Concurrent Remedies under RERA and Consumer Protection Act: Which is more effective?

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

Franklin D. Roosevelt, U.S. President                                       

By stating a quote said by the then-former U.S. President, we come to an understanding that owning a house that can be called your own is something that every individual dreams of. But, in most cases, the hurdles that a buyer has to overcome in achieving his dream lead to a lot of financial and mental distress. This distress can be caused by a variety of factors, the most common of which is fraud or cheating by unscrupulous builders and real estate agents. 

Hence, it is vital for a buyer to know about the various legal remedies at his disposal. Furthermore, it is crucial to understand which of the various legal remedies is the best approach. This article analyses the various legal recourses available and the forum that would best redress the buyers’ concerns.

 

The Real Estate (Regulation and Development) Act, 2016

 

RERA prescribes that the promoter shall not accept more than 10% (ten percent) of the total value of the real estate property before entering into the agreement for sale[1]. Further, the promoter is required to maintain a separate account with 70% (seventy percent) of the project funds. If the builder wants to modify the sanction plan under RERA, he requires the consent of two-thirds of the allottees. Under RERA, if any defect is brought to the attention of the promoter within a period of 5(five) years of handing over possession of the property, it shall be the duty of the promoter to rectify the defect[2].

RERA mandates that every real estate project be registered with the Real Estate Regulatory Authority. Without the registration of the real estate project, the promoter is not allowed to book, sell, or invite any person to purchase the project[3]. The applications must be filed addressing it to RERA with the necessary approvals from the local authorities, along with a development plan, proforma of all agreements that are signed by the company, details relating to contractors, real estate agents, architects, structural engineers, and other people concerned with the project, the details of the total carpet area of the apartments for sale in the project and a declaration signed with an affidavit confirming that it is free from all encumbrances. The following provisions bind the promoters as well as the real estate agents, providing the buyers with holistic protection.

Non-compliance or default with any of the aforementioned provisions resulted in a penalty of up to 10% (ten percent) of the total project cost and up to three years in prison[4]. The builders are also mandated to deposit 70% (seventy percent) of the project funds into a separate bank account to avoid the problem of builders diverting the funds of the project to another new project[5].

Grievances with regard to violations of the RERA can be filed on the RERA website, which acts as a single repository for all real estate project data and filing grievances[6]. The Real Estate regulatory authority has been prescribed a resolution time of 60 (sixty) days from the date of receipt of the application[7]. Further, the tribunal can hear appeals of the authority’s rulings within 60 (sixty) days[8]. Any appeal from the tribunal lies before the High Court and must be filed within a period of 60 (sixty) days of the decision. If there is a pending case before the Consumer Forum pertaining to the damages caused by the false advertisements and non-adherence to the project specification, approved plan, or failure to complete the project on the specified date, the case can be withdrawn and filed before the RERA adjudicating officer[9].

 

Overview of the Consumer Protection Act, 2019

 

The Consumer Protection Act of 1986 and the new Act of 2019 were enacted to provide a simple and quick solution to consumers’ grievances against any deficiency in services or defect in goods. It is organised into three levels: the District Forum, the State Commission, and the National Commission (“Consumer Forum”). The Act defines “product seller,” and it includes a seller of immovable property only if that person is engaged in the construction of flats or homes or the sale of constructed homes[10]. As a result, builders and real estate agents are covered by the Act.

Under the said Act, only consumers can file a complaint, the term consumer is defined as a person who buys goods for consideration but doesn’t include a person who obtains such goods for commercial or resale purposes[11]. As a result, for the purposes of this article, those individuals are considered consumers who purchase a home or other property for personal use rather than commercial use.

In case of any defect or deficiency in the product or services, the consumer can file a complaint before the consumer forum within a period of 2 (two) years from the date on which the cause of action arose[12]. The consumer forums have a pecuniary limit. Hence, the District forum entertains complaints where the value of goods and services is not more than 1 crore rupees[13], State Commissions can entertain complaints that are above 1(one) crore and below 10 (ten) crore[14] and all complaints above 10 (ten) crores need to be filed with the National Commission[15].

Under the Act, the complaint is disposed of within a period of 3 (three) months from the date of receipt of the notice by the opposite parties[16]. The Act empowers the forums to grant compensation for loss incurred and punitive damages in appropriate cases.

 

 

Does RERA Reduce the Scope of CPA?

