Landowners also liable along with the Builder for Shortcomings in Construction of Flats: Upholds Supreme Court

The Apex Court has recently held in the case of Akshay & Anr. v/s Aditya & Ors that landowners are jointly and severally liable along with builders in consumer cases for deficiency of services.

The Apex Court held that landowners cannot absolve themselves from liabilities by revoking power of attorney (“POA”) between them and builders executed for development of land. A Joint Venture Agreement (“JVA”) remains operative even after the POA gets revoked. The Apex Court explained the scope of the term ‘henceforth’ used in the revocation letter by observing that absolution of any liability of landowner for any action of builder will occur after revocation of POA and not absolve the landowner for liability for any agreement entered by the builder before the termination. The Court observed as under:

“In the letter dated 12-8-2014, the appellants had stated to be not liable “Henceforth”, i.e. after the said letter was sent. The appellants therefore were bound by the acts/deeds of the Respondent No.2 carried out pursuant to the irrevocable Power of Attorney till it was terminated, in accordance with law.”

The factual background was that appellants (landowners) and respondent 2 (builder) had entered into a Joint Venture Agreement (JVA) for building and selling flats. The builder executed sale agreements for sale of flats. The respondents filed a complaint before the Maharashtra State Consumer Disputes Redressal Commission alleging unfair trade practices and deficiency of service in failing to complete and hand over possession of flat units by the landowners and builder. Appellants pleaded that they cannot be held liable for the acts of builder and they were not privy to the agreement therefore they cannot be held liable under the Consumer Protection Act.

The Apex Court upheld the decision of the National Consumer Dispute Redressal Commission and dismissed the appeal. Observing that appellants are jointly and severally liable, the apex court observed that revocation of POA does not revoke the JVA and the term ‘henceforth’ operated to cease liability of appellants only for the actions of Respondent 2 after August 12, 2014. This implies that they are still liable for the agreements entered by the builder with the flat buyers.

Occupancy certificate (OC) or Completion certificate (CC) is now mandatory for issuing letters of possession: Directive by UP-RERA

In a recent directive vide Order No. 7316/U.P. RERA/Admin./2024-25, dated 29/05/2024, the Uttar Pradesh Real Estate Regulatory Authority (“UP RERA”) has mandated that builders/ developers must secure an occupancy certificate (“OC”) or completion certificate (“CC”) before issuing possession letters to homebuyers. In order to obtain the OC/ CC, the promoter must submit an application along with necessary documents. Only after obtaining such OC or CC, can possession letters be issued.

The promoter must send a written possession offer to the allottee via registered email, mail, phone, and SMS, once the OC/ CC is obtained. Offer of possession should be sent within 2 (two) months of receiving such OC/ CC. Additionally, homebuyers must receive a copy of OC/ CC at the time of possession. Such information regarding issuance of OC/ CC and subsequent offers of possession being made, should be displayed by the promoter at the project site and the head office.

Rationale: According to UP RERA, this measure was instituted “to prevent arbitrariness” by promoters in issuing possession letters to flat buyers. The goal is to eliminate disputes that often arise between promoters and buyers due to the premature or improper issuance of these letters.

Landlord entitled to receive compensation in the form of ‘mesne profits’ from tenant in case tenant continues to retain possession even after tenancy rights are extinguished: Observes Supreme Court

In the recent case of Bijay Kumar Manish Kumar Huf v. Ashwin Bhanulal Desai, the Hon’ble Supreme Court of India, drawing support from its earlier judgment in the case of Indian Oil Corporation Ltd. v. Sudera Realty Private Limited, held that if a tenant continues to be in possession of the rented premises even after his right to do so stands extinguished, then the landlord would be entitled to receive compensation in the form of ‘mesne profit’ from the tenant.

While arriving at this position, the Court found it pertinent to refer to the concept of ‘tenant at sufferance’. A tenant at sufferance refers to a tenant who enters upon the land by lawful title but continues in possession after the title has ended without statutory authority and without obtaining consent of the person then entitled.

Clarifying positions related to nomenclature, the court observed as under:

“In our considered view, the effect of the words ‘determination’, ‘expiry’, ‘forfeiture’ and ‘termination’ would, subject to the facts applicable, be similar, i.e., when any of these three words are applied to a lease, henceforth, the rights of the lessee/tenant stand extinguished or in certain cases metamorphosed into weaker iteration of their former selves…Therefore, in any of the these situations, mesne profit would be payable.”

Partition Can Also Be Achieved Through a Settlement or Verbal Agreement: Reiterates Supreme Court

The Supreme Court has made a significant observation in the matter of H. Vasanthi v. A Santha, stating that it is not compulsory that partition should be effected exclusively through a written instrument in strict accordance with the requirements of law.

In the specific case at hand, the plaintiff’s contention centered around the ancestral property, tracking it back to plaintiff’s grandfather. According to the plaintiff, the said property was purchased through a registered sale deed. Her grandfather’s son, the first defendant, inherited the said property as Joint Hindu Family Property, thereby passing it down to his son, the second defendant and the plaintiff herself (First defendant’s daughter). An agreement of sale between the first and second defendant and a third party was executed.

A partial partition was undertaken on February 24, 1980 which involved the plaintiff, first and second defendants and other siblings. The Hindu Succession Act’s amendment (Section 29A) on March 25, 1989 conferred coparcener status and partition rights to unmarried daughters. Although the plaintiff got married on July 7, 1989, she subsequently initiated legal proceedings seeking partition of the property. Simultaneously, she prayed for partition, asserting that the rights and entitlements of the plaintiff could not have been transferred by the first and second defendants, thus forming the basis for her partition suit.

The central issue presented before the Court pertained to whether the property outlined in the plaint schedule exhibited the characteristics of a coparcenary status as of March 25, 1989 and if it is available for partition.

