Home interprets heaven. Home is heaven for beginners
Charles Henry Parkhurs
Buying Home is a pleasant event for every person and owning a beautiful Home
might be the biggest dream of their life. A person invests his hard earned money
to get a shelter for his family but at times all these dreams are shattered.
In today's world, every home buyer has apprehension of being cheated by the
unscrupulous builders and cases of cheating, fraud etc. are piling-up day by
day. The poor home buyer is not sure whether after paying the amount to the
builder, he will get the property and also if it is going to be allotted on time
and of good quality. Smart Buyers should know what all remedies are available to
help him in their time of difficulty. Sensing the difficulties faced by home
buyers, the Government has taken adequate measures to their rescue. However, at
times a poor home buyer is not aware of his legal rights.
The law is becoming stringent day by day and few remedies that are available to
the buyer under various Statutes are as below:
- Consumer Protection Act,1986 (CPA)
- Real Estate Regulation Act, 2016 (RERA)
- Insolvency and Bankruptcy Code, 2016 (IBC)
- Arbitration & Conciliation Act, 1996
- Competition Commission of India (CCI)
- Civil Remedy
- Criminal Remedy
Consumer Protection Act, 1986
- Consumer Protection Act established various Redressal Forum at different
levels, viz. District Forum, State Commission and the National Consumer Dispute
Redressal Commission NCDRC. Such Forums/Commissions have been set up with
jurisdictions being defined in terms of territory and the monetary value.
- Under the Consumer Protection Act, a Complaint may be made by the Home
Buyer regarding delay in possession of the property or deficiency in service of
the builder. There is no mandatory requirement to engage an Advocate to file
such complaint as the procedures being followed are very simple. The Applicant
has to file Complaint alongwith necessary documents in support of his Complaint.
The Complaint may be filed by any Consumer or group of consumers having same
cause of interest.
- In terms of the relief granted to aggrieved home-buyers, the relevant
Consumer Forum may pass an Order directing the builder or developer to return
the money along with compensation for any loss or damage caused to the
home-buyers due to the deficiency in service of builders or developers.
Real Estate Regulation Act
- The RERA Act is considered as one of the specialized legislation passed by
the Indian Parliament for real estate sector. Its objective is to address
grievances of buyers and bring transparency and accountability of builders. This
is in line with the vast and growing demand in Real Estate sector to streamline
this Industry and balance interest of Home Buyers and Builders.
- RERA envisages Real Estate Regulatory Authorities to be created in each
State for not only promoting the interest of all the stakeholders under RERA but
also to deal with their grievances.
- Significantly, RERA entitles the aggrieved Home Buyers to claim the refund
amount which has been paid for purchase of a property, alongwith interest as may
be prescribed by the States or Union Territories, in case builders or developers
default in delivery of possession, in accordance with the agreed terms.
- RERA provides for penal provision and stipulated that he shall be liable to
a penalty which may extend up to 5% of the estimated cost of the real estate
project as determined by the concerned Real Estate Regulation Authority.
Imposition of penalty in case of contravention to the orders or directions of
the Real Estate Appellate Tribunal has been made stricter as it can extend to
10% of the estimated cost or three years of imprisonment or both.
- The law ensures that realty project is completed in time. If delayed, then
the developer will have to pay interest to the home buyer. Home-buyers have the
choice of filing a complaint with the concerned Real Estate Regulation
Authority, in case the developer(s) defaults in delivery of possession or for
that matter contravenes any provisions of the RERA or the Rules or Regulations
made thereunder. A complaint may be filed by an Association of Home Buyers.
- RERA affords the option to appeal against the decision of the concerned
Real Estate Regulation Authority to the Appellate Authority, and thereafter to
the High Court and then to the Supreme Court, and all in a time bound manner. As
the proceedings are to be concluded within a stipulated time frame, the
adjudication mechanism can be opined to be more expeditious as compared to the
adjudication mechanism provided in the earlier grievance redressal mechanisms.
- As per the RERA, the developer will have to keep 70% of the money collected
from the buyers in a separate Escrow Account to meet the construction cost of
the project. This will keep a control on developers who tends to divert the
buyer's money, instead of completing the Project for which money was collected &
also ensure that the respective project is completed in time.
