Mr. Amit Ahuja vs ITD Homes Welfare Society

A complaint in Form 'M' was filed on 20.03.2023 by Mr. Amit Ahuja (hereinafter referred to as “Complainant”) under section 31 r/w section 18 of the Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as ^“RE (RD) Act, 2016” or “the Act”) stating that he became a member of ITD Homes Welfare Society (hereinafter referred to as “Respondents” or “Respondent Society”) and paid contribution towards what was represented as a housing project under the Delhi Development Authority's Land Pooling Policy.

The Complainant has sought refund of the amount of Rs. 12,50,000/- (Rupees Twelve Lakh and Fifty Thousand Only) paid along with interest and compensation on account of failure of the Respondent Society to deliver possession of the promised housing unit despite passage of more than 9-10 years.

The Respondent Society was registered on 18.06.2013 under the Societies Registration Act, 1860. The Society collected approximately Rs. 5.97 crore from 46-47 members as contribution for purchase of agricultural land and purchased approximately 1.2 acres in Village Mukhmelpur, Delhi, falling in Zone P-II. The stated objective was to participate in DDA's Land Pooling Policy (LLP) notified on 05.09.2013.

The Complainant was issued receipts for payments described as "Basic Contribution for Purchase of Land". However, the promotional material and representations made to members clearly indicated the purpose was obtaining flats or housing units under the "IT Residency Project". The Respondent Society filed application with DDA on 02.08.2019 for participation in the Land Pooling Policy, which remains pending.

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

A preliminary hearing in the case was held on 22.05.2023 and a notice to the Respondents was issued on 07.06.2023 via registered post and on 14.06.2023 via email. The matter was subsequently heard on various dates.

The Respondent Society filed reply on 06.10.2023 denying the allegations and raised preliminary objections. For the sake of convenience, the arguments and submissions made on behalf of the Respondents Society are summarized as under:

The Complainant filed rejoinder on 17.12.2023 reiterating that money was taken purely for flats by issuing brochures, not merely for purchase of agricultural land. The Society is exercising monopoly by not convening meetings and refusing refund despite majority members seeking the same. The ‘IT Residency Project’ is an ongoing project falling under RERA’s jurisdiction.

The Complainant has also submitted that by collecting money for a housing project, the Society has committed fraud and falls under purview of the RE(RD) Act, 2016. The Expression of Interest form was one-sided and unfair. The Complainant relies on judgments in Newtech Promoters, Fortune Infrastructure, Imperia Structures, Pioneer Urban Land and Jeevan Ashray Welfare Society cases establishing the unqualified right to refund under Section 18 of RE(RD) Act, 2016.

The Respondent filed additional submissions placing on record WhatsApp messages showing some Complainants were actively seeking to participate in LPP and had given written consent for filing the LPP application in July 2019. The Respondent submits that consent was given after full awareness of the project status, and that adverse action against the Society would harm remaining members who wish to continue.

We have perused the documents on record and heard arguments of learned counsels for both the Complainant and Respondents.

The complainant has claimed compensation and sought refund as well. At the very outset, it is pertinent to shed light on the issue whether compensation can be granted by the Authority. The Hon'ble Apex Court in the case of M/s. Newtech Promoters and Developers Pvt. Ltd vs. State of UP & Ors. (CIVIL APPEAL NO(S). 6745 6749 OF 2021) has categorically held, "when it comes to a question of seeking the relief of adjudging compensation and interest thereon under Sections 12, 14, 18, and 19, the adjudicating officer exclusively has the power to determine, keeping in view the collective reading of Section 71 read with Section 72 of the Act." It is thus clear that the Authority does not have the power to grant the relief of compensation under Section 18 of the Act. As per Section 71, the complainant may approach the Adjudicating Officer for the grant of compensation. In view of the same, we are not considering the relief as to compensation in the present order.

The Respondents have argued that this Authority has no jurisdiction in the matter because the Respondents do not fall within the definition of Promoter due to provisions contained in Sub Clause (iv) of Section 2 (zk). The Respondents have contended that they are merely a welfare society that purchased agricultural land on behalf of members to participate in DDA's LLP, and that they have not undertaken any construction or development activities.

