Ms. Kamlesh Kumari & Anr. vs M/s Purearth Infrastructure Limited

A complaint was filed in FORM 'M' on 07.08.2023 by Ms. Kamlesh Kumari & Sh. Chander Mani Dhir (hereinafter referred to as “Complainants”) under section 31 r/w section 18 of Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as “RE (RD) Act, 2016” or “the Act”) stating that they booked a commercial shop in project "Central Square" promoted by 'M/s Purearth Infrastructure Limited' (hereinafter referred to as "Respondents" or "Respondent Company") located at Bara Hindu Rao, Delhi-110007.

In the present matter, the Complainants have sought various reliefs including delayed possession charges on the paid amount of Rs. 48,02,490/- as per RE (RD) Act, 2016 from the due date of possession (i.e. on October 4, 2009) until actual physical possession after land title conversion, initiation of suo moto proceedings for violation of Section 3 of RE (RD) Act, 2016 for non-registration of the project, and quashing of maintenance bill demands as interim relief.

A preliminary hearing in the case was held on 09.10.2023. Notice to the Respondents was issued on 27.10.2023 through registered post and email as well.

The matter was subsequently heard on 17.01.2024, 07.03.2024, 07.05.2024, 31.07.2024, 17.09.2024, 25.09.2024, 23.10.2024, 13.11.2024. The noticee filed their reply on 07.05.2024.

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

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

We have perused the documents available on records and heard the arguments of the Complainants and Respondents.

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 home buyers 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's 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 "Central Square Integrated Business District," which explicitly indicates its commercial character and target audience. The choice of nomenclature "Integrated Business District" 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, as the construction includes amenities such as escalators, centralized air conditioning systems, high-speed passenger lifts, and double-height showrooms with modern architectural features. These facilities and specifications are entirely inconsistent with the typical requirements of flatted factory users, who would primarily need basic industrial infrastructure such as goods lifts, adequate power supply for machinery, and functional workspace rather than aesthetic commercial amenities. The installation of escalators and air conditioning systems, in particular, demonstrates a clear intention to attract commercial tenants and customers who would frequent a business district, as these amenities serve no practical purpose in an industrial setting but are essential for commercial establishments expecting regular footfall.

The documentary evidence further reveals that the brochures and promotional materials issued by the Respondent consistently describe the project as an 'Integrated Business District,' thereby reinforcing the commercial character and intent of the development. This deliberate choice of terminology in official marketing literature is particularly significant, as it demonstrates that the Respondent's commercial positioning was not merely verbal or incidental, but was formally documented and widely disseminated through printed promotional materials distributed to prospective buyers. The continued use of 'Integrated Business District' nomenclature across all promotional channels—including brochures, advertisements, and sales presentations—establishes that the Respondent's intent since inception was to market and sell a commercial project to the general public, rather than industrial flatted factories for manufacturing industrial products. Such systematic and sustained commercial marketing cannot be dismissed as inadvertent or unintentional, and clearly evidences a calculated strategy to attract commercial investors while exploiting the underlying industrial land classification.

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 Respondent specifically targeted the general public rather than industrial users or manufacturers who would typically be the intended beneficiaries of flatted factory developments. The sales and marketing approach, including the engagement of real estate brokers and the conduct of public exhibitions and promotional events, was clearly designed to attract commercial investors and businesses rather than industrial enterprises seeking manufacturing space.

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, as asserted by the complainants. The evidence showed that M/s Purearth Infrastructure Ltd. persistently marketed and sold the development as an “Integrated Business District,” featuring commercial infrastructure such as escalators, central air conditioning, double-height showrooms, and lifts, 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. 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, as established under Section 115 of the Indian Evidence Act, 1872, and developed through judicial precedents, prevents 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, relying on the Respondent's representations and conduct, invested substantial amounts with the legitimate expectation that they were purchasing commercial properties in an integrated 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.

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 "Central Square Integrated Business District," constructing commercial infrastructure with amenities unsuitable for industrial use, targeting the general public as buyers, charging commercial rates, and providing assurances regarding land conversion, 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.

ISSUE NO. 2: Whether an occupancy certificate for one block/plaza of an integrated project constitutes a valid completion certificate for exemption under Section 3(2)(b) of the RE(RD) Act, 2016, when the entire project with common facilities remains incomplete.

The RE (RD) Act, 2016 draws a clear statutory distinction between different types of certificates that serve specific regulatory purposes in the real estate development process. Section 2(q) of the Act defines "completion certificate" as a certificate issued by the competent authority certifying that the real estate project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority. This definition emphasizes that the completion certificate must verify that the actual development conforms to the approved plans and specifications. In contrast, Section 2(zf) of the Act defines "occupancy certificate" as a certificate issued by the competent authority permitting occupation of any building. The fundamental distinction lies in the fact that while an occupancy certificate merely permits occupation of a structure, a completion certificate specifically certifies compliance with approved development plans and specifications.

