• Ayushi Srivastava

RERA v. NCLT v. Consumer Redressal Commission: Which is the best forum for homebuyers?

Updated: Aug 4, 2021

To own a home is one of the biggest dreams in one's life and a common man has to work his entire life to be able to earn permanent shelter for his family, however, at times this dream remains a far-fetched reality when a person becomes a victim of fraud and cheating played by unscrupulous builders and real-estate companies. Even after paying the consideration amount to the builder, the poor home buyer is made to wait endlessly in order to receive possession of the allotted unit, causing him mental agony and financial distress. Therefore, it is important for a homebuyer/allottee to know about the various legal remedies in order to take action against such defaulter real estate companies. It is furthermore important to be able to make the right and smart choice amongst these several legal remedies.

Prior to 2016, the choice of Civil Remedies available to homebuyers/allottees for proceeding against the malpractices of builders was majorly limited to either filing complaints before Consumer Redressal Commissions (Consumer Courts) or approach the District Courts. Though, the process of seeking justice under these forums was cumbersome, expensive, and time-consuming.

With the passage of time, it became imperative for the Government of India to establish forums that would promote transparency and efficiency in the real estate sector while providing speedier and cost-effective resolutions. Hence in 2016, the Real Estate Regulatory Authority (RERA) was established under the enactment of The Real Estate (Regulation and Development) Act. Further in the year 2018, homebuyers/allottees were allowed to move National Company Law Tribunal against the defaulter builders/real-estate companies by filing Insolvency Application under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC).[1]

Today, Real Estate disputes are being adjudicated by RERA, Consumer Redressal Commission, and NCLT. Thus, in case of any dispute, the aggrieved party can now approach the Consumer Protection Act, 2019, as a 'consumer'; Real Estate (Regulation and Development) Act, 2016 (RERA) as an 'allottee'; and Insolvency and Bankruptcy Code, 2016, as a 'Financial Creditor'. Majority of such cases are filed under RERA as this Act creates a system wherein issues like delayed possession, quality of construction, value of the property, etc. can be solved with higher transparency.

A three-judge bench of the Supreme Court headed by Justice Rohinton F Nariman delivered a judgment on August 9, 2019 in Pioneer Urban Land and Infrastructure Limited & Anr v. Union of India & Ors.[2] where it was held that remedies given to allottees of flats are concurrent and they are in a position to avail remedies under the CPA, RERA as well the Insolvency and Bankruptcy Code, 2016 (IBC).

Now let us discuss the differences between these three forums and which is the most suitable forum for homebuyers?

National Company Law Tribunal (NCLT):

NCLT was primarily established for adjudicating disputes related to companies both under the Companies Act as well as IBC. Under IBC, a class of creditors, namely, financial creditors can move Insolvency Application under Section 7 against the defaulting companies in order to initiate Corporate Insolvency Resolution Process (CIRP). However, prior to 2018, homebuyers/allottees were not accorded the status of financial creditors and it was only after the amendment of 2018[3] to the IBC that the home-buyers were recognized as financial creditors, and thus, were made eligible to move Insolvency Application under Section 7 against builders who committed default.

The change in status could be attributed to the case of Col. Vinod Awasthy v AMR Infrastructure Ltd.[4]; in this case the home-buyers approached the NCLT and asked that the status of financial creditors be granted to them and consequently they be allowed to participate in the Insolvency resolution process of AMR Infrastructure Limited, but they were not given that status by the NCLT. Though, the NCLAT reversed that decision and gave the recognition of financial creditors to the home-buyers.[5]

Thus, owing to this recognition the home-buyers can now either initiate the insolvency resolution process under the IBC [6] or can seek receipt of a portion of the sale of the assets under the liquidation process. As financial creditors, home-buyers are also accorded the opportunity of being a part of the 'committee of creditors' and may vote during the corporate insolvency resolution process.[7]

Appellate Structure under NCLT:

  1. National Company Law Tribunal;

  2. National Company Law Appellate Tribunal;

  3. Supreme Court.

A writ petition under Article 226 or 227 can also be preferred in exceptional circumstances against the decisions of the NCLT.

Prior to 2020, NCLT was proving to be a popular option amongst the aggrieved home buyers who sought relief from builders and real-estate companies. However, a series of recent amendments and changes introduced in the IBC have jeopardized this remedy available to homebuyers/allottees to a great extent.

Firstly, an Amendment was introduced in IBC on 13.03.2020, whereby, a Proviso was added to Section 7, thereby making it obligatory for the homebuyers/allottees to move only joint applications in order to initiate the CIRP against the defaulting builders. Joint Applications should be moved by one hundred of such allottees under the same real estate project or not less than ten percent of the total number of such allottees under the same real estate project, whichever is less.[8] This change has restricted an individual homebuyer or a small group of home buyers to seek relief against a real-estate company.

