M/s SLG Estates Pvt. Ltd. vs M/s Purearth Infrastructure Limited

A complaint was filed in FORM 'M' on 15.05.2023 by M/s SLG Estates Pvt. Ltd. (hereinafter referred to as "Complainant") under Section 31 read with Section 18 of the Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as "RE (RD) Act, 2016" or “The Act”) stating that it had acquired booking rights for a commercial unit in the project "Central Square" (formerly known as "Techno Business Park") promoted by M/s Purearth Infrastructure Private Limited (hereinafter referred to as "Respondent" or “Respondent Society”) located at Bara Hindu Rao, Delhi-110006.

The Complainant has sought various reliefs including refund of the amount deposited against the booking amounting to Rs. 7,92,000/- and payment of Rs. 45,000/- per month towards loss of rental income from the deemed date of possession till the date of refund.

A preliminary hearing in the case was held on 09.10.2023 and notice to the Respondent was issued through registered post and email. The matter was subsequently heard on various dates and the Respondent filed their reply on 30.07.2024.

For the sake of convenience, the submissions and arguments made on behalf of the Complainant are as follows:

For the sake of convenience, the submissions and arguments made on behalf of the Respondent are as follows:

We have perused the documents available on records and heard the arguments of the Complainant and Respondent.

Based on the pleadings and submissions of both parties, the following issues arise for determination.

Let us discuss the issues in detail now.

The RE (RD) Act, 2016 was enacted with the primary objective of protecting the interests of allottees in the real estate sector and ensuring transparency and accountability in real estate transactions across India. The Act's definition of "real estate project" under Section 2(zn) of the RE (RD) Act, 2016 encompasses the development of buildings for sale, transfer or disposal to the general public, and this definition is deliberately broad to capture various forms of real estate development that involve public participation. The legislative intent behind RERA was to create a comprehensive regulatory framework that would govern all real estate transactions where developers engage with the general public, irrespective of the specific categorization or nomenclature given to such projects by the developers.

In determining the applicability of RERA jurisdiction, this Authority must apply the well-established legal principle of "substance over form," which requires examining the true nature and character of the transaction rather than merely relying on superficial labels or classifications. The Hon'ble Supreme Court of India in the landmark judgment of M/s Newtech Promoters & Developers Pvt. Ltd. vs. State of UP & Ors., (2021) 4 SCC 357, has categorically held that RERA's protective umbrella extends to all real estate projects that involve sale to the general public and the Act must be given a liberal interpretation to achieve its consumer protection objectives. The Court emphasized that technical interpretations that defeat the purpose of the Act should be avoided and the focus should be on the actual conduct and intentions of the developer rather than on paper classifications.

The evidence on record establishes that the Respondent had a clear and unequivocal intent to develop and market the project as a commercial venture rather than as industrial flatted factories. The project was marketed under the name "Techno Business Park" and later as "Central Square," which explicitly indicates its commercial character and target audience. The choice of nomenclature "Business Park" is particularly significant as it clearly communicates to potential buyers that the project is designed for business and commercial activities rather than industrial manufacturing purposes. The marketing consistently portrayed the project as a commercial hub suitable for retail outlets, offices, and business establishments, thereby creating legitimate expectations in the minds of prospective buyers about the commercial nature of their investment.

The infrastructure developed within the project provides compelling evidence of the Respondent's commercial intent. The Provisional Allotment Letter dated 17.12.2008 specifically mentions that the effective sale price included charges for "Air Condition and power back-up, STP and road development charges," which are amenities typically associated with commercial developments and not with industrial flatted factories. These facilities and specifications are entirely inconsistent with the typical requirements of flatted factory users, who would primarily need basic industrial infrastructure rather than commercial-grade amenities. The installation of such amenities demonstrates a clear intention to attract commercial tenants and customers who would frequent a business district rather than industrial manufacturers requiring factory space.

The pricing strategy adopted by the Respondent further corroborates the commercial intent, as the units were sold at premium commercial rates that are significantly higher than typical industrial property prices in the area. The Basic Sale Price was agreed at Rs. 4,500/- per sq. ft. in 1996, which escalated to an effective price of Rs. 21,50,000/- for a 400 sq. ft. unit, representing a substantial premium consistent with commercial property valuation. The Respondent specifically targeted the general public rather than industrial users or manufacturers who would typically be the intended beneficiaries of flatted factory developments. The entire sales and marketing approach, including the engagement of real estate brokers and promotional activities, was clearly designed to attract commercial investors and businesses rather than industrial enterprises seeking manufacturing space.

