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BANKIG AND FINANCE NEWSLETTER October 2019 | Series 28.2

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Banking and Finance Bytes Homebuyers cannot be made to wait indefinitely for

possession of the property

Now the aggrieved homebuyers can approach both

NCDRC and State RERA: Delhi HC

Lis Pendens may be a bar under Section 9 of the IBC

but cannot be a subject matter of Section 7

Maintainability of a suit filed by a person claiming

the title by adverse possession

Homebuyers cannot be made to wait indefinitely for

possession of the property

-Akshay Ramesh, Associate.

National Consumer Disputes Redressal Commission, New

Delhi (“NCDRC”), in the recent case of Mr. Alok Kumar vs

M/s Golden Peacock Residency1, disposed of the appeal

against the Flat Buyer.

NCDRC stated that purchasers cannot be made to wait

indefinitely for the possession of the building unit, and

has directed real estate developer, Golden Peacock

Residency Pvt. Ltd., to refund INR. 4.12 crore with interest

to the homebuyers.

In this order, which came on a complaint filed by Mr. Alok

Kumar under Section 21 (a) (i) of the Consumer

Protection Act, 986 ('the Act”) against the developer

Golden Peacock Residency Pvt. Ltd. (Developer) and the

construction company Homestead Infrastructure

Development Pvt. Ltd., Mr. Alok Kumar submitted that he

was residing in Tokyo, Japan and was looking for

accommodation in India when he saw the Developer's

advertisement of a residential project "Michael

Schumacher World Tower" in Sector 109, Gurgaon.

He argued that after being lured by the advertisement, he

booked an apartment in the residential project in 2012,

and paid a total amount of INR 4,12,98,926 in 2015. He

also pleaded that he had obtained a home loan of INR

2,64,24,926 at 10.10 % per annum in order to make the

payment to the Developer.

1

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI CONSUMER CASE NO. 1315 OF 2018 http://cms.nic.in/ncdrcusersWeb/GetJudgement.do?method=GetJudgement&caseidin=0%2F0%2FCC%2F1315%2F2018&dtofhearing=2019-09-06

According to the 'Flat Buyer's Agreement’ executed

between the Developer and Mr. Alok Kumar, the

possession of the apartment was agreed to be delivered

within 36 months with an additional grace period of six

months from the date of execution of the agreement,

which concluded on 19th August 2016.

It was stated by Mr Alok Kumar that construction work by

the Developer had stopped in 2015. The Developer

informed Mr Alok Kumar that the work had slowed down

since the contract with Homestead Infrastructure, the

construction company, stood terminated. Even so, Mr.

Alok Kumar has assured possession in terms of the

agreement, upon completion of balance work by a new

construction company.

Despite repeated assurances, the construction work

wasn't completed even by 2018, that is when Mr. Alok

Kumar visited the site and found it locked. More than 6

months had passed since the extended date of possession

and yet an exact date of delivery was not allotted by the

Developer. Finally, the complainant issued a legal notice

to the Developer as well as to the construction company,

seeking the exact date of possession of the apartment,

but the same was received back with postal remarks

"refused" and "left".

Unable to get any effective response from both, the

developer or the construction company, Alok Kumar

approached NCDRC in July 2018, seeking a refund of

money paid for purchasing the apartment. Mr. Alok

Kumar's complaint was admitted by the NCDRC on 24th

July, 2018.

The NCDRC,upon consideration of the available

information, held that “the contractual terms of the

Agreement ex-facie one-sided, unfair, and unreasonable,

and incorporation of such one-sided clauses in an

agreement constituted an unfair trade practice as per the

Consumer Protection Act, 1986.” The Commission also

observed that the Complainant, Mr. Alok Kumar could not

be made to wait indefinitely for possession of the unit, as

the construction is yet to be completed, even after a

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period of more than 6 years has lapsed from the date of

booking

In view of the above, the Developer was directed to

refund INR. 4,12,98,926 with interest to Mr. Alok Kumar,

till the date of realisation. The NCDRC Bench said that the

interest was awarded for the interest paid by the

complainant on the home loan availed, and for also

undergoing 'mental agony and monetary loss'.

Furthermore, the Commission also imposed costs of INR

25,000 on the Developer, and disposed of the appeal.

Now the aggrieved homebuyers can approach both

NCDRC and State RERA: Delhi HC. --Gokul. L, Associate.

