Remedies available to scammed flat buyers against builders of illegaly constructed buildings or violation of terms of contracts.

If you have been a victim of a scam by a builder from whom you bought or rented a unit in a building that was later discovered to be unauthorized, and the property has been demolished, you may pursue one or more of the following remedies. However, it is essential to consult with a qualified property lawyer before proceeding with any actions. This guideline is not comprehensive; it is intended to provide you with a general understanding of some of the legal remedies available.

Consumer Forums

The Consumer Protection Act of 1986 created several Redressal Forums at various levels, including the District Forum, State Commission, and the National Consumer Dispute Redressal Commission (NCDRC). These Forums and Commissions have specific jurisdictions based on territory and monetary value. Under this Act, Home Buyers can file a Complaint about delays in property possession or poor service from builders. There is no need to hire a lawyer to submit such a complaint, as the process is straightforward. The Applicant must submit the Complaint along with the necessary supporting documents. Any Consumer or group of Consumers with a common interest can file a Complaint. Regarding the relief for affected home-buyers, the appropriate Consumer Forum can issue an Order requiring the builder or developer to refund the money and provide compensation for any losses or damages caused by the builders' or developers' inadequate service.

RERA

The RERA Act is regarded as one of the specialized legislations enacted by the Indian Parliament specifically for the real estate sector. Its primary aim is to resolve the grievances of buyers while enhancing transparency and accountability among builders. This initiative aligns with the increasing demand within the Real Estate sector to streamline operations and balance the interests of both Home Buyers and Builders. RERA anticipates the establishment of Real Estate Regulatory Authorities in each State, which will not only promote the interests of all stakeholders under RERA but also address their grievances. Importantly, RERA grants aggrieved Home Buyers the right to claim a refund of the amount paid for property purchases, along with interest as prescribed by the States or Union Territories, in instances where builders or developers fail to deliver possession as per the agreed terms. RERA includes penal provisions, stipulating that violators may face penalties of up to 5% of the estimated cost of the real estate project as determined by the relevant Real Estate Regulation Authority. The imposition of penalties for contravening the orders or directives of the Real Estate Appellate Tribunal has been made more stringent, potentially reaching 10% of the estimated cost or three years of imprisonment, or both. The law guarantees that real estate projects are completed on time; if delays occur, the developer is obligated to pay interest to the home buyer. Home buyers have the option to file a complaint with the appropriate Real Estate Regulation Authority if the developer(s) default on possession delivery or violate any provisions of RERA or its associated Rules or Regulations. Complaints may also be lodged by an Association of Home Buyers. RERA provides the opportunity to appeal against the decisions made by the relevant Real Estate Regulation Authority to the Appellate Authority, and subsequently to the High Court and the Supreme Court, all within a specified timeframe. As the proceedings are required to be concluded within a stipulated period, this ensures timely resolution of disputes.

The proceedings must be finished within a set time frame, making the adjudication process faster than previous grievance redressal methods. According to RERA, developers are required to hold 70% of the funds received from buyers in a separate Escrow Account to cover the project's construction costs. This measure will help prevent developers from misusing buyers' money instead of completing the project for which the funds were raised, and it will also ensure timely project completion.

NCLT

The Insolvency and Bankruptcy Act 2016 (IBC) is a significant law introduced by the Government of India. The National Company Law Tribunal (NCLT) serves as the Adjudicating Authority under the IBC. This law has turned into a challenge for dishonest builders while benefiting home buyers. The revised IBC recognizes home buyers as financial creditors. Consequently, according to the updated law, home buyers can start the Corporate Insolvency Resolution Process (CIRP) against the builder company, as stated in Section 7 of the IBC. As financial creditors, home buyers also have the chance to participate in the Committee of Creditors and vote during the CIRP. A key advantage of the IBC is that once the CIRP process is initiated by the Hon’ble NCLT's order, the previous directors lose their authority to manage the company, and the Insolvency Resolution Professional (IRP) takes full control under the supervision of the Committee of Creditors. The IBC process is strictly time-bound, and the resolution of disputes under it is fast. 

Arbitration

If the Builder-Buyer Agreement or any agreement between the home buyer and the Builder includes an ‘Arbitration Clause’, home buyers can initiate Arbitration proceedings under the Arbitration and Conciliation Act, 1996. This process is generally quicker than pursuing a Civil Remedy to obtain the Award. Sometimes, the builder appoints the Arbitrator, which can lead to biased Arbitral proceedings. In such situations, home buyers have the right to appeal the Arbitral Award. 

CCI

 “COMPETITION COMMISSION OF INDIA” (CCI), under the Competition Act 2002, if a Builder holds a Dominant Position and misuses it to the detriment of the buyer, the buyer can lodge a complaint with the CCI for abusing that dominant position. If the investigation finds the builder guilty of anti-competitive behavior, the CCI can impose significant fines. 

Civil Suit

For a “Civil Case for Recovery of Money”, if the builder breaches the Agreement by failing to meet his obligations, the buyer can approach the Civil Court to file a Civil Suit for recovering his money, along with interest, as per the Code of Civil Procedure, 1908. Additionally, if the builder fails to meet any obligations or alters the agreed terms, the buyer can also request a refund of any money already paid to the builder.

Criminal Complaint. 

Under the Indian Penal Code of 1860, a buyer can lodge a criminal complaint for cheating or fraud against a builder. The buyer can lodge complaint with Economic Offence Wing (EOW).