An examination of the documentary evidence reveals that the occupancy certificate dated 13.09.2010 relied upon by the Respondent pertains exclusively to Plaza 3 (Block A) of the project and does not certify the completion of the entire "Central Square Integrated Business District" project. The project, as conceptualized, marketed, and sold to the Complainants and other buyers, comprises four distinct plazas (Plaza 1, Plaza 2, Plaza 3, and Plaza 4) that collectively constitute an integrated development with shared common areas, amenities, and infrastructure. The Respondent's attempt to rely on a plaza-specific occupancy certificate as evidence of project completion fundamentally misconstrues the scope and nature of the real estate project as defined under the RE (RD) Act, 2016.

The sanctioned building plan submitted by the Respondent and approved by the competent authority encompassed the entire project comprising all four plazas as a unified development scheme. The architectural drawings, structural plans, and development specifications presented for statutory approval clearly depicted an integrated commercial complex wherein the four plazas would function cohesively with interconnected facilities, common circulation areas, shared parking infrastructure, centralized services, and collective amenities. The buyers, including the Complainants, were induced to invest in this project based on representations regarding the comprehensive nature of the development and the availability of modern facilities and amenities that would be provided across the entire integrated complex.

The concept of an "Integrated Business District" inherently implies a holistic development where multiple buildings or blocks function together as a unified commercial ecosystem, sharing essential infrastructure and common facilities. The marketing materials, promotional literature, and representations made to prospective buyers consistently emphasized the integrated nature of the development, highlighting features such as centralized air conditioning systems, common area maintenance, shared parking facilities, landscaped common areas, security infrastructure covering the entire project, and other amenities that would serve all four plazas collectively. These representations created legitimate expectations among buyers that they were investing in a complete and fully-developed commercial complex rather than isolated individual structures.

Furthermore, the Third Schedule attached to the Agreement for Sale explicitly promised comprehensive common amenities and facilities to be provided to all allottees, which included:

The contractual commitment to provide these extensive common areas and facilities across the entire integrated project is significant for two reasons.

The evidence on record establishes that at the time the occupancy certificate for Plaza 3 was issued on 13.09.2010, and indeed even at present, the common amenities, shared facilities, and infrastructure components that were integral to the project as marketed and sold remain incomplete, non-functional, or absent altogether. The Respondent has failed to produce any documentary evidence demonstrating that the promised common facilities such as adequate parking infrastructure, landscaped areas, proper vehicular and pedestrian circulation systems, centralized services, and other collective amenities spanning across all four plazas have been completed and made operational in accordance with the sanctioned plans and the representations made to buyers.

The legal position on this issue has been authoritatively clarified by the Hon'ble High Court of Madras in the recent judgment of M/s. KSM Nirman Private Limited (now known as M/s. Olympia Tech Park (Chennai) Private Limited) v. Olympia Grande Apartments Owners Welfare Association, decided on 20.11.2024 in C.M.S.A. No. 38 of 2021. In that case, the developer had obtained partial completion certificates dated 13.05.2015, 06.11.2015, and 15.02.2016 for different phases of a 17-tower integrated residential project and sought exemption from RERA registration by relying on these partial completion certificates. The developer argued that since partial completion certificates were issued before RERA came into force, the project should be treated as completed and exempt from RERA jurisdiction under Section 3(2)(b) of the Act. The Hon'ble High Court of Madras, after examining the concept of integrated projects and the distinction between partial completion certificates and final completion certificates, categorically rejected the developer's contentions. The Court held that when a project is conceived, sanctioned, and developed as an integrated development with a single planning permit covering multiple towers or blocks, partial completion certificates issued for individual phases cannot be equated with the completion certificate contemplated under Section 2(q) of the RE(RD) Act, 2016. The Court observed that "these partial completion certificates do not indicate that the entire project, as approved, has been developed according to the sanction plan, layout plan and specifications as approved by the competent authority."

The Hon'ble Madras High Court further elucidated the fundamental distinction between partial completion certificates and final completion certificates, holding that "on a harmonious reading of TNRERA Rules, 2017 and the definition of 'completion certificate' mentioned in Section 2(q) of the Real Estate (Regulation and Development) Act, 2016, it can be safely concluded that the completion certificate that is required to be obtained by a builder can only mean a final completion certificate, which is issued after ascertaining whether the entire real estate project has been completed with the required roads, amenities etc." The Court emphasized that partial completion certificates are issued merely for administrative convenience in phased construction to enable availing of civic facilities and electricity connections, but they do not certify the completion of the entire integrated project with all its common areas, amenities, and facilities.

