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Inappropriate To Entertain Art. 32 Plea By Homebuyers Against Developers: Supreme Courts Points To Provisions In CPA, RERA, IBC, Criminal Law

Mehal Jain
17 Feb 2021 7:27 AM GMT
Inappropriate To Entertain Art. 32 Plea By Homebuyers Against Developers: Supreme Courts Points To Provisions In CPA, RERA, IBC, Criminal Law
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The Supreme Court on Thursday declared that proceedings under Article 32 of the Constitution by a purchaser, seeking relief in respect of a real estate project, cannot be entertained. The bench of Justices D. Y. Chandrachud and M. R. Shah was considering a writ petition by one of the home-buyers in respect of a real estate project called "Sushant Megapolis" in Bulandshahar....

The Supreme Court on Thursday declared that proceedings under Article 32 of the Constitution by a purchaser, seeking relief in respect of a real estate project, cannot be entertained. 

 The bench of Justices D. Y. Chandrachud and M. R. Shah was considering a writ petition by one of the home-buyers in respect of a real estate project called "Sushant Megapolis" in Bulandshahar. The primary relief which had been sought was (i) cancellation of all the agreements; (ii) refund of money to purchasers, and in the alternative (iii) ensuring that the construction is carried out and that the premises are handed over within a reasonable period of time. Incidental to the above reliefs, the petitioner sought the constitution of a Committee headed by a former Judge of the Apex Court together with other persons to monitor and handle the projects of the developer in the present case. The petitioner also sought a forensic audit, an investigation by CBI and by other authorities such as the Serious Fraud Investigation Office and Enforcement Directorate.
"On account of the economic meltdown and now the COVID pandemic, the real estate sector has taken a hit. If we entertain homebuyers' petitions against builders/developers under Article 32, it will open the flood-gates. The Supreme Court will become the 'Building Projects Court'...We will get pleas from every part of the country. If we look at Bulandshahr, we will also have to see Aurangabad and so on...Entertaining a petition of this nature will involve the Court in virtually carrying out day-to-day supervision of a building project", Justice Chandrachud had remarked on Thursday.
"On 7 January 2021, a three-Judge Bench of this Court [of which one of us was a member] has dealt with the maintainability of a petition under Article 32 in similar circumstances. In Shelly Lal v Union of India, this Court declined to entertain the petition", the bench noted in the judgment, penned by Justice Chandrachud.
The bench was of the view that the reliefs which have been extracted earlier would involve the Court in an adjudicative process in determining whether (i) all the agreements should be cancelled; (ii) whether money which is paid by the home buyers should be refunded, or in the alternative (iii) whether judicial directions are necessary to ensure that the project is constructed and the premises are handed over within a reasonable time.
The bench further observed that the writ petition under Article 32 has been filed by a singular home buyer without seeking to represent the entire class of home buyers; that the petition proceeds on the implicit assumption that the interest of all the buyers are identical. "There is no basis to make such an assumption. All buyers may not seek a cancellation and refund of consideration. Apart from this aspect, the petitioner seeks other reliefs in aid of the primary relief, including the constitution of a Committee presided over by a former Judge of this Court for the purpose of handling the projects of the developer where moneys have been taken from home buyers", said the bench.

Opining that it would be inappropriate to entertain a petition under Article 32 for more than one reason, the bench indicated that there are specific statutory provisions holding the field, including among them:

  1. (i) The Consumer Protection Act 19863 and its successor legislation;

  2. (ii) The Real Estate (Regulation and Development) Act 20164; and

  3. (iii) The Insolvency and Bankruptcy Code 20165.

"Each of these statutory enactments has been made by Parliament with a specific purpose in view. The 1986 Act as well as the subsequent legislation contain provisions for representative consumer complaints. One or more homebuyers can consequently seek relief to represent a common grievance for a whole class of purchasers of real estate. The RERA similarly contains specific provisions and remedies for dealing with the grievance of purchasers of real estate. The provisions of the IBC have specifically taken note of the difficulties which are faced by homebuyers by providing for remedies within the fold of the statute", elaborated the bench.

As regards the allegations of fraud at the instance of the petitioner, the bench iterated that insofar as the remedies of a criminal investigation are concerned, there is reason for this Court not to entertain a petition directly under Article 32 in the present set of facts. Adequate remedies are available in terms of the Code of Criminal Procedure 1973. The statutory procedures which are enunciated have to be invoked. Adequate provisions have been made in the statute to deal with the filing of a complaint and for investigation in accordance with law.

"Real estate projects across the country may be facing difficulties. The intervention of the Court cannot be confined to one or a few selected projects. Judicial time is a precious resource which needs to be zealously guarded. We have to always be mindful of the opportunity cost involved in exercising our discretion to admit a petition and to intervene, in terms of diversion of time and resources away from other matters where our intervention would be more apposite and necessary", reflected the bench.

The judgment proceeds to distinguish the cases of Amrapali and Unitech which have seized the indulgence of the Court, orally remarking that in both these instances, the proceedings before the top court had been by way of consequence of prior proceedings at other forums.

"In certain cases in the past, this court has intervened on behalf of home buyers. These include :

  1. (i) Projects of Amrapali Group (Bikram Chatterji v Union of India7); and

  2. (ii) Unitech matter (Bhupinder Singh v Unitech Ltd8)"

The bench clarified that nothing contained in the present judgment will affect those proceedings or similar cases which have been monitored.



Case: Upendra Choudhury vs. Bulandshahar Development Authority [Writ Petition (Civil) No 150 of 2021]
Citation : LL 2021 SC 91

Click here to download the Order


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