Legal Remedies for stalled projects

Legal Remedies for stalled projects
  • General
  • Tuesday 28th July 2020
  • Author: Nidhi Verma

Highlights

  • For the Buyers side, there are various other platforms that are established for protecting the interest of buyers and to provide them a robust mechanism through which they can submit their grievances to the authoriti

  • 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.

The Real Estate (Development and Regulation) Act, 2016, which is usually seen as being pro-buyers, offers a range of provisions for the promoters of real estate projects. In the case of reviving a stalled project, the RERA allows the promoter to set a new time frame, which is reasonable to complete the project after registering with RERA. Despite the delay in projects, the promoters get enough time to fulfill fresh commitments by paying the comparatively lower costs in the form of compensation to the Buyers for the extended period as per the contractual agreement with the buyer.

For the Buyers side, there are various other platforms that are established for protecting the interest of buyers and to provide them a robust mechanism through which they can submit their grievances to the authorities. These platforms are Tribunals set up under;

  1. Consumer Protection Act,1986 (CPA)

A Complaint may be made by the Home Buyer regarding the 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 a complaint as the procedures being followed are very simple. The Applicant has to file a Complaint along with necessary documents in support of his Complaint. The Complaint may be filed by any Consumer or group of consumers having the same cause of interest.

2. Real Estate Regulation Act, 2016 (RERA)

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.

3. Insolvency and Bankruptcy Code, 2016 (IBC)

Homebuyer can file Claim with Resolution professionals and be part of the Committee of Creditors and will be categorized as Financial Creditors.

4. Arbitration &Conciliation Act, 1996

Homebuyers can invoke the Arbitration clause under the agreement executed with the Developer and get an easy timely resolution.

5. Competition Commission of India (CCI)

if the Builder is in a Dominant Position and has misused his dominant position leading to the disadvantage of the buyer, the homebuyer can file a complaint before CCI against the builder for the abuse of the dominant position.

6.Civil Remedy

Homebuyers can file Recovery of money suit under the Civil Procedure Code, 1908

7.Criminal Remedy

Homebuyers can file a criminal case under the Criminal Procedure Code, 1974

All the remedies available under the above-said points are exercisable as per the option of the Buyer. Earlier except District/High Courts, the Homebuyers did not have a dedicated platform to register their grievances and the resolution time for any case to be resolved was much longer. But now under the dedicated State-wise Tribunals established under the different legislations mentioned above, gives the Homebuyer confidence that in case, the project in which he/she invests becomes stalled, he does not have to go through the long-drawn litigation process in the courts of India. Now, if the buyer’s project is stalled, he/she may approach the quasi-judicial courts and get the resolution within the maximum period prescribed under the above acts.

The orders given by such quasi-judicial courts have the same status as orders of Civil courts of India. Further, after getting feedback and deliberations at various platforms, the Government is also making required changes in the legislations to make the Judicial process easy and effective for aggrieved Buyers. As per the recent amendments in Insolvency & Bankruptcy Code, 2016, the Homebuyers are included in the Category of Secured Creditors in case of Corporate Insolvency & Resolution Process (CIRP) of the Company is under process. Due to the amendment, the buyer will now get priority in case of Insolvency and Liquidation of the Company and during the CIRP, as per Section 7 of the IBC, 2016, Homebuyers will also be part of Committee of Creditors in finalizing the Resolution plan. Therefore, the homebuyers will not have to just wait & watch during the whole Insolvency & Liquidation process of the Investee Company but, be part of the whole decision-making process.

There are various reasons for such projects to be stalled and delayed in delivery of possession, some of which are;

  1. Diversion of money by the Developer to a new project
  2. Unpredictable market conditions 
  3. Unethical practices of the Developer 
  4. Wrong intention of the Developer to lure money from Investors/Buyers
  5. Pandemic situations
  6. Siphoning of funds by the Developer
  7. Disputed land and litigation with Farmers

Whatever the reason, the only outcome is that the construction of homebuyer's dream houses stucks due to the said situations, and the whole Real Estate market gets affected. Even if the Homebuyer gets a favorable order against complaints made to RERA, Consumer court, Conciliation, arbitration, etc, the Developer still does not comply with the Tribunal’s order, due to which further time is lapsed in applying for Execution of the order and Recovery Certificate. Also, the Lending banks of the Buyers pressurize them for EMI which tightens the situation of the already affected Buyer. Therefore, the current situation requires effective legal resolution and further amendments in the legislation so that the purpose of the whole Real estate business is met, rather imposing, inordinate pressure on the Developers, and ineffective legal resolution to the Homebuyers.

Have Questions on RERA ? Have free discussion on email.