Prior to 2017, the sale of units in under-construction projects in India was governed by applicable state laws with no central regulator. A common grievances of the homebuyers was delay in possession; or flats not being in accordance with agreed parameters when delivered. Thus, they would typically approach civil courts or consumer fora under the Consumer Protection Act 1986 (CP Act) for appropriate relief.

Thereafter, the Central Government notified the Real Estate (Regulation & Development) Act 2016 (Act) providing homebuyers a specific redressal forum for legal remedies. The Act, however, did not specifically exclude the jurisdiction of consumer forums established under the CP Act. As a result, homebuyers were unsure whether they could approach the consumer forums for any dispute with developers.

The Supreme Court judgement

This question has now been answered by Supreme Court in ‘Imperia Structures Ltd vs. Anil Patni and another’ (Civil Appeal No. 3581-3590 of 2020) wherein it held that the remedies of a consumer under the CP Act are in addition to any other remedies a litigant may have before any other fora. Therefore, allottees of any project, whether it is registered as a ‘real-estate project’ under RERA or not, shall be entitled to approach the National Consumer Dispute Redressal Forum (NCDRC) in the event of any deficiency in services by a developer, including delay in completion of construction and handing over of the premises. The Court held that Section 79 of the Act provides for a bar of jurisdiction of civil courts over matters that may lie before the RERA Authority.

However, as NCDRC is a quasi-judicial authority and not a civil court, the Act does not impose any bar on its jurisdiction to hear matters of disgruntled allottees in a real-estate project and that the same is further clear from Section 88 of RERA, which provides that the Act shall be read in addition to and not in derogation of the provisions of any other law in force for the time being. Thus, as long as the powers of NCDRC under the CP Act are not contrary to the powers of the RERA Authority, the two shall co-exist and are not mutually exclusive remedies. Further, it held that the remedy available to an allottee under Section 18 of RERA is without prejudice to any other remedy available to him. In light of this judgment, homebuyers are at liberty to choose the appropriate forum to put forth their claims.

Thus, the Supreme Court has put a long-debated issue at rest. Now, it is up to homebuyers to decide which forum is the most effective to address their issues. To help answer this question, let’s examine the objectives and purposes of both legislations.

RERA

The Act was introduced to ensure that the sale of a plot, apartment or units in a real-estate project in India is carried out efficiently and transparently and to protect the interests of consumers. The provisions of the Act prohibit developers from advertising or selling any unit/flat in a real-estate project without first registering the project with the concerned RERA authority (subject to certain exemptions as laid down in Section 3), and require developers to complete construction and handover of the units in a timebound manner, failing which homebuyers have the option to exit the project and demand a refund of monies with interest.

Any aggrieved person may file a complaint with the RERA Authority for a violation or contravention of the provisions of the Act by a promoter. The remedy under Section 31 of the Act shall also extend to an allottee seeking remedy against a defaulting promoter for refund of monies or payment of interest on monies already advanced.

Consumer Disputes Act 2019

NCDRC, constituted under the Consumer Protection Act 2019 (CP Act 2019) for expeditious economical redressal of consumer disputes, forms the apex quasi-judicial body of the three-tier structure consisting of the National and State Commissions and District Forums. Under the CP Act 2019, a product seller has been defined to include a manufacturer who is also a product seller and a service provider. However, it does not include a seller of immovable property, unless such person is engaged in the sale of a constructed house or the construction of homes or flats. Thus, a developer/promoter of a project can be a product seller and included within the ambit of the CP Act 2019.

With regard to the relief to be granted to aggrieved homebuyers/consumers, an order may be passed by NCDRC directing the developer to refund the amounts paid along with compensation for any loss or damage because of the negligence of the builder or developer. The power to grant punitive damages also lies with the NCDRC.

Making a choice

The RERA Authority has been constituted to entertain disputes between a homebuyer of a real-estate project and the developer whereas the CP Act deals with consumer-related disputes of all kinds. Also, the Act (unlike the CP Act) does not provide for any pecuniary limits for the authorities constituted under the Act and thus any homebuyer irrespective of the amount claimed is entitled to file a complaint with the RERA Authority. The RERA Authority has the power, either suo moto or on receipt of a complaint by any person, to revoke the registration of any real-estate project. And in case of projects abandoned or stalled by the promoters, it has the power to facilitate completion of the balance development and assist the association of the flat purchaser to undertake such development.

Therefore, while homebuyers are at liberty to choose between the RERA Authority or NCDRC, they must first analyse the nature and complexity of their cases, and the ultimate relief they seek. Last, the quantum of damages and monetary claim of the homebuyer would also influence the decision.

About the author: Vineet Nalawalla, Partner – Real Estate, Veritas Legal, is a qualified Solicitor with over a decade of experience. Over the years, Vineet has advised and assisted various domestic and foreign clients on several real estate transactions, regulatory issues such as CRZ regulations, stamp duty and registration.