This Authority notes with concern that the Respondent has been making representations regarding the commercial nature of this project for over two decades while simultaneously seeking to avoid regulatory oversight by claiming industrial classification. Such conduct demonstrates a clear attempt to enjoy the benefits of commercial pricing and public participation while evading the accountability that comes with RERA jurisdiction. The principle of estoppel, as enshrined under Section 115 of the Indian Evidence Act, 1872, prevents the Respondent from now claiming that the project is purely industrial in nature when its entire conduct spanning decades has been to the contrary.

The legal precedent established by the National Consumer Disputes Redressal Commission in the case of Sunil Kohli & Anr. vs. M/s Purearth Infrastructure Ltd., Consumer Case No. 62 of 2013, provides significant judicial recognition of the issues surrounding this very project. The National Commission, after examining similar facts involving the same builder and project, conclusively held that the Respondent had committed "unfair trade practice in advertising the project as INTEGRATED BUSINESS DISTRICT" and ordered refund of the entire amount with interest. This decision is particularly relevant as it involved the same Respondent and the same project, and the National Commission's findings regarding the commercial nature of the project and the unfair trade practices employed by the builder have attained finality and serve as a judicial pronouncement on the true character of the development.

In the matter of Iqbal Singh Gumber & Anr. v. M/s Purearth Infrastructure Ltd. & Ors. in Consumer Complaint No. 224 of 2014, confirmed by the Supreme Court in Civil Appeal No. 4771 of 2022, order dated 15 July 2022, the decisive issue was whether the project, initially classified as a "flatted factory," was in substance and intent a commercial venture. The evidence showed that M/s Purearth Infrastructure Ltd. persistently marketed and sold the development as an "Integrated Business District," featuring commercial infrastructure while offering units at commercial prices to the general public. The builder further assured purchasers of securing necessary permissions for commercial use, effectively representing the project as fit for business and commercial activities rather than for industrial purposes. Hon’ble National Consumer Disputes Redressal Commission applied the doctrine of substance over form, concluding that the project's essential character was commercial and therefore the developer was liable for deficiency in service and unfair trade practices, and could not evade legal obligations by relying on the land's original industrial classification. The court affirmed that buyers are entitled to consumer and statutory protections on the basis of the real, substantive nature of the transaction.

Verbatim extract from the NCDRC judgment (Iqbal Singh Gumber & Anr. v. M/s Purearth Infrastructure Ltd. & Ors., ) is produced as below:

The Hon’ble Supreme Court of India upheld the above decision saying:

Furthermore, the principle of estoppel operates to prevent the Respondent from now claiming that the project is purely industrial in nature to escape RERA jurisdiction. Having consistently marketed and sold the units as commercial property while simultaneously constructing commercial infrastructure and collecting premium commercial rates from buyers, the Respondent cannot be permitted to take a contradictory position when faced with regulatory oversight. The Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh, (1979) 2 SCC 409, has held that estoppel operates to prevent a party from denying the truth of any material fact which, by words or conduct, it has induced another party to believe and act upon.

The conduct of the Respondent throughout the development and marketing phase creates a clear estoppel against any attempt to now characterize the project as falling outside RERA jurisdiction. The buyers, including the original booking holder and subsequently the Complainant, relied on the Respondent's representations and conduct when they invested substantial amounts with the legitimate expectation that they were purchasing commercial properties in a business district. To allow the Respondent to now claim immunity from RERA regulation would not only be contrary to the principle of estoppel but would also defeat the very purpose of the Act, which is to protect consumers from such deceptive practices in the real estate sector.

The cases cited by the Respondent from Maharashtra RERA and Uttar Pradesh RERA are distinguishable on facts and do not support the Respondent's contention. Those cases involved genuine industrial plots or flatted factory units where the marketing was specifically targeted at industrial users, the buyers were industrial entities seeking manufacturing space, the infrastructure was designed for industrial operations, and the pricing reflected industrial land values. In stark contrast, the present case involves a project that was marketed to the general public as a commercial "Business Park" or "Integrated Business District," with commercial amenities, commercial pricing structure, and commercial usability being the core inducement for investment. The Respondent cannot selectively rely on industrial classification when it suits its purpose while having enjoyed all the benefits of commercial development and commercial pricing throughout the project lifecycle.