Earlier, the suit was dismissed by trial Court and subsequently the dismissal was upheld by the Madras High Court on the grounds that the subject property was ineligible for partition as of the date of coming into force of Section 29A.

The Court, in its judgement, dismissed the plaintiff’s claim on the grounds that the plaintiff failed to substantiate the continuous coparcenary status of the property indicated in the plaint schedule. The mere acquisition of the coparcenary status by the Plaintiff cannot warrant a partition in her favour unless the plaintiff establishes that the partial partition did not affect the coparcenary rights.

Furthermore, the court observed that there is no prohibition in effecting a partition through means other than a written instrument by duly complying with the requirements of law. In essence, the division of coparcenary property could also be executed through a settlement or oral agreement.

Though Agreement To Sell does not confer Title, Possessory Right of prospective purchaser protected under Sec 53A Transfer of Property Act : Observes Supreme Court

The Hon’ble Supreme Court in the matter Ghanshyam v Yogendra Rathi has held that even though an Agreement to Sell does not transfer proprietary rights in an immovable property, however, when the prospective purchaser performs his part of the contract and receives possession of the property, then he/she is said to have acquired possessory title and the same is protectable under Section 53A of the Transfer of Property Act, 1882 (TPA).

In this matter, Mr. Ghanshyam (“Appellant”) was the owner of a property situated in Delhi (“Suit Property”). He entered into an Agreement to Sell dated 10.04.2002 with Mr. Yogendra Rathi (“Respondent”) for sale of Suit Property and received the entire sale consideration from the Respondent. On the same day, the Appellant executed a will bequeathing the Suit Property to the Respondent. The Appellant further executed a General Power of Attorney in favour of the Respondent. The possession of the Suit Property was handed over to the Respondent, however, no sale deed was executed.

The Respondent permitted the Appellant to occupy a portion of the Suit Property for 3 months as a licensee. After expiry of 3 months period, the Appellant did not vacate the Property. The Respondent filed a suit against the Appellant seeking the latter’s eviction from the Suit Property and recovery of mesne profits.

The Respondent claimed his ownership on the Suit Property on the strength of the Agreement to Sell dated 10.04.2002, General Power of Attorney, memo of possession, receipt of payment of sale consideration and a will dated 10.04.2002.

The Appellant argued that the documents cited by the Respondent have been manipulated on blank papers. However, there was no evidence to that effect. The Appellant did not dispute the execution of such documents or receipt of sale consideration by him.

The Trial Court held that there was no manipulation of documents and thus the Respondent is entitled to decree for eviction and recovery of mesne profits.

The Appellant filed a first appeal and thereafter a second appeal before the High Court and both were decided in favour of the Respondent. Subsequently, the Appellant filed an appeal before the Supreme Court.

The Bench noted that an Agreement to Sell is neither a document of title nor a deed of transfer of property by sale. Therefore, it does not confer any absolute title upon the Respondent over the Suit Property, in view of Section 54 of the Transfer of Property Act, 1882. However, the factors such as entering into an Agreement to Sell, payment of entire sale consideration and being put in possession by the transferor, shows that the Respondent has de-facto possessory rights based on his part performance of the Agreement to Sell.

Further, the Appellant’s entry into the Suit Property subsequently was as a licensee of the Respondent and not as the owner of Property.

The Bench opined that ordinarily an Agreement to Sell does not transfer proprietary rights in an immovable property. Nonetheless, when the prospective purchaser performs his part of the contract and receives possession of the property, then he/she is said to have acquired possessory title and the same is protectable under Section 53A of the TPA. The Bench held as under:

“Legally an agreement to sell may not be regarded as a transaction of sale or a document transferring the proprietary rights in an immovable property but the prospective purchaser having performed his part of the contract and lawfully in possession acquires possessory title which is liable to be protected in view of Section 53A of the Transfer of Property Act, 1882. The said possessory rights of the prospective purchaser cannot be invaded by the transferer or any person claiming under him.”

The Bench held that the possessory right of the Respondent is not liable to be disturbed by the transferer (Appellant). Accordingly, the Bench upheld the High Court’s view that the Respondent is entitled to a decree for eviction with mesne profits.

If a claim of tenancy appears to be prima facie baseless, civil court can refuse reference to land tribunal- Opines Kerala High Court

The Kerala High Court on April 17, 2022 in the matter of Annamma & Ors v. P.V. Varkey & Ors., while dealing with a tenancy case established that simply because a contention was raised in the written statement, there is no necessity for the court to refer it to the land tribunal, if it prima facie appears to be a baseless assertion. The single judge bench held that a civil court is only bound to refer a tenancy matter to the land tribunal, if it finds sufficient force in the contention raised by the parties.

In the instant matter, petitioners filed an application in a suit before a Principal Sub Court claiming that as the legal heirs of one Zachariah, they got tenancy right over 29 cents out of the total extent of the plaint schedule property. They sought a reference under Section 125(3) of the Land Reforms Act to get this claim adjudicated by the Land Tribunal. However, the Munsiff dismissed the application finding that the petitioners will not get tenancy right over the property as on the commencement of the Land Reforms Act, the said property was government land, and was therefore vested with the government. Aggrieved by this decision, the petitioners moved a plea before the High Court.

The High Court found that prior to the issuance of patta under the Land Assignment Act, the Government was the owner of the property and, therefore, the contention raised by the legal heirs of Zachariah (son of P.P.Varkey) claiming tenancy right over 21 cents of land to Zachariah, is not prima facie sustainable. Since P.P.Varkey did not claim tenancy right over the property, it cannot be held that his son Zachariah obtained the tenancy right. Thus, prima facie the convention of tenancy raised by the petitioners will not sustain.

