Elective Paper 6D: Economic Laws Case Study 1: ST ST
Elective Paper 6D: Economic Laws Case Study 1: ST ST
Elective Paper 6D: Economic Laws Case Study 1: ST ST
CASE STUDY 1
Mr. Bhanu Pratap Taneja is a leading real estate developer based in Delhi. In the
last decade, his company Garvit Bhoomi Developers Pvt. Limited having registered
office in Bhikaji Cama Place, New Delhi, had successfully developed four housing
projects – two in Gurgaon and one each in Jaipur and Lucknow. They had a robust
management team. Having been the name behind developing more than five
thousand luxurious apartments with modern amenities, they had the reputation of
delivering the projects well within the promised time.
In the beginning of the year 2015, they launched another project in Indirapuram, UP
by the name Omega Capetown Residency in which 1000 residential units consisting
of 2BHK and 3BHK apartments were to be developed. They were to be completed in
all respects by January 2018 and delivered to the consumers by that date. This
project was being carried on smoothly when the Real Estate (Regulation and
Development) Act, 2016 came to be enacted w.e.f. 1 st May, 2016. Section 3, which
was enacted later w.e.f. 1 st May 2017. Since Omega Capetown Residency consisted
of 1,000 residential units, it was required to be registered and so the company
submitted the requisite documents with concerned authorities.
As the application for registration was found to be complete in all respects, the
Omega Capetown Residency Project was granted registration by RERA (UP) within
the statutory period and was provided with a registration number including a log-in
ID for assessing the website of the Authority and to create webpage.
In the meantime, Mr. Taneja was approached by some of the influential developers
that an understanding had been reached among them to control the price of
apartments to be built by them. However, because of legal tangles such
understanding could not be brought into writing and it was also not intended to be
enforced by legal proceedings. Mr. Taneja did not agree to the proposal because
even though the understanding was not in writing and it was not intended to be
enforceable by legal proceedings, it was still illegal as per the Competition Act, 2002.
This revelation made by Mr. Taneja discouraged the intending developers and they
desisted from being a party to this proposal.
Mr. Taneja’s son Garvit, who was a commerce graduate and holder of law degree,
had a college friend Rohit whose father Mr. Dev Kumar dealt in sale, purchase and
renting of properties under the title ‘Dev Property Dealers’ from the Yusuf Sarai
market. Since Rohit had joined his father’s business, it was thought prudent to
convert the existing proprietary business into a registered partnership firm titled as
‘Dev & Sons Property Dealers’. Because of the enactment of Real Estate Act, Rohit
consulted his friend Garvit regarding its implications in case of real estate agents.
Accordingly, the firm was got registered as real estate agent with the help of Garvit’s
legal advisor.
Further, Garvit made a proposal to Rohit and his father that they could associate
themselves with his Omega Capetown Residency, a registered RERA project in
Indirapuram for facilitating sale of apartments which they readily accepted. Garvit
also cautioned them that as per the Act, since their firm was now a registered real
estate agent they were not supposed to facilitate sale/purchase of any plot,
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apartment or building in a real estate project being sold by the promoter in any
planning area, if such project was not registered with RERA of the concerned State.
In addition, Garvit’s legal advisor told them that as required by Section 10, a
registered real estate agent would maintain and preserve proper books of accounts
and other necessary documents. Further, such agent would not involve himself in
any unfair trade practice like making a false statement regarding services to be
provided by him. He would also not permit the publication of any advertisement
whether in any newspaper or otherwise of services that were not intended to be
offered. Besides, the agent would also have to help the intending buyers in getting
the required information and documents to which they were entitled, at the time of
booking of any property.
