From ET Realty
MUMBAI: Till recently, builders in Mumbai and other metros did not fear criminal action for any of their willing violations because being sent to jail was a rarity. However, the arrest and release in the Delhi Unitech builders case a few days ago, over delay in handing over possession-a common experience among flat purchasers-has raised the red flag for developers and hope among property buyers.
Legal experts say developers were not worried about criminal action despite penal provisions in Maharashtra Ownership Flats Act (MOFA) for violations or delay in handing over possession. A perception of immunity from legal action prevailed among builders. What fed it was buyers’ reluctance to resort to criminal provisions.
“Usually the prime concern is getting possession,” said senior counsel Milind Sathe who added in Mumbai, where real estate rates rarely fall, “it is very difficult for a buyer to again buy a flat in the same location at the same rate. Post-booking, rates usually shoot up at least 10-20%, rendering the 9% interest rate for refund provided in MOFA an unattractive option.” Builders cashed in on this inequity in law and reality. “Most buyers want to get possession first, even without an occupancy certificate. Once in, they usually move a consumer or civil court, for deficiencies in promised amenities or other lapses, including failure to give conveyance,” said Sathe.
Criminal law practitioners admitted that builders getting convicted in a criminal case was uncommon. “I can’t recall any under MOFA. There are criminal complaints filed for MOFA violations, but in most cases, these usually get settled out of court,” said advocate Pranav Badhekar.
Advocate Sushil Gehlani pointed to a November 2015 Patna high court verdict that a mere delay in handing over possession without an accompanying dishonest intention would not amount to a criminal case of cheating or breach of trust. “These are essentially civil disputes between a land-owner and a builder regarding breach of agreement terms,” the high court held in Amarendra Kumar versus Bihar, in what builders may finding soothing.
In Mumbai, though, builders are also fearless because litigation allows for multiple appeals that can stretch for years. Besides, consumer courts can only pass orders for compensation or handing over a flat– not sending a builder to prison. Senior counsel Rajiv Kumar said, “Punishment for builders as in the Unitech case is rarest of rare…” Lawyer Vinod Gangwal added, “Enforcement of penalties must be quicker and a regulatory body set up to bring transparency.” Advocate Vinod Sampat said he recently issued a builder notice for statutory non-compliance under MOFA, from non-registration of a sale agreement to non-disclosure; a reply is awaited. Solicitor Swapnil Kothari said, “Power and pelf ensure promoters get best lawyers.” Bombay HC, though, has come to buyers’ aid. In 1998, Justice N J Pandya held failure to give conveyance of land and building to the housing society is a “continuing offence.”
In 2013, a bench of then Chief Justice M S Shah and M S Sanklecha held even a part pro-rata conveyance is permissible in a larger layout.