Introduction:

In a recent decision of Dinesh Humane and another vs. Piramal Estate Pvt. Ltd.  the RERA Tribunal, Maharashtra has passed an interesting order highlighting the difference between a “reservation letter”, a “booking form” filled by the buyer for the flat and the formal “Agreement for sale” of the flat. The said decision is bound to bring in material change in the manner in which the documentation takes place between a flat buyer and the Developer.

Facts of the Case:

The flat buyer requested to buy a flat in a project of the Developer and submitted a document namely “request for reservation of flat”. The said request letter was in a ready made “form” not countersigned by the Developer. Along with the said request the Buyer made a payment of Rs. 1,12,393/-. Subsequently, the buyer further paid Rs. 4,49,574/- to the Developer.

However, due to some medical urgency, the Buyer requested for cancellation of the reservation and sought refund of Rs. 5,61,967/- paid to the Developer. Though the Developer honored the cancellation request but refused to refund the amount paid and forfeited the amount paid by Buyer.

Complaint before the Authority:

The Buyer filed a complaint before the Maharashtra Real Estate Regulatory Authority (“Authority”) against the Developer, seeking refund of Rs. 5,61,967/- towards the amount paid for the said flat. After due enquiry was conducted, the Authority passed an order directing the Developer to refund the ‘booking amount’ in accordance with the ‘booking form’ signed by both parties. The Developer used the said order against the Buyer to say that the booking form had a clause holding that amount will be forfeited in case of cancellation. Dissatisfied with the correctness of the order passed by the Authority, the Buyer preferred a first appeal before the Maharashtra Real Estate Appellate Tribunal (“Tribunal”), challenging the said order passed by the Authority.

Before the Tribunal the Buyer pleaded that as per section 18 of RERA the Buyer was entitled to refund and even a claim of interest.

Held by Tribunal:

Firstly, the Tribunal held that the Authority wrongly directed the Developer to refund the amount to the Buyer as per the terms of the ‘booking form’. The reason is that there was no ‘booking form’ executed between the parties. There was only a unilateral reservation request from the Buyer not signed by the Developer. Therefore, in absence of a booking form the Authority could not have issued a direction in the manner it did.

Secondly, the Tribunal came down heavily on the terms of the pre printed reservation letter format. Referring to clause 17 of the said reservation letter it held that the said clause was one sided and unenforceable. The said clause stated that upon cancellation of the allotment, the Developer will be entitled to forfeit 10% of the total price of the flat or the amount paid till date, whichever is less. The Tribunal held that the Buyer was forced to sign the said reservation letter so as to buy the said flat in the Developer’s project.

The Tribunal relied upon the decision passed by the hon’ble Supreme Court in the case of Pioneer Urban Land and Infrastructure vs Govindan Raghavan [Civil Appeal No, 72238 of 2018] which highlighted the non-enforcement of contract, especially where one of the parties had no choice but to give their assent in a prescribed or standard form.

Thirdly, the Tribunal had observed that since an agreement was never executed by either parties, the Buyer could not claim refund as per clause 18 of the model agreement under rules of RERA. As a result, section 18 of RERA will be inapplicable in this case.

Analysis:

(a) The Tribunal rightly pointed out the discrepancy in the order passed by the Authority, differentiating the said reservation letter from  a ‘booking form’. The said reservation letter is merely a one sided request sought by an allottee to book a flat in the promoter’s project. It does not confirm the booking of the said flat because the developer did not sign the said reservation letter. Moreover, the terms of said reservation letter itself was unjust and arbitrary to the interest of the allottee.

A ‘booking form’ on the other hand would confirm the booking of a flat in the promoter’s project, which would be required to be signed and acknowledged by both parties to the transaction. As such, the ‘booking form’ stands legal and valid in the eyes of law, irrespective of whether an AFS was executed between the parties, so long as the allottee has paid an amount to the promoter towards the purchase of flat and the form is signed by both parties.

The above finding by the Tribunal raises an important issue. Section 3 of the RERA holds that the Promoter shall not accept any booking without registering the project under RERA. Conversely, whether this decision leads to a conclusion that the Promoter will be entitled to accept the reservation requests from the Buyers without RERA registration since its not booking. Whether the Developer will be okay to collect the proceeds along with the reservation letter and plead that the said reservation letters cannot be equated with booking since the Developer has not countersigned the reservation letter. The Tribunal has not mentioned anything about the effect of acceptance of money from the Buyer on reservation nor about the issuance of the receipt by the Developer. These were important points to determine the question before the Tribunal.

(b) The other aspect laid down by the Tribunal regarding the one sided nature of the document is well taken. It’s a trite law that the Contract bearing unreasonable and unfair terms will be unenforceable in cases where there is no chance of equal bargaining by either party. As a result, this gives an unfair advantage to such parties who somehow get to dictate the terms of the transaction. A pre printed form with no choice with the buyer but to sign the same will always be looked at adversely by the Courts. Now the amendment in the Consumer Protection Act has specifically included the aspect of one sided or unfair contracts or clauses. Thus the legislature is increasingly putting such contracts and clauses under the lens and examining the issues accordingly.

c) The Tribunal has further held that in absence of a formal Agreement for Sale, section 18 does not come into play. Now this decision also has far reaching impact since in a large number of cases the buyers go to RERA armed with an allotment letter seeking interest for delayed possession etc under section 18. This decision could become a precedent in those cases and will be cited by the Developer.

Though the Buyer was not entitled under section 18 of RERA to claim refund due to non-existence of AFS, this order definitely sets a precedent for other cases wherein an allottee can claim refund of the booking amount even without the existence of AFS since, they are spending their hard-earned money to buy a home.

Finally, taking into consideration the objective of RERA, the Tribunal exercised its inherent powers conferred by Regulation 39 of the Maharashtra Real Estate Regulatory Authority (General) Regulations, 2017 as well as Regulation 25 of the Maharashtra Real Estate Appellate Tribunal Regulation, 2019, thereby granting relief to the Buyer by directing the Developer to refund the entire amount paid to them till date.

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Name: Acelegal
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Company: Acelegal
Location: Vashi, Navi Mumbai, Maharashtra, IN
Member Since: 25 Apr 2020 | Total Posts: 11
Acelegal is a research based law firm specializing in tax and property laws. The firm has been handling assortment of issues relating to Direct and Indirect tax laws with real estate transactions at the heart of functions. It deal with plethora of issues in tax and real estate matters ranging from d View Full Profile

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