Written By: Yosha Dogra, Intern
The Supreme Court in various decisions had held that the rights of the subsequent buyer who purchases from an original alottee were not equal to that of the original alottee. In HUDA v. Raje Ram and Wing Commander Arifur Rahman Khan & Anr. V. DLF Southern Homes Pvt. Ltd. held that if an original alottee in a housing project transfers their rights to another person also called the ‘subsequent buyer’, such a third party could not claim rights to the same extent as the original alottee, specially in claims for interest.
However, this stance of the Supreme Court has changed wherein the above judgments have been overruled. The Apex Court in the case Laureate Buildwell Pvt. Ltd. v. Charanjeet Singh holds the rights of the subsequent buyer to be equal to that of the original alottee which has not only changed the jurisprudence behind rights of homebuyers but also expanded the scope of remedies that can be taken by them.
Facts
An original alottee Madhabi Venkatraman applied for allotment of a residential flat which was to be developed by Laureate builders who were the Appellants. The original alottee paid an amount of 7,00,000 for registration and further deposit of Rs. 32,33,657 out of sale consideration of 2,47,29,405. The appellant issued an allotment letter which stated possession of the flat to be given to the original alottee within 36 months of issuing the letter.
Subsequently, the original alottee paid the first 7 installments amounting to 1,55,89,329 to the Appellant. The original alottee observed the slow pace of construction and decided to sell to the subsequent purchaser, Charanjeet Singh who was ensured possession of flat in a timely manner. The respondent agreed to pay 1,00,000/- to the original allottee along with the balance amount which was to be paid on or before 15, 2015. It was also agreed that the respondent would pay the remaining installments to the appellant. The was informed that the possession of flat could not be delivered by the end of 2017 and therefore asked for a refund along with interest payable at 24% p.a. the appellant demanded payment of further installments and threatened to cancel the deal and forfeit the amount already paid.
The National Consumer Disputes Redressal Commission (hereinafter referred to as (NCDRC) noticed that even though the promised date of delivery was 2015, the tower was far from competition thereby ordering the appellant to pay the amount deposited so far with an interest of 10%p.a. Aggrieved by this ruling of the NCDRC, the appellant filed an appeal before the Supreme Court.
Issue
The issue of consideration, in this case, was whether a subsequent purchaser of a flat from the original alottee in an under-construction project has the same rights and remedies like that of the original purchaser?
Judgment
The Supreme Court held that on issuing the endorsement letter by the Appellant, the Respondent stepped into the shoes of the original alottee and thereby became entitled to the same treatment, rights and reliefs. The purchaser is a ‘consumer’ and is entitled to move any forum under the Consumer Protection Act, 1986. The Court also noted that sometimes the original allottees seek funding from banks or financial institutions to finance their flat by mortgaging property for which they must repay installments towards loan and interest after or even before completion of the property.
If the projects are allowed to continue indefinitely it would lead to economic problems for the original allottees. Therefore, there are situations where the original alottee looks for other purchasers who can step into their shoes and the subsequent purchaser takes the obligations like making the payment of balance installments.
The Apex Court in this matter also delved into the jurisprudence of Consumer Protection Act, 1986 which is to address complaints of consumers and provide a forum for quick redressal thus providing better protection of consumer interests. Furthermore, it was held that where a purchaser steps into the shoes of an original alottee and the commitment is not fulfilled within the stipulated time, it cannot be said that they cannot expect a delivery within reasonable time. It would be arbitrary and unreasonable for the subsequent buyer.
Therefore, the Court modified the order passed by NCDRC and direct appellant to refund the principal amount with an interest of 9% per annum from the date the appellant acquired knowledge of the transfer or acknowledge it.
Analysis-This judgment clearly outlines that the subsequent flat buyers or purchasers would have the same right as the original allottees. This decision is one of the path breaking judgments in the field of real estate as it would bring major relief to the home buyers who have purchased flats from original allottees but were not delivered the flat on grounds of privity of contract by developers who are defaulting.
Reading this judgment in the light of the Consumer Protection Act (hereinafter referred to as (CPA) broadens the scope of remedies available to a ‘consumer’ availing services such as that of construction from developer. The Supreme Court has correctly held the principle of equity enshrined in the CPA as being applicable to both the original alottee as well as the subsequent purchaser who has the same rights and remedies against the builder for indefinite delay of possession of flat.