The RE (RD) Act, 2016 has been enacted to induct professionalism and standardization in the real estate sector, paving the way for catalysing investments and accelerating growth of sector in the long run. It is a special law enacted to address issues in the real estate sector. To achieve these objectives, the Act created Real Estate Regulatory Authorities to supervise the conception, initiation and completion of Real Estate Projects. Therefore, all disputes between homebuyers/allottees and promoters/developers relating to any Real Estate Project covered under RE (RD) Act of 2016, can be raised before the concerned Real Estate Regulatory Authority (RERA). Section 79 of the RE (RD) Act, 2016 even bars jurisdiction of civil courts to entertain any suit or proceeding in respect of any matter which the Authority is empowered under the Act to determine. Moreover, section 89 of RE (RD) Act, 2016 says that provisions of this Act shall have an overriding effect on anything inconsistent in any other law in force.

The Respondents have further stated that Section 2(zn) of RE(RD) Act, 2016, defines “Real Estate Project”, to mean the development of a building or a building consisting of apartments or converting an existing building or a part thereof into apartments, as the case may be, for the purpose of selling all or some of the apartments or plots or building, as the case may be and includes the common areas, the development works, all improvements and structures thereof and all easements and rights appurtenances belonging thereto. The Respondents have stated that they collected money only for procurement of land and the Complainant have paid money only towards land cost. The said land has been offered to DDA under LLP and has not yet been returned to the Respondents Society. The Respondents have stated that in the instant case the Respondents have neither engaged in construction of apartments or buildings for its members nor there exists any apartment or building of which the Complainant may claim to be an allottee. There is no real estate project, as defined under Section 2(zj) or 2(zn) of the RE(RD) Act, 2016 as on date. The Respondents have therefore argued that because they are not dealing with any real estate project at present, they cannot be stated to be promoter under the RE(RD) Act, 2016 and the Authority has no jurisdiction in the matter.

The record shows that the Respondent Society issued brochures advertising "IT Residency Project", created and maintained a website until 2019, and collected money from 46-47 members over a period of time. The prefix "ITD" and name "IT Residency Project" gave impression of association with Income Tax Department, lending credibility to attract members. The objects clause of the Society's Memorandum of Association specifically includes:

While receipts issued mention "Basic Contribution for Purchase of Land", the promotional material and representations made to members clearly indicated purpose was obtaining flats or housing units. The Expression of Interest forms, though mentioning participation in LPP and contribution for land purchase, also indicated that members would eventually receive residential units, creating expectation of receiving housing accommodation. The ultimate objective was to develop housing units for delivery to members or contributors, which brings the activity within ambit of real estate development.

Section 2(zk) of the RE(RD) Act, 2016 defines "promoter" as follows:

The issue of whether a welfare society or cooperative society falls under purview of the Act has been thoroughly discussed by the Hon'ble Real Estate Appellate Tribunal, Delhi, in its order dated 12.05.2023 in case titled Jeevan Ashray Welfare Society vs. Diwakar Garg & Ors. (Appeal Nos. 27, 28 & 29/REAT/2021). The relevant observations of the Tribunal are as follows:

Similarly, the Hon'ble High Court of Allahabad in bunch of appeals (Appeals 1 to 26 of 2022) in Air Force Naval Housing Board (Welfare Society) vs. U.P. Real Estate Regulatory Authority concluded that welfare societies are promoters within meaning of Section 2(zk) of the Act and are subject to the jurisdiction of this Authority.

This Authority has also held in catena of judgments that entities operating as cooperative societies or welfare societies but engaged in real estate activities fall within the definition of "promoter".

The Respondent Society clearly falls within clause (iv) of Section 2(zk) which covers "a primary co-operative housing society which constructs apartments or buildings for its members". Though the Respondent is registered under Societies Registration Act, 1860 and not under Cooperative Societies Act, the substance of its activities and the elaborated definition of "Person" in Section 2(zg) which includes "an association of persons or body of individuals, whether incorporated or not" makes it amenable to RERA.

The Hon'ble Supreme Court in Pioneer Urban Land & Infrastructure Ltd. vs. Govindan Raghavan (Civil Appeal No. 12238 of 2018) held that the court must look at substance of the transaction and not merely the form. The fact that construction has not yet commenced does not mean the Respondent is not a promoter. The definition of promoter includes persons who "develop land into a project" even without constructing structures. The moment the Respondent purchased land with intent to develop it for housing and collected money from persons for that purpose, it became a promoter.

