Making a significant move, the Real Estate Appellate Tribunal passed an order
in the favour of a group of flat purchasers/allottees allowing the appeals filed
by them challenging an order passed by MahaRERA. The buyers had made bookings
for purchase of flats in the year 2012-13 in a project named Island City Centre
in Spring Mills Compound, Wadala. The bookings were made by the buyers pursuant
to the various representations made by the promoters of the Project in their
advertisements, brochure, prospectus etc.
Upon making the bookings by paying approximately 19% of the sale consideration
along with Service Tax and MVAT, the buyers were issued allotment letters
containing inter alia a list of amenities to be provided in the flats and
buildings and an express commitment that the possession of the flats would be
handed over in the year 2017.
The promoters, however, failed to handover the possession in the year 2017 and
also carried out major amendments in the plans of the project multiple times and
without any intimation to the buyers. After amendments, the Project was devoid
of many prime features, attractions and amenities that were promised to the
buyers in the advertisements and well as the allotment letters. The RERA came
into force on 1.05.2017 and the promoter then eventually registered his project
with the MahaRERA as it was incomplete on 1.05.2017.
The promoter kept on extending the time line for the completion of the project
and mentioned the proposed date of possession as 31.08.2018 and revised date for
completion of the project as 31.08.2019 at the time of registration.
Aggrieved, the buyers filed complaints before MahaRERA under the Real Estate
(Regulation and Development) Act, 2016 against the promoters and sought to
withdraw from the Project by claiming refund of the sale consideration, service
tax and MVAT paid by them along with interest under Section 12 (case of false
statement contained in the notice, advertisement or prospectus published by the
promoter) and Section 18 (failure on the part of the promoter to give
According to Section 12 of the RERA, if a buyer invests in a particular project
on the basis of the information contained in the prospectus / advertisement or
after seeing a model apartment, plot or building and sustains any loss or damage
by reason of any incorrect, false statement included therein, he shall be
compensated by the promoter. It also provides refund of entire investment with
interest if a buyer wishes to withdraw from the project on being affected by
such incorrect or false statement contained in the advertisement or prospectus.
Section 18 provides that if the promoter fails to complete or is unable to give
possession in accordance with the terms of the agreement for sale he shall be
liable, if the buyer wishes to withdraw from the project, to return the amount
received by him with interest including the compensation in the manner provided
However, the complaints were dismissed by MahaRERA on the ground adopted by the
Promoters that Section 12 and 18 did not apply to the transactions in question
as the same were entered into much prior to enactment of RERA and that there was
no delay under Section 18. The MahaRERA observed that the project was an ongoing
project which was registered under the provisions of RERA once the same was
It is vital to note that, at the time of registering an ongoing project, the
promoters are required to provide a time period within which he undertakes to
complete the project or any part thereof, or as the case may be. The promoters
can provide an updated/extended timeline. In the instant case the promoter had
mentioned August 2019 as the date of completion of the project.
It was on this basis that the MahaRERA held that there was no delay in handing
over the possession. Aggrieved by the order passed by the MahaRERA, the buyers
filed an appeal before the Tribunal.
The Tribunal however, rejected the said view and held that the delay in handing
over possession would be counted from the date mentioned in the Agreement for
Sale ( in this case the brochure) and not from the revised date mentioned at the
time of registration. The Tribunal set aside the order of MahaRERA by holding
that the provisions of Section 12 and 18 would apply even if the transactions
were entered into prior to enactment of RERA as the Project was ongoing and had
not been completed. In the light of the above circumstances, the Tribunal set
aside the order of MahaRERA and ordered the cancellation of allotment letters.
It further directed the promoters to return the amounts they had received from
the buyers along with other ancillary costs including stamp duty, service tax
and MVAT incurred by the home buyers with interest @2% above the State Bank of
India's highest Marginal Cost of Lending Rate from the date of payment of the
said amount till realization of the amount.
Discontented by the order passed by the Real Estate Appellate Tribunal, the
promoters of the project filed appeals before the Hon'ble Bombay High Court
seeking stay of the impugned order passed by the Tribunal. However, the Hon'ble
Bombay High court upheld the Tribunal's order and rejected the appellants prayer
for stay. Dissatisfied and aggrieved, the promoters filed SLP's (Special Leave
Petitions) before the Hon'ble Supreme Court of India.
However, the Supreme Court dismissed its Special Leave Petitions for permission
for filing an appeal against the High Court's judgment that upheld the Real
Estate Appellate Tribunal's order for refund to the flat buyers for delay in
handing over the possession.
The Real Estate Appellate Tribunal's order will go a long way in protecting the
interests of the home buyers against the unfair or unethical practices adopted
by the promoters/ builders, who abdicate their responsibilities with respect to
the agreements entered into by them.
The order has also set the record straight and provided clarity regarding
applicability of Section 12 and Section 18 of RERA upon ongoing Projects. The
same will now have to be followed by the State Authorities and the promoters
will be thwarted from taking the plea of non - applicability of the said
provisions on ongoing projects in future.
The common order passed in the above matter can be perceived as a confirmation
towards the attainment of efficacious remedies embodied in the RERA. It will
help in elevating the level of transparency in real estate transactions. The
order passed will also help to repose hope and trust in the system and prevent
the same from getting dismantled.
It also communicates the message that the home buyers/flat purchasers have a
right to walk out of any project and obtain compensation at the same time, if
the builder fails to fulfill his obligation of granting the possession as per
the agreed timeline. It can be hoped that this order will bring about some
discipline amongst the builders and help the flat buyers to combat against the
malpractices of the builders.
Having invested their hard earned money and time, the home buyers/flat
purchasers cannot be forced to rely upon the false promises of the builders /
developers. It is vital to note that not all buyers are equipped with the
financial capacity to indulge in litigation, as it would entail a heavy
expenditure at their end followed by the perpetration of mental agony.
It can be concluded that RERA has been enacted in the larger public interest for
the purpose of settlement of disputes and redressal of grievances between the
home buyers and the builders/ developers including compensation for any delay in
handing over the possession or non-compliance with the terms of the agreement
etc. The order will induce fear among the builders accompanied with keeping them
more alert while in the course of the transactions.
The order passed in the above matter evidently conveys that the courts and/or
tribunals across the country will not remain mute spectators to the blatant
violation of the law and have been conferred with the power to take strict
action against those who are seen flouting the law.
The stringent provisions within the purview of RERA prescribing imprisonment and
penalties for non-compliance of the rules, now coupled with the above order will
compel the developers / builders to constantly monitor their demeanor ensuring
that the terms and conditions incorporated in the agreements are complied with
in an ethical manner.
- Rohit Chawla and Ors vs. M/s. Bombay Dyeing & Manufacturing Company
limited decided on 31st December 2019.
- M/s. Bombay Dyeing & Manufacturing Company limited v/s. Ashok Narang &
Ors decided on 30th August 2021.