Tuesday, Jun 28, 2022
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Denied Refund By Developer? Here’s The Legal Recourse Home Buyers Have

Real estate legal experts believe that home buyers have multiple legal avenues to claim refund from a developer. Read here to find out more.

Denied Refund By Developer? Here’s The Legal Recourse Home Buyers Have
Denied Refund By Developer? Here’s The Legal Recourse Home Buyers Have

Recently, the Haryana Real Estate Regulatory Authority (HRERA) issued arrest warrants against directors of real estate firm Ansal Housing and Construction Limited for allegedly failing to deliver residential units to homebuyers on time and for not giving refunds to the allottees.

Amidst all these uncertainties, let us look at the recourse the buyers have against a real estate developer under which they can claim refund for non-fulfilment of obligations on the part of the developer.

What Kind Of Options Do Home Buyers Have?

Legal experts have said that home buyers have multiple legal avenues to claim refund from a developer, in case there is no progression in construction.

“All the different forums are separate and they are distinct legal entities. That said, the home buyer can approach any one of them keeping in mind the factual matrix of his/her respective case,” says Simranjeet Singh, partner, Athena Legal.

A White Painted Home
A White Painted Home Photo by Pixasquare on Unsplash

1. Consumer Protection Act, 2019: A home buyer can file a complaint case before the district, state or National Commission depending on the value claimed, and obtain a refund along with interest and compensation from the respective commission.

2. Real Estate Regulatory Authority Act, 2016: A home buyer can file a complaint before the requisite RERA Authority and seek refund under Section 20 of the Act.

3. Insolvency and Bankruptcy Code, 2016: After various amendments to the Code, a group of home buyers consisting of at least 10 per cent of the total number of allottees of the builder (at least 100 in number) can file an application under Section 7 of the Code before the relevant bench of the National Company Law Tribunal and seek insolvency of the developer in view of non-repayment of the amount deposited by the home buyers.

4. Civil Suit for Recovery: A suit for recovery of the deposited amounts along with interest and compensation can be filed before the district courts or the high court. However, the same is liable to fail in case there is a clause for resolution of disputes through arbitration in the builder-buyer agreement/terms, and the conditions of sale. In such a case, a developer can move an application under Section 8 of the Arbitration and Conciliation Act, and seek dismissal of the suit.

Singh adds: “A home buyer should have complete records of the property and allotment, including allotment letters, all payments receipts, booking application form, if any, builder-buyer agreement, all letters of communications, demand notices/letters sent by the developer in case of delayed payments, etc.”

Things Homebuyers Should Keep In Mind Before Refund Claims

According to real estate experts, there are various stages at which payments are done during the allotment process—from payment of the booking amount/token money, stamp duty, registration charges and GST (Goods and Service Tax), and so on.

Devendra Deshmukh, partner, Khaitan & Co. stressed that a home buyer must always bear in mind the terms and conditions stipulated in an agreement for sale, more specifically the terms which highlight events that trigger defaults on the part of the developer. “The flat buyer shall also ensure that it is not in breach/default of its obligations under the agreement for sale,” he says.

A lot depends on the terms and conditions in the builder-buyer agreement but it should be seen “whether this agreement has legal validity–i.e., whether the builder-buyer agreement has been registered. In case of a registered agreement for sale, all the terms and conditions will be valid, even if they are tilted in favour of the selling party,” says Harish Sharma, founder and CEO, Plinthstone, REMA.

He added that reading the agreement to sell, and the builder-buyer agreement is absolutely crucial. Carefully read the clause pertaining to cancellation of booking and get it changed, if you find that it is heavily in favour of the seller, he says.

What If The Developer Denies Refund?

If the builder fails to refund the said amount to the buyer, the latter can file a complaint against the builder before Rera or the civil court or consumer forum, and seek orders to direct the builder to refund the money with interest.

“A buyer can also file a criminal complaint under Section 420 of the Indian Penal Code alleging cheating by the developer, in view of non-delivery of possession, etc,” Singh adds.