After careful consideration of facts, statutory provisions and binding precedents, this Authority holds that the Respondent Society qualifies as "promoter" within meaning of Section 2(zk) of the RE(RD) Act, 2016. The Respondent has undertaken activities of developing land into real estate project for purpose of providing housing units to members or contributors, which squarely brings it within definition of "promoter".

It is also pertinent to note that no Society registered under the Societies Registration Act, 1860 can undertake housing as an activity considering the provision made under section 20 which is reproduced as under:

The Respondents, a Society registered under Societies Registration Act, 1860, though not authorized to undertake “housing” activity; advertised membership, misled the people, made members for their housing project and collected monies from them & therefore, would come under the purview of RE (RD) Act, 2016. The Respondents by collecting the monies in the name of housing project have, on the face of it, committed a fraud on the members and general public.

In view of above facts, the Respondents cannot even be considered to have shown willingness to DDA for participation in the Land Pooling Scheme for the reasons that they are not the land owners. Further, the Society has also not applied to DDA validly because the application has not been made by the Respondents Society. For the same reasons the arguments of the Respondents Society that they are awaiting the Land Pooling Policy to take off to provide housing to its members is also rejected because the Respondents Society neither owns any land nor it has submitted its expression of interest before DDA within prescribed time window.

The Respondent Society alleged that the complainant is not an "allottee" within the meaning of Section 2(d) of the Act but is member of a welfare society who contributed money for purchase of agricultural land.

Section 2(d) of the RE(RD) Act, 2016 defines "allottee" in relation to real estate project to mean the person to whom a plot, apartment or building has been allotted, sold or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise.

The Complainant and other members paid money to the Respondent Society with clear expectation of receiving residential unit or flat in return. While the transaction was structured as "membership" and "contribution for land purchase", the economic substance was that of sale of future housing units. The Expression of Interest forms signed by members including the Complainant created contractual relationship whereby the Society undertook to provide housing accommodation in exchange for monetary contribution.

The brochures and advertisements issued by the Society promised delivery of flats or housing units under the "IT Residency Project". The phrase "or otherwise transferred" in the definition of allottee is wide enough to cover the present situation where members have acquired rights to receive housing units through their membership and payment of consideration. The definition of allottee is independent and covers persons to whom units have been "allotted, sold or otherwise transferred".

The absence of formal allotment letter does not mean there is no allottee. While Section 2(c) defines "Agreement for Sale", the absence of formal agreement for sale does not negate ‘allottee’ status. The Expression of Interest form itself states objective of agreement between the Society and members. The RE(RD) Act, 2016 is beneficial legislation enacted for consumer protection and its provisions must be interpreted liberally to effectuate the object of protecting home buyers.

If narrow interpretation were adopted requiring formal allotment letters or agreements for sale, unscrupulous developers could easily circumvent RERA by avoiding such documentation while still collecting money from buyers. The Hon'ble Supreme Court in Imperia Structures Ltd. vs. Anil Patni (Civil Appeal Nos. 3571-3590 of 2020) held that Section 18 confers unqualified right upon allottee to seek refund if promoter fails to give possession as per agreement, emphasizing the protective nature of legislation in favor of home buyers.

This Authority holds that the Complainant qualifies as "allottee" within meaning of Section 2(d) of the RE(RD) Act, 2016. The Complainant has acquired rights to receive housing accommodation from the Respondent Society by virtue of paying consideration and becoming member. The substance of the transaction is that of sale or allotment of future housing units, notwithstanding the nomenclature used or absence of formal allotment documentation.

An allottee/house buyer can seek refund of amount invested with promoter under section 18 of RE(RD) Act, 2016, if the promoter fails to complete project by the date specified in agreement to sale with interest including compensation and also under section 12 of RE(RD) Act, 2016 if he/she was misled by any information furnished by promoter with regard to the proposed project either through advertisement or otherwise.