Secondly, a notification dated 24.03.2020 was introduced by the Ministry of Corporate Affairs, Government of India[9] whereby the minimum threshold limit or minimum amount of default, under Section 4 of IBC was increased from Rs. 1 Lakh to Rs. 1 crore. This minimum amount of default is necessary for the initiation of the Corporate Insolvency Resolution Process under the IBC. This notification has restricted homebuyers having claim amount lesser than Rs. 1 Lakh from filing insolvency applications before NCLT.

Thus, the recent amendments and changes brought in the IBC have diluted the remedy available to the homebuyers/allottees by approaching NCLT. Preferably, NCLT can be approached if there are multiple aggrieved homebuyers of a particular project. If the Developer has a sound financial position and the allottee seeks to obtain specific performance as to the completion of the project, then filing an Insolvency Application may not be a feasible option.

Real Estate Regulatory Authority (RERA):

The Real Estate (Regulation and Development) Act, 2016 (RERA Act) is an Act made by the Parliament of India with the objective to secure the rights and interests of the home buyers, increase the transparency in the working of the construction companies, and to establish an adjudicating mechanism for speedy dispute redressal.[10]

Under RERA Act there is no pecuniary jurisdiction, and even a single home buyer who had paid 1 Lakh or less to the builders can file a complaint. RERA mandates that promoters have to deposit 70% of the receivables into a separate bank account in a scheduled bank and the amounts from the separate account shall be withdrawn by the promoter after it is certified by an engineer, an architect, and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project,[11] thus preventing the diversion of funds.

Appellate Structure under the Real Estate (Regulation and Development) Act, 2016:

  1. Real Estate Regulatory Authority;

  2. Real Estate Appellate Tribunal;

  3. High Court;

  4. Supreme Court.

All the proceedings before RERA are to be completed in a time-bound manner[12] thereby, making this a more expeditious method of grievance redressal. Further, RERA entitles the aggrieved allottee to claim the refund amount which has been paid in consideration of a plot, apartment etc. along with interest as may be prescribed by the States or Union Territories in case builders or developers default in delivery of possession in accordance with the terms of agreement for sale or due to discontinuance of business or suspension/revocation of registration.[13]

It has already been held that remedies to homebuyers under the Consumer Protection Act and the Real Estate (Regulation and Development) Act are concurrent.[14] Thus, where different reliefs are to be sought from RERA Authority and Consumer Forum, different complaints in both the institutions are maintainable. However, there are two remedies that can only be provided by RERA, and the consumer forums are not competent to provide the same. These are: -

i. Power to issue directions for completion of project in consultation with State Government by appointment of the suitable agency.

ii. Power to include Builder/Developer in the list of defaulters and/or to prohibit it from undertaking new projects.

Moreover, the fact that the RERA Act contains a ‘bar of jurisdiction’[15] has not stopped the courts from providing the homebuyers with a simultaneous remedy under the Consumer Protection Act for issues that go beyond the RERA Act. According to the Punjab and Haryana High Court, remedies under RERA are in addition to and not in derogation of the other laws in force, taking recourse to Section 88 of the RERA Act.[16] This stance has also been upheld by the Supreme Court.[17]

Consumer Redressal Commission:

Consumer Protection Act, 1986 established various Redressal Forums at different levels, District Forum at District Level, State Commission at State Level, and the National Consumer Dispute Redressal Commission at National Level. Such Forums/Commissions have been set up with jurisdictions being defined in terms of territory and the monetary value of the claims.

Homebuyers have been adjudicated as 'consumers' under Consumer Protection Act, 1986, and a Complaint may be made by the Homebuyer regarding the delay in possession of the property or 'deficiency in service' of the builder. The Applicant has to file a Complaint along with necessary documents in support of his Complaint. The Complaint may be filed by any Consumer or group of consumers having same cause of interest.

Recently, The Consumer Protection Act, 1986 was replaced by the Consumer Protection Act, 2019 by the Parliament of India. Under the Consumer Protection Act, 2019 the home buyers were also included within the purview of the Act by interpreting the word "Services" to include 'construction' since construction is also a service.[18] Further, since there is no specific form in which the complaint must be filed thus an application is more than enough, making this an easier form of registering a complaint. Though, only a person who can be held to be a consumer according to the Consumer Protection Act can file a complaint.[19]

Appellate Structure under the CPA:

  1. District Consumer Disputes Redressal Commission.

  2. State Consumer Disputes Redressal Commission.

  3. National Consumer Disputes Redressal Commission.

  4. Supreme Court.

A writ petition under Article 226 & 227 can be preferred in exceptional circumstances against the decisions of the Forums.

