27 March 2020

RERA UPDATE | BOMBAY REALTY CASE

The Maharashtra Real Estate Appellate Tribunal, Mumbai (Appellate Tribunal) recently passed an order, allowing certain allottees (Allottees) of Bombay Realty`s Island City Center (Project) to withdraw from the Project and further, granting refund and compensation to the Allottees of the Project.

Background:

The Project was being developed by Bombay Dyeing (Promoter) at Spring Mills Compound, Wadala, Mumbai. The Allottees had submitted booking application forms for allotment of their respective flats in the 2 buildings of the Project between 2012 and 2013. The Promoter had issued allotment letters. Terms and conditions of allotment were mentioned in the said allotment letters. A list of amenities to be provided by the Promoter inside the apartments was also separately attached. The Allottees paid approximately 19% of the consideration of their respective flat in the year 2012-2013 to the Promoter, the balance being payable at the time of possession.

After the Real Estate (Regulation and Development) Act, 2016 (RERA) came into force on 1 May 2017, the Promoter registered the Project under RERA. Under the RERA registration, the timeline for the completion of the Project was unilaterally extended by the Promoter. The Promoter mentioned the proposed date of possession as 31 August 2018 and the revised date for completion of the Project as 31 August 2019 at the time of registration.

Complaint under RERA:

• As the Promoter failed to give possession of the flats on or before the year 2017 and also failed to render amenities as assured to the Allottees, the Allottees filed complaints under Section 31 of RERA. The Allottees had prayed in the said complaints that the Promoter be directed to cancel the allotment letters and refund the entire amount paid by the Allottees along with the interest and compensation for breach of Section 12 and Section 18 of RERA.
  
  
• The Adjudicating Authority, however disposed of the complaints by advising the parties to execute and register agreement for sale as per Section 13 of RERA within 30 days and in the alternative, directed that if the Allottees intend to withdraw from the Project, then such withdrawal would be guided by the terms and conditions of the allotment letters. No specific order for refund with interest and compensation was passed by the Adjudicating Authority under Section 12 and Section 18 of RERA.
  
  
• The Adjudicating Authority observed that Section 12 and 18 of RERA do not apply retrospectively and Section 12 is not attracted to the present transactions between parties which took place between 2012 and 2013, much prior to the enactment of RERA.
  
  

Appeal before Appellate Tribunal:

• The Allottees filed an appeal before the Appellate Tribunal. The Appellate Tribunal, relying on the decision of the Hon`ble Bombay High Court in Neelkamal Realtors Suburban Pvt. Ltd v. Union of India, held that Section 18 of RERA has quasi-retroactive application. Further, the Appellate Tribunal observed that Section 12 of RERA would also apply quasi-retroactively. As per the Appellate Tribunal, the principle of quasi-retroactivity applies a new rule of law to an act or transaction which is in the process of completion.
  
  
• The Appellate Tribunal held that though the Promoter gets an opportunity to prescribe a fresh time line for completing a project at the time of registration, however, the Promoter is not absolved of the liability under the agreement for sale. Further, the Appellate Tribunal also observed that the obligation to pay interest for delayed possession is not a penalty, as payment of interest is compensatory in nature.
  
  
• The Appellate Tribunal held that though no date of possession was mentioned in the letters of allotment, however, the Allottees have made out a case that when they booked the flats in the year 2012-13, the Promoter had assured them orally to give possession in the year 2017. It also held that it is settled position of law that in absence of a specific date of handing over the possession, a reasonable period of 3 years is to be assumed for handing over the possession.
  
  
• The Appellate Tribunal observed that the issuance of occupancy certificate in the year 2019 and offer of giving possession accordingly will not deprive the Allottees of the remedy of withdrawing from Project and claiming refund and compensation.
  
  
• Thus, finding the Promoters guilty of delaying possession and changing the layout plans, the Appellate Tribunal allowed the appeal of the Allottees and permitted them to withdraw from the Project. The Appellate Tribunal also directed the Promoter to refund the amount paid by the Allottees along with interest at the rate of 2% plus State Bank of India`s highest Marginal Costs of Lending Rate.
  

MHCO Comment: We believe that this is a landmark judgement passed by the Appellate Tribunal. Not only has the Appellate Tribunal taken a note of the problems faced by the Allottees under the Project that was initiated prior to the enactment of RERA, but it has also clarified that the Allottees do not require a registered agreement for sale for initiating action under RERA. Considering the fact that RERA is a beneficial legislation, the Appellate Tribunal has given RERA a wider interpretation to make sure that such Allottees are not left remediless. However, this will definitely be subject to an appeal before the Hon`ble Supreme Court.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.comfor any assistance.