Prior to the enactment of Real Estate (Regulation and Development) Act, 2016 (“RERA“), developers often unilaterally added and altered or modified the sanctioned plan, layout plan, and specifications of the building or common areas in an ongoing real estate project. In such a scenario, home buyers with sizeable funds already invested were left with no option but to either accept such new terms forced upon them or engage in a protracted battle in consumer fora and courts spending both time and money.
RERA permits that changes may be done in sanctioned plans and layout by the developers with the prior consent of at least two-third of the allottees who have agreed to take a flat/unit/apartment in the building. Today, home buyers can be content about their interest and be assured against the blanket or general consents, obtained in advance by developers.
With the new development control rules (DCPR 2034) in force in Mumbai and a slowdown in the real estate sector, there has been a rise in revisions of planning and designing of ongoing real estate projects as developers prioritise movement of inventory. We examine a recent judgment by the Maharashtra Real Estate Regulatory Authority (“Maha-RERA“) on 7th January, 2020 in Sunil Wadhwani (“Complainant“) v. Pashmina Realty Private Limited (“Respondent“) in Complaint No. CC006000000078745.
- The Complainant had booked flat no. C-701 having carpet area of 1,436 square feet consisting of 4 (four) bedrooms in the Respondent’s project ‘Pashmina Lotus’ situated at Chandivali, Powai (“the Original Flat“), at and for a consideration of Rs. 2,76,00,000/-.
- The Respondent agreed to handover possession of the Original Flat by 30th September, 2016. However, the project was not viable, the plans were revised and two bedroom and three-bedroom flats were proposed to be constructed with the consent of 2/3rd (two-third) allottees of the project including the Complainant. A new development manager was brought in and the development was rebranded and re-registered under RERA under a new name.
- The Complainant gave express consent for the change in plan on 27th December, 2017 in the form of consent terms (“Consent Letter“) whereby the Complainant has given consent to two flats being flat no. B-1104 admeasuring 770 square feet carpet area and flat no. A-1101 admeasuring 812 square feet carpet area (“New Flats“) and gave consent for re-planning the building under Section 14(2) of RERA.
- After the Consent, the Complainant sought refund of his amount with interest under Section 18 of the RERA claiming that the Respondent failed to handover the possession of the Original Flat on the agreed date.
Whether the Complainant is estopped from denying/withdrawing his consent given for the re-planning of the building?
Observations of Maha-RERA:
- The consent under Section 14(2) of RERA of 2/3rd (two-third) allottees for re-planning has been given to the Respondent and the Respondent has revised the plans. The Respondent is ready to execute the agreements of the flats revised by them i.e. New Flats. Not only that, in terms of the Consent Letter, the Complainant has given his consent to accept the New Flats each consisting of two bedrooms in lieu of the Original Flat consisting of four bedrooms. The Complainant also showed his readiness to pay Rs. 20,00,000/- for additional carpet area which he is going to obtain. These facts, therefore, establish that on the consent of the Complainant, the Respondent has acting to its dis-advantage and hence, the Complainant is estopped under Section 115 of the Evidence Act from withdrawing his consent and his status as an allottee of the New Flats.
- In context of the aforesaid, Maha-RERA observed that provisions of Section 62 of the Contract Act can also be pressed into service, which Section 62 reads as follows:
- “62. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.”
- Maha-RERA also relied upon the observation made by the Hon’ble Supreme Court in the context of Section 62 of the Contract Act in Lata Construction and Others v. Dr. Rameshchandra Ramniklal Shah (2001)1 SCC 586 whereby it was observed:
- “Section 62 of the Contract Act contains the principle of “Novation” of contract. One of the essential requirements of “Novation”, as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be in substitution of the earlier contract.”
Order of the Maha-RERA:
- After considering the facts and circumstances of the case, Maha-RERA found that there is novation of the contract and only a formal contract in writing is to be executed. The consideration of the Original Flat is to be adjusted against the New Flats, otherwise the terms and conditions are similar. In view of the same, the Complainant’s claim for withdrawal is not maintainable and the same is dismissed.
- Maha-RERA, in order to avoid multiplicity of the proceedings, in the capacity of the regulator, directed the parties to enter and register the agreement for sale of New Flats in consonance with terms and the conditions of the Consent Letter and the Previous Agreement within period of 1 (one) month.
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