Mumbai: MahaRERA order on Bombay Realty finally out

Updated: Mar 14, 2020, 08:18 IST | Vinod Kumar Menon | Mumbai

The order, verbally passed two months ago, directs the developer to refund buyers; hailed as 'landmark judgement' by lawyers, experts

MahaRERA chief Gautam Chatterjee addresses the BAI
MahaRERA chief Gautam Chatterjee addresses the BAI

The much-awaited Bombay Realty order from MahaRERA Appellate authority is finally out and it is in favour of flat buyers, thereby setting aside the earlier order by MahaRERA chairman which favoured the developer.

Lawyers and real estate experts called it a landmark judgement. The verdict regarding Bombay Realty's Island City Centre project in Dadar was passed on December 31, 2019 and a written order had been awaited ever since. Now out, it directs the developer to pay flat buyers an interest of 10.5 per cent apart from the invested money of Rs 2 crore each and also refund the MVAT paid by the flat buyers. The builder will have to shell out over R30 crore towards a refund.

The flat buyers had challenged the January 9, 2019 order of MahaRERA chairman Gautam Chatterjee saying that a bulk withdrawal from the project would jeopardise the entire project and impact 520 other flat buyers.

The 73-page judgement was passed by a two-member bench of Sumant Kolhe and S S Sandu. "So far, MahaRERA had been saying that section 12 of RERA is not applicable retrospectively or retroactively, which means MahaRERA was not allowing flat buyers to withdraw from the project despite builders not adhering to the promised design and layout of the project," said chartered accountant Ramesh Prabhu, adding, "The developer had initially assured one 85-storey building and another 84-storeyed one but the actual floors built were between 59 to 65 with the layout, dimension and size of flats altered."

Also, section 18 of RERA requires an agreement to be registered to give flat buyers interest and compensation for delayed possession. In this case, however, there was no registered agreement between the parties despite having paid the developer around 20 per cent (R2 crore) towards the flat cost of over Rs 10 crore at the time of booking in 2012-13.

Maiden aspects of order

The appellate tribunal in its verdict considered the marketing brochure of the property and e-mail exchange too was used as evidence for the first time. The developer was supposed to handover the flats between March and August 2017 which he failed to do.

The appellate tribunal, also for the first time, directed the developer to return the VAT and service tax with an interest of 10.5 per cent. It has also informed appellants that in case they required additional compensation for violation of sections 12 (misleading advertisements), section 14 (change of layout and plans) and section 18 (delayed possession of flat) under RERA, they may file a separate complaint before the adjudicating officer of RERA as the regulatory authority is not empowered to grant additional compensation.

The tribunal will have a say in the property until all payments are cleared, which means these flats cannot be resold unless the developer clears all payments.

Other buyers to benefit

Over a hundred flat buyers have registered their complaints on similar grounds before the MahaRERA in the said project. With this order, Prabhu said, the MahaRERA and adjudicating officers will be liable to consider a violation of section 12 and 14 whenever home buyers claim refund, and section 18 for delayed possession, even if the agreement is not registered but the onus is on the flat buyers to prove that the project was indeed delayed.

MahaRERA also cannot hereafter compel flat buyers to continue in the projects citing the larger interest of other flat buyers. The tribunal order also has included references from the Apex Court and Bombay High Court judgements.

'Can't take buyers for granted'

"The judgement explains the intricacies of various sections of the RERA; no wonder it took a long time to be delivered after having been pronounced on December 31, 2019.

This will be a benchmark judgement followed by lower courts and serves well for developers who take buyers for granted," said senior advocate Advocate Vinod Sampat. In all probability, "it is likely to be challenged by the developer to block flat buyers' money and force them to compromise," he added.

Sampat said that builders may also now offer the flats at a price far lower than the original price. "This judgement will result in some discipline amongst the builders and help flat buyers in their fight against influential builders who are in all probability supported by bureaucrats and politicians," Sampat added.

Voices:

Nainesh Sanghavi, a businessman

"This order clearly shows that the RERA Act is with flat buyers and this will be an eyeopener. However, knowing Bombay Dyeing and the promoters, we are confident that they would appeal to the Bombay High Court and Supreme Court and flay buyers would opt for arbitration settlement, but not anymore. I am happy with the judgement."

Paresh Sutaria, Chartered Accountant

"It is very exhaustive order and could be a landmark judgement under the RERA regime, more power to home buyers, and clarity of the RERA act."

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