Unitech, Jaypee saga: Time and again, Supreme Court has been the saviour of distraught homebuyers

Over the past few years, the real estate landscape of the country has changed significantly, and the scales are steadily tilting in favour of the average homebuyer. Take the Supreme Court's stance on the ongoing Unitech versus the National Company Law Tribunal (NCLT) saga for instance. Today, while hearing an appeal filed by Unitech against NCLT's order directing the central government to take over the company, the court asked the Centre to give its suggestions on protecting the interest of homebuyers. Here are some landmark judgements by the apex court that have tremendously benefited homebuyers battling ruthless or lethargic developers.

Changes in layouts/floor plans require buyer consent

Before 2015, real estate developers had been known to make sudden, unannounced changes in project plans after selling a significant proportion of flats, much to the disadvantage of homebuyers. This was a rampant practice despite various judgements by state courts ruling against it. Then, in August 2015, the Supreme Court ruled that no layout and floor plan changes can be done without the prior consent of homebuyers while hearing an appeal by developer GG Associates. The complainant, a resident of Pune, discovered that the builder had changed original plans to merge the common lobby outside his apartment with other apartments only when he got possession. The district forum had ordered the builder to restore the original floor and layout plans along with compensating the homebuyer, a decision that the apex court upheld.

Real estate majors can't abuse their dominant positions

In August 2014, the apex court had come down heavy on real estate majors bulldozing their way into unwarranted gains at the expense of homeowners. By upholding the Rs 630 crore penalty imposed on DLF by the Competition Appellate Tribunal in 2011 for unfair trade practices, the Supreme Court effectively stopped copycats from trying to abuse their dominant positions. The ruling followed complaints by the flat buyer associations of two DLF projects in Gurgaon alleging an increase in the number of floors from what was initially planned, and highly arbitrary and unreasonable conditions on allottees of apartments, which had serious adverse effects on the rights of the buyers.

Strong stance against project delays

In October 2016, the apex court held that a property developer cannot delay the grant of possession of flats to the buyers beyond the period of contract. And, if there is delay, the buyers are entitled for refund of their amount. A three-judge Bench had ordered Unitech Residential Resorts to refund the principal amount of Rs 17 crore to 39 respondent-allottees in the National Capital Region, who had been waiting for their flats for over seven years. In its ruling, the Bench had said, "the appellant builder by delaying or procrastinating the completion of the flats cannot base its stand on excuses or any subterfuge to advance the stand that the constructions take time. It is "flat" or "money". And nothing else." Keep this in mind if the property you have purchased is also being delayed indefinitely under the force majeure banner.  

Similarly, in September 2017, expressing concern "about the tears of the homebuyers who cannot be taken for a ride by builders", the Supreme Court asked Jaypee Associates to pay Rs 5 lakh each to 10 homebuyers who got their flats in a Noida project 5 years later than the promised time. This ruling came during a hearing on an appeal filed by Jaypee against a 2016 NCDRC order that slapped a 12 per cent per annum penalty for the delay in delivery.

Allowing homebuyers to directly approach NCDRC as an association

In February this year, the Supreme Court ruled that aggrieved homebuyers could join hands to directly approach the National Consumer Disputes Redressal Commission (NCDRC) as an association against realtors. Previously, as per the Consumer Protection Act, complainants could approach the NCDRC directly only if the cost involved was more than Rs 1 crore; all other aggrieved homebuyers had to first file a plea at the district consumer forums. In this landmark judgement, the bench headed by Justice Misra saw through Amrapali Sapphire Developers' strategy to use the Rs 1 crore caveat to tire out flat owners in the long route via district consumer forums-thus buying time to complete delayed housing projects-and tilted the scales in favour of flat owners yet again.  

Secured creditors

Two more developments are currently underway that could make life even better for home buyers. The Supreme Court has recently shown its willingness to hear a plea made by the homeowners in the Jaypee default case to allow them to be considered secured creditors. Currently, when builders declare bankruptcy, the liquidation process under NCLT allows affected home buyers to claim compensation as unsecured creditors. This means that they will receive a share of whatever money is left once the operational and financial creditors (secured creditors) have got their dues. All this will change if the Supreme Court rules in favour of the Jaypee homeowners.

Incomplete projects under RERA

Meanwhile, just last week, the Bombay High Court upheld the validity of the Real Estate (Regulation and Development) Act (RERA), and ruled that all incomplete and ongoing housing projects will also be covered under it. The Supreme Court had earlier transferred 21 pending cases filed by real estate developers and individual plot owners challenging the constitutional validity of the Act across the country to the Bombay High Court. So this decision is applicable for all the cases. The builders will, in all likelihood, move Supreme Court to appeal against this decision, and if the latter upholds this ruling then it would have struck yet another one for homebuyers.