RE-ASSESSING RESOLUTION MECHANISM FOR RERA DISPUTES: A COMPELLING CASE FOR RERA CONCILIATION FORUMS
Shubham Joshi, Associate, Rab & Rab Associates LLP
The Real Estate (Regulation and Development) Act, 2016 (“Act”) supported by its Rules were enacted to establish the Real Estate Regulatory Authority (“RERA”) for regulation and promotion of the real estate sector with a critical objective of instituting an adjudicating mechanism for the speedy redressal of disputes. RERA was received with much delight, hope, enthusiasm, and optimism among the buyers who believed that their grievances against the big corporations and builders would be heard expeditiously with an effective outcome.
Unfortunately, the euphoria around RERA and the relief that it was expected to bring to the buyers is at best – delusory! The failure to adhere to the mandatory timeline of summarily disposing of complaints in 60 days, multiple adjudicating authorities viz. RERA and Adjudication Officer for a single cause of action, and most importantly, the lack of enforcement mechanism to execute the orders passed by RERA have rendered the relief under the current redressal mechanism faulty, inefficacious, and as onerous as traditional litigation.
As a result, aggrieved parties are opting for alternatives in the form of out of court settlement to avoid the inordinate delay, inconvenience, and lack of enforcement of the remedy which the parties face when RERA adjudicates the disputes. In practice, parties are resorting to informal dialogues, mediations, and negotiations to settle their disputes mutually and amicably with or without the help of RERA. For instance, 65% of the complaints filed before Karnataka RERA have been settled between the parties. Furthermore, a report from Gujarat RERA suggests that 99% of cases were settled between the parties before RERA adjudicated their grievances.
It is no surprise that the majority of real estate disputes end up being mutually and amicably settled because of its peculiar nature. Real estate disputes are majorly commercial disputes which, most often, do not involve a question of law. It mostly pertains to the breach of promise to deliver the project on time or on the terms and conditions as agreed. In such disputes, adversarial adjudication seems misplaced, and a thoughtful, meaningful, and a solution-oriented approach where mutual interests are taken care of, and the disputes can be resolved without going through the hassle of litigation and its multi-faceted procedure is preferred.
The importance and compelling need of having such an approach in the form of an alternative dispute resolution mechanism was first recognized and formalized by Maharashtra RERA which established the first official conciliatory forum to encourage and provide a platform for an out of court settlement by virtue of the power envisaged under Section 32(g) of the Act. Following Maharashtra’s lead, Uttar Pradesh and Karnataka further established the conciliatory forums in its respective state. Kerala, Rajasthan, and Goa have also initiated the process of establishing such forums in their respective states.
The idea behind such conciliatory forums is to provide an informal timebound platform for the aggrieved parties (whether they are home buyers, real estate developers or agents) to talk out their disputes with the help of a committee of neutral third party conciliators comprising experts across various stakeholders. Such platforms are needed because a significant chunk of real estate disputes stem from the poor communication, loss of trust, and a lack of willingness to find a mutual solution when there is a breach of obligations by either party. In such scenarios, instead of adjudicating grievances through a traditional adversarial adjudication mechanism, it makes more sense to opt for a pragmatic way and provide a platform to the aggrieved parties to talk openly and honestly express their concerns, doubts, and desires to each other, which still has a higher possibility to lead to a resolution than an intensive litigation exercise.
Conciliation forums practically facilitate the resolution of disputes harmoniously where most often, parties are directly involved and do not have to hire lawyers which results into cheaper, quicker, and convenient resolution as it saves on the cost and time involved. The proceedings are swift – lasts not more than two to three sittings spanning across a month. Further, conciliation proceedings are private, confidential, and insulate parties from any public outcry. It reduces the scope of leaving behind any bitter taste between the parties as the aggrieved are in such a precarious situation that they wish to focus on the future and improving the situation to the extent possible, than focusing on the past and determine liability. It also caters to the needs of every party involved whether it is a buyer, builder, or an agent and aims to strike a win-win solution which is conducive and acceptable to all the parties involved.
It is believed that mutual and amicable settlements often broaden the scope and range of solutions that can be opted by the parties. In fact, conciliators or mediators play a significant role here to suggest innovative and creative solutions to the parties. For instance, in one of the conciliation proceedings by UP RERA addressing a bunch of complaints of a delayed project, it was agreed that an escrow account under the supervision of the conciliatory forum may be opened where buyers can pool in the money which they stopped giving to the builders due to the trust deficit caused by the delay in delivery of possession. Developers may then use that money for completing the project. Conciliatory forums are meant to come up with such creative, innovative, and peculiar solutions catering to different circumstances and root causes on a case to case basis.
