Owning a home is one of life’s most significant aspirations, symbolizing stability and security for families. However, the journey towards this dream can turn into a nightmare when individuals encounter fraudulent practices by corrupt builders and real estate companies. Despite investing their hard-earned savings, many homebuyers find themselves entangled in a web of deceit, facing endless delays and financial strain in their pursuit of homeownership.
To regulate this corrupt behaviour a new act came into existence called Real Estate (Regulation and Development) Act, 2016. The purpose of RERA is to make real estate dealings more transparent and accountable, attracting both local and international investors. Creating consistent regulations, also ensures that disputes are resolved quickly and fairly. Most importantly, the act prioritizes the rights of homebuyers, empowering and protecting them throughout the process.
In a recent decision by the NCLT, New Delhi, it was decided that homebuyers who filed petitions for resolving financial issues under the Insolvency and Bankruptcy Code (IBC) are still considered as ‘financial creditors,’ even if they had previously sought help from the Real Estate Regulatory Authority (RERA) or the National Consumer Disputes Redressal Commission (NCDRC). This means that homebuyers can still take legal action against the company, even if they tried other ways to solve their problems before. The decision also said that the number of homebuyers needed to file such petitions is decided when they file it, and it doesn’t change if some homebuyers later withdraw from the case because of settlements with the company.[1]
Today, homebuyers facing Real Estate Disputes have three main forums for seeking recourse in RERA, Consumer Redressal Commissions, and NCLT. Each avenue offers distinct advantages and considerations, necessitating a thoughtful evaluation to determine the most suitable course of action.
Real Estate Regulatory Authority (RERA):
RERA emerged as an encouragement of hope for homebuyers, offering a streamlined mechanism for addressing grievances related to delayed possession, construction quality, and contractual breaches. With no pecuniary jurisdiction limitations, even individual homebuyers can seek redress under RERA, ensuring inclusivity and accessibility. The Act mandates developers to deposit funds into a separate account, preventing the diversion of finances and safeguarding buyers’ interests. RERA has the power to offer compensation and impose penalties for violations of the Real Estate (Regulation & Development) Act. Additionally, RERA can mandate the refund of payments made by buyers in instances of possession delays.
Consumer Redressal Commissions:
The Consumer Protection Act, 2019, extends protection to homebuyers by deeming construction services as within the purview of consumer rights. Consumer forums provide a forum for seeking compensation and relief for deficient services, although with longer adjudication timelines. However, recent legal reforms have enhanced the effectiveness of consumer redressal mechanisms, empowering homebuyers to assert their rights with greater confidence. The Consumer Forums have the authority to provide compensation, order refunds, rectify any shortcomings, and enforce obligations outlined in buyer agreements. Over time, these forums have refined their laws and processes to prioritize consumer satisfaction and accessibility.
National Company Law Tribunal (NCLT):
NCLT offers a recourse route under the Insolvency and Bankruptcy Code, particularly beneficial when developers exhibit financial distress. Homebuyers, recognized as financial creditors, can initiate insolvency proceedings against defaulting developers, facilitating asset liquidation or corporate resolution. While NCLT provides a potent remedy, recent amendments imposing joint application requirements and increased default thresholds necessitate careful consideration before resorting to this forum.
NCLT Delhi, ruled that homebuyers, despite seeking aid from RERA or NCDRC, remain ‘financial creditors’ under IBC, allowing legal action against companies.
Choosing the Right Forum:
Selecting the most appropriate forum hinges on several factors, including the nature of the dispute, financial position of the developer, and desired outcome. RERA proves advantageous for issues requiring immediate resolution, while NCLT offers recourse in cases of financial instability. Consumer forums remain relevant for seeking compensation and relief for deficient services, albeit with longer timelines.
In conclusion, the legal landscape for real estate disputes has evolved significantly, empowering homebuyers with an array of remedies to safeguard their rights. While each forum offers distinct advantages, informed decision-making is paramount to ensure effective and timely resolution of disputes. Homebuyers can confidently navigate real estate disputes by grasping the details of each legal option and seeking professional advice.
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[1] Tarun Ahuja & Ors. Vs Puri Construction Private Limited, CP IB NO. 755/PB/2020
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This article is written and submitted by Advocate Surya Kumar and you can reach out to the author at surya@bnblegal.com.
