HUGE BACKLOG OF CASES IN THE REAL ESTATE SECTOR: TIME FOR A RE-LOOK AT RERA?

The author is Srinjoy Debnath, a second year student at National Law School of India University.

Recently, the Department of Consumer Affairs held a round conference on ‘How to effectively Redress the Grievances pertaining to the Real Estate Sector’. The conference comes against the backdrop of a huge pendency of cases pertaining to the Real Estate sector in the consumer commissions. While the conference mainly focussed on the minimization of disputes and developing party-friendly dispute resolution mechanisms such as mediation, the question of why so many cases related to real estate are being filled in the consumer commissions when there is a special dispute resolution mechanism under The Real Estate (Regulation and Development) Act, 2016 (‘RERA’), remained unaddressed. In this article, I shall delve into the issues and problems with the dispute resolution mechanism under RERA that makes homebuyers look for other remedies instead of RERA, thus undermining the very intent behind setting up a separate dispute resolution mechanism for the real estate sector.

In order to achieve the same, this article is divided into the following: Section I deals with the territorial jurisdictions of different dispute resolution mechanisms available to the complainant in a real-estate dispute and argues that the dispute resolution mechanism under RERA suffers from a problem of accessibility; Section II looks at the provisions for appeal as provided under RERA and argue that the provisions can be misused in order to delay the execution of the orders; Section III analyses the problem of non-enforcement of the orders passed under RERA and argue that dispute resolution mechanism under RERA lacks the power to enforce its own orders which ultimately undermines its power; Section IV concludes.

ACCESSIBILITY: A PROBLEM UNDER THE RERA PROVISIONS?

Section 3 of RERA mandates every real estate project to be registered under the Real Estate Regulation Authority (‘Authority’) of the concerned state subject to certain exceptions. In case of dispute, a buyer can approach the Authority or the Adjudicating Officer (‘AO’). It is pertinent to note that the authority, as well as The Real Estate Appellate Tribunal (‘Appellate Tribunal’), varies across states and there is no appellate authority at the central level. Therefore, a dispute involving a real estate project which is registered under the Authority of a particular state has to be filed before the Authority of that state only. However, the offices of the authority are not present in every district of the state. Further, there is no mechanism for filing or hearing cases online. This makes it very difficult for buyers from distant parts of the state to avail of the dispute redressal mechanism under RERA. The situation is worse for buyers living in other states so if a person living in Bangalore purchases an apartment in Delhi, they will have to travel all the way to Delhi in order to file a case or attend the hearings. This is where the Consumer Protection Act, 2019 (‘CPA, 2019’) provides a better and more accessible alternative. District Consumer Disputes Redressal Commissions (‘District Commission’) are present in every district and the buyer can file a complaint in the district commission of their residence. This can form part of the reason why there is a huge backlog of Real Estate related cases in the consumer forum even after 7 years since the passing of RERA and the formation of a separate mechanism for real estate disputes.

The issue of inaccessibility can be resolved to a great extent either by opening up RERA authority offices in every district or by establishing a process of Online Dispute Resolution (‘ODR’) mechanism. However, opening up offices in every district may not be feasible and will anyway not solve the problem in its entirety because, in the case of a buyer located in a different state, they will still have to travel all the way to the concerned state in order to file a complaint. ODR provides the ease of filing as well as hearing cases from the comfort of the home or any place that the parties want and consists of minimal travelling. As per NITI Aayog, ODR has the potential to reduce the cost of hearings by 60-70%. The State Legal Services Authority of states like Delhi, Gujarat, and Maharashtra among others have already used ODR mechanisms by tying up with private ODR firms for conducting online Lok Adalats. Apart from accessibility and cost-effectiveness, ODR has other advantages such as the elimination of bias and uniformity in procedure which comes with the use of AI. State-administered ODR mechanisms are already functioning in countries like Brazil, Netherlands, and Columbia among others. However, ODR comes with concerns for privacy which have been voiced by NITI Aayog. Therefore, the Government should look at ways of implementing a proper ODR mechanism with proper checks and balances which will benefit the parties involved and protect their privacy at the same time.

