Bombay High Court Diary
Introduction
[1]The Maharashtra Real Estate Regulatory Authority (for short, “MahaRERA”), Chairman Shri. Ajoy Mehta was hearing a bunch of complaints filed by a Pune based Promoter/Developer against 9 (nine) flat purchasers/allottees for committing defaults in making payments according to the timelines outlined in their respective Agreements for Sale.
Facts of the case
The Complainant is the Promoter/Developer under the ambit of Section 2 (zk) of the Real Estate Regulation and Development Act, 2016 (for short, “said Act”) and the Respondents in all the complaints are flat purchasers/ allottees within the scope of Section 2 (d) of the said Act.
The Complainant is registered as a ‘Promoter’ under the purview of Section 5 of the said Act for his projects known as ‘Geras World of Joy’ and ‘Geras Imperium Oasis’ in Pune. The Complainant submitted that the 9 (nine) flat purchasers had made part payments in respect of the flats agreed to be purchased by them in his real estate projects as mentioned hereinabove and the Agreements for Sale were executed between the year 2019 and 2020.
It was contended by the Complainant that he had issued demand notices and also sent several reminders to the Respondents from time to time calling upon them to make the payments of the outstanding instalments. However, inspite of the Complainant’s bonafide efforts, the Respondents in total disregard of the sincere appeals and requests made to them, defaulted in making timely payments as stated in their respective Agreements for Sale.
Therefore, the Complainant was compelled to issue termination notices to the Respondents. The Complainant approached the MahaRERA praying for a declaration that the agreements registered in the Office of the Sub – Registrar stand terminated and cancelled and accordingly the Office of Sub – Registrar be directed to make appropriate entry/note in its record.
Issue before the MahaRERA for adjudication
Whether the Complainant was entitled to reliefs under the said Act?
Observations of the MahaRERA
The MahaRERA made the following observations in its order.
- The stage wise instalments as mentioned in the Agreement for Sale towards the flat agreed to be purchased by the respective flat purchaser/allottee became due and payable upon the completion of the work as set out in the Agreements.
A consistent cash flow is the requirement of every project and hence the monies in an under construction real estate project are to be paid by the flat purchasers/allottees at predefined stages.
- It took into consideration the fact that the Respondents had only made the payments of some amounts and no further amounts were paid by them till date.
- The MahaRERA remarked that the flat purchasers/allottees are under an obligation to make the payments in accordance with the timelines as stipulated in the Agreements for Sale.
- It noted that the Respondents had remained absent and had failed to provide any kind of evidence or document to prove the contrary.
The MahaRERA analyzed Section 19(6) of the said Act pertaining to the rights and duties of the allottees which is reproduced herein below.
CHAPTER IV
19. Rights and Duties of Allottees
“(6) Every allottee, who has entered into an agreement for sale to take a flat, plot or building as the case may be, under Section 13, shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other charges, if any.”
After analyzing the said section and considering the submissions made by the Complainant, the MahaRERA observed that the Respondents had without an iota of doubt, defaulted in performing their duties of paying the instalments on time and thus had committed a contravention of Section 19(6).
The MahaRERA studied Section 34 of the said Act relating to functions of the authority. Section 34 (f) reads as follows:
“(f)to ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents under this Act and the rules and regulations made thereunder,”
The MahaRERA also scrutinized Section 11(5) of the Act which reads as follows:
Section 11- Functions and Duties of Promoter:
“(5) The promoter may cancel the allotment only in terms of the agreement for sale:
Provided that the allottee may approach the Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, unilateral and without any sufficient cause.”
The MahaRERA derived that the Complainant had terminated the Agreements owing to the default committed by the Respondents in making timely payments and following the termination the Complainant was seeking directions in respect of execution of the cancellation deed.
Order of the MahaRERA
The MahaRERA in its order dated August 25, 2023 directed the Respondents to remain present for executing the cancellation deed within a period of 30 (thirty) days from the date of the said order. It also further added that in the event the Respondents (flat purchasers/allottees) fail and/or avoid to execute the cancellation deed, the Complainant (Promoter/Developer) shall file a non-execution application against the Respondents (flat purchasers/allottees) in the said complaint before the MahaRERA for further action.
In pursuance of the above order passed by the MahaRERA for execution of cancellation deed, only 5 out of the total 9 Respondents (flat purchasers/allottees) came ahead and made the balance payments. Hence, the Complainant filed an appeal before the MahaRERA seeking cancellation of the agreements with the remaining 4 Respondents (flat purchasers/allottees).
The MahaRERA accordingly passed an order in favour of the Complainant for cancellation of the Agreements for Sale with the remaining 4 Respondents (flat purchasers/allottees) due to the default committed by them in making the timely payments to the Complainant (Promoter/Developer) as envisaged in their respective Agreements for Sale.
Analysis of the order
The flat purchasers/ allottees along with the Promoter/Developer have to strictly adhere to the terms and conditions as recorded in the Agreement for Sale, failing which they shall be held liable and responsible for such noncompliance.
The MahaRERA has also prescribed a ‘Model Form of Agreement for Sale’ to be entered into between the Promoter and the Allottees which clearly states that
“Time is essence for the Promoter as well as the Allottee. The Promoter shall abide by the time schedule for completing the project and handing over the [Apartment/Plot] to the Allottee and the common areas to the association of the allottees after receiving the occupancy certificate or the completion certificate or both, as the case may be.
Similarly, the Allottee shall make timely payments of the instalment and other dues payable by him/her and meeting the other obligations under the Agreement subject to the simultaneous stage wise completion of construction by the Promoter as provided in clause hereinabove (Payment Plan).”
The flat purchasers/ allottees cannot avoid discharging their obligation of making timely payments to the Promoter/Developer in consonance with the payment schedule mentioned in the Agreement for Sale. The Promoter/Developer informs the flat purchaser/ allottee about the completion of each stage of work and the flat purchaser/ allottee is bound to pay the amounts due for each instalment against the completion of such construction work.
The said order of the MahaRERA has been passed in the better interest of the Promoters/Developers as it provides a legal recourse to them in cases where the flat purchasers/allottees fail and/or default in making timely payments.
The said order shall help to monitor financial discipline in the real estate industry and shall also safeguard the Promoters/Developers from the flat purchasers/allottees who default in making timely payments to them. It shall also deter the flat purchasers/ allottees from committing a default in complying with their obligation of making payments from time to time to the Promoter/Developer.
[1] GERA Developments Private Limited v/s Ajeesh Peter & Ors
The article is authored by Mrs. Nirali Yash Desai. she is a real estate lawyer working with Damji Shamji Shah Group, Mumbai (in house legal department).