The application of RERA jurisdiction should be determined based on the actual nature of the project as evidenced by the developer's conduct, marketing strategies, infrastructure development, and representations made to buyers, rather than merely on the technical classification of the underlying land. The Supreme Court in M/s Newtech Promoters & Developers Pvt. Ltd. (supra) has emphasized that RERA should be given a purposive interpretation that advances its consumer protection objectives, and technical arguments that would deny relief to aggrieved buyers should be rejected.

This Authority, after careful consideration of the evidence, legal precedents, and applicable principles, holds that despite the underlying land being classified as flatted factory, the Respondent's consistent and unequivocal conduct throughout the development process, including marketing the project as "Techno Business Park" and later as "Central Square," constructing commercial infrastructure with amenities unsuitable for industrial use, targeting the general public as buyers, charging commercial rates, and creating legitimate expectations of commercial property ownership, clearly establishes the intent to develop and operate the project as a commercial venture. The project, having been developed, marketed, and sold to the general public as commercial property, unambiguously falls within the definition of "real estate project" under Section 2(zn) of the RE (RD) Act, 2016, and is therefore subject to the jurisdiction of this Authority.

The Respondent has contended that the complaint is barred by limitation as it has been filed approximately 25 years after the last payment and about 14 years after the Provisional Allotment Letter. This contention requires examination of the nature of the cause of action and the applicability of limitation principles to complaints filed under the RE (RD) Act, 2016.

Section 31 of the RE (RD) Act, 2016 provides that any aggrieved person may file a complaint with the Authority for any violation or contravention of the provisions of this Act or the rules and regulations made thereunder. The Act does not prescribe a specific limitation period for filing complaints before RERA. In the absence of a specific limitation period under the Act, the general principles of limitation and the nature of the cause of action must be examined to determine whether the complaint is time-barred.

The fundamental principle governing limitation is that time begins to run from the date when the cause of action accrues. In cases involving failure to deliver possession, the cause of action is of a continuing nature as the breach continues with each passing day until possession is actually delivered or the agreement is terminated and refund is made. The obligation to deliver possession as per the agreement is a continuing contractual obligation, and the failure to fulfill this obligation creates a fresh cause of action each day.

In the present case, the agreed possession date was 17.09.1999, being 36 months from the date of booking. The Respondent issued a Provisional Allotment Letter on 17.12.2008, nearly nine years after the agreed date of possession. However, even after issuing the allotment letter, the Respondent never offered possession of the unit with clear, marketable commercial title. The Respondent continues to hold the Complainant's money amounting to Rs. 7,92,000/- without delivering the promised unit. The cause of action for non-delivery of possession is therefore continuing in nature and cannot be said to be barred by limitation when the very breach, namely non-delivery of possession, continues to subsist at the time of filing the complaint.

The RE (RD) Act, 2016 being a beneficial legislation enacted for protection of the allottees must be interpreted liberally to advance its remedial objectives. Technical objections such as limitation should not be allowed to defeat the substantive rights of aggrieved allottees, particularly when the developer continues to hold the buyer's money without delivering possession or making refund. The very purpose of RERA would be frustrated if developers could escape accountability by merely allowing time to lapse while continuing to hold buyers' money.

This Authority holds that the complaint is not barred by limitation for the following reasons. RERA being a consumer protection legislation must be interpreted liberally to ensure that aggrieved buyers are not denied relief on technical grounds when the substantive violation by the developer is continuing. Therefore, the defense of limitation is rejected.

Having established the jurisdiction of this Authority over the project and having rejected the defense of limitation, it becomes necessary to determine the appropriate reliefs that should be granted to the Complainant to remedy the injustice suffered and to ensure that the remedial provisions of the RE (RD) Act, 2016 are effectively implemented.