The factual position regarding Plaza 1, Plaza 2, and Plaza 4 further reinforces the conclusion that the project remains incomplete and ongoing. The occupancy certificates initially issued for Plaza 1 and Plaza 3 were subsequently revoked by the Municipal Corporation of Delhi due to misrepresentations and concealment of material facts, though the same were later restored. More significantly, Plaza 2 and Plaza 4 of the project have never obtained any completion certificate or occupancy certificate whatsoever, clearly establishing that substantial components of the integrated project remain uncompleted and non-compliant with statutory requirements even after more than 15 years from the commencement of the project.

The absence of completion certificates for Plaza 2 and Plaza 4, coupled with the fact that the occupancy certificates for Plaza 1 and Plaza 3 pertain only to those specific plazas without certifying the completion of the entire "Central Square Integrated Business District," demonstrates that the project remains incomplete. The situation in the present case is even more compelling than in the Olympia judgment, as here fifty percent of the integrated project (two out of four plazas) lacks any form of completion or occupancy certification whatsoever.

This Authority holds that in the absence of a completion certificate that certifies the completion of the entire "Central Square Integrated Business District" project as a unified development, including all four plazas and the common amenities and facilities that were integral to the sanctioned plan and the representations made to buyers, the project must be treated as an ongoing project within the meaning of Section 3 of the RE (RD) Act, 2016. The occupancy certificate dated 13.09.2010 for Plaza 3 alone, issued with an incomplete overall project where two plazas (Plaza 2 and Plaza 4) remain without any completion or occupancy certification, cannot serve as a valid completion certificate for the purposes of exemption under Section 3(2)(b) of the Act. The present case presents an even stronger basis for treating the project as ongoing compared to typical phased developments.

Section 3(1) of the RE (RD) Act, 2016 mandates as under

Section 3(2) of the Act provides for specific exemptions from the registration requirement, and it is relevant to reproduce the same for clarity:

The exemption under Section 3(2)(b) is specifically limited to projects for which the promoter has received a completion certificate prior to the commencement of the Act, which came into force on 01.05.2017. The term "completion certificate" in this provision must be understood in accordance with its statutory definition under Section 2(q) of the Act, which requires certification that the real estate project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority. As already established in the preceding analysis, the occupancy certificate for Plaza 3 does not constitute a completion certificate for the entire project, and no such completion certificate exists for the "Central Square Integrated Business District" project as a whole.

The Hon'ble Supreme Court in M/s Newtech Promoters & Developers Pvt. Ltd. vs. State of UP & Ors. has unequivocally held that all ongoing projects, regardless of when they were commenced, must be registered under RERA if they did not obtain completion certificates prior to the Act coming into force. The Court emphasized that the Act's provisions are mandatory and must be strictly complied with to achieve the legislative objective of protecting home buyers and ensuring accountability in the real estate sector. The Court rejected arguments that projects commenced before RERA should be exempt from registration, holding that the Act's protective provisions apply to all ongoing projects to safeguard the interests of buyers who had invested in such projects.

Therefore, the Authority finds that the occupancy certificate dated 13.09.2010 for Plaza 3 alone cannot constitute a valid completion certificate for the entire "Central Square Integrated Business District" project, which comprises four integrated plazas with shared amenities and infrastructure. Since two plazas (Plaza 2 and Plaza 4) lack any completion certification and the common facilities remain incomplete, the project must be treated as an ongoing project under Section 3 of the RE (RD) Act, 2016, requiring mandatory RERA registration.

ISSUE NO. 3: Whether the offer of possession given by the Respondents on 22.08.2013 constitutes a valid offer of possession under the RE(RD) Act, 2016.

The concept of "possession" in real estate transactions encompasses not merely physical handover of keys or access to a unit, but the delivery of legally valid, encumbrance-free, and marketable title that enables the buyer to enjoy the property for its intended purpose as represented and contracted. The offer of possession made by the Respondent to the Complainants on 22.08.2013 must be examined against this fundamental principle and the specific requirements under the RE (RD) Act, 2016, which places paramount importance on protecting the substantive rights and legitimate expectations of home buyers and investors.

Section 11(4)(a) of the RE (RD) Act, 2016 casts a statutory obligation upon every promoter to "be responsible for all obligations, responsibilities and functions under the provisions of this Act or the rules and regulations made thereunder or to the allottees as per the agreement for sale, or to the association of allottees, as the case may be, till the conveyance of all the apartments, plots or buildings, as the case may be, to the allottees, or the common areas to the association of allottees or the competent authority, as the case may be." This provision makes it unequivocally clear that the promoter's responsibility extends beyond mere construction and includes the duty to Page 17 of 23 deliver what was promised and contracted, including clear and marketable title suitable for the represented purpose.

