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The Real Estate (Regulation and Development) Act, 2016 (“RERA”) has address several issues faced by various stakeholders, yet, there remains aspects in the real estate sector requiring further attention by the authorities. Cases have emerged where allottees are untraceable, unable to make payments, or neglecting their obligations under the registered agreement for sale (“AFS”) resulting in breaches and eventually termination.
However, in some cases an allottee may not come forward to sign and register a cancellation deed, restricting the developer's ability to deal with the unit in spite of termination. What are the legal remedies available in such scenarios, considering the complexities that stakeholders face?
Relevant Provisions
RERA casts obligations on both promoters and allottees. Promoters must deliver properties as per agreed specifications, while allottees must fulfil payment obligations and cooperate in the completion process.
RERA and various rules framed thereunder interalia provides that:
- allottees must make payment of instalments and other charges on time as agreed under the registered AFS;
- allottees are liable to pay interest for delayed payments;
- promoters can charge interest for payment defaults and terminate the agreement if an allottee defaults on three instalments. Promoters are allowed to cancel the allotment only in terms of the AFS as per Section 11(5) of the RERA.
- any penalty imposed is recoverable under section 40 of RERA, in the same manner as land revenue under the Maharashtra Land Revenue Code, 1966.
- orders or directions by an adjudicating officer, Regulatory Authority or the Appellate Tribunal, must be enforced as prescribed.
Specific Relief Act 1963 (“SRA”)
Additionally, Section 31 of the SRA allows a court to cancel an instrument if it is void or voidable. A party believing that the instrument could harm them can file a suit for its cancellation. The court may declare the instrument void or voidable and order its cancellation, relieving the party from obligations or potential harm.
Issue At Hand
Now a days many cases are emerging whereby promoters are faced with difficult situations when there is failure on part of allottee to fulfil their obligations under the AFS. The allottees either stop making payment of the balance consideration as per the timelines mentioned in the AFS or are either absconding or are not traceable.
Apart from Section 11(5) of RERA, there is no specific provision under RERA which expressly sets out the procedure to be followed under such circumstances leading to confusion as regards available remedy. This leads to inventory being stuck which may have an overall bearing on financial viability of the project an in time hamper the project and affect bonafide allottee.
Orders Passed Under Rera
When facing a circumstance of defaulted payments from the allottee, not only Karnataka Real Estate Appellate Tribunal, but also Adjudicating officer, Maharashtra Real Estate Regulatory Authority held that the Authority, under Section 11(5) of RERA, can validate the termination of AFS by the promoter and ordered its cancellation by sub-registrar.
Conclusion
When there is a special act which covers all aspects regarding sale and purchase of units then the question of seeking a remedy under any other act should not arise and the same should be done under the RERA only. There should not be any requirement of a party to go to civil court in view of RERA which is an encompassing law covering the issue at hand.
Considering that RERA is meant to be an act which regulates the real estate sector, issue at hand can be addressed by appropriate authority as against a party approaching the civil court as the RERA itself bars jurisdiction of a civil court.
Amendments can be made to RERA to clarify the issue and prescribe a detailed procedure to be adopted in such scenarios. As per the power given under Section 37 of RERA, authority can also issue a circular detailing a pre-defined process for promoters before applying for cancellation (like issuing notices, declaration by the promoter, details of funds received from the allottee etc.), ensuring faster resolution and protection of genuine allottees’ rights.
