Saturday, 7 April 2018

Bhagtani Flat buyers: Questions raised by TRANSFER OF PROPERTY ACT & CONTRACT ACT in your Allotment Letter?

Mumbai, 8th April, 2018: This article is relevant to all home-buyers, although it is written for the 2500-odd victims of Bhagtani builders, i.e. the people who booked flats in Bhagtani Riyo (Mira Road), Sapphire (Dahisar), Serenity (Powai) and Savannah (Kanjurmarg). Bhagtani's victims have no registered agreement of sale; they only have allotment letters that looks like this specimen. Although they have paid well over 20% of flat's consideration value, the builders have deliberately avoided the duty cast upon them by MOFA (Maharashtra Ownership Flats Act) to execute registered sale agreements.

Flourishing their allotment letters and a scanty understanding of their legal position, Bhagtani's cheated flat-buyers are approaching various legal forums. Over-dependency on lawyers is making some Bhagtani victims the victims of lawyers also. Due to either mental laziness or a subconscious fear of receiving bad news, people aren't asking the right questions.

Some key questions are:

a) Can Allotment Letter be deemed to be an "Unregistered Agreement" from a legal perspective?

b) Is such an "Unregistered Agreement" admissible as evidence and/or enforceable in courts of law?

c) Does YOUR allotment letter, with its specific clauses and conditions, empower you to go to court?  If so, which courts, and what kind of reliefs can be realistically sought?

The answers lie in interpretation of the legislations governing agreements and contracts, sale and ownership of flats, registration of documents, and transfer of property, and also case laws of Bombay High Court and Supreme Court showing how these legislations are interpreted in context.



Relevant legislations:

a) Real Estate Regulation Act (RERA) 2017
Read section 2(c) and (d) -- definition of "Agreement for Sale" and "Allottee".

b) Maharashtra Ownership Flats Act (MOFA) 1963
Read section 4 -- Promoter before accepting advance payment or deposit to enter into  agreement and agreement to be registered. Also read section 4(a) -- Effect of non-registration of agreement required to be registered under section 4.

c) Registration Act 1908
Section 17(1)(b) -- Mortgages Of Immovable Property And Charge -- is of relevance

d) Transfer of Property Act 1882
Section 25 (Conditional transfer) and Section 48 (Priority of rights created by transfer) are definitely of interest to the victims of Bhagtani Serenity, in the context of the rights created by mortgage to Xander. The whole of Chapter IV (Mortgages Of Immovable Property And Charge) and section 56 (Marshalling by subsequent purchaser) have relevance.

e) Indian Contract Act 1872
The entire Contract Act is relevant and must be read and digested to understand the nature of your contract with