Rohit had a friend Tarun whose father Dr. Sreenivas Sharma was a surgeon in a
government hospital and was residing in a rented government flat in the hospital
campus itself. He had an intense desire to have a luxurious flat of his own. Tarun
had joined IBM after doing MBA from IIFT, New Delhi. So, with the combined salary
of both, they decided to buy a flat. Tarun contacted Rohit to help him in searching a
suitable apartment for his family. In turn, Rohit informed him that one particular 3BHK
flat at an ideal location was available in Omega Capetown Residency in Indirapuram
as the original allottee had withdrawn from the scheme; otherwise the booking under
this project was already full. Dr. Sharma got interested in the information and went
to the Omega Capetown Residency along with his family to see the concerned
apartment. He liked its strategic location and gathered more information regarding
sanctioned plan, layout plan along with the other specifications, etc. He then asked
for stage-wise time schedule of completion of the project and also enquired regarding
provision of water, sanitation and other amenities. Since, Rohit personally knew
Garvit and his father Mr. Taneja - the promoters of the project - Dr. Sharma and his
family had a lively and fruitful meeting with them. Subsequently, he and his son jointly
entered into an agreement for sale with the promoters of the project and made
payment of 75% of the cost of the apartment, while remaining 25% of the cost was
to be paid at the time when the apartments were ready for occupation.
A few months after booking the apartment, Dr. Sharma got a notice from the
promoters of Omega Capetown Residency that due to unforeseen circumstances
they were not in a position to complete the project and needed the allottees’ consent
for transferring of their majority rights and liabilities to another reputed developer
M/s. Sai Developers Pvt. Limited of New Delhi. In case any of the allottees was not
agreeable to this proposal he could get his money refunded. Since Dr. Sharma was
very much attached to the location of the flat, he accepted the proposal after
enquiring with Rohit and his father. He also learnt that 95% of the allottees had
already given their written permission. Further, the Authority had given its written
approval to the proposal for transfer and completion of Project by M/s. Sai
Developers Pvt. Limited. Dr. Sharma was also assured by Mr. Bhanu Pratap Taneja,
the erstwhile promoter with whom he had earlier interacted satisfactorily, that all the
pending obligations would be fulfilled by the new developer and in no case the date
of completion of the project would be extended; otherwise it would attract penalty. It
was also disclosed by Mr. Taneja that the new promoter would rectify any structural
defect if it occurred within a period of five years from the date of handing over the
possession of the apartments. Dr. Sharma, thus felt relieved.
© The Institute of Chartered Accountants of India
M/s. Sai Developers completed the project on time and received Completion
Certificate from the Competent Authority. As per the agreement for sale, Dr. Sharma
made payment of the remaining 25% of the cost. Thereafter, he received Occupancy
Certificate and took physical possession of the apartment well before two months
since the allottees were supposed to take physical possession within statutory period
of two months from the issue of Occupancy Certificate. He was also given other
necessary documents and plans, including that of common areas. He also became
a member of the RWA formed by the allottees. In the meantime, the promoter
executed a registered conveyance deed in favour of each of the allottees along with
the undivided proportionate title in the common areas to the RWA.
I. Multiple Choice Questions
1. Registration of a real estate project shall not be required –
(a) where the area of land proposed to be developed does not exceed
five hundred square meters or the number of apartments proposed to
be developed does not exceed eight.
(b) where the area of land proposed to be developed does not exceed
five thousand square meters or the number of apartments proposed
to be developed does not exceed eighty.
(c) where the area of land proposed to be developed does not exceed
two hundred fifty square meters or the number of apartments
proposed to be developed does not exceed four.
(d) where the area of land proposed to be developed does not exceed
three hundred square meters or the number of apartments proposed
to be developed does not exceed three.
2. Who is required to submit a copy of duly obtained approvals and
commencement certificate for getting the project registered with RERA:
(a) Allottee
(b) Promoter
(c) Real Estate Agent
(d) None of the above
3. A registered real estate agent shall -
(a) Facilitate the sale/purchase of any plot, apartment or building, being
sold by the promoter in any planning area, which is registered with
the Authority;
(b) maintain and preserve prescribed books of account, records and
documents;
(c) not involve himself in any unfair trade practices
(d) All of the above.