 

Before the enactment of the RERA, the Consumer Forum used to deal with matters relating to allottees. Following the enactment, the Consumer Forum’s jurisdiction to deal with allottee-related issues was not barred by the RERA. The standing committee also clarified that the jurisdiction of the Consumer Forums was not taken away by the establishment of the Real Estate Tribunal. Further, the consumer also has the discretion to withdraw the complaint pending before the Consumer Forum, with the permission of the said forum, and file an application before the adjudicating officer under RERA[17].

In Experion Developers Pvt. Ltd. v. State of Haryana and Ors.[18] the court referred to Section 71 of the RERA, which enables the consumer whose complaint is pending before the Consumer Forum to withdraw and go before the adjudicating officer. But the court held that the said provision has to be read with Section 88 of the said act, which explicitly states that the provision of RERA is in addition to and not in derogation of any other law. As a result, the court concluded that the complainant was not required to withdraw and transfer the complaint before the adjudicating officer. The complainant was empowered to simultaneously pursue remedies in both the forum on the strength of section 88 of the act.

The Apex Court, in Pioneer Urban Land and Infrastructure Ltd v. Union of India and Ors [19], held that buyers of flats could avail concurrent remedies under Consumer Protection Act and RERA.

In M3M India Pvt Ltd v. Dinesh Sharma[20] the court considered the question of whether the proceedings before the consumer forum can commence after the commencement of the RERA. It was held that the remedies that are provided under RERA and the Consumer Protection Act are concurrent in nature and the jurisdiction of the commission or the Consumer Forum will not be ousted by RERA, specifically Section 79 of the Act.

In Malay Kumar Ganguly v. Dr. Sukumar Mukherjee[21] the Supreme Court held that even though the proceeding in the National Commission is a judicial proceeding, within the definition of the Civil Procedure Code it is not a Civil Court. Although the National Commission has the trappings of a Civil Court, it cannot be termed a Civil Court. Therefore, the bar that has been provided under Section 79 of RERA is not applicable to the Consumer Forum. This judgement was strongly relied on in the below-mentioned judgement.

Further, in M/s Imperia Structures Ltd v Anil Patni & Another[22] Section 79 of the RERA bars the civil court from entertaining any suit or proceeding in respect of any matter over which the Authority, the adjudicating officer or the Appellate Tribunal is empowered by the RERA. The Apex Court held that it did not bar the complainant from filing complaints under the Consumer Protection Act. The section only imposes limitations on the Civil Courts’ ability to try issues that the adjudicating authority is empowered to entertain. As the Consumer Forum is not the same as the Civil Court the limitation does not apply.

Section 18 of the Act states that there is no bar to any aggrieved party from pursuing any other remedy that is available. Section 88 of the Act states that the provisions of the Act are in addition to and not in derogation of any other laws in force. However, on the contrary, Section 89 of the act provides that RERA shall have an overriding effect. The court cleared up the confusion by stating that even though Section 89 states that the Act shall have an overriding effect, the buyers can still approach the other forums under Section 18 of the Act. Thus, it is clear that parallel proceedings in different forums can exist. The court established that the aggrieved party could avail of parallel remedies under RERA as well as under the Consumer Protection Act.

A Comparative Study of RERA and Consumer Protection Act

 

The following are the requisite pointers that can be considered to determine which forum best serves the needs of homebuyers. 

Limitation Period

RERA has not provided any limitation period within which a complaint needs to be filed. However, according to the Consumer Protection Act, the complaint must be filed within two years of the cause of action. Hence, if the time period since the cause is more than 2 years, then the complainant can’t file a complaint before the Consumer Forum; the only remedy available at the complainant’s disposal is adjudication under the RERA.

Filing of a Complaint

Under RERA, any person who has been aggrieved by the builder or developer can file a complaint. However, under the Act, only a person who is a consumer can file a complaint. As a result, if a person does not fall within the definition of “consumer,” or if he has purchased a property for commercial purposes, or if any other person is dissatisfied with the developer, the only recourse is to approach RERA for adjudication.

Under RERA, the complaints are filed on the RERA website, and the process is simplified with minimal to no opportunity for modification because many States have distinct prescribed methods for filing complaints under RERA (including the format). However, under the Act, the complaint must be submitted in writing to the relevant authorities; it involves a complex procedure and includes documentation evidence; as a result, it appears to be a more time-consuming process. 

