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The Uncertain Position of Adjudication of Real Estate Disputes in India

A Critical Analysis of M/S. Imperia Structures Limited vs Anil Patni and Another


Authors: Anushka Rungta and Pratik Irpatgire


In this piece, the authors have highlighted the need for an exclusive adjudication forum for Real Estate matters by RERA authorities. They have attempted to deal with the existential crisis faced by homebuyers’ and developers for the adjudication of RERA dispute. Their submissions are based upon on the recent judgement delivered by the Supreme Court in light of jurisdiction and adjudication of Real Estate Matters.


Introduction


With an unprecedented nationwide lockdown and a global pandemic, many sectors have been witnessing a major downfall in their business activities in the country, one of which is the real estate sector. The effects of COVID-19 pandemic have led to an interruption of construction outflow, attributable in the execution of projects, reduction in consumer demand and disruption of the economy. It is expected from such circumstances to limit the net cash flows.


This has also pressed many real estate companies to file for bankruptcy across India.[1] This indicates that while the outbreak of the unprecedented pandemic has negatively impacted the real estate sector, it can also lead to arousal of disputes in the coming times. Earlier, in bid to provide the respite to the developers, the Ministry of Housing and Urban affairs issued an advisory to the States and UTs for an extension for registration and completion of the project.


Interestingly, in the recent judgement of M/s. Imperia Structures Limited vs Anil Patni and Anr.,[2](“M/s Imperia Structures”) the Hon’ble Supreme Court of India (SC) held that a complaint filed before consumer forum by an allottee as against a developer under the provisions of Consumer Protection Act is not barred by the Real Estate (Regulation and Development), 2016 (“RERA”).


In this backdrop, an analysis of the Supreme Court verdict in the aforementioned case is important as it is indicated to be one of the landmark judgments in light of the overall structuring of the adjudication of real estate matters post-pandemic and in the backdrop of the recently passed Consumer Protection Act, 2019 (“CPA”). The debate surrounding the application of CPA to the real estate sector and the subsequent conundrum in adjudication of real estate matters has always been at a disputed position in our legal framework.


This post seeks to address twofold objectives: firstly, to analyse the overlapping effects of jurisdictions in the adjudication of real estate disputes and; secondly, to understand whether RERA would prevail over CPA in light of the general rules of interpretation.


Factual Background


The housing development scheme was launched by M/s Imperia Structures (“Appellant” and “Developer”) in 2011 at Gurugram. Mr Anil Patni (“Respondent” and “Homebuyers”) and other homebuyers booked a property under the said scheme. The builder buyer agreement was executed between the parties to enable smooth possession of the property.


The dispute arose between the parties due to the delay elicited by the Appellant in delivering the possession of the said property to the respondent and other homebuyers, despite paying the substantial consideration amount in the light of the said property.


For more than four years, the possession was not handed over to the homebuyers by the appellant. This aggrieved the homebuyers who felt insecure by the actions of the appellant to file a complaint before the Consumer Commission seeking possession of the property and other damages.


The decision of the National Consumer Dispute Redressal Commission


The NCDRC adjudicated upon the complaint filed by the homebuyers, penalised the developer and directed them to refund the amount paid by the homebuyers along with a considerable rate of interest. During adjudication of the complaint, the developer challenged the jurisdiction of the consumer commission. Additionally, the developer contended that the aggrieved complainant doesn’t fall within the ambit of the definition of “Consumer” as prescribed in CPA. Aggrieved by the judgement, the developer preferred an appeal before the Hon’ble Supreme Court seeking relief to set aside the order passed by the NCDRC on the grounds (a) complainants were not a consumer within the purview of CPA (b) the matters about constructions and completion of the project should be exclusively adjudicated by RERA and thereof barring jurisdiction of the consumer commission from adjudicating the complaint. Moreover, the developer sought additional relief which was based on the factual context of the case.