The evidence on record establishes that the fundamental basis of the transaction between the Complainants and the Respondent was the purchase of a commercial unit in what was marketed, advertised, and represented as the "Central Square Integrated Business District." The entire investment decision of the Complainants was premised on the understanding, created and reinforced through consistent representations by the Respondent, that they were acquiring a commercial property suitable for conducting business operations, establishing retail outlets, or leasing for commercial purposes. The Respondent made specific and unambiguous assurances that the land title would be converted from flatted factory to commercial use before the time of possession, thereby acknowledging both the commercial nature of the project and the necessity of appropriate legal title for commercial operations.

The offer of possession dated 22.08.2013 was made while the land user/title remained classified as flatted factory, with no conversion having been undertaken despite the Respondent's earlier assurances and the passage of nearly six years from the booking date. This fundamental defect in title renders the offered possession legally deficient and commercially unviable.

The Respondent cannot seek to escape liability for delayed possession by making an offer that is fundamentally defective and incapable of serving the purpose for which the property was purchased. The law does not require a buyer to accept possession of property that suffers from fundamental title defects or that cannot be used for its intended and represented purpose. The Complainants' refusal to accept possession under such circumstances was not only justified but was the prudent course of action to protect their legal rights and commercial interests.

The phrase "in accordance with the terms of the agreement for sale" in Section 18(1) must be interpreted to include not just the physical structure but also the legal title and character of the property as represented and contracted. An offer of possession that does not conform to the fundamental terms of the agreement, particularly regarding the commercial nature and legal title of the property, cannot be considered a valid offer that triggers the buyer's obligation to accept possession or relieves the promoter of liability for delay.

This Authority, after careful examination of the facts, the applicable legal principles, and the specific circumstances of this case, conclusively holds that the offer of possession made by the Respondent on 22.08.2013 does not constitute a valid offer of possession under the RE (RD) Act, 2016 for the following reasons:

Consequently, the Respondent's liability for delayed possession continues from the contractual due date of 04.10.2009 until such time as valid possession with clear commercial title is delivered to the Complainants. The defective offer of possession in 2013 neither extinguished the Respondent's obligations nor relieved it of liability for compensation under Section 18 of the RE (RD) Act, 2016.

Having established the jurisdiction of this Authority over the project, the ongoing nature of the project requiring RERA registration, the violation of mandatory statutory provisions by the Respondent, and the invalidity of the offer of possession made without clear commercial title, it becomes necessary to determine the appropriate reliefs that should be granted to the Complainants to remedy the injustice suffered by them 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: (a) withdrawal from the project with refund of the amount paid along with prescribed interest and compensation; or (b) 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 this Authority must respect and give effect to the option exercised by the Complainants in the present case.

The Complainants, through their complaint filed in Form 'M', have specifically sought delayed possession charges on the paid amount rather than refund and withdrawal from the project. This indicates their clear intention to continue with the project and receive possession of the unit they have invested in, subject to the Respondent fulfilling its obligations regarding title conversion and delivery of valid possession. The Authority notes that this choice is reasonable and justified, particularly considering that the Complainants have already invested a substantial amount of Rs. 48,02,490/- (net Rs. 45,75,317/- after adjustment) over a period spanning from 2007 to 2021, and that the unit's current market value would substantially exceed the original investment.

The rate of interest payable for delayed possession is governed by Rule 15 of the Real Estate (Regulation and Development) (General) Rules, 2016, which was subsequently amended and adopted by various State Governments. The Delhi Real Estate (Regulation and Development) Rules, 2017, as amended from time to time, prescribe the rate of interest as the State Bank of India highest marginal cost of lending rate (MCLR) plus 2%. As of the relevant period, this works out to 10.80% per annum, which is significantly higher than the standard rate of simple interest typically awarded in civil matters.

The period for which delayed possession charges should be calculated requires careful determination based on the contractual terms and the findings of this Authority. Clause 19 of the Builder Buyer Agreement dated 05.10.2007 stipulated that possession would be delivered within two years from the commencement of construction, with a grace period of six months. The documentary evidence, including the payment schedule, establishes that construction commenced before 12.05.2006. Therefore, the contractual due date for possession, giving the builder the benefit of the maximum grace period, would be 04.10.2009 (two years and six months from the commencement date).

The Respondent's contention that its obligations were fulfilled by offering possession on 22.08.2013 has already been rejected by this Authority in its analysis of Issue No. 3, wherein it was conclusively held that the offer made without resolving the fundamental title defect cannot constitute valid possession under the Act. Therefore, the liability for delayed possession charges continues from the contractual due date of 04.10.2009 and shall continue until actual physical possession is delivered with clear commercial title.

Based upon the findings of jurisdictional authority, statutory violations, contractual breach, and deficiency in service, this Authority directs as under:

The case is disposed of accordingly.

No order as to costs.

File be consigned to record room after due compliances.