The High Court referred to the decision in Madhavi Amma v. Kesavan [2008 (1) KLT SN 49] where the single judge had concurred with the earlier decisions and held that there may be several other instances where reference to the land tribunal is not only unnecessary but also unwarranted. In many cases, reference made to the Land Tribunal would be a futile exercise but even in such cases, the civil court is not bound to refer the question of tenancy raised by the defendant to the Land Tribunal.

The Court observed-

“It is true that the Civil Courts cannot decide the question of tenancy. However, the Civil Courts can decide the genuineness of the claim to avoid reference of the claim for tenancy without considering its merits, as observed above.”

Accordingly, the petition was dismissed.

Compliance of pre-deposit under Section 43(5) of the RERA Act before entertainment of appeal in a tribunal- Observes Allahabad HC

The Allahabad High Court on April 16, 2022 in the matter of Air Force Naval Housing Board Air Force Station v. U.P. Real Estate Regulatory Authority observed that the statutory compliance of a pre-deposit under Section 43(5) of the Real Estate (Regulation and Development) Act, 2016 (“the Act“) by a ‘promoter’ before the entertainment of an appeal in an appellate tribunal is mandatory.

In the instant matter, Air Force Naval Housing Board (“AFNHB“), a welfare organization comprising senior officers of the Air Force and Navy launched a project named AFNHB, Meerut in 2008 to provide suitable and affordable homes to the army and naval personnel, where out 545 flats, 523 flats had been sold and 418 allottees had already taken possession. However, due to a delay in the completion of the project, some allottees approached the Real Estate (Regulation and Development) Authority (“the Authority”) whereby an order the allottees were either awarded interest on their deposited amount or a refund of the deposited amount with interest. As against this, an appeal was filed before Uttar Pradesh Real Estate Appellate Tribunal (“the Appellate Tribunal”) under Section 44 of the Act. The Appellate Tribunal dismissed the appeal on the ground that the appellant had not complied with the mandate of Section 43(5) of the Act and had not deposited the balance amount.

In regard to the legislative logic of the usage of the word ‘promoter’ in Section 43(5) that mandates the paying of a deposit prior to the entertainment of any appeal before a Tribunal, the single judge bench asserted:

“The word ‘promoter’ has been deliberately used by the legislature in the proviso to sub-section (5) of Section 43, as sub-section (5) provides a remedy of statutory appeal to any person aggrieved by the direction or decision of an authority to file appeal before the Tribunal, but in case of a ‘promoter’, the mandatory deposit has to be made prior to the entertainment of the appeal by the Tribunal. The purpose of insertion of such provision is to safeguard the innocent home buyer who has deposited his hard earned money with the developers/promoter and in case of failure of the project or the project getting delayed and on his complaint, the authority directing for refund of the amount with interest, the promoter is obliged to deposit the same before his appeal is heard.”

The Court opined:

“…the appellants are working in real estate sector and their project having been registered on 15.8.2017 after enforcement of Act, 2016, comes under the purview of ‘promoter’, as defined under Section 2(zk) of Act, 2016, and necessary compliance of pre-deposit, as enshrined under Section 43(5) of Act, 2016, has to be made before the Tribunal before entertainment of their appeal.“

Forcible dispossession of private property of a person without following due process of law is violative of both Human & Constitutional Right- Observes Supreme Court

The Supreme Court on April 06, 2022 in the matter of Sukh Dutt Ratra vs State of Himachal Pradesh, observed that forcible dispossession of private property of a person without following due process of law, is violative of both their human right and constitutional right.

In the instant case, Sukh Dutt Ratra and Bhagat Ram claimed to be owners of land which was utilized for the construction of the ‘Narag Fagla Road’ in 1972-73. They filed a writ petition before the High Court of Himachal Pradesh in 2011, seeking compensation for the subject land or initiation of acquisition proceedings under the Act. They alleged that no land acquisition proceedings were initiated, nor compensation given to them or owners of the adjoining land. The High Court disposed of this writ petition, with liberty to file a civil suit in accordance with law. Before the Apex Court, the appellants contended that the State had illegally usurped their lands, without following due process of law.

The Bench observed –

“The State cannot shield itself behind the ground of delay and laches in such a situation; there cannot be a ‘limitation’ to doing justice… In the absence of written consent to voluntarily give up their land, the appellants were entitled to compensation in terms of law.”

The Apex Court therefore disposed the appeals by making following observations and directions:

“Concluding that the forcible dispossession of a person of their private property without following due process of law was violative of both their human right, and constitutional right under Article 300-A, this court allowed the appeal. In view of the above discussion, in view of this court’s extraordinary jurisdiction under Article 136 and 142 of the Constitution, the State is hereby directed to treat the subject lands as a deemed acquisition and appropriately disburse compensation to the appellants”.

Logix City developers declared as insolvent and Interim Resolution Professional (“IRP”) appointed – NCLT Delhi

Just few days after the initiation of Corporate Insolvency Resolution Process of Supertech, Jaypee and Mascot Soho, the NCLT, New Delhi on April 1, 2022, declared another Noida based Real Estate Developer Logix city Developers Private Limited (“Logix”) as insolvent vide its order and appointed the Interim Resolution Professional.

In the instant case, Colliers International (India) Property Services Pvt. Ltd. (“Operational Creditor“) entered into an agreement dated 05.07.2011 with Logix for the project management consultancy services at the “Blossom Zest” project situated at Sector 143, Noida. The Operational Creditor sent a reminder email to pay the operational debt of Rs. 1.08 crores and thereafter sent a demand notice under section 8 of the Insolvency and bankruptcy code, 2016 (“IBC”) to repay the operational debt. Logix accepted the liability and did not raise any dispute. Subsequently, petition under Section 9 of the IBC was filed by the Operational Creditor. Logix filed a reply and there also it has admitted the default of the operational debt.