The recent judgment of the High Court of Delhi has

created a great relief for the aggrieved homebuyers

because now they can approach both National Consumer

Disputes Redressal Commission (NCDRC) and the State

RERA. This development in Indian real estate arose due

to the recent verdict, dated September 4, 2019 held by

the division bench of the High Court of Delhi (High Court)

in M/s M3M India Private Limited & Anr v. Dr Dinesh

Sharma & Anr (CM (M) 1244 of 2019 & CM APPL 38052-

38053 of 2019)2 along with other connected matters. The

court held that remedies to homebuyers under the

Consumer Protection Act, 1986 (“CPA”) and the Real

Estate (Regulation and Development) Act, 2016 (“RERA”)

are concurrent. This judgment allows homebuyers

aggrieved by errant developers to choose between

redressal authorities established under the CPA or the

RERA.

Various developers challenged the order passed by the

NCDRCbefore the High Court of Delhi, wherein, the

NCDRCheld that the remedies provided under the CPA

and RERA are concurrent and the jurisdiction of the

forums/ commissions constituted under the CPA isn’t

ousted by RERA, particularly Section 79 of the RERA.

2 http://lobis.nic.in/ddir/dhc/PRJ/judgement/05-09-

2019/PRJ04092019CMM12442019.pdf 3 Company Appeal (AT) (Insolvency) No. 1021 of 2019 https://nclat.nic.in/Useradmin/upload/6195188245d933d9ce5f27.pdf

Based on discussion held by the Supreme Court in

Pioneer Urban Land and Infrastructure Limited & Anr v.

Union of India & Ors (Writ Petition (Civil) No 43 of 2019),

the High Court arrived at an unequivocal finding that

remedies available under the CPA and RERA to the home

buyers are concurrent and there is no ground for

interference with the view taken by the National

Commission in the judgment impugned before the High

Court. Thus, the High Court dismissed the petitions filed

by the petitioners.

On the contrary, the High Court in its order didn’t deal on

the aspect of whether the jurisdiction of Civil Courts

which is barred under Section 79 of RERA, applies to

Consumer Forums or not. There are various special

statutes that contain provisions akin to Section 79 of the

RERA where the jurisdiction of civil courts is barred and

exclusive jurisdiction is conferred on the authorities

established under the enactment.

Lis Pendens may be a bar under Section 9 of the IBC

but cannot be a subject matter of Section 73 -Dhivya, Associate.

National Company Law Appellate Tribunal, New Delhi

while hearing Company Appeal (AT) (Insolvency) No. 1021

OF 2019 filed by the Promoter of M/s Pashupati Jewellers

(Corporate Debtor) against the order dated 20.09.2019

passed by the Adj. Authority (NCLT), Spl. Bench New

Delhi. Hon'ble Appellate Tribunal relying on the findings

of the Hon'ble Supreme Court in the matter of

Innoventive Industries Ltd vs ICICI Bank & Anr. (2018) 1

SCC 407: whereby Supreme Court had observed “27.

The scheme of the IBC is to ensure that when a default

takes place, in the sense that debt becomes due and is

not paid, the insolvency resolution process begins.

‘Default’ is defined in Section 3(12) as non-payment of a

debt once it becomes due and payable, which includes

non-payment of even a part thereof or an instalment

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amount. For the meaning of ‘debt’, we have to go to

Section 3(11), which tells us that a debt means a liability

of obligation in respect of a ‘claim’ and for the meaning

of ‘claim’, we have to go back to Section 3(6) which

defines “claim” to mean a right to payment even if it is

disputed. The Code gets triggered when the ‘default’ is

INR one lakh or more (Section 4).

The corporate insolvency resolution process may be

triggered by the corporate debtor itself or a financial

creditor or an operational creditor. A distinction is made

by the IBC between debts owed to financial creditors and

operational creditors. A ‘financial creditor’ has been

defined, under Section 5(7), as a person to whom a

financial debt is owed and ‘financial debt’ is defined in

Section 5(8) as a debt which is disbursed against the

consideration for the time value of money. As opposed to

this, an ‘operational creditor’ means a person to whom

an operational debt is owed and an ‘operational debt’

under Section 5(21) means a claim in respect of the

provision of goods or services.

28. When a financial creditor triggers the process, Section

7 becomes relevant. Under the Explanation to Section

7(1), default is in respect of a financial debt owed to any

financial creditor of the corporate debtor — it need not

be a debt owed to the applicant financial creditor. Under

Section 7(2), an application is to be made under sub-

section (1) in such form and manner as is prescribed,

which takes us to the Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016.

Under Rule 4, the application is made by a financial

creditor in Form 1 accompanied by documents and

records required therein.