Most importantly, the outcome of a conciliation proceeding, i.e. the settlement agreements that are made after an objective and constructive approach with a collaborative mindset of resolving the problem are more likely to be enforced than RERA’s decision. It is observed that compliance through consent is more feasible than court-ordered enforcement.
These advantages are probably testimony to the fact that the initial results of the conciliation proceedings conducted in Maharashtra and UP have shown positive results. MahaRERA reported that more than 400 families had resolved their issues amicably and it is estimated that more than INR 200 crores of financial investment which was stuck due to the dispute has been cleared amicably through conciliator panels. UP RERA reported a staggering success rate of 81% of the cases which were settled due to the conciliation proceedings.
The contemporary trend is to go beyond the traditional notions of the dispute resolution mechanism and opt for a more practical and logical mechanism to resolve disputes, especially of commercial nature. In the real estate sector, a pragmatic, quick, convenient, and effective dispute resolution mechanism is a necessity. The current conciliation forums have managed to achieve such needs, and it is an initiative in the right direction. However, such forums are available and functional only in a couple of states, and the Act does not mandate RERAs to have such forums in their respective states compulsorily.
Therefore, it is submitted that there is a need to formalize such conciliatory forums within the Act to encourage the aggrieved parties to settle their disputes mutually and amicably. The Act must make it mandatory for all the State RERAs to compulsory establish and manage conciliation forums across the states. It is especially important to act quickly because the current global pandemic and its aftermath have ravaged the real estate sector. There is going to be a massive surge in the real estate disputes that will mostly relate to the inability of builders to hand over possession in time. Such cases will peak in a year when the extended deadline for the completion of projects will be over, and the projects may still not have been completed. The buyers will lose patience and will approach RERA in numbers.
 Statement of Objects & Reasons of The Real Estate (Regulation and Development) Act, 2016.  Rajive Kumar, RERA in Uttar Pradesh: A Nice Upturn for Home Buyers, Financial Express, January 11, 2020, available at https://www.financialexpress.com/opinion/rera-in-uttar-pradesh-a-nice-upturn-for-home-buyers/1819602/ (Last visited on September 18, 2020).  Dipika Kinhal, How RERA is Implemented in Karnataka, and Why they Face Issues in Future, Vidhi Centre for Legal Policy, March 25, 2018, available at https://vidhilegalpolicy.in/2018/03/25/2018-4-5-how-rera-is-implemented-in-karnataka-and-why-they-may-face-issues-in-future/ (Last visited on September 18, 2020).  See generally, Concept and Techniques of Mediation, Course Material Designed by Delhi Mediation Centre for Training Programme in Mediation, 135, available at http://lawfaculty.du.ac.in/files/course_material/VI_Term/LB602%20Alternative%20Dispute%20Resolution/(15)%20Concept%20&%20Techniques%20Of%20Mediation.pdf (Last visited on September 18, 2020).  It is observed that builders’ failure to enter a settlement is largely driven by their incapacities such as financial or resources crunch, inability to efficiently manage huge projects, and several external factors beyond their control. As a result, promoters are unable to accommodate the interests of the buyers even if those are fundamental simply because they do not have the means to provide it. When that happens, even if a judicial authority directs them to provide those basic relief, they simply cannot because of their incapacities. Hence, if a buyer doesn’t get a relief while settling it in a mediation or a conciliation, it is unlikely that a promoter would follow or implement the orders of the RERA.  See, Craig A. McEwen & Richard S. Maiman, Mediation in Small Claims Court: Achieving Compliance Through Consent, 18 Law & Society Rev. 11 (1984).  See, S. I. Strong, Beyond International Commercial Arbitration? The Promise of International Commercial Mediation, 45 Wash. U. J. L. & Pol’y 11 (2014).  Sugata Ghosh, How Coronavirus may Cause Legal Wrangles, Economic Times, March 26, 2020, available at https://economictimes.indiatimes.com/news/politics-and-nation/how-coronavirus-may-cause-legal-wrangles/articleshow/74815141.cms?from=mdr (Last visited on September 16, 2020).  Vandana Ramnani, COVID-19 has had a Debilitating Effect on the Real Estate Sector: Hardeep Puri, Money Control, May 16 2020, available at https://www.moneycontrol.com/news/business/real-estate/covid-19-has-had-a-debilitating-effect-on-the-real-estate-sector-puri-5275911.html (Last visited on September 16, 2020).