In the present complaint, the Complainant intends to withdraw from the said project and is seeking refund of the amount paid to Respondents in respect of subject unit under section 18(1) of the RE(RD) Act, 2016 on account of delay which reads as under:

Section 12 of the RE(RD) Act, 2016 casts a duty upon the promoter to provide correct and updated information to allottees regarding the project. It reads as under:

The Respondents, in complete disregard to their duties, not only failed to furnish correct information to the Complainant but also misled him by concealing information that the Society cannot undertake housing activity. In the present case, money was collected from members starting in 2013-14, land was purchased in 2014, and more than 9-10 years have elapsed. No construction has been done, no flats have been completed or delivered, and no timeline for completion is in sight. The DDA’s LPP application filed in 2019 remains pending with no certainty of approval. This constitutes complete failure to give possession of promised housing units.

The Respondent argued that since no specific date of completion was mentioned in Expression of Interest forms, there is no breach of timeline. This argument is rejected. The Hon'ble Supreme Court in Fortune Infrastructure vs. Trevor D'Lima (Civil Appeal Nos. 3533-3534 of 2017) held that a person cannot be made to wait indefinitely for possession of flats allotted to them and they are entitled to seek refund of amount paid along with compensation.

Although when there was no delivery period stipulated in agreement, reasonable time has to be taken into consideration, the Court held that in facts of similar cases, 3 years would have been reasonable time for completion. In the present case, it has been more than 10 years since money was collected and land was purchased. Even considering delays in implementation of government policy, this period far exceeds any reasonable time. Based on material on record, this Authority is of view that there is no realistic prospect of project being completed in foreseeable future. Even Society's land holding of 1.2 acres is below threshold of 5 acres required for eligibility as Developer Entity under DDA’s LPP. The Society admits it will have to pool its land with other Developer Entities. The DDA’s LPP application filed in 2019 is still pending with no timeline for approval. Even if DDA approves the application, the process of forming consortium, receiving developed land back, constructing housing units and delivering possession will take several more years. The Society itself admits it is not developer and will have to engage other entities for construction. There is no financial or project planning evident from the record. Twenty-four out of 46 members, more than 50 percent, have filed complaints seeking refund, indicating lack of confidence in the project.

The Respondents have argued that refunding money to Complainants will cause harm to other members who wish to continue with the project. However, the majority of members, 24 out of 46, have filed complaints seeking refund. The remaining members are free to continue with project using their own contributions. The statutory rights of individual allottees cannot be held hostage to wishes of other members. Section 18 of the Act gives individual right to each allottee to seek refund in case of delay and it is not dependent on majority decision.

After detailed consideration of all facts, submissions and legal provisions, this Authority holds that the Complainant is entitled to refund of amount paid to Respondent Society along with interest. The Respondent has failed to deliver possession of housing units within reasonable time as more than 10 years have elapsed, there is no realistic prospect of completion in foreseeable future, and the Complainant has exercised his statutory right under Section 18 of the Act to withdraw from the project and seek refund.

The law is well settled that the allottees/homebuyers hold an unqualified right to seek refund of the amount with interest at such rate as may be prescribed in this behalf. A conscious decision has been taken by the legislature to cast an obligation upon the promoter to refund the amount on demand along with interest at rate prescribed. It has also been held through the recent judgments of the Hon’ble Supreme Court that the Regulatory Authority has exclusive jurisdiction to direct refund of the amount, and interest on the refund amount to the allottees. (Vide: Imperia Structures Ltd. Vs. Anil Patni and Another, 2020 (10) SCC 783, and Newtech Promoters and Developers Pvt. Ltd. v. State of UP And Ors. LL 2021 SC 641).

On perusal of the documents on record and submissions made by both the parties, the Authority is of view that the Respondents are in contravention of the sections 18 and 12 of RE (RD) Act, 2016. As such, the Complainant is entitled to get the refund of the amount paid by him along with the interest at prescribed rate @ 10.75% p.a. (i.e., MCLR plus 2%) as per provisions of section 18 and 12 of RE (RD) Act, 2016 read with Rule 15 of the NCT of Delhi RE(RD) (General) Rules, 2016^{11.The National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016}.

In the light of the aforesaid, we consider it appropriate to direct the Respondents i.e. ITD Homes Welfare Society to refund the entire amount of Rs. 12,50,000/- (Rupees Twelve Lakh and Fifty Thousand Only) to the Complainant, Mr. Amit Ahuja within 45 days of issuance of this order along with interest at the rate of 10.75% per annum (MCLR+2%) from the date of payment of each sum until the date of its actual return.

The case is disposed of accordingly.

No orders as to costs.