DISPUTES UNDER RERA: THE START OF A CYCLE OF APPEALS

The authority, the AO, or the Appellate Tribunal does not have any pecuniary limits or jurisdiction under RERA. Therefore, the parties to a dispute must file the case at the same forum (either with the authority or with the Adjudicating Officer) and also follow the same hierarchy of appeals irrespective of the amount of money or monetary value of the asset in question. In contrast, the consumer forum has fixed pecuniary jurisdictions for all three levels, namely, the District, State, and National Consumer Dispute Redressal Commission (‘NCDRC’). The NCDRC had held that the amount of consideration paid by all the persons joined as a complainant must be taken together while deciding the pecuniary jurisdiction of the respective commission. Therefore, if a buyer who has purchased a flat worth more than Rs 2Cr or a group of buyers whose cumulative investment is more than Rs 2 Crores files a complaint under the provisions of CPA, 2019, they can directly approach the NCDRC and only one appeal lies to the Supreme Court against the decision of the NCDRC. However, if the same person or group uses the provisions under RERA then they will have to start with the authority or the AO. Further, the hierarchy of appeals as provided under the RERA is not really promising. The first appeal against the decision of the Authority or the AO lies to the Appellate Tribunal while the second appeal lies to the High Court. The second appeal is where the parties are thrown into the problem of delayed justice. As per the data available on the website of National Judicial Data Grid (NJDG), there were around 13.88 lakh cases in different High Courts which are pending for more than 5 years and formed more than 40% of the total cases filed in the High courts as of 2018. Quick resolution of disputes was certainly one of the main objectives of the RERA as the act fixes short time frames for disposing of cases as well as the limitation period for filing an appeal against the order. However, having the high court as the appellate authority against the judgment of the appellate tribunal, the legislature may just have opened the floodgates for long-drawn legal battles under the dispute resolution mechanism provided in the act. Constituting an appellate authority at the national level or excluding the High Courts from the order of appeals can go a long way in expediting the resolution process.

This section dealt with the potential problems which the buyer may face if the builder appeals against a pro-buyer order. In the following section, I shall look at cases where the builder has not appealed against the order of the Authority or the AO but the buyer has struggled to get the orders enforced even after receiving a favourable order.

RERA: NO FORCE TO ENFORCE

As per the data released by the Ministry of Housing and Urban Affairs, more than 1 lakh complaints have been successfully disposed of by the authorities under RERA across the states. However, concerns have been raised about the powers of the authority to enforce the orders which it has passed. In case of non-compliance with any penalty or compensation awarded by the authorities under RERA, the same is recovered as arrears of land revenue. In the case of Uttar Pradesh, for example, the order of recovery passed under section 40 of the RERA is addressed to the district magistrate who is in charge of enforcing such order as per the local laws. However, in case the district magistrate fails to recover the same, the buyers are left with little remedy. There have been cases where the homebuyers have approached the NCLT as decree holders in order to start insolvency proceedings against the corporate debtor. In other cases, the buyers had to file a writ petition in the High Court against the district magistrate or collector in order to recover the amount. One of the hurdles which the district magistrate faces is the lack of manpower available and a huge workload. This problem has led buyers to opt for other remedies like the Insolvency and Bankruptcy Code, 2016 (‘IBC’). Around 20% of all cases under the IBC are related to the real estate sector as of 2020. A part of these has been filed by the homebuyers. IBC provides a time-bound process and the courts have often taken a homebuyer-friendly approach. The government too has come up with amendments to clarify the position and interests of homebuyers under the IBC. Recently, the Ministry of Corporate Affairs has proposed a few amendments to the IBC which will look to safeguard the interests of homebuyers. However, not much is being done to strengthen the powers of RERA authorities, which were established to make lives easier for homebuyers. The problem of non-compliance with the orders of RERA authorities needs immediate attention. The government should look at ways of strengthening adjudicatory and enforcement powers of the authority so that the buyers don’t have to run from pillar to post in order to get the orders executed.

CONCLUSION AND THE WAY FORWARD

This article has pointed out three major problems with the legislation and have suggested changes for eliminating the same. The usage of ODR for addressing concerns about accessibility of the dispute resolution mechanism under RERA is suggested. However, ODR should be in addition and not a replacement for the existing system. The aggrieved party should be given the option to opt for either the ODR or the existing mechanism. Technological advancement is ever-growing and a pro-technology stand by the government can ensure that the fruits of the consumer-friendly legislation is realised to its full potential.

The number of appeals provided under the act can be reduced by establishing an appellate tribunal at the national level instead of the existing appellate tribunal at the state level and an appeal from the national tribunal should lie to the Supreme Court which is similar to the structure operating for the consumer dispute redressal commissions. This will ensure that the homebuyers do not get lost in a cycle of appeals.

The problem of enforceability can be redressed by strengthening the current mechanism with a specialised person who would be tasked with ensuring that the orders get enforced instead of involving the District Magistrate who is usually overworked and lacks sufficient manpower.

RERA is a consumer-friendly legislation which was brought in with the intent of protecting the homebuyers and their interests. RERA has already done a great job in states like Maharashtra but a few concerns related to the dispute resolution mechanism remain. The focus of the Government so far including the round table conference has remained on preventing disputes in the first place. However, disputes are bound to happen and the government has time and again overlooked the issues clogging the dispute resolution mechanism under RERA in the current form.