The NCLT observed that there are two requirements for admission of section 9 petition that there is a default of a debt and there is a no pre existing dispute. Since Logix in the present case admitted the default of the operational debt both in reply to demand and in reply to the Section 9 petition. Therefore, both the conditions of a Section 9 petition are fulfilled and the petition by the Operational Creditor is admitted. Accordingly, the CIRP is initiated and Interim Resolution Professional is appointed by NCLT.

Officers can’t promote encroachers by allotting alternative lands in absence of statutory provision – Observes Madras High Court

The Madras High Court on March 25, 2022 in the matter of S. Karthikeyan & Anr v. District Collector & Ors. once again made clear its rigid stand on the removal of water body encroachments by stating that officers can’t be allowed to promote encroachers by allotting alternative lands elsewhere.

The first bench noted that allotment of such alternative lands would only promote the tendency to encroach Government/ Poramboke land and water bodies. The court also reiterated about the ‘total failure’ of government officers in the removal of encroachments in water bodies and catchment areas.

It is pertinent to note that Madras High Court had issued a slew of directions to prevent encroachments in January this year, thereby signalling that there will be no leniency towards water body encroachers and land grabbers.

Due to AAG’s submission, the court asked the state if it can refer to any provision of law that mandates state government to allot lands to the encroachers. AAG couldn’t answer the question to the court’s satisfaction. Therefore, Madras High Court noted in the order as below:

“In view of the above, learned Additional Advocate General could not clarify as to why the Officers are promoting the encroachers by allotting alternative lands else-where. It may be a Government policy or decision. However, in the absence of any statutory provision, it would lead to promoting encroachment of the lands on the water-bodies and the same cannot be endorsed.”

The bench also placed reliance on the Apex court’s judgment in Joginder v. State of Haryana, 2021 LL SC 66, where it was held that the persons in illegal occupation of the government land/panchayat land cannot, as a matter of right, claim regularisation.

The Ministry of Commerce and Industry through DPIIT brought significant change in the definition of the Real Estate business under the FDI Policy.

The Department for Promotion of Industry and Internal Trade (“DPIIT”) on March 14, 2022, released a Press Note issuing amendment to the definition of the real estate business under the Para 5.1(f) and Note (i) to Para 5.2.10.2 of the Consolidated FDI Policy Circular of 2020 (“FDI Policy”).

The amended definition is read as under:
‘Real Estate business’ means dealing in land and immovable property with a view to earning profit there from and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014. Further, earning of rent/income on lease of the property, not amounting to transfer, will not amount to real estate business

183 Real Estate cases pending before Karnataka RERA settled in National Lok Adalat

In the National Lok Adalat on March 12, 2022, for the first time in the history of Karnataka, cases pending before Karnataka Real Estate Regulatory Authority and Real Estate Appellate Authority were taken up for disposal. A total of 183 cases disposed of and a compensation of Rs. 8 Crores paid.

Altering project layout without prior notice is an ‘unfair trade practice’- NCDRC orders refund to flat buyer

The National Consumer Disputes Redressal Commission (“Commission”) on March 11, 2022, in the matter of Vikas Jain v. M/s Chintels India Ltd., observed that:

“There is an admitted delay in offer of possession. There is also an admitted alteration in the project in as much as it has been bifurcated into two phases with an increase in the number of total flats by 36% or additional 120 flats. It is, therefore, evident that opposite party has indulged in unfair trade practice”

The Commission held that alteration in the number of flats per tower without any increase in the project area and without prior notice to the buyer amounts to unfair trade practice.

Insolvency application withdrawal as majority homebuyers accepted builder’s settlement during CIRP- Allows the Supreme Court

The Supreme Court on March 03, 2022 in the matter of Amit Katyal vs Meera Ahuja, allowed withdrawal of Corporate Insolvency Resolution Process (“CIRP”) against a builder in an application filed by three homebuyers. The court exercised power under Article 142 of the Constitution of India to permit withdrawal of CIRP proceedings and set aside all the pending matter between the parties in the interest of majority homebuyers.

The bench reserved the liberty in favor of the homebuyers to approach it in case the settlement does not go as per the proposal.

In the instant case, the builder came up with a housing project in Gurgaon, namely, ‘Krrish Provence Estate’, which he could not complete in eight years. Three home buyers (original applicants) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC“) before the NCLT, Delhi seeking initiation of the CIRP. A Resolution Professional (“RP”) was appointed and moratorium was declared. The promoters challenged the admission of Section 7 application before NCLT which was dismissed by NCLAT and the CIRP was directed to be initiated. The promoters filed a Special Leave Petition (“SLP”) before the Apex Court challenging the order passed by the NCLAT.

The Court observed that under Section 12A of IBC, NCLT may allow withdrawal of the application admitted under Section 7 on an application filed by the applicant with approval of 90% voting share of Committee of Creditors (“CoC”).

The Hon’ble Supreme Court relied on the case of Swiss Ribbons Pvt. Ltd. And Anr. v. Union of India And Ors. wherein, it permitted the original applicants to withdraw the CIRP proceedings in view of the settlement entered between parties.

It observed:

“Therefore, in the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant/Corporate Debtor, we are of the opinion that this is a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings. We are of the opinion that the same shall be in the larger interest of the home buyers who are waiting for the possession since more than eight years.”

It further observed:

“If the original applicants and the majority of the home buyers are not permitted to close the CIRP proceedings, it would have a drastic consequence on the home buyers of real estate project.”

The court noted that the purpose of IBC is not to kill the company but to ensure that it can run it being a going concern.

Whether the orders passed under the repealed West Bengal Housing Industry Regulation Authority Act, 2017 be executed? – Cal HC discusses

The Calcutta High Court on February 28, 2022, in the matter of Saptaparna Ray v. District Magistrate and Collector, discussed the validity of an order passed under the repealed West Bengal Housing Industry Regulation Authority Act, 2017 (“WBHIRA Act”).

