Sh. Karan Gupta vs M/s Purearth Infrastructure Limited & Anr.

A complaint was filed in FORM 'M' on 19.09.2022 by Sh. Karan Gupta through his Attorney Sh. Deepak Gupta (hereinafter referred to as "Complainant") under section 31 r/w section 18 of RE (RD) Act, 2016 stating that he booked a Multipurpose Shop in project "Central Square" promoted by 'M/s Purearth Infrastructure Limited' (hereinafter referred to as "Respondents" or "Respondent Company") located at Hindu Bara Rao, Old Delhi – 110006.

The Complainant has sought various reliefs including termination of the Agreement, refund of the paid amount with interest, compensation for mental agony amounting to Rs. 5 lakh, litigation cost of Rs. 1.5 lakh and directions to cease unfair trade practices.

Additionally, an interim order was sought to attach bank accounts of the Respondents and restrict their asset transfers during the pendency of the complaint.

A preliminary hearing in the case was held on 10.10.2022. A notice to the Respondents was issued on 12.01.2023 through registered post and email as well.

The matter was subsequently heard on 14.12.2022, 09.03.2023, 16.05.2023, 05.07.2023, 09.08.2023, 11.10.2023, 23.11.2023, 17.01.2024, 07.03.2024, 07.05.2024, 31.07.2024, 25.09.2024, 23.10.2024 and 13.11.2024. The Noticee filed their reply on 04.07.2023.

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 Respondents are as follows:

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

The Agreement for Sale dated 28.07.2006 executed between the original allottee Sh. Deepak Gupta and the Respondent specifically describes the unit as a "Multi-Purpose Shop" in its recitals and terms. Clause 36 of the said Agreement explicitly stipulates the permissible use as follows:

The characterization of the unit as a "Multi-Purpose Shop" is further reinforced by the Second Schedule of the Agreement for Sale dated 28.07.2006, which forms an integral part of the contractual arrangement between the parties. The Second Schedule explicitly describes the nature and particulars of the unit being transacted. The relevant portion of the Second Schedule is reproduced verbatim as follows:

From a combined reading of Clause 36 of the Agreement for Sale, which stipulates the permissible use as "Flatted Complex/ Multi-Purpose Shop," and the Second Schedule, which explicitly describes the unit as "flatted factory/ Multi-Purpose Shop" at Rs. 8,330/- per square foot aggregating to Rs. 1,07,12,380/-, it becomes pellucidly clear that the Respondent contractually sold unit as a commercial one to the Complainant. The description "Multi-Purpose Shop" appearing in both integral provisions is a commercial designation referring to business premises, and the premium pricing of Rs. 8,330/- per square foot is consistent with commercial rates rather than industrial rates. The factum that the Respondent contractually sold "Multi-Purpose Shop" units, which are quintessentially commercial establishments meant for business activities, conclusively establishes the commercial character of the project, thereby bringing it squarely within the ambit of "real estate project" as defined under Section 2(zn) of the RE (RD) Act, 2016.

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 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 double height showrooms, 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 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.

Throughout the sales process, the Respondent provided consistent assurances to buyers regarding the conversion of land title from flatted factory to commercial before the time of possession, thereby acknowledging the mismatch between the underlying land classification and the actual intended use of the project. These representations were made as material inducements to prospective buyers and formed the basis of their investment decisions. The Respondent's own conduct in providing such assurances demonstrates recognition of the commercial nature of the project and the necessity of obtaining appropriate approvals and clearances for commercial use.

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 this Authority’s 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 Respondents throughout the development and marketing phase creates a clear estoppel against any attempt to now characterize the project as Industrial and falling outside this Authority’s jurisdiction. The buyers, relying on the Respondent Company’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 RE(RD) Act’s provisions 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.

under Section 3(2)(b) of the RE(RD) Act, 2016, particularly 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 Respondents pertain 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 Complainant and other buyers, comprises multiple distinct plazas 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 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 plazas would function cohesively with interconnected facilities, common circulation areas, shared parking infrastructure, centralized services, and collective amenities. The buyers, including the Complainant, 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.

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 Respondents have 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 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 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 the other plazas in the project further reinforces the conclusion that the project remains incomplete and ongoing. The evidence demonstrates that other components of the integrated project have not obtained completion certificates, 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.

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 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 other plazas and common facilities remain without completion certification, cannot serve as a valid completion certificate for the purposes of exemption under Section 3(2)(b) of the Act.

Section 3(1) of the RE (RD) Act, 2016 mandates that "No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act." The provision is categorical and admits of no exceptions for projects that were commenced prior to the enactment of the Act but remained incomplete and ongoing at the time the Act came into force.

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. (supra) 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 multiple integrated plazas with shared amenities and infrastructure. Since other plazas and common facilities lack completion certification and remain incomplete, the project must be treated as an ongoing project under Section 3 of the RE (RD) Act, 2016, requiring mandatory RERA registration.

Having established the jurisdiction of this Authority over the project, the ongoing nature of the project requiring RERA registration, and the violation of mandatory statutory provisions by the Respondent, 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: (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.

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 in possession, the fundamental misrepresentation regarding the nature of the property, the failure to convert the land title from flatted factory to commercial despite assurances, and the overall conduct of the Respondent which demonstrates deficiency in service and unfair trade practices.

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 an "Integrated Business District," 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 Company’s failure to obtain conversion approvals despite specific assurances, renders the property unsuitable for the intended commercial purpose for which it was purchased. This constitutes not just delayed possession but delivery of a product that is fundamentally different from what was contracted and represented.

Furthermore, the Authority notes that the Respondent Company’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, charged premium commercial rates, provided assurances regarding land conversion that were never fulfilled, 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 and where there is no assurance that the Respondents will fulfill its obligations regarding 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, material misrepresentations, and fundamental defects in title, the law recognizes their 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 RE(RD) 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.

Therefore, this Authority, after careful consideration of all facts and circumstances, the nature and extent of the Respondent's defaults and misrepresentations, the fundamental defects in title affecting the commercial usability of the property, the prolonged delay spanning over 15 years from the contractual due date, 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 and compensation as provided under the Act. 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 consumer protection 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 Respondents 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.