Real Estate Regulation and Development Act vs The Consumer Protection Act : Which is Better?

Authors:

Tejas Chhura – NLSIU

Kavya Shukla – JGU

Inderjot Kaur - FIMT


Editor:

Tejas Chhura – NLSIU

Introduction

“Customer is king” is a saying that we all are familiar with. However, unfortunately, for the longest time, this was nothing more than just a saying. India lacked any laws regarding consumer protection. As a result, this left consumers vulnerable to exploitations with doctrines such as caveat emptor. However, fortunately, this injustice was not unnoticed, and the legislature introduced the Consumer Protection Act of 1986. Since then, there have been several legislatures and the setting up of several regulatory bodies to further this cause, the most notable of which is the introduction of the Real Estate Regulatory Authority. Since its introduction in 2013, the Real Estate Regulation and Development Act has shaken up the real estate market by helping deliver justice to home-buyers in an efficient manner while relieving pressure on the Consumer courts. This article aims to take a look at the Real Estate Regulation and Development Act and compare and contrast the different remedies it provides as opposed to the Consumer Protection Act.

Introduction to the Real Estate Regulation and Development Act

The Real Estate Regulation and Development Act was introduced by the Indian National Congress Government in 2013. RERA or Real Estate (Regulation and Development) Act, 2016 aims at protecting the home purchasers and also boosts the real estate investments. The bill of this Parliament of India Act was passed on 10 March 2016 by the Upper House (Rajya Sabha). The Real Estate Regulation and Development Act was effective on and from 1 May 2016. During this time, out of 92 sections, 52 were notified. All the other provisions were effective on and from 1 May 2017.[1]


The Real Estate Regulation and Development Act is the first set of the organised legal system to streamline the real estate industry and seeks to bring transparency and accountability that would protect the interest of home buyers and regain the lost faith in the real estate industry.

Objectives of the Real Estate Regulation and Development Act:

The primary objective of the Real Estate Regulation and Development Act is to bring transparency and generate faith & confidence of real estate buyers.

Some of the objectives of RERA have been listed below –[1]

  • To establish a Real Estate Regulatory Authority (RERA) for the sole purpose of regulation in real estate.

  • To provide transparency and grievance system in Real Estate Sector

  • To give protection to buyers of their rights.

  • To establish the authenticity of promoters, real estate project and real estate agents.

  • To control on unnecessary delay in the approval of the project, delivery of project etc.

  • To Set up an independent System for grievance redressal system.

  • To bring confidence in the real estate sector.

  • To prescribe the penalties for defaulters.

Definition of Force Majeure

Force majeure is one of the oldest and most widely used doctrines in order to frustrate a contract. However, India faced a unique problem when it came to the applicability of this doctrine owing to the fact that until the Real Estate Regulation and Development Act, there was no definition of force majeure in the Indian context. Although one could theoretically cite common law cases, international cases are not binding precedents on Indian courts and hold only persuasive value. As a result of this, this left the application of the principle vague and arbitrary. In addition to this, the vagueness in the term, allowed builders to escape liability by claiming force majeure as a reason for the delay, and escape unscathed. However, this was an exploit that the drafters of the Real Estate Regulation and Development Act were aware of and hence, for the first time, the term force majeure as defined in India. Force majeure was defined as “a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project.”[2] This definition has found usage not only in Consumer Protection cases but has rather also been used to fill the gaps in many other legislations. Judges while determining matters regarding force majeure have looked at the definition of the same in the Real Estate Regulation and Development Act

Consumer Protection Act compared to the Real Estate Regulation and Development Act

While a house buyer does fall under the definition of a consumer under Section 2(1)(d) of the Consumer Protection Act, 1986, there is a special legislation protecting their rights, namely the Real Estate Regulation and Development Act. However, this does not bar the remedies that the Consumer Protection Act offers to home-buyers, and a consumer can file a case both under RERA as well as COPRA.[3] However, this begs the question of which one of these legislations should an aggrieved consumer approach?


The author aims to compare these two legislations on three grounds, namely the applicability of the law, the cognisance of the law and the remedies/sanctions/damages that each of them offers.

Applicability of the Legislations

As mentioned above, the Real Estate Regulation and Development Act is a special legislation to deal with cases regarding real estate. Hence, it comes as no surprise that the Act is applicable only to issues regarding real estate. Alternatively, the Consumer Protection Act of 1986 is seen as a comparatively general legislation and hence, has a wider scope of applicability.

Cognisance

Under the Real Estate Regulation and Development Act, the courts have the power to take suo-moto action as well as the luxury of being able to act on complaints.[4] It has also been given the right to conduct an independent investigation in order to decide a case. However, contrasting this with the rights given to the Courts under the Consumer Protection Act of 1986, we see that the latter is much more stringent. Consumer Courts/Forums do not have the right to take suo-moto action and have no freedom to conduct independent investigations even in the cases when they are required.

Remedies/Sanctions

We see another major difference when we compare the sanctions or punishments that each of the legislations can impose. While the Consumer Protection Act, can at maximum fine the wrongdoers, the drafters of the Real Estate Regulation and Development Act has been more liberal in providing courts with the option for punishment. Under the Real Estate Regulation and Development Act, courts can not only fine the wrongdoers, but the Act also gives the option for the Courts to imprison the wrongdoers. This has proved to be a powerful deterrence as the existence of the potential of jail time as opposed to just a fine, has caused real estate developers to think twice before doing anything.[5]

Conclusion

There was a dire need to protect the home buyer as the existing Consumer Protection Acts were simply not up to the standard that they needed to be and the numerous consumer cases that were being filed by home-buyers, was clogging up the consumer courts, hence taking away one of the major things (i.e.. access to justice at a rate significantly faster than that of ordinary courts) that made it the consumer-friendly system it is known as. The definitions and the procedure that it has provided has proved its value in protecting house buyers, and hence, the authors feel that the purpose of the Act has been achieved and has proven to be effective. When compared to the Consumer Protection Act of 1986, the Real Estate Regulation and Development Act is definitely more fitting for home-buyers and has given Courts enough options to help ensure that the law acts as a deterrence rather than a minor inconvenience that can be paid off.

Citations

[1] SHIRISH B Patel. “Revisiting the Real Estate Bill, 2013.” Economic and Political Weekly, vol. 48, no. 48, 2013, pp. 34–39. JSTOR, <www.jstor.org/stable/23528920> accessed on 24 December 2019.

[2] Real Estate (Regulation and Development) Act, 2016 s 6.

[3] Abhinav Garg, “Home-buyer can approach both consumer panel and RERA: Delhi HC” <https://timesofindia.indiatimes.com/city/delhi/homebuyer-can-approach-both-consumer-panel-and-rera-hc/articleshow/71056244.cms> accessed on 28 Dec. 19.

[4] Real Estate Regulation and Development Act, 2013 s 7(1).

[5] Real Estate Regulation and Development Act, 2013 s 59(2).

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