In the instant case, the petitioner approached the West Bengal Housing Industry Regulation Authority (“WBHIRA”) against the private respondents (promoters) for damages arising due to delay in delivery of possession of flat booked, and for money for the same paid by her. The complaint was allowed by WBHIRA, and an order was passed. However, the WBHIRA Act was struck down by the Supreme Court as being ultra vires the Constitution of India and repugnant to the provisions of Real Estate (Regulation and Development) Act, 2016, in the case of Forum for People’s Collective Efforts (FPCE) v. State of West Bengal, (2021) 8 SCC 599.

The Court noted that it was evident from the above mentioned Supreme Court’s judgment that what can been saved by the Supreme Court under Article 142 of the Constitution of India are legislation, sanction and permission already granted. The orders already passed under the said repealed act, have not been specifically mentioned to have been saved.

The Court finally observed:

“It is only the Hon’ble Supreme Court under Article 142 of the Constitution of India, that can clarify as to whether the orders passed under the erstwhile WBHIRA, are saved and the execution thereof can be continued post the decision in the Forum for People’s Collective Case (Supra) or whether the execution should be carried out under the Real Estate Regulation Authority Act, 2016.”

Arbitral tribunal not barred under section 79 of the RERA Act from passing an order of injunction: Holds Bombay High Court

The Bombay High Court on August 20, 2022 in the matter of Ashok Palav Coop. Housing Society Ltd v. Pankaj Bhagubhai Desai & Anr. held that Arbitral tribunal is not a Civil Court within the meaning and purview of the Code of Civil Procedure, 1908 (“CPC”) and thus, the arbitral proceedings cannot be said to be barred under Section 79 of the Real Estate (Regulation and Development) Act, 2016 (“RERA”).

In the instant matter, an appeal was filed under section 37 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an order passed by the Arbitral tribunal whereby the tribunal rejected an application filed under Section 17 of the Act on the ground that by the virtue of section 79 of the RERA, the tribunal was barred from passing any order of injunction under section 17 of the Act. In the present case, the dispute between the parties concerned an agreement under which the parties had agreed for the disputes being referred to arbitration. It was contented that the tribunal was erroneous in rejecting the application filed under section 17 of the Act as the parties had entered into the aforementioned agreement, which contained an arbitration clause, much before the provisions of the RERA were brought into force and the Supreme Court, by an order passed on Special Leave Appeal, appointed a sole arbitrator to adjudicate the disputes between the parties.

The Court observed that from the scheme of the RERA, it is certain that the same has been enacted for regulation and promotion of the real estate sector and to establish an adjudicating mechanism to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority. Section 79 of the RERA postulates a bar on the Civil Court to exercise any jurisdiction to entertain any suit or proceedings, as also that no injunction shall be granted by “any Court” or “any other authority” as provided in the concluding part of the said provision. Thus, the issue before the court was whether arbitral tribunal can be construed as Civil Court falling under the CPC.

The Court referred to an earlier judgment of the Supreme Court in the matter of Food Corporation of India v. Evdomen Corporation where it was held that “Civil Court having jurisdiction to decide” as contained in Section 2(c) of the Arbitration Act,1940, would refer to a court having jurisdiction under Section 20 of the CPC. Further, the Supreme Court in the matter of Nahar Industrial Enterprises Ltd. v. Hong Kong and Shanghai Banking Corporation held that even though a “tribunal” which is authorized to take evidence of witnesses would ordinarily be held to be a “court” within the meaning of Section 3 of the Evidence Act, 1872 and the Arbitrators were excluded from the definition of “court”.

The Court observed that it can never be the intention of the legislature to elevate the status of the arbitral tribunal to that of a Civil Court as to construe the arbitral tribunal as an authority like a Civil Court even though the arbitral tribunal being a private tribunal has adjudicatory functions. Hence, the Court held that the arbitral tribunal is not a Civil Court within the meaning and purview of the CPC and directed the tribunal to reconsider the application filed by the appellant under Section 17 of the Act on merits.

Unregistered Sale Agreement may be received as an evidence of contract in a suit for specific performance- Opines Madras High Court

The Madras High Court on May 07, 2022 in the matter of Lakshmi Ammal and Others v. Gejaraj (died) and others, was of the view that the inadmissibility of the unregistered document will only be with respect to the protection sought under Section 53-A of the Transfer of Property Act and opined that even though the sale agreement was not registered, it can be acted upon as evidence for deciding the relief of specific performance.

In this case, the case of the plaintiff was the suit properties were owned by the defendants 2 to 5, who appointed defendant 1 as their Power of Attorney. The first defendant, acting as an agent entered into an agreement of sale with the plaintiff for a total sale consideration of Rs.50,000/- of which Rs.40,000/- was paid as advance on the date of agreement. The balance sale consideration of Rs.10,000/- was to be paid within three years.

The plaintiffs submitted that he was willing to perform his part of the contract but the first defendant was deliberately trying to evade the execution of the sale deed in favour of the plaintiff and later informed the plaintiff that the defendants had cancelled the power of attorney document. Meanwhile, the defendants were trying to disturb the possession and enjoyment of the suit properties which is why the plaintiffs filed the original suit. The first defendant submitted that it was the plaintiff who was not ready and willing to pay the balance sale consideration and that he had also accepted to hand over the possession of the suit properties. Since the Power of Attorney document was cancelled the first defendant asked the plaintiff to get the advance amount back from the other defendants. The other defendants took the stand that the first defendant did not act as per the conditions stipulated in the Power of Attorney document and did not properly maintain the account from the suit properties and the income yielded by the suit properties was also not given to the 2nd and 3rd defendants. They also contended that the sale agreement was a fabricated document and was created in collusion between the plaintiff and the first defendant and with an intention to grab the suit properties. It was pleaded that the suit was an orchestrated one and liable to be set aside.

