The National Consumer Disputes Redressal Commission (NCRDC) Bench interpreting Section 12 (1) ( c) of the Consumer Protection Act conforms to certain provisions of the Real Estate (Regulation and Development) Act 2016.
Experts are of the opinion that the order could not have come at a better time. With consumer activism going up immensely, this order was necessary to deal with the sheer quantum of cases.
It is also important to note that the penalty provision is available only under RERA and not vested with the consumer courts. “RERA specifies that if the buyer is expected to pay a penalty of 18% in case he defaults, the builder too will be liable to pay the same amount and not a meagre Rs 5 per sq ft or a Rs 10 per sq ft.
“The principle and ratio set out in the RERA Act qua the builder and the allottees can now be cited before consumer courts whenever they are applicable for the judgment to confirm to RERA,” says SK Pal, a Supreme Court lawyer.
The court order also clarifies that cases related to properties worth below Rs 20 lakh can be heard in district courts.
NCRDC can be approached for cases of properties in the range of Rs 20 lakh to a crore; and the state commission for cases dealing with properties valued at more than a crore.
“The court has emphasised on the book value of the apartment as specified in the registered document rather than the value of the amount claimed by the buyer. The court has clarified that even if the claim is a meagre Rs 5 lakh but the cost of the apartment at the time of purchase was Rs 1 crore, homebuyers can directly approach the NCRDC rather than going through the lower courts. It is not the amount of the claim but the value of the apartment which is important,” says Pal, adding the judgment has opened the doors to consumer law to a large number of people.
According to Amit Chauhan of Logical Buyer, a real estate blog for homebuyers, such class action suits will benefit homebuyers and will prove to be a deterrent for builders who delay projects. But the only challenge here is that there may be a possibility of sabotage from the developer as a proxy group can join in and derail the case altogether.
This is unfounded, says Pal as it is up to the court in its wisdom to decide who is a collusive perpetrator.
Impact on developers
Legal experts say that the burden on the developer will now increase as he will now have to compensate all homebuyers (even 3,000) as against 50 earlier who went ahead and filed cases.
“If all 5,000 buyers were to give their assent to the public notice, all would automatically be made a party to the case and the developer will have to compensate all of them instead of the 50 who would have filed a case earlier,” says Sethi.
Investors to benefit too
The automatic application of compensation on all buyers will now apply to investors as well, who might actually exploit the situation, says Sahil Sethi, senior associate at law firm Saikrishna and Associates. The investor will benefit as he will automatically be made party to the case and can claim compensation which he could not earlier. “Earlier, if he filed a case in the high court, the maximum the high court did was to ensure that the agreement or the contract he signed with the builder was executed as per law. There were few chances of him getting a penalty. Now like all homebuyers, investors too will be eligible for penalty,” says Sethi.
Will it apply to old cases?
The order will apply to all old and new cases filed under Section 12 (1) (c) of the Act, according to Sethi. This will make life tough for defaulting real estate developers.