Insolvency & Bankruptcy Code
- Insolvency and Bankruptcy Act 2016 (IBC) is the landmark law promulgated by
the Government of India. The Adjudicating Authority under IBC is National
Company Law Tribunal (NCLT). This law has become a nightmare for unscrupulous
builders and a boon for the Home Buyers.
- The amended IBC provides recognition to home-buyers as financial creditors.
Therefore, as per the amended law, home-buyers are permitted to initiate the
Corporate Insolvency Resolution Process (CIRP) against the builder company,
under Section 7 of IBC.
- As Financial Creditors, Home-Buyers are also accorded the opportunity of
being a part of Committee of Creditors to vote during the CIRP.
- The golden shine under IBC is that, the moment the CIRP process is
initiated by the order of the Hon'ble NCLT, the erstwhile directors are divested
with the powers to manage the Company and the complete charge is taken over by
Insolvency Resolution Professional (IRP) who act under the overall supervision
of Committee of Creditors.
- IBC is totally time bound process and the scope of resolution of dispute
under IBC, is very fast.
Arbitration & Conciliation Act, 1996
If there is an Arbitration Clause
in the Builder-Buyer Agreement or any
Agreement executed between home buyer and Builder, then Home buyers will invoke
Arbitration proceedings governed under the Arbitration and Conciliation Act,
1996. It is less time technical as compared to a Civil Remedy to get the Award.
At times, it happens that the Arbitrator is appointed by the builder and the
Arbitral proceedings may be conducted in a biased manner. In that case, the Home
buyers may file appeal against the Arbitral Award.
Competition Commission Of India (CCI)
- According to the Competition Act 2002, if the Builder is in a Dominant
Position and has misused his dominant position leading to the disadvantage of
the buyer, he/she can file a complaint before CCI against the builder for the
abuse of the dominant position.
- If after the investigation, it is revealed that the builder is found guilty
anti-competitive practice, he shall be fined huge penalties by the CCI.
Civil Case for Recovery of Money
If there is a case of breach of the Agreement i.e., the builder does not
fulfill his agreed obligations, the buyer can move to the Civil Court and file
the Civil Suit for the recovery of his money and also claim the interest
thereon, according to the Code of Civil Procedure, 1908.
Also, if the builder does not fulfill any obligation or make any change in
the agreed terms, then the buyer can also pray for a refund of the money which
is already paid to the builder.
Criminal Case for Cheating:
- Under the Indian Penal Code, 1860 a buyer can file a criminal case for
cheating, fraud etc. against the builder.
- The buyer can lodge Police Complaint before Economic Offence Wing (EOW).
- The buyer can also approach the Criminal Court against the builder and its
directors for cheating, fraud, siphoning of funds etc.
- This trial process works fast in court and if the builder makes no
appearance before the Court, then Non Bailable Warrant (NBW) can also be issued
Prior to the enactment of the IBC and RERA, aggrieved home-buyers had the
options of approaching only the Consumer Courts or the Civil Courts to address
their grievances. However, with the enactment of RERA and subsequently, with the
IBC, legal rights of the aggrieved Home-Buyers are strengthened in India and now
they have various option to enforce their lawful rights.
The contents of the above article are based on the personal interpretation of
the prevalent law, which may differ from person to person. The laws stated
therein have been derived from various legal documents and sources e.g., Bare
Acts, Rules, Regulations etc.
The laws stated in Article are subject to
amendments and notification made by the legislative authorities or departments.
We have tried to compile the best updated information available and every effort
has been taken to avoid errors, still we will not be responsible for any
consequences of any action taken based solely on this article. Hence, the
readers are expected to take expert opinion before placing reliance on this
Written By: Mr. Deep Bisht and Mr. Sanidhaya Malhotra
- Sigma Legal Group (Legal Department)
407-408, GD-ITL Tower, B-08, Netaji Subhash Place, Pitampura, New Delhi-110034
Ph.: (011)-47015959, 47015989, Email: [email protected]