A homebuyer who is aggrieved by the malpractice of builders can file a complaint under the CPA,2019 within the limits of their jurisdiction in the following way:

1. District Consumer Disputes Redressal Commission (DCDRC): Where the value of the claim doesn’t exceed one crore rupees.[20]

2. State Consumer Disputes Redressal Commission (SCDRC): Where the value of the claim exceeds one crore but doesn’t exceed ten crore rupees.[21]

3. National Consumer Disputes Redressal Commission (NCDRC): Where the value of the claim exceeds ten crore rupees.[22]

The adjudication process before these Consumer Dispute Redressal Commissions is usually very time taking and it varies approximately between 5 to 6 years. The limitation set by the said Act is 2 years[23] therefore, a customer has to file a complaint within 2 years from the cause of action, any delay would have to be explained and if the District Commission, the State Commission or the National Commission, as the case may be is satisfied that the complainant had sufficient reason for delay then they may allow the complaint.[24]

In terms of the relief granted to aggrieved home-buyers, the relevant Commission may pass an Order directing the builder or developer to return the money along with the interest and compensation for any loss or damage caused to the home-buyers due to the deficiency in service of builders or developers. Further, the Commissions have the power to execute their own orders. This makes execution of orders also an expeditious affair in comparison to regular suits or execution of orders passed by various Courts/Quasi-Judicial Forums.


Since 2016, the real estate sector in India has seen significant improvements. The recent judgments passed by the High Court, the Supreme Court, and even the authorities under RERA, CPA and NCLT, have all been favourable to the home buyers. The aggrieved home buyer is now armed with a host of remedies to seek relief against the malpractice of builders.

However, the following points should be in order to make a smart - choice between one of these forums:

  1. If a person seeks performance of contractual obligations or compensation in respect thereof, then both RERA & Consumer Disputes Redressal Commissions can be a better and effective remedy especially in cases where Developer has financial ability to pay. One may simultaneously file a complaint with RERA to blacklist the Developer and seek other reliefs which RERA can provide but the consumer forum cannot.

  2. However, it has to be kept in mind that the practical timeline for redressal of a complaint before RERA is relatively shorter (6 months - 1 year) than before Consumer Disputes Redressal Commissions (4 - 5 years).

  3. Also if the project/construction work is on the verge of completion, RERA would be a more effective remedy, especially if Flat Purchaser/Home Buyer desires to obtain possession of the Allotted Unit coupled with the consideration that RERA can also provide compensatory reliefs. Having said that, it has to be kept in mind that RERA is a 'toothless' authority and it has no effective mechanism to execute its own orders. However, a person can always approach High Courts under Article 226 for expediting the recovery process in pursuance of a RERA order.

  4. If the financial position of a developer is deteriorating and a large group of Homebuyers is unable to get possession of the allotted unit or refund of his consideration amount paid to the developer; then in such the homebuyers can file a Joint Insolvency Application before NCLT which would be an appropriate remedy

  5. Insolvency can always be availed as an alternative/concurrent remedy when the allottee feels that the financial position of the Developer is deteriorating and Developer will not be able to complete the project and return the money with interest.

  6. The insolvency process under IBC helps to recover the maximum amount of money invested along with Interest. Completion of a project may take several years due to various practical difficulties that may arise in the completion of the project. Also, execution of the order for payment of money will not have any fruitful result if the Developer does not have the financial ability to pay it.

  7. In terms of execution, initiating Insolvency Process before NCLT will be a more lucrative remedy as it involves a process to liquidate the assets of an entity or person in case there is a high probability that the Developer may not be in a position to return the money invested.


[1] Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, Ordinance No. 06 of 2018. [2] (Writ Petition (Civil) No 43 of 2019). [3] Supra at 1. [4] CP No. (IB)-10(PB)/2017, (NCLT Principal Bench Delhi, 20 February 2017). [5] Nikhil Mehta and Sons v. AMR Infrastructure, Company Appeal (AT) (Insolvency) No. 07/2017, (NCLAT, New Delhi, 21 July 2017). [6] Section 7, Insolvency and Bankruptcy Code, 2016 [7] Section 24, Insolvency and Bankruptcy Code, 2016. [8] The Insolvency and Bankruptcy (Amendment) Code, 2016 on 13.03.2019. [9] https://ibbi.gov.in//uploads/legalframwork/48bf32150f5d6b30477b74f652964edc.pdf

[10] Preamble of RERA. [11] Section 4(D) of RERA. [12] RERA, Sections 29 (4); 44 (2), 44 (5) and 58. [13] Ibid, Sections 19 (4). [14] M/s. M3M India Private Limited & Anr v. Dr Dinesh Sharma & Anr (CM (M) 1244 of 2019 & CM APPL 38052-38053 of 2019) [15] Section 79 of RERA. [16] Experion Developers Pvt. Ltd. v. State of Haryana and Ors., and Janta Land Promoters Private Limited v. Union of India and Ors. [17] M/S Imperial Structures Ltd v. Anil Patni. [18] Section 2(42) of CPA,2019 [19] Section 2(d) of CPA,2019. [20] Section 34(1), CPA,2019. [21] Section 47(1)(a)(i), CPA,2019. [22] Section 58(1)(a)(i), CPA,2019. [23] Section 69(1),CPA,2019. [24] Section 69(2), CPA,2019.


Author: Poorva Bharadwaj, Intern at S&D Legal Associates.