Form 1 is a detailed form in 5 parts, which requires

particulars of the applicant in Part I, particulars of the

corporate debtor in Part II, particulars of the proposed

interim resolution professional in Part III, particulars of

the financial debt in Part IV and documents, records and

evidence of default in Part V. Under Rule 4(3), the

applicant is to dispatch a copy of the application filed with

the adjudicating authority by registered post or speed

post to the registered office of the corporate debtor.

The speed, within which the adjudicating authority is to

ascertain the existence of a default from the records of

the information utility or on the basis of evidence

furnished by the financial creditor, is important. This it

must do within 14 days of the receipt of the application.

It is at the stage of Section 7(5), where the adjudicating

authority is to be satisfied that a default has occurred,

that the corporate debtor is entitled to point out that a

default has not occurred in the sense that the “debt”,

which may also include a disputed claim, is not due. A

debt may not be due if it is not payable in law or in fact.

The moment the adjudicating authority is satisfied that a

default has occurred, the application must be admitted

unless it is incomplete, in which case it may give notice to

the applicant to rectify the defect within 7 days of receipt

of a notice from the adjudicating authority. Under sub-

section (7), the adjudicating authority shall then

communicate the order passed to the financial creditor

and corporate debtor within 7 days of admission or

rejection of such application, as the case may be.”

NCLAT while dismissing the petition observed that when

Adjudicating Authority being satisfied that the debt is

payable and there is default, the Adjudicating Authority is

required to admit the application and that the

Respondent – M/s Pashupati Jewellers having enclosed

the copy of the ‘Corporate Guarantee and Undertaking’

Agreement dated 7th April, 2017 instituted on e-Stamp,

issued by Government of National Capital Territory of

Delhi, it was not open to the Adjudicating Authority to

deliberate on the issue whether e-Stamp is a forged

document or not. And held that merely because a suit has

been filed by the Appellant and pending, cannot be a

ground to reject the application under Section 7 of the

I&B Code, and that the pre-existing dispute cannot be a

subject matter of Section 7, though it may be relevant

under Section 9 of the I&B Code.

Maintainability of a suit filed by a person claiming the

title by adverse possession -Latha Shanmugam, Associate

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In the case titled “Ravinder Kaur Grewal vs Manjit Kaur4”,

on August 07, 2019, Supreme Court has decided on the

questions of law, “Whether a person claiming the title by

virtue of adverse possession can maintain a suit under

Article 65 of the Limitation Act, 1963 for declaration of

title and for a permanent injunction seeking the protection

of his possession or for restoration of possession in case of

illegal dispossession” and “ Whether Article 65 of

Limitation Act, 1963 only enables a person to set up a plea

of adverse possession as a shield as a defendant and such

a plea cannot be used as a sword by a plaintiff to protect

the possession of immovable property or to recover it in

case of dispossession”.

While discussing about the adverse possession, the court

explained that to establish the adverse possession co-

existing of the three classic requirements i.e. nec-vi

(adequate in continuity), nec-clam (adequate in publicity)

and nec precario (adverse to a competitor) are necessary

and the trespassers in long possession and persons in

possession of property reserved for public use are not

considered to have adverse possession to acquire the

title.

The concept of adverse possession confers right on

possessor after the extinguishment of right on the owner

and for the person to sue for possession would indicate

that the right has accrued to him in present and not in the

future. Under Article 65, a suit can be filed for recovery

of possession based on the title within 12 years of the

start of adverse possession which means if the rightful

owner does not initiate an action for possession within

the period of limitation, his right is lost and the person in

possession acquires the title.

Further, the person in possession cannot be expelled by

another person except by due procedure of law and once

the 12 years’ period of adverse possession is over, even

the owner’s right to eject him is lost and the possession

holder acquires the right, title and interest and once the

right, title and interest is acquired it can be used as a

sword by the plaintiff and a shield by the defendant and

4 Ravinder Kaur Grewal vs Manjit Kaur, C.A. No. 7764 of 2014

if adverse possession is perfected he can file suit for

restoration of possession in case of dispossession and the

person is not remediless.

Further, the supreme court also overruled the decisions

in Gurudwara Sahab v. Gram Panchayat Village, Sithala,

State of Uttarakhand v. Mandir Shri Lakshmi Siddh

Maharaj and Dharampal (dead) through LRs v. Punjab

Wakf Board and held that the plea of acquisition of title

by adverse possession can be claimed by plaintiff under

Article 65 of the Limitation Act, 1963 to sue in case of any

infringement to the rights.

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