Pecuniary Limitations

The Act has prescribed pecuniary limitations based on the value of the property. Suppose the complainant’s property is above Rs. 1 crore, then he has to approach the State Commission and if its above Rs. 10 crores, he has to approach the National Commission for filing a complaint. Whereas RERA does not have any pecuniary limitations based on the value of the property. Hence, the complaint can be filed before the regulatory authority of the state in which the property is situated. Suppose the value of the property is more than Rs. 10 crores, then it is convenient for the buyer to adjudicate the dispute before RERA as the National Commission that is given jurisdiction under the Consumer Protection Act is situated in New Delhi.

Penalty

The Act is empowered only to grant pecuniary compensation. It doesn’t enforce any preventive measures nor does it provide for any specific performance or imprisonment of the defaulting party. RERA, however, is exclusively empowered to provide certain non-compensatory remedies. Further, it is also empowered to impose imprisonment for up to 3 (three) years on the defaulting developers.  If the consumer is only seeking compensatory relief, then the consumer forum is the right forum to approach. But if the buyer is looking for a deterrent remedy, then filing a complaint before RERA is a better option.

Commercial Dispute

The Consumer Forum doesn’t deal with commercial issues. RERA has no such bar on the adjudication of commercial issues. Therefore, if an individual doesn’t fall within the definition of “Consumer” as defined under the Act, then the best and only recourse available in the hands of the buyer is to file a complaint under RERA.

Time Period for Disposal of Dispute

The resolution time specified under RERA is 60 (sixty) days[23]. Similarly, the Act states that every complaint shall be disposed of as expeditiously as possible within a period of 3(three) months from the date of receiving notice from the other party[24].  However, in practice, disposing of matters in both forums takes much longer.

 

Conclusion

 

For regulating the “real estate” sector, the “Real Estate Regulatory Authority Act” is a landmark piece of legislation imposing time-bound obligations on promoters. Consumers’ or homebuyers’ rights are intended to be protected by ensuring fair play.

It is worth noting that RERA has not only been actively involved in maintaining transparency and accountability in the real estate sector, but has also assisted consumers and homebuyers in obtaining possession quickly and easily.

From the above analysis, we can deduce that RERA has finally ended up being an extension of the “Consumer Protection Act” which helps to address the growing need for transparency in favour of consumers as well as builders.

In light of the preceding comparative study and judicial pronouncements, we can safely conclude that it is entirely up to the allottee to choose either a concurrent remedy or a single forum to resolve his or her disputes. But it is a tedious process for a common man to simultaneously approach two different forums, the RERA or the Consumer Forum. 

The concurrent remedy has broadened the range of remedies available to home buyers. Both acts have their benefits and drawbacks in terms of resolving the buyers’ issues. The most effective forum for the buyer to approach for resolving his issue is highly dependent on the facts of the case and the remedy that the aggrieved party is seeking from the respective forum.

Concurrent Remedies under RERA and Consumer Protection Act: Which is more effective?

References: 

[1] Section 13 of the Real Estate (Regulation and Development) Act, 2016

[2] Section 14(3) of the Real Estate (Regulation and Development) Act, 2016

[3] Section 3 of the Real Estate (Regulation and Development) Act, 2016

[4] Section 59 of the Real Estate (Regulation and Development) Act, 2016

[5] Section 4(d) of the Real Estate (Regulation and Development) Act, 2016

[6] Section 31(1) of the Real Estate (Regulation and Development) Act, 2016

[7] Section 29(4) of the Real Estate (Regulation and Development) Act, 2016

[8] Section 44 of the Real Estate (Regulation and Development) Act, 2016

[9] Section 71 of the Real Estate (Regulation and Development) Act, 2016

[10] Section 1(37) of Consumer Protection Act, 2019

[11] Section 1(7) of Consumer Protection Act, 201

[12] Section 69(1) of Consumer Protection Act, 2019

[13] Section 34 of Consumer Protection Act, 2019

[14] Section 47 of Consumer Protection Act, 2019

[15] Section 58 of Consumer Protection Act, 2019

[16] 38(7) of of Consumer Protection Act, 2019

[17] Section 71 of the Real Estate (Regulation and Development) Act, 2016

[18] Experion Developers Pvt. Ltd. v. State of Haryana CWP No. 38144 of 2018

[19] Pioneer Urban Land and Infrastructure Ltd v. Union of India and Ors 2019 SCC OnLine SC 1005