The Court relied on the decision of the Supreme Court in Ameer Minhaj v. Dierdre Elizabeth(Wright) Issar and Others (2018), wherein it was observed that a document is required to be registered, but if unregistered, can still be admitted as evidence of a contract in a suit for specific performance.

Both the trial court and the lower appellate court did not possess any doubt with respect to the genuineness of the sale agreement.

This Court was satisfied that the plaintiff had established the execution of the sale agreement and also the payment of a substantial amount towards sale consideration and also his readiness and willingness to perform his part of the contract. Thus, he was entitled to the relief of a specific performance. Therefore, it was held that the decision of the lower appellate court was correct in law.

Merely obtaining ‘Occupancy Certificate’ before Section 3 of RERA came into force would not oust jurisdiction of Regulatory Authority- Observes Punjab & Haryana High Court

The Punjab and Haryana High Court on May 03, 2022 in the matter of M/s Experion Developers Private Limited vs. State of Haryana and others observed that obtaining of an occupancy certificate will not render anyone to be outside the purview of the jurisdiction of the State Real Estate Regulatory Authority.

In this matter, M/s Experion Developers Private Limited (“Petitioner”), sought issuance of a writ in the nature of ‘certiorari’ to set aside the proceedings pending before the Haryana Real Estate Regulatory Authority (“Regulatory Authority”) in a complaint case. It further sought issuance of a writ of ‘mandamus/prohibition’ restraining the aforesaid authority from acting in contravention of the provisions of the Real Estate (Regulation and Development) Act, 2016 (“RERA”).

On one hand, Petitioner raised a basic issue that he had received an occupancy certificate in respect of at least that part of the project as respondents would be concerned with, on 02.03.2017, and RERA came into effect (as regards Section 3 thereof) only from 01.05.2017, so the project has to be treated to be a completed project and therefore there was no requirement for even registration of the project by the Petitioner with the RERA authority in terms of Section 3. On the other hand, Counsel for Regulatory Authority submitted that there is an obvious anomaly between Section 3(2)(b) of the Act of 2016 and the Rules of 2017, as Section 3(2)(b) reads to say that it is only after a completion certificate has been obtained by a developer in respect of any particular project, before the said Act came into effect, that it would not be required to get such project registered with the Authority; but with the Petitioner having obtained only an occupancy certificate and not a completion certificate, necessarily it was required to get its project registered and therefore the jurisdiction of the Authority is very much existent qua the project.

The Court observed-

“As regards that factual aspect and specifically with regard to as to whether the petitioner was allowed to complete the project in different phases in terms of the licence granted to it, and therefore whether that occupancy certificate for any particular phase as has been completed (if so), is to be treated to be a completion certificate in terms of Section 2(q) of the Act, is left to the appellate authority under the Act to decide on merits, keeping in view of course the judgement of the Supreme Court in M/s Newtech Promoters and Developers (supra), and any other law laid down on the subject.”

In view of the above, the petition was dismissed.

If a claim of tenancy appears to be prima facie baseless, civil court can refuse reference to land tribunal- Opines Kerala High Court

The Kerala High Court on April 17, 2022 in the matter of Annamma & Ors v. P.V. Varkey & Ors., while dealing with a tenancy case established that simply because a contention was raised in the written statement, there is no necessity for the court to refer it to the land tribunal, if it prima facie appears to be a baseless assertion. The single judge bench held that a civil court is only bound to refer a tenancy matter to the land tribunal, if it finds sufficient force in the contention raised by the parties.

In the instant matter, petitioners filed an application in a suit before a Principal Sub Court claiming that as the legal heirs of one Zachariah, they got tenancy right over 29 cents out of the total extent of the plaint schedule property. They sought a reference under Section 125(3) of the Land Reforms Act to get this claim adjudicated by the Land Tribunal. However, the Munsiff dismissed the application finding that the petitioners will not get tenancy right over the property as on the commencement of the Land Reforms Act, the said property was government land, and was therefore vested with the government. Aggrieved by this decision, the petitioners moved a plea before the High Court.

The High Court found that prior to the issuance of patta under the Land Assignment Act, the Government was the owner of the property and, therefore, the contention raised by the legal heirs of Zachariah (son of P.P.Varkey) claiming tenancy right over 21 cents of land to Zachariah, is not prima facie sustainable. Since P.P.Varkey did not claim tenancy right over the property, it cannot be held that his son Zachariah obtained the tenancy right. Thus, prima facie the convention of tenancy raised by the petitioners will not sustain.

The High Court referred to the decision in Madhavi Amma v. Kesavan [2008 (1) KLT SN 49] where the single judge had concurred with the earlier decisions and held that there may be several other instances where reference to the land tribunal is not only unnecessary but also unwarranted. In many cases, reference made to the Land Tribunal would be a futile exercise but even in such cases, the civil court is not bound to refer the question of tenancy raised by the defendant to the Land Tribunal.

The Court observed-

“It is true that the Civil Courts cannot decide the question of tenancy. However, the Civil Courts can decide the genuineness of the claim to avoid reference of the claim for tenancy without considering its merits, as observed above.”

Accordingly, the petition was dismissed.

Compliance of pre-deposit under Section 43(5) of the RERA Act before entertainment of appeal in a tribunal- Observes Allahabad HC

The Allahabad High Court on April 16, 2022 in the matter of Air Force Naval Housing Board Air Force Station v. U.P. Real Estate Regulatory Authority observed that the statutory compliance of a pre-deposit under Section 43(5) of the Real Estate (Regulation and Development) Act, 2016 (“the Act“) by a ‘promoter’ before the entertainment of an appeal in an appellate tribunal is mandatory.

