The Odisha Real Estate Appellate Tribunal has held that a project brochure can be treated as an agreement between a developer and a homebuyer in the absence of a formal written agreement for sale.
However, the developer cannot rely on clauses in the brochure that violate homebuyers' statutory rights under the Real Estate (Regulation and Development) Act, 2016.
The Bench comprising Judicial Member S.K. Rajguru and Technical/Administrative Member Dr. B.K. Das made the observation while allowing an appeal filed by Jayanarayan Mishra against the Odisha State Housing Board (OSHB) over a flat allotted to him in its Kharvela Enclave project in Bhubaneswar.
“In absence of a formal agreement for sale between the parties in writing, certainly the brochure can be treated as same,” the tribunal observed.
“The project being under the fold of the Act, 2016 the respondent no.1-promoter is not entitled to keep a clause in the brochure which will be violative of appellant-allottee's right to interest u/sec. 18 (1) of the Act", it added.
The dispute arose after OSHB launched Kharvela Enclave, a multi-storeyed residential project at Dharma Vihar, Jagamara, Bhubaneswar, in 2011.
Following an application and draw of lots, homebuyer Jayanarayan Mishra was allotted a four-bedroom deluxe flat on June 13, 2014, at a provisional price of ₹67.25 lakh.
Mishra paid ₹7 lakh as earnest money and subsequently deposited ₹14.08 lakh along with ₹65,137 in service tax on June 30, 2014.
Under the project brochure, possession was due within 36 months of allottee selection, making June 12, 2017, the stipulated completion date.
However, on February 2, 2017, OSHB increased the flat's price to ₹91.63 lakh.
Following objections, it reduced the amount to ₹88.40 lakh in July 2018, still ₹21,15,875 above the original price. The expected completion date was also subsequently extended to June 30, 2020.
Aggrieved by the price escalation and delay, Mishra approached Odisha RERA on October 29, 2018.
By an order dated June 4, 2019, the Regulatory Authority declined to invalidate the increased price, treating it as an accomplished situation, and awarded delayed-possession interest only from November 24, 2018.
Mishra challenged these findings before the Appellate Tribunal, arguing that OSHB had increased the price contrary to the brochure, which permitted determination of the final sale price only after project completion.
OSHB defended the escalation by citing rising construction costs, administrative delays and encroachments on the project land. It also maintained that Mishra could have withdrawn from the project when the price increased beyond 25% but had chosen to continue.
Examining the brochure, the Tribunal found that OSHB had increased the price before completing construction, without adequately explaining the substantial escalation.
It further rejected the Housing Board's reliance on broadly worded force majeure conditions covering administrative delays, material shortages and other circumstances beyond its control.
“As the project in question is under the fold of the Act, 2016, 'force majeure', for delay in its completion can only include the aforesaid circumstances as per Section 6 but not the other circumstances as included in the brochure", it said.
The Tribunal held that such contractual conditions could not extend the statutory grounds for excusing delays under RERA or deprive homebuyers of interest for delayed possession.
It also rejected the explanation concerning land encroachments, observing that OSHB should have ensured the project land was free from encroachments before advertising flats and collecting payments.
Accordingly, the Tribunal allowed Mishra's appeal, set aside the price escalation from ₹67.25 lakh to ₹88.40 lakh and directed OSHB to pay 10.15% annual interest on ₹14,73,137 from June 13, 2017, until actual possession.
It further set aside the earlier direction for compound interest, holding that quarterly compounding was not prescribed under the Odisha RERA Rules, 2017.
For Appellant (Jayanarayan Mishra): Advocate S. Mohanty.
For Respondent (Odisha State Housing Board): Advocate T.K. Biswal.
For Respondent (Odisha RERA): Advocate B. Nayak.