the Act to include construction.

Is it legal to approach consumer panel after the arrival of the RERA?

Homebuyers have every legal right to approach either the RERA or the consumer panel or both at the same time to seek relief in case of an issue with a developer.

In the M/s M3M India Pvt. Ltd. vs. Dr Dinesh Sharma and Anr. case, judgment was passed by Delhi High Court while deciding a batch of petitions moved by several real estate companies against an order passed by the National Consumer Disputes Redressal Commission (NCDRC). The question for consideration was whether proceedings under the CPA 1986 can be commenced by homebuyers against developers after the commencement of RERA 2016.

The NCDRC in its order stated that “remedies provided under CPA and RERA are concurrent, and the jurisdiction of the forums/commissions constituted under the CPA is not ousted by RERA, particularly section 79 thereof”. Section 79 of RERA provides that no civil court shall have jurisdiction over matters empowered to be decided by RERA under the act and no court shall grant injunction in pursuance of any power conferred by or under this act.

While passing the judgment, the High Court placed reliance on the recent Supreme Court judgment in Pioneer Urban Land and Infrastructure Ltd &Anr vs. Union of India &Ors, (2019) - also known as the Flat Buyer's case - wherein it was held that that remedies given to allottees of flats are concurrent and they are in a position to avail remedies under the CPA, RERA as well trigger the IBC. It was observed that the provisions of RERA were not intended to be exclusive, but to run parallel with other remedies and the High Court followed suit in the M3M India case.

While dismissing a large number writ petitions filed by the developers, the Court in Pioneer upheld the following:

The IBC amendment is constitutionally valid by virtue of which 'Allottees' were brought within the ambit of Financial Creditors

The amendment act does not infringe Articles 14, 19(1)(g) read with Article 19(6) or 300-A of the Constitution of India.

Remedies to the Allottees under various statutes such as the RERA, the Consumer protection act, and the IBA are concurrent.

In case of conflict between the RERA and the IBC, the IBC would prevail.

Allottees were always subsumed within the definition of Section 5(8)(f) and the explanation and deeming fiction added by the Amendment act was only explanatory in nature.

Refer to the table below:  

Particulars

RERA

CPA

IBC

Who can file

A Purchaser, Home Buyer or prospective purchaser/Home Buyer offered flat can file Complaint irrespective of the fact that such person is Corporate Entity or Individual.

A Consumer who satisfies the requirement under Section 2(d) of CPA can file a CPA complaint. Typically, an Individual who enters into agreement for purchase of Flat can file complaint when he purchases the same for his individual use and residence.

Since by recent amendment in August 2018, the Allottee of Project is considered a Financial Creditor, any person whether an Individual or Corporate Entity can file an Insolvency Application under Section 7 of IBC.

Case Timeline

RERA takes a few months to years for redressal of grievances depending on the State.

Redressal of grievances or adjudication of a dispute takes an average of 5 to 6 years by Consumer Forums.

IBC takes about 6 Months to a year for adjudication of Insolvency Application by Adjudicating Authority.

Accessibility

There are 1 - 2 RERA offices in each state which has constituted the Authority under the Act.

Maharashtra has offices in Mumbai, Pune and Nagpur.

District Forums are established in every district of the State. State Commission presides in capital of each state and sometimes has benches in other parts of the State. National Commission presides at Delhi and has circuit benches in various parts of the Country which are rotating.

NCLT has 16 benches all over India. NCLT is typically constituted for each state and presides at one place in the state or one NCLT is commonly empowered and is having jurisdiction over two states.

Key Observations & Analysis:

a. If person is a consumer and seeks performance of statutory obligation or compensation in respect thereof, then Consumer Forum is a better and effective remedy especially in case where Developer has financial ability to pay. Also he may file a complaint with RERA to blacklist Developer and other reliefs which RERA can provide but consumer forum cannot.

b. If a person is not a consumer, then RERA would be more appropriate remedy.

c. If a person is not a consumer and seeks specific performance of statutory obligations from Developer, his only remedy would be to file a regular suit. However, for compensation and other reliefs he may approach RERA.

d. If Person, whether consumer or not, is seeking only return of his money, especially when Developers financial position is deteriorating, then Insolvency Application before NCLT would be appropriate remedy more so when its redevelopment of property that does not involve many flat in sale component.

e. The Flat Purchaser/Home Buyer can always initiate criminal proceedings against Developer against fraud or other criminal offences or acts committed by it.

Conclusion

From the recent judgments passed by the High Court, the Supreme Court and even the authorities under RERA, CPA and IBC, the judicial sentiment seems to favour the home buyer. From a conjoint reading of the judgment of the Supreme Court in the case of Pioneer (supra) or the Court in the case of Messrs M3M (supra), the judiciary has armed an aggrieved home buyer with a host of remedies to seek relief against a developer and bring you a step closer to owning your dream home!

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