In the instant matter, Air Force Naval Housing Board (“AFNHB“), a welfare organization comprising senior officers of the Air Force and Navy launched a project named AFNHB, Meerut in 2008 to provide suitable and affordable homes to the army and naval personnel, where out 545 flats, 523 flats had been sold and 418 allottees had already taken possession. However, due to a delay in the completion of the project, some allottees approached the Real Estate (Regulation and Development) Authority (“the Authority”) whereby an order the allottees were either awarded interest on their deposited amount or a refund of the deposited amount with interest. As against this, an appeal was filed before Uttar Pradesh Real Estate Appellate Tribunal (“the Appellate Tribunal”) under Section 44 of the Act. The Appellate Tribunal dismissed the appeal on the ground that the appellant had not complied with the mandate of Section 43(5) of the Act and had not deposited the balance amount.

In regard to the legislative logic of the usage of the word ‘promoter’ in Section 43(5) that mandates the paying of a deposit prior to the entertainment of any appeal before a Tribunal, the single judge bench asserted:

“The word ‘promoter’ has been deliberately used by the legislature in the proviso to sub-section (5) of Section 43, as sub-section (5) provides a remedy of statutory appeal to any person aggrieved by the direction or decision of an authority to file appeal before the Tribunal, but in case of a ‘promoter’, the mandatory deposit has to be made prior to the entertainment of the appeal by the Tribunal. The purpose of insertion of such provision is to safeguard the innocent home buyer who has deposited his hard earned money with the developers/promoter and in case of failure of the project or the project getting delayed and on his complaint, the authority directing for refund of the amount with interest, the promoter is obliged to deposit the same before his appeal is heard.”

The Court opined:

“…the appellants are working in real estate sector and their project having been registered on 15.8.2017 after enforcement of Act, 2016, comes under the purview of ‘promoter’, as defined under Section 2(zk) of Act, 2016, and necessary compliance of pre-deposit, as enshrined under Section 43(5) of Act, 2016, has to be made before the Tribunal before entertainment of their appeal.“

Forcible dispossession of private property of a person without following due process of law is violative of both Human & Constitutional Right- Observes Supreme Court

The Supreme Court on April 06, 2022 in the matter of Sukh Dutt Ratra vs State of Himachal Pradesh, observed that forcible dispossession of private property of a person without following due process of law, is violative of both their human right and constitutional right.

In the instant case, Sukh Dutt Ratra and Bhagat Ram claimed to be owners of land which was utilized for the construction of the ‘Narag Fagla Road’ in 1972-73. They filed a writ petition before the High Court of Himachal Pradesh in 2011, seeking compensation for the subject land or initiation of acquisition proceedings under the Act. They alleged that no land acquisition proceedings were initiated, nor compensation given to them or owners of the adjoining land. The High Court disposed of this writ petition, with liberty to file a civil suit in accordance with law. Before the Apex Court, the appellants contended that the State had illegally usurped their lands, without following due process of law.

The Bench observed –

“The State cannot shield itself behind the ground of delay and laches in such a situation; there cannot be a ‘limitation’ to doing justice… In the absence of written consent to voluntarily give up their land, the appellants were entitled to compensation in terms of law.”

The Apex Court therefore disposed the appeals by making following observations and directions:

“Concluding that the forcible dispossession of a person of their private property without following due process of law was violative of both their human right, and constitutional right under Article 300-A, this court allowed the appeal. In view of the above discussion, in view of this court’s extraordinary jurisdiction under Article 136 and 142 of the Constitution, the State is hereby directed to treat the subject lands as a deemed acquisition and appropriately disburse compensation to the appellants”.

Logix City developers declared as insolvent and Interim Resolution Professional (“IRP”) appointed – NCLT Delhi

Just few days after the initiation of Corporate Insolvency Resolution Process of Supertech, Jaypee and Mascot Soho, the NCLT, New Delhi on April 1, 2022, declared another Noida based Real Estate Developer Logix city Developers Private Limited (“Logix”) as insolvent vide its order and appointed the Interim Resolution Professional.

In the instant case, Colliers International (India) Property Services Pvt. Ltd. (“Operational Creditor“) entered into an agreement dated 05.07.2011 with Logix for the project management consultancy services at the “Blossom Zest” project situated at Sector 143, Noida. The Operational Creditor sent a reminder email to pay the operational debt of Rs. 1.08 crores and thereafter sent a demand notice under section 8 of the Insolvency and bankruptcy code, 2016 (“IBC”) to repay the operational debt. Logix accepted the liability and did not raise any dispute. Subsequently, petition under Section 9 of the IBC was filed by the Operational Creditor. Logix filed a reply and there also it has admitted the default of the operational debt.

The NCLT observed that there are two requirements for admission of section 9 petition that there is a default of a debt and there is a no pre existing dispute. Since Logix in the present case admitted the default of the operational debt both in reply to demand and in reply to the Section 9 petition. Therefore, both the conditions of a Section 9 petition are fulfilled and the petition by the Operational Creditor is admitted. Accordingly, the CIRP is initiated and Interim Resolution Professional is appointed by NCLT.

Officers can’t promote encroachers by allotting alternative lands in absence of statutory provision – Observes Madras High Court

The Madras High Court on March 25, 2022 in the matter of S. Karthikeyan & Anr v. District Collector & Ors. once again made clear its rigid stand on the removal of water body encroachments by stating that officers can’t be allowed to promote encroachers by allotting alternative lands elsewhere.

The first bench noted that allotment of such alternative lands would only promote the tendency to encroach Government/ Poramboke land and water bodies. The court also reiterated about the ‘total failure’ of government officers in the removal of encroachments in water bodies and catchment areas.

It is pertinent to note that Madras High Court had issued a slew of directions to prevent encroachments in January this year, thereby signalling that there will be no leniency towards water body encroachers and land grabbers.