[20] M3M India Pvt Ltd v. Dinesh Sharma W.P.(C)43/2019

[21] Malay Kumar Ganguly vs. Dr. Sukumar Mukherjee AIR 2010 SC 1162

[22] M/s Imperia Structures Ltd v Anil Patni & Another (Civil Appeal No. 3581-3590 of 2020)

[23] Section 29(4) of the Real Estate (Regulation and Development) Act, 2016

[24] Section 38(7) of the of Consumer Protection Act, 2019

 

Image Credits: Photo by energepic.com

The concurrent remedy has increased the scope of remedy that the home buyer can avail. Both acts have their benefits and drawbacks in terms of resolving the buyers’ issues. The most effective forum for the buyer to approach for resolving his/her issue is highly dependent on the facts of the case and the remedy that the aggrieved party is seeking from the respective forum.

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Rectifying the Parallel Regime of RERA & WB-HIRA

The Supreme Court issued an important verdict on May 4, 2021, when it declared that the West Bengal Housing Industry Regulatory Act, 2017 (WB-HIRA) is “repugnant” to the Parliamentary law of Real Estate (Regulation and Development) Act, 2016 (RERA). The state law created a “parallel regime” and encroached upon the identical Central law RERA, 2016, enacted the year before, and was in direct conflict with the central legislation by lacking necessary safeguards to protect consumers.

Background

The Bench of Justices D. Y. Chandrachud and M. R. Shah in Writ Petition (C) No. 116 of 2019 [Forum for People’s Collective Efforts (FPCE) & Anr. vs. State of West Bengal & Anr.], in its 190-page judgment, struck down as unconstitutional West Bengal State law WB-HIRA meant to protect home buyers, enacted in 2017, a year after the Centre passed the RERA, stating that if Parliament had passed legislation, it was not open for states to enact similar statute.

Before Parliament enacted the RERA in 2016, state legislatures had enacted several laws to regulate the relationship between promoters and purchasers of real estate. Before the WB-HIRA, one of the laws the state legislature had enacted was the West Bengal (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993 (the “WB 1993 Act”). Upon receiving the assent of the President, the Act was published in the Calcutta Gazette, Extraordinary on March 9, 1994.

In the State of West Bengal, the Real Estate (Regulation and Development) Bill, 2016 (the “RERA Bill 2016”) was introduced and draft rules under the RERA were framed on August 18, 2016, but no further progress was made in that regard. On August 16, 2017, the motion to pass the WB-HIRA Bill was adopted in the State Legislative Assembly. The Housing Industry Regulatory Authority was established under Section 20 of the West Bengal Housing Industry Regulatory Act, 2017 to regulate and promote the housing sector, to ensure the sale of plots, apartments or buildings, as the case may be, or sale of real estate projects in an efficient and transparent manner, to protect the interests of consumers in the real estate sector and to establish a mechanism for speedy dispute redressal and for matters connected therewith or incidental thereto. The State enactment received the assent of the Governor of West Bengal and was published in the Official Gazette on October 17, 2017, and came into effect from June 1, 2018.

The WB-HIRA repealed the WB 1993 Act. The remaining provisions of WB-HIRA were enforced by a notification dated March 29, 2018, issued by the Governor of the State of West Bengal in exercise of the power conferred by sub-section (3) of section 1 of WB-HIRA. Thereafter, on June 8, 2018, the State of West Bengal framed rules under WB-HIRA.

Because the Supreme Court declared the provisions of WB-HIRA to be invalid and struck them down in the current judgment, there will be no revival of the provisions of the WB 1993 Act, which were repealed upon the enactment of WB-HIRA, because the provisions of the WB 1993 Act are repugnant to the corresponding provisions of the RERA, which were impliedly repealed upon the enactment of the RERA in 2016.

The State Legislature has encroached upon the legislative authority of Parliament and this exercise conducted by the State Legislature is unconstitutional. The valuable safeguards introduced by Parliament in the public interest and certain remedies created by Parliament were absent in WB-HIRA.

Inconsistencies with RERA

RERA is a complete and exhaustive code which regulates the contractual relationship between a builder/promoter and a buyer/consumer in the real estate sector and provides remedial measures. RERA regulates the rights and obligations between promoters and buyers of real estate, in addition to the provisions of the Indian Contract Act, 1872. The enactment, in ensuring the actual transfer of property to the buyer, furthers the objects of the Transfer of Property Act, 1882. It provides for the enforcement of contracts through remedial measures that are in addition to the remedies provided in the Consumer Protection Act, 1986 and its successor legislation of 2019. RERA, in other words, is a special statute governing the real estate sector, encompassing rights and obligations found in different central enactments.

