Project Delay and Absolute Right of Homebuyer to get Refund of their money

Real Estate (Regulation and Development) Act, 2016 popularly known as RERA Act was enacted with an intent of bringing efficiency and transparency in real estate sector and to protect the interest of buyers in the real estate sector. Prior to enactment of RERA Act, it was seen that the builders failed to deliver the possession of units to the homebuyers even after a prolonged delay on their account. Though the redressal mechanisms were available, but they were not efficient as it used to take awfully long time. One of the major objectives of RERA Act was to provide for an adjudicating mechanism for speedy dispute redressal. Section 18 of RERA Act puts obligation on the promoter to return the amount along with compensating the buyer in case of default by the promoter in delivering possession of the unit or in case the promoter fails to discharge any other obligations mentioned in the act or the rules and regulations made thereunder.

Promoter Unable to Deliver Possession:

According to Section 18 (1) of RERA Act, the buyer is entitled to get refund of whole of the amount invested by him in promoter’s project along with the interest and including compensation if the Promoter:

• Fails to deliver possession in accordance with terms and conditions laid down in the Agreement to Sell.
• Is unable to complete the project in due time specified in the agreement.
• Fails to deliver possession on account of discontinuance his business due to revocation of his project under this act or for any other reasons.

It is pertinent to note here that Section 18 (1) gives two kinds of rights to the buyers i.e. Right to get Refund along with Interest and Right to get Compensation.

Right to get Refund under Section 18 RERA

The right of the buyer to seek refund with interest is an unqualified and absolute right. The same has been established by the Hon’ble Supreme Court in Imperia Structures Ltd. Vs. Anil Patni and Another held that Section 18 confers an unqualified right upon an allottee to get refund of the amount deposited with the promoter and interest at the prescribed rate, if the promoter fails to complete or is unable to give possession of an apartment as per the date specified in the home buyer’s agreement.

Earlier the authorities while deciding refund cases use to link the same with the stage of construction and normally would not pass a refund order in case the promoter has gotten the occupancy certificate or when the construction was at an advance stage. But now it has been a settled position in law that the Right of Allottee to seek refund is an unqualified right. It has been very clear that this right of allotee is independent of any contingency and stipulations

The same has been reiterated by the Hon’ble Supreme Court in the case of Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P. wherethe hon’ble Court noted thatthe legislative intention and mandate is clear that Section 18(1) is an indefeasible right of the allottee to get a return of the amount on demand, if the promoter is unable to handover possession in terms of the agreement for sale or failed to complete the project by the date specified and the justification which the promotor wants to tender as his defence as to why the withdrawal of the amount under the scheme of the Act may not be justified appears to be insignificant and the regulatory authority with summary nature of scrutiny of undisputed facts may determine the refund of the amount which the allottee has deposited, while seeking withdrawal from the project, with interest, that too has been prescribed under the Act.

Interest for Delay in Possession:

Moreover, section 18 (1) of the act also states that in case if the allottee does not want to withdraw from the project he is entitled to get interest for every month of delay till handling over the possession by the promoter. The interest for delay in possession of flat cannot be denied on the fact that there is no registered agreement to sell. In a recent order dated 17.06.2022, Maharashtra Real Estate Appellate Tribunal observed that merely because there is no registered agreement between a developer and home buyer, interest relief for delayed possession under section 18 cannot be denied. In the absence of a formal agreement, any other document such as an allotment letter, brochure, template or email communication mentioning the date of possession can be considered to work out the delay in possession.

Right to get Compensation under Section 18 RERA

Apart from non-delivery of the possession by the promoter on the account of conditions mentioned above, the buyer is also entitled to seek compensation under Section 18(2) and 18(3) of the act. The promoter is liable to pay compensation to the buyer if:

• There is a loss caused to the buyer due to defective title of land.
• Promoter fails to discharge any obligations under RERA Act, or the Rules and Regulations made thereunder.
• Promoter fails to comply with terms and conditions of the Agreement to Sell.

The right to decide the compensation is vested in the adjudicating officer which shall be appointed by Real Estate Regulatory Authority in consultation with the government. The buyer has to move an application separately before the adjudicating officer and the authority cannot decide on the matters of compensation.

The Hon’ble Supreme court has cleared doubts over the ambiguity about the Powers of Authority and Adjudicating Officer for granting Refund and Compensation and in Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P. (supra) the Hon’ble court noted that when it comes to refund of the amount, and interest on the refund amount, or directing payment of interest for delayed delivery of possession, or penalty and interest thereon, it is the regulatory authority which has the power to examine and determine the outcome of a complaint. At the same time, when it comes to a question of seeking the relief of adjudging compensation and interest thereon the adjudicating officer exclusively has the power to determine, keeping in view the collective reading of Section 71 read with Section 72 of the Act.

It is also worthwhile to notice that while disposing of such complaints for the compensation the adjudicating officer is empowered to conduct enquiry and direct the payment compensation and interest, as the case may be and such complaints are to be statutorily disposed of within 60 days failing which the reasons are to be recorded.

Conclusion

The scheme of the Section 18 of RERA Act is to return the allottee, his life savings with interest as computed by the authority. It is held by the judiciary that such a right of seeking refund vested in the buyer by the provisions of Section 18 is absolute and unqualified. Moreover, it is left at the will of the buyer that he could either file a complaint for the refund with interest or a complaint for seeking compensation. The provisions mentioned under section 18 act have proved to be very efficacious in protecting the interest of buyers and may buyers have been able to claim back from promoters their hard-earned money along with the specified interest.