Decoding the Legislative Intent


The Indian position for the adjudication of the real estate sector prior to the enactment of RERA was very concealed and discrete. Therefore, propagating the belief, lawmakers and drafters felt a necessity for a codified legislation to upheld the uniformity of the governance of the real estate sector in the country. The primary objective of RERA is to safeguard the interest of the homebuyers whilst maintaining uniformity in regulating the real estate sector.


Section 79 of the RERA[3] completely bars the jurisdiction of civil courts and other authorities from entertaining any other sought of matters which can be adjudicated by the competent authority as established under the RERA. Assuming but not conceding, the plain reading of Section 79 does not significantly incorporate the word consumer court or consumer forum into it but the interpretation of court and other authorities is impeccable to understand the inclusion of consumer court as another authority in the said section. The primary objective behind this provision was to avoid the multiplicity proceedings.


However, in the present case of M/s Imperia Structures Limited, the apex court while interpreting Section 79 categorically and more importantly identified that unlike other courts NCDRC cannot be considered as a civil court. This finding of the court raises an interesting query in a broader and inclusive interpretation of provisions of Section 38 of the CPA 1986.


The recent, nevertheless the repealed CPA, 1986 envisaged that powers of the District Commission stand pari materia to that of the civil court. This interpretation can be evaluated from the end of proviso incorporated in Section 38 of CPA, 1986.


The proviso to Section 38 reads as follow-

For the purposes of this section, the District Commission shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit in respect of the following matters.


Predominantly, it is pertinent to understand that the explicit reference of District Forum to civil court excludes the consumer forums from entertaining matters which fall within the purview of the RERA. Notably, the full bench of Hon’ble Supreme Court in Dr. J. J Merchant and Ors. vs Shrinath Chaturvedi[4] has previously observed “that the Consumer forum is an alternative forum established under the Act to discharge the functions of a Civil Court.”


The instant judgement of the Supreme Court in M/s Imperia Structures is definitely going to open some new avenues for the adjudication of real estate disputes. In the coming times, it can be anticipated that other quasi-judicial authorities can legitimately venture to adjudicate the dispute pertaining to real estate.

Overriding effect: RERA vis-à-vis CPA


The fundamental objective of RERA is to create a specialised authority for the timely adjudication for disputes as stated in the preamble of the Act. Section 89 of RERA provides for an overriding effect to it over all other laws.[5] It is a well-established rule of interpretation notably; “statutes must read as whole while referring to the specific provisions in the statute”. Such interpretations have meritorious outcomes to understand the legislative intent of the statutes.


Further, Section 18 of RERA gives the allottees the right to demand a refund for the considerable amount paid by an allottee as well as any interest to be claimed for delayed possession of the property.[6] Therefore, these special rights conferred to the allottee cannot be exercised before the consumer forum. Additionally, in the instant judgement of M/s Imperia, the Hon’ble Supreme Court has reiterated and acknowledged the fact that RERA is a special law enacted in need for regulating the real estate sector, in particular.


It is a thumb rule of interpretation of statute that if any inconsistency arises between the two statutes the special statutes shall prevail over general statutes. (Generalia specialibus non derogant). In such a scenario, the more emphasis should be given to Section 3 of old CPA[7] and Section 100 of the new CPA[8] which states that provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force. Section 41 of the Indian Penal Code suggests that a special Law is law which is applicable to a particular subject, assuming the same principle the RERA Law covers the particular facet of the real estate segment, ultimately it is the RERA law which prevails over the CPA.[9] Thus the CPA should not become a barrier to ensure the smooth adjudication and functioning of RERA and its concerned authorities. The Indian Courts have time and again invoked the doctrine of election while choosing an appropriate remedy. The doctrine of election contemplates that one remedy can be taken in respect of one action. Apparently, the present decision of the Supreme Court is in absence of doctrine of election which has been traditionally practiced by the various Indian jurisdictions. The Gujarat High Court in Tensile Steel Ltd. & Anr. Punjab & Sind Bank & Ors[10] has observed that the “doctrine of election is a rule of estoppel”. Thus it can be assumed that by invoking such doctrines, the jurisdiction of the specialised adjudication authorities ceases.


