Builder Cannot Escape Refund Liability For Failing To Deliver Flat With Clear Title By Blaming Landowner: REAT

The Karnataka Real Estate Appellate Tribunal has recently held that a builder (promoter) cannot escape liability to refund amounts paid by homebuyers with interest for failing to deliver a flat with a clear and marketable title by blaming the landowner or citing pending title disputes.

A bench of Judicial Member Santhosh Kumar Shetty N and Administrative Member Mahendra Jain said, “The Promoter cannot absolve himself from the responsibility of paying delay compensation to the Allottee solely on the ground that the landowner is liable to pay the compensation arising due to title issues under the framework of RERA Act.”

It further held, “It is the responsibility of the Promoter to ensure that he has legal title to the land along with legally valid documents with authentication of such title, if such land is owned by another person, namely the landlord who may be different from the Promoter. It is also his responsibility to ensure that land is free from all encumbrances including any rights, title, interest or name of any party in or over such land along with details.”

The case arose from a flat booked by Anil Handigol and Prabhavati Handigol in Sobha Limited's “Sobha Valley View – Heritage” project. They paid about 1.30 crore under agreements signed in November 2014. The flat was to be delivered by July 2018, with a grace period till February 2019. However, legal proceedings affecting the project land, including attachment in a benami case, prevented registration of the property.

Though an occupancy certificate was issued in October 2019, the sale deed was never executed. The buyers approached the regulator and were granted a refund of about 2.24 crore with interest.

Sobha Limited argued that it had completed construction and offered possession and that delays were caused by proceedings involving the landowner and other factors beyond its control. It also relied on contractual clauses and claimed the buyers had initially agreed to take possession before later seeking cancellation.

The Tribunal rejected these arguments. It held that offering possession is not enough if the promoter cannot transfer a clear and legally valid title. It also found that material information was not disclosed to the buyers and observed, “It is incumbent on the part of the Promoter to disclose this material and relevant fact to the Allottees and then proceed to take further steps of executing the Sale Deed for handing over possession on the strength of the 'Deemed Occupancy Certificate', rather than waiting for a proper Occupancy Certificate.”

The Tribunal clarified that only delays caused by events such as natural calamities can qualify as force majeure under the law, stating, “Only the delay on account of these factors can be taken as valid grounds for limiting the liability of Promoter.”

It also held, “Promoter cannot take shelter under the alleged fault on part of the landowner as a valid reason to avoid paying compensation to the Allottees.” The appeal was dismissed and the refund order upheld.

For Appellant (Sobha Limited): Advocates Vinayaka S. Pandit, M.S. Rajagopal.

For Respondents (Anil Handigol & Prabhavati Handigol): Advocates Ravi Kumara B.R., I.S. Devaiah.