RERA or Consumer Fora – Homebuyers can make the choice!

Can allottees approach Consumer Forum under the Consumer Protection Act, 1986[1] (the “CP Act”), despite the remedies available under the Real Estate (Regulation and Development) Act, 2016 (the “RERA”), if they don’t want to take a recourse under the latter? This question was long debated and the Supreme Court of India (“Supreme Court”) finally answered it in the case of Imperial Structures Limited v. Surinder Anil Patni and Another[2]. The Supreme Court held that the RERA does not bar the jurisdiction of the CP Act to deal with the complaints filed by consumers who are homebuyers or allottees of real estate projects registered under RERA. While this finding may create more challenges and complexities, such as parallel litigations and claims initiated under both RERA and CP Act, we will analyse the rationale behind this judgment.

The issue arose out of the builder-buyer agreement executed by Imperial Structures Limited with buyers of its housing scheme, ESFERA in Gurgaon, Haryana (the “Project”). The Project was launched in 2011 and the homebuyers later approached National Consumer Disputes Redressal Commission (the “NCDRC”) claiming that despite the lapse of 42 months, they have not received possession of their homes.  In 2019, the NCDRC directed the developer company to refund the sums deposited by each of the petitioner homebuyers with a simple interest of 9% per annum from the respective dates of payments along with a litigation cost of Rs 50,000 to each of the petitioners.

Against the decision of the NCDRC, the developer company approached the Supreme Court appealing that since the project has been registered under RERA, the buyers cannot approach NCDRC. The developer company also argued that the homebuyers had bought the properties not for residential purposes but as commercial investments, and hence they cannot be referred to as ‘Consumers’ under the explanation of the CP Act.

While upholding the verdict of the NCDRC in favour of the homebuyers, the apex court stated that though the special 2016 legislation i.e., RERA had many features that benefit the allottees, Consumer Fora still have the authority to entertain complaints of the homebuyers if they qualify under the definition of ‘consumer’ under the CP Act.  The Supreme Court referred to the earlier precedents of National Seeds Corporation Limited vs. M. Madhusudhan Reddy and Another[3] and Secretary, Thirumurugan Cooperative Agricultural Credit Society vs. M. Lalitha[4] and held that the very purpose of the CP Act is to provide better protection to the consumers and it should be read in addition to remedies contained in other laws.

The Supreme Court further held that the restriction provided under Section 79 of the RERA is only in relation to jurisdiction of civil courts and, the Consumer Forums and NCDRC are not civil courts within the meaning of Civil Procedure Code, 1908. It further held that the provisions of Section 71(1) of the RERA Act gives a choice to the allottees, whether they want to initiate appropriate proceedings under the CP Act or file an application under the RERA. In this regard, the Supreme Court also observed that the RERA does not statutorily force a person to withdraw any such complaint nor do the provisions of the RERA Act create any mechanism for the transfer of such pending proceedings to authorities under the RERA Act.

Lastly, the Supreme Court observed that even the new Consumer Protection Act of 2019, which has been enacted post implementation of RERA, does not refuse the remedies under it to the homebuyers. Therefore, the remedies provided under CP Act should not be regarded as mutually exclusive with other legal remedies available to a homebuyer.

What lies ahead?

This judgment has indefinitely clarified that the allottees have the liberty to select between RERA  and the Consumer Fora to exercise their rights in a real estate project.  As the real estate business continues to grapple with the unprecedented challenges presented by ever-growing liquidity crisis and the current pandemic, the delayed projects will have to prepare for longer legal battles on account of possible initiation of new cases before RERA or the Consumer Fora.

[1] Or the Consumer Protection Act, 2019.

[2] Judgement dated November 2, 2020 in Civil Appeal No. 3581-3590 of 2020.

[3] (2012) 2 SCC 506.

[4] (2004) 1 SCC 305.