Section 18 of the RE (RD) Act, 2016 is the primary provision that governs the rights and remedies available to allottees in cases where the promoter fails to deliver possession as per the agreed terms. The relevant portions of Section 18 are reproduced below for ready reference:

Section 18(1) thus provides two distinct remedies to aggrieved allottees, namely withdrawal from the project with refund of the amount paid along with prescribed interest and compensation, or continuation in the project with payment of interest for every month of delay until possession is handed over. The choice between these two remedies vests with the allottee and cannot be dictated by the promoter.

The Complainant, through the complaint and subsequent submissions, has sought refund of the amount paid along with interest. This indicates the Complainant's clear intention to withdraw from the project. The Authority notes that this choice is reasonable and justified, particularly considering the prolonged delay of over 25 years in possession, the fundamental misrepresentation regarding the nature of the property, the failure to convert the land title from flatted factory to commercial despite the nature of the development, and the overall conduct of the Respondent which demonstrates deficiency in service and unfair trade practices spanning decades.

The Authority observes that the Respondent's failure to deliver possession is not merely a case of ordinary delay but involves fundamental breach of contract stemming from material misrepresentation about the very nature and character of the property. The unit was marketed, advertised, and sold as a commercial property in a "Business Park," creating legitimate expectations in the mind of the buyer regarding its commercial usability and marketability. However, the underlying land classification as flatted factory, coupled with the Respondent's failure to obtain conversion approvals or deliver marketable commercial property, renders the entire transaction fundamentally defective. This constitutes not just delayed possession but a situation where the product that can be delivered is fundamentally different from what was contracted and represented.

This Authority further notes a critical fact that makes the Respondent's failure even more egregious and renders the doctrine of frustration completely inapplicable. The unit in question, Unit No. P4-1128 measuring 400 sq. ft. at Upper Ground Floor, is located in Plaza-04 of the project. It is evident from the record and the parties' submissions that the construction of Plaza-04 has not even been commenced till date. Despite collecting Rs. 7,92,000/- from the Complainant by 10.02.2009 and issuing a Provisional Allotment Letter in December 2008, the Respondent has failed to even start the construction work in Plaza-04 where the allotted unit is supposed to be located. This complete failure to commence construction for over 15 years after collecting substantial amounts and issuing allotment letters demonstrates not merely delay but total abandonment of contractual obligations.

The fact that construction has not even been started in Plaza-04 completely demolishes the Respondent's defense based on the doctrine of frustration and force majeure. The Respondent cannot claim that litigation, sealing orders, or regulatory difficulties prevented completion of the project when the reality is that construction was never even commenced in the relevant plaza. The alleged supervening events and impossibility of performance cited by the Respondent cannot explain or justify the complete failure to even begin construction work. This demonstrates that the Respondent's inability to deliver possession stems not from any unforeseen circumstances or supervening impossibility but from its own lack of intent, planning failure, or financial incapacity to execute the project.

Furthermore, the Authority notes that the Respondent's conduct demonstrates a pattern of unfair trade practices that warrant the relief of refund rather than continuation in the project. The Respondent made conscious and deliberate misrepresentations about the commercial nature of the project, constructed infrastructure unsuitable for flatted factory use in some plazas while completely failing to commence construction in Plaza-04, charged premium commercial rates, created expectations of commercial property ownership, collected substantial amounts from buyers, and subsequently attempted to avoid liability by claiming the project falls outside RERA jurisdiction. Such conduct reflects a clear intention to mislead buyers and escape accountability. In such circumstances, the buyer cannot be compelled to continue in a project where fundamental trust has been breached, where construction has not even commenced despite 15 years having elapsed since allotment, and where there is no assurance that the Respondent will fulfill its obligations regarding commencement of construction, completion, title conversion, and delivery of marketable commercial property.

The principle underlying Section 18 of the RE (RD) Act, 2016 is to provide effective remedies to aggrieved allottees and to ensure that promoters are held accountable for their failures and misrepresentations. The choice between refund and continuation is deliberately vested with the allottee to enable them to make an informed decision based on their individual circumstances, the nature and extent of the developer's default, and their confidence in the developer's ability and willingness to fulfill pending obligations. When a buyer has lost confidence in the developer due to prolonged delays spanning over two decades, material misrepresentations regarding the fundamental nature of the property, complete failure to even commence construction in the relevant plaza, and fundamental defects in the project, the law recognizes their absolute right to exit the project and seek refund of their investment.