Prior to the enactment of RERA, the disputes affecting real estate were adjudicated by CPA. Thus, RERA was enacted to overcome these discrepancies in the adjudication of real estate matters. The Supreme Court in the case of KSL and Industries Ltd vs Arihant Ltd has relied on the “test of later enactment”.[11] The court while providing the justification in the said judgement has clearly emphasized that “a later enactment should prevail over the former.” Thus, by applying the test of later enactment it is the role of the court to interpret laws in a manner consistent with such progression to warrant smooth adjudication.

Inconsistency of New Consumer Protection Act in Adjudication of Real Estate Disputes


The recent CPA 2019, that took effect from 20th July, has been enacted to ensure the maximum welfare and protection of consumers. The definition of consumer as incorporated in CPA is wide and provides a broader interpretation. It is pertinent to note that the definition of consumer incorporated in CPA, 2019 explicitly eliminates a person who obtains goods for resale or services for any commercial nature. However on the contrary side, the RERA statute more pertinently and unambiguously embraces the term commercial in the definition clause of building and apartment asprescribed in Section 2(e) and 2(g) of the RERA respectively.[12] Thus, it can be flawlessly argued that the transaction between a homebuyer and developer can be made out for a purely commercial purpose which overtly restricts the person from filing the complaint under CPA. Hence, it is self-explanatory and understandable that the application of CPA in adjudication such disputes is extremely vague and obscure.


Moreover, relatively the recent CPA gives an exclusive right to homebuyers or consumers to file the complaint at the place of his residence. Therefore, this prejudices the developers to adjudicate the dispute away from the location of the project.

Conclusion


In the backdrop of the Hon’ble Supreme Court ruling made in the case of M/s Imperia and considering the aforementioned findings by the authors, it is an absolute onus upon the legislation to carve the ambiguities in the adjudication of real estate disputes. The matters pertaining to real estate may affect the public at large. It is imperative that the CPA cannot overrule RERA, however, the parallel adjudication by various forums can hamper the primary objective of the RERA statute. Thus, in coming times it is an utmost need to bring certain amendments in both the law viz.. RERA and CPA to maintain uniformity and avoid multiple proceedings in the resolving complaints pertaining to the real estate sector especially in the interest of both the homebuyers as well as developers.


[The authors are students of law at the Maharashtra National Law University, Mumbai.]




Notes and References

[1] The Economic Times, Stalled residential projects worth $66 billion face bankruptcy proceedings, November 21, 2019, available at https://economictimes.indiatimes.com/industry/services/property-/-cstruction/stalled-residential-projects-worth-66-billion-faces-bankruptcy-proceedings/articleshow/72146124.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (Last visited on December 1, 2020).

[2] M/s. Imperia Structures Limited vs Anil Patni and Anr., 2020 SCC OnLine SC 894.

[3] Real Estate (Regulation and Development), 2016, Section 79.

[4] Dr. J. J Merchant and Ors. vs Shrinath Chaturvedi, (2002) 6 SCC 635.

[5] Real Estate (Regulation and Development), 2016, Section 89.

[6] Real Estate (Regulation and Development), 2016, Section 18.

[7] Consumer Protection Act, 1986, Section 3.

[8] Consumer Protection Act, 2019, Section 100.

[9] Indian Penal Code, 1860, Section 41.

[10] Tensile Steel Ltd. & Anr. Punjab & Sind Bank & Ors, AIR 2007 Guj 126.

[11] KSL and Industries Ltd vs Arihant Ltd, [2014] 123 CLA 198 (SC).

[12] Real Estate (Regulation and Development), 2016, Section 2(e) and 2(g).

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