Karnataka RERA Directs Thills To Pay ₹7 Lakh For Concealing Land Litigation From Homebuyers

The Karnataka Real Estate Regulatory Authority (RERA) on 18 July held that a real estate developer's failure to disclose pending litigation over project land before executing a sale deed amounts to suppression of a material fact, entitling homebuyers to compensation for loss of opportunity and mental agony.

Adjudicating Officer Smt. Maheshwari S. Hiremath directed Thills (formerly known as Jaganmata Property Developers Private Limited) to pay Rs. 7 lakh as compensation to two homebuyers after finding that the developer concealed a pending civil suit concerning the land on which its Tivoli Hills Phase 3 project at Devanahalli was being developed. The Bench held:

"Considering the facts and circumstances of the case, certainly the complainants do not enjoy absolute right, title and interest over their plot as the same shall be based on the outcome of said suit. The non-disclosure of such a material fact has resulted in the loss of opportunity and mental agony. Generally, the allottees will purchase residential plots with an intention to construct their dream house. Herein this case, the complainants are unable to construct their house on the said plot. Further, the complainants have availed home loan to purchase the said plot. Hence, they are burdened with EMI towards housing loan."

The dispute arose from the purchase of Plot No. PTH-249 in the Tivoli Hills Phase 3 project at Devanahalli, developed by Thills, a wholly owned subsidiary of Puravankara Limited.

On 21 February 2024, Ashish Choudhary and Neha Mallik entered into an Agreement of Sale and a Development Agreement with Thills for Rs. 1,96,87,500. They financed the purchase through a Rs. 1.86 crore housing loan, following which L&T Finance Holdings Limited disbursed Rs. 1,77,98,000 on 22 March 2024.

Thills executed a registered Sale Deed on 19 April 2024, declaring that the property had clear and marketable title and was free from encumbrances and litigation. However, in June 2024, the buyers discovered that a civil suit concerning ownership of part of the project land had been pending before the 2nd Additional Senior Civil Judge and JMFC, Devanahalli, since 2006. They also learnt that Thills had applied to be impleaded in the suit on 15 November 2022, was added as Defendant No. 17 on 18 March 2023, and had filed its written statement on 23 June 2023, before executing the sale documents.

Aggrieved by the non-disclosure, Ashish Choudhary and Neha Mallik filed a complaint under Section 31 of the Real Estate (Regulation and Development) Act, 2016, seeking compensation under Sections 71 and 72. They argued that they would not have purchased the plot or availed the housing loan had the litigation been disclosed before execution of the agreements and Sale Deed. They further alleged that Thills knowingly misrepresented the property's title despite being aware of the pending suit.

Thills argued that the Sale Deed concluded the contractual relationship, that cancellation of a registered conveyance could only be sought before a civil court, and that claims relating to home loan liability and opportunity cost were speculative and legally unsustainable.

Rejecting these submissions, the Authority found that Thills was aware of the litigation well before entering into the transaction but still represented in the Sale Deed that the property was free from court proceedings. It observed that homebuyers invest their lifetime savings to own a home and that the relationship between a developer and buyers places a greater responsibility on promoters to disclose material facts. It stated:

“In general to have his own cozy house is everyone's dream. To fulfil that dream one would take risk of investing all his lifetime savings and raise loans in terms of lakhs or crores which would take away rest of his life in repaying the same. That being so, the developer who promises to fulfil dream of owning the house shall conduct himself in equally responsible manner. If he resorts to use the hard earned money of investors in a reckless manner, it would not only shatter the dreams of investors, but also make him run from pillar to post by incurring heavy investment as well as legal expenses.”

Noting that the buyers had separately sought refund with interest, the Authority confined the present proceedings to compensation for non-pecuniary losses. It held that the concealment of the pending suit deprived the buyers of an informed choice and caused mental agony, warranting compensation of Rs. 7 lakh.

Accordingly, the RERA allowed the complaint and directed Thills to pay Rs. 7 lakh as compensation within 60 days, failing which the amount would carry interest at MCLR + 2% per annum from the sixty-first day until payment. It also awarded Rs. 7,000 towards litigation costs.

Appearances for complainants (Ashish Choudhary and Neha Mallik): Advocate Amit Anand.

Appearances for respondent (Thills): Advocate Joseph Anthony.