RERA: Assured Returns Of Payment Not Barred Under Banning Of Unregulated Deposit Schemes Act

RERA: Assured Returns Of Payment Not Barred Under Banning Of Unregulated Deposit Schemes Act

Orders Neo Square project’s Gurugram builder to pay the homebuyer within 90 days

The Haryana bench of the Real Estate Regulatory Authority (RERA) has held that the payment of assured returns by a builder to a homebuyer is protected under the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019.

The assured returns are schemes where builders promise to pay a fixed amount to homebuyers at regular intervals (usually monthly) for a specified period.

The homebuyer filed a complaint before RERA after the builder failed to provide a monthly assured return of Rs.44,43,863.

The homebuyer (complainant) booked a flat in the builder's (respondent) project Neo Square in Sector 109, Gurugram.

The homebuyer and builder entered an agreement for the sale of the flat on 14.07.2016. As per the agreement, the builder was to hand over the possession of the flat by 14.07.2019.

A Memorandum of Understanding (MOU) was also executed on 14.07.2016 between them. As per Clause 4 of the MOU, the total cost of the flat was Rs.47,25,000. It stipulated that the builder would pay the homebuyer a monthly assured return of Rs.40,500 on the total amount received from 14.07.2016. The homebuyer paid Rs.44,43,863 to the builder.

The complainant contended that the builder kept delaying the assured return payment until June 2019. Also, some of the cheques issued by the builder were dishonored. His representatives assured the homebuyer that the delayed payments, along with interest, would be adjusted at the time of the possession.

However, after the possession date passed, in January 2020, the homebuyer visited the builder's office to inquire about the possession and the pending payment of the assured returns.

He was informed that the possession of the flat would soon be handed over along with the adjustment of the delayed payment interest and monthly assured returns.

When this did not happen, the homebuyer filed a complaint before RERA seeking interest for the delayed possession, payment of monthly assured returns, and a refund of the Value Added Tax (VAT) charges.

The builder contended that the BUDS Act came into effect in 2019. Therefore, he was forced to stop all payments related to assured returns from 2016 onwards. He added that the relief of returns was not maintainable before RERA due to the enactment of the Act. The directions to pay assured returns violated the provisions of the Act.

The bench of Ashok Sangwan (Member) observed that the BUDS Act did not bar payment of assured returns. The assured returns payment by the builder to the homebuyer was protected under Section 2(4)(iii) of the BUDS Act.

The RERA referred to Section 2(4), wherein the ‘deposit’ meant an amount received as an advance or loan or in any other form, by a deposit-taker with a promise to return whether after a specified period or otherwise, either in cash or in kind, or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or any other form.

However, it did not include an amount received in the course of, or for the purpose of, business and bearing a genuine connection to such business including an advance received in consideration of an immovable property under an agreement or arrangement subject to the condition that such advance was adjusted against the immovable property as specified in terms of the agreement or arrangement.

The bench observed that the definition of ‘deposit’ was similar to that under Section 2(31) of the Companies Act, 2013, and Rule 2(c) of the Companies (Acceptance of Deposits) Rules, 2014.

The Authority noted that the Government of India introduced the BUDS Act in 2019 to stop the unregulated deposit schemes and protect the depositors. The Act did not apply to deposits taken during regular business activities.

Thus, the RERA held that the amount paid by the complainant to the builder was a regulated deposit. The builder accepted it from the homebuyer for the flat (immovable property) to be later transferred to the latter.

It ordered the builder to pay the due of assured returns to the homebuyer, as per the MOU entered on 14.07.2016, within 90 days.