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The Karnataka Real Estate Regulatory Authority (‘KRERA’ in short) IN Complaint No. CMP/201230/0007353, has passed an Order dated 02.01.2023 cancelling the Agreement for Sale entered into between the Complainant- Promoter and the Respondent allottee which had been duly registered before the jurisdictional Sub-Registrar. The KRERA further directed the Sub- Registrar to cancel the Agreement for Sale which was registered.

The Order so passed by the KRERA goes a long way in addressing the issue of allottees not adhering to the terms of the Agreements for Sale that they entered into and make payments as per the payment schedule in such Agreements in respect of the apartment or plots that they would have agreed to purchase from the Promoters. While Section 13 prescribes that any order to receive a sum of more than 10% of the sale price of an apartment or a plot, the Sale Agreement has to be executed and registered under any law for the time being in force, upon the allottee paying more than 10% when the Agreement comes to be executed and registered as mandated, the encumbrance is created in respect of the apartment or plot which is agreed to be sold under the Agreement for Sale.   Upon failure on the part of the allottee to adhere to the terms of the Agreement for Sale, the Promoter or the Developer then faces the problem of encumbered unit for which the allottee not paying the money as per the payment schedule and has also not coming forward to cancel the Agreement for Sale which may also stipulated the condition that the booking amount of 10% paid by the allottee would stand forfeited in the event of the allottee cancelling the Agreement.

In such cases, the Real Estate (Regulation and Development) Act (‘Act’ in short) under Section 19, the liability is fastened upon the allottee to not only make payments in the manner and within the time as specified in the Agreement for Sale but also be liable to pay interest at the rate as may be prescribed, for the delay in payments towards any amount or charges to be paid as a consequence of not having made the payments as per the terms of the Agreements for Sale. The Promoter/Developer, in such a case, can file a complaint before Real Estate Regulatory Authority (‘Authority’ in short) and seek for the relief of direction to the allottee to pay the balance amount that remained unpaid as per the schedule of payments under the Agreement for Sale along with interest as prescribed therein and seek for an alternative prayer of cancellation of Agreement for Sale along with payment of money towards interest that may have accrued on account of non-payment of the money as per the payment schedule.

The Authority can exercise the powers under Section 31 of the Act while entertaining the complaint filed by a Promoter on account of the breach committed by the allottees and since the Act now under Section 79 bars the jurisdiction of Civil Court to entertain any suit or proceedings in respect of any matter which the Authority or the Adjudicating Officer or the Appellate Tribunal is empowered by or under the Act to determine, effectively in respect of any project which is registered under the provisions of the Act over which the Authority can exercise jurisdiction, all matters relating to such a project in respect of which a complaint can be brought under Section 31 of the Act by an aggrieved person, to remedy violation or contravention of the provisions of the Act, it would essentially by the Authority which will exercise all powers including the powers that the Civil Court can exercise. This also would include the relief of seeking cancellation of an instrument, which in this case, would be Agreement for Sale.

Further, under Section 88, the provisions of the Authority are declared to be in addition to, and not any derogation of the provision of any other law for the time being in force, essentially the specific relief or cancellation of an instrument can also be granted by the Authority, which power is generally exercised by the Civil Court.

The Order passed by the KRERA thus aims at protecting the interest of the Promoter which is provided under the provisions of the Act and rightfully the Authority has passed the Order directing that the Agreement for Sale be cancelled by the Sub-Registrar by taking into account the fact that in the said complaint, the allottee had failed to make further payments after having entered into Agreement for Sale and registered the same. Such complaints cannot be filed by the Promoters, in order to make the allottees adhere to the terms of the Agreements and force them to pay either the outstanding amount along with interest or to seek for cancellation of the Agreements for Sale so that the encumbrance created over the apartment or the flat is discharged and the Promoter is able to realize the money by selling the same to any other third parties.

It is further pertinent to note that in such cases, the Promoter is eligible to seek for interest and also seek for compensation by filing the complaint before the Adjudicating Officer in the event there are valid ground based on the facts of the case to seek for interest and compensation.

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Smriti Legal LLP is a sector focused law firm headquartered at Bengaluru with associated offices nationwide. The firm specializes in RERA litigation and legal advisory services under The Real Estate (Regulation and Development) Act, 2016 (www.smritilegal.com) Contact: +91 97400 12005 View Full Profile

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