WB-HIRA covers the identical field of regulating the contractual behaviour of promoters and buyers in real estate projects. The State law is a ‘copy and paste’ replica of the central legislation (except for certain provisions which are inconsistent with RERA) and covers the field which is occupied by the central enactment. WB-HIRA is a “virtual replica” of the Central Law. A significant and even overwhelmingly large part of WB-HIRA overlaps with the provisions of RERA, but it does not complement the central law by fortifying the rights, obligations, and remedies.

The important provisions of WB-HIRA which are inconsistent with RERA are mentioned herein below:

  1. Force majeure events – The RERA restricts force majeure events to fire, cyclone, drought, flood, war, earthquake, or any other natural calamity that hinders the development of the projects, while WB-HIRA includes “any other circumstances as may be prescribed” as an added eventuality.
  2. Planning Area – The RERA specifies that only the projects that fall within the planning areas are subject to the RERA. According to Section 2 (zh) of the RERA, a “planning area” is a planning area or a development area, a local planning area, a regional development plan area, any other area specified as such by the appropriate government or any competent authority, while the WB-HIRA does not define the term “planning area”.
  3. Garage Area – RERA defines a garage as being ‘a place within a project having a roof and walls on three sides for parking any vehicle. It does not include uncovered parking spaces such as open parking areas. On the other hand, WB-HIRA has no such restrictions in defining garage or parking spaces and only mentions spaces as sanctioned by the competent authority.
  4. Compounding of Offences – If any person is found to have violated the RERA, they can be punished under the provision in the Code of Criminal Procedure, 1973 while WB-HIRA does not have provision for the compounding of offences.

Apart from the above, the subject of the provisions of the state enactment is identical, the content is identical. In essence and substance, WB-HIRA has enacted a parallel mechanism and parallel regime which the RERA already entails. In other words, the State legislature has enacted legislation on the same subject matter as the central enactment. Not only is the subject matter identical, but the statutory provisions of WB-HIRA are nearly identical to those of RERA.

WB-HIRA, since its enforcement in the State of West Bengal, would have been applied to building projects and implemented by the authorities constituted under the law in the state. In order to avoid uncertainty and disruption in respect of actions taken in the past, recourse to the jurisdiction of this Court under Article 142 was necessary. The Court, as such, exercised its extraordinary powers under Article 142 and gave effect to its judgment striking down the provisions of WB-HIRA prospective. The Court directed that the striking down of WB-HIRA will not affect the registrations, sanctions, and permissions previously granted under the legislation prior to the date of this judgment.

Down the Road

After the repeal of the WB-HIRA, the Government of West Bengal, Housing Department, by its Notification dated July 27, 2021, framed the West Bengal Real Estate (Regulation and Development) Rules, 2021, and the rules will come into force from the date of their publication in the Official Gazette. Thereafter, by another Notification dated July 29, 2021, the Government of West Bengal, Housing Department established an Authority known as the West Bengal Real Estate Regulatory Authority with immediate effect to exercise the powers conferred on it and to perform the functions assigned to it under the RERA throughout the State of West Bengal. With a further notification dated July 30, 2021, the Government of West Bengal, Housing Department, established an Appellate Tribunal known as the West Bengal Real Estate Appellate Tribunal with immediate effect. It is a sad plight that though the authorities have been established by several notifications dated July 29, 2021 and July 30, 2021, respectively, the positions of Chairperson, Members of the Regulatory Authority, Judicial Member, and Administrative Member of the Appellate Authority are still vacant. By a notice dated July 7, 2022, the Search Committee constituted under the West Bengal Real Estate (Regulation and Development) Rules, 2021, invited eligible and willing persons for the above-mentioned position.

A time-bound and proper implementation of the real estate regulatory law RERA in the state is required. Lack of implementation of RERA has left home buyers in the lurch as neither new complaints can be filed against builders nor existing complaints already filed before the erstwhile WB-HIRA can be continued and home buyers are being subjected to even more ruthless exploitation by builders since there is no mechanism in the state at present for redressal of home buyers’ grievances.

WB-HIRA is a “virtual replica” of the Central Law. A significant and even overwhelmingly large part of WB-HIRA overlaps with the provisions of RERA, but it does not complement the central law by fortifying the rights, obligations, and remedies.

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