The Hon'ble Supreme Court in Pioneer Urban Land and Infrastructure Limited vs. Union of India, (2019) 8 SCC 416, while interpreting Section 18 of the Act, observed that the provision is intended to protect allottees from unscrupulous promoters and to provide them with effective remedies. The Court held that when a promoter fails to fulfill its obligations, the allottee has an unqualified right to seek refund along with interest and compensation. This right cannot be defeated by technical arguments or by placing onerous conditions on the allottee.

The Respondent has sought to invoke the doctrine of frustration under Section 56 of the Indian Contract Act, 1872, claiming that performance of the contract has become impossible due to circumstances beyond its control, including litigation with the Monitoring Committee, MCD, and NDMC, and sealing orders. This contention must be examined carefully as it goes to the root of the Respondent's defense against refund liability.

The doctrine of frustration applies only when performance of a contract becomes impossible due to an unforeseen supervening event that occurs after the contract is made and is beyond the control of the parties, rendering performance impossible or radically different from what was contemplated. The Hon'ble Supreme Court in Energy Watchdog vs. Central Electricity Regulatory Commission, (2017) 14 SCC 80, held that the cardinal principle of the doctrine of frustration is that it should not be lightly invoked and should be kept within narrow limits, and the party alleging frustration must establish that the changed circumstances were truly fundamental and not merely that performance has become onerous or difficult.

In the present case, the Respondent's reliance on the doctrine of frustration is completely misplaced and must be rejected for several compelling reasons:

Furthermore, even if the doctrine of frustration were applicable, which it is not, Section 65 of the Indian Contract Act, 1872 mandates that when an agreement is discovered to be void or becomes void, any person who has received any advantage under such agreement is bound to restore it or to make compensation for it to the person from whom he received it. Therefore, even under the doctrine of frustration, the Respondent would be obligated to refund the amounts received from the Complainant. The Respondent cannot retain the Complainant's money of Rs. 7,92,000/- while claiming that the contract has been frustrated.

The Authority therefore conclusively holds that the doctrine of frustration is not applicable to the facts of the present case and the Respondent's attempt to invoke it to escape refund liability must be rejected. The Respondent's failures stem from its own misrepresentations, lack of proper planning, failure to obtain necessary approvals, complete failure to even commence construction in Plaza-04, and subsequent inability to deliver on its promises, none of which can be characterized as supervening impossibility beyond its control.

Any demands raised by the Respondent for maintenance charges, holding charges, interest on delayed payments, or any other charges prior to delivery of valid possession with clear commercial title are illegal and cannot be sustained in law. The Respondent has no right to demand payment for services not rendered, for possession not delivered, or for a property that has not been handed over with marketable title. When construction has not even been commenced in Plaza-04, the question of maintenance charges or holding charges does not arise at all. All such demands are hereby quashed and declared null and void.

Therefore, this Authority, after careful consideration of all facts and circumstances, the nature and extent of the Respondent's defaults and misrepresentations, the prolonged delay spanning over 25 years from the contractual due date, the fundamental defects in the nature of the property affecting its commercial usability, the complete failure to even commence construction in Plaza-04 where the Complainant's unit is located, and the Complainant's expressed intention to withdraw from the project, conclusively holds that the Complainant is entitled to refund of the entire amount paid to the Respondent along with interest at the prescribed rate. This relief is warranted not only to remedy the financial loss suffered by the Complainant but also to uphold the principles of justice, accountability and protection of the allottees that form the bedrock of the RE (RD) Act, 2016.

Having examined the entire factual matrix, the documentary evidence, the applicable statutory provisions, and the relevant judicial precedents, this Authority directs the following:

This Authority decides to initiate suo moto proceedings against the Respondent for violation of Section 3 of the RE (RD) Act, 2016 for failure to register the ongoing project "Central Square - Integrated Business District" with this Authority despite the project being mandatorily registrable under the Act. Accordingly, the office is directed to issue a show cause notice to the Respondent to explain why penal action should not be initiated under Section 59 of the RE (RD) Act, 2016 for this statutory violation.

The case is disposed of accordingly with the above directions.

No order as to cost.

File be consigned to record room after due compliances.