Due to AAG’s submission, the court asked the state if it can refer to any provision of law that mandates state government to allot lands to the encroachers. AAG couldn’t answer the question to the court’s satisfaction. Therefore, Madras High Court noted in the order as below:

“In view of the above, learned Additional Advocate General could not clarify as to why the Officers are promoting the encroachers by allotting alternative lands else-where. It may be a Government policy or decision. However, in the absence of any statutory provision, it would lead to promoting encroachment of the lands on the water-bodies and the same cannot be endorsed.”

The bench also placed reliance on the Apex court’s judgment in Joginder v. State of Haryana, 2021 LL SC 66, where it was held that the persons in illegal occupation of the government land/panchayat land cannot, as a matter of right, claim regularisation.

The Ministry of Commerce and Industry through DPIIT brought significant change in the definition of the Real Estate business under the FDI Policy.

The Department for Promotion of Industry and Internal Trade (“DPIIT”) on March 14, 2022, released a Press Note issuing amendment to the definition of the real estate business under the Para 5.1(f) and Note (i) to Para 5.2.10.2 of the Consolidated FDI Policy Circular of 2020 (“FDI Policy”).

The amended definition is read as under:
‘Real Estate business’ means dealing in land and immovable property with a view to earning profit there from and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014. Further, earning of rent/income on lease of the property, not amounting to transfer, will not amount to real estate business

183 Real Estate cases pending before Karnataka RERA settled in National Lok Adalat

In the National Lok Adalat on March 12, 2022, for the first time in the history of Karnataka, cases pending before Karnataka Real Estate Regulatory Authority and Real Estate Appellate Authority were taken up for disposal. A total of 183 cases disposed of and a compensation of Rs. 8 Crores paid.

Altering project layout without prior notice is an ‘unfair trade practice’- NCDRC orders refund to flat buyer

The National Consumer Disputes Redressal Commission (“Commission”) on March 11, 2022, in the matter of Vikas Jain v. M/s Chintels India Ltd., observed that:

“There is an admitted delay in offer of possession. There is also an admitted alteration in the project in as much as it has been bifurcated into two phases with an increase in the number of total flats by 36% or additional 120 flats. It is, therefore, evident that opposite party has indulged in unfair trade practice”

The Commission held that alteration in the number of flats per tower without any increase in the project area and without prior notice to the buyer amounts to unfair trade practice.

Insolvency application withdrawal as majority homebuyers accepted builder’s settlement during CIRP- Allows the Supreme Court

The Supreme Court on March 03, 2022 in the matter of Amit Katyal vs Meera Ahuja, allowed withdrawal of Corporate Insolvency Resolution Process (“CIRP”) against a builder in an application filed by three homebuyers. The court exercised power under Article 142 of the Constitution of India to permit withdrawal of CIRP proceedings and set aside all the pending matter between the parties in the interest of majority homebuyers.

The bench reserved the liberty in favor of the homebuyers to approach it in case the settlement does not go as per the proposal.

In the instant case, the builder came up with a housing project in Gurgaon, namely, ‘Krrish Provence Estate’, which he could not complete in eight years. Three home buyers (original applicants) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC“) before the NCLT, Delhi seeking initiation of the CIRP. A Resolution Professional (“RP”) was appointed and moratorium was declared. The promoters challenged the admission of Section 7 application before NCLT which was dismissed by NCLAT and the CIRP was directed to be initiated. The promoters filed a Special Leave Petition (“SLP”) before the Apex Court challenging the order passed by the NCLAT.

The Court observed that under Section 12A of IBC, NCLT may allow withdrawal of the application admitted under Section 7 on an application filed by the applicant with approval of 90% voting share of Committee of Creditors (“CoC”).

The Hon’ble Supreme Court relied on the case of Swiss Ribbons Pvt. Ltd. And Anr. v. Union of India And Ors. wherein, it permitted the original applicants to withdraw the CIRP proceedings in view of the settlement entered between parties.

It observed:

“Therefore, in the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant/Corporate Debtor, we are of the opinion that this is a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings. We are of the opinion that the same shall be in the larger interest of the home buyers who are waiting for the possession since more than eight years.”

It further observed:

“If the original applicants and the majority of the home buyers are not permitted to close the CIRP proceedings, it would have a drastic consequence on the home buyers of real estate project.”

The court noted that the purpose of IBC is not to kill the company but to ensure that it can run it being a going concern.

Whether the orders passed under the repealed West Bengal Housing Industry Regulation Authority Act, 2017 be executed? – Cal HC discusses

The Calcutta High Court on February 28, 2022, in the matter of Saptaparna Ray v. District Magistrate and Collector, discussed the validity of an order passed under the repealed West Bengal Housing Industry Regulation Authority Act, 2017 (“WBHIRA Act”).

In the instant case, the petitioner approached the West Bengal Housing Industry Regulation Authority (“WBHIRA”) against the private respondents (promoters) for damages arising due to delay in delivery of possession of flat booked, and for money for the same paid by her. The complaint was allowed by WBHIRA, and an order was passed. However, the WBHIRA Act was struck down by the Supreme Court as being ultra vires the Constitution of India and repugnant to the provisions of Real Estate (Regulation and Development) Act, 2016, in the case of Forum for People’s Collective Efforts (FPCE) v. State of West Bengal, (2021) 8 SCC 599.

The Court noted that it was evident from the above mentioned Supreme Court’s judgment that what can been saved by the Supreme Court under Article 142 of the Constitution of India are legislation, sanction and permission already granted. The orders already passed under the said repealed act, have not been specifically mentioned to have been saved.

The Court finally observed:

“It is only the Hon’ble Supreme Court under Article 142 of the Constitution of India, that can clarify as to whether the orders passed under the erstwhile WBHIRA, are saved and the execution thereof can be continued post the decision in the Forum for People’s Collective Case (Supra) or whether the execution should be carried out under the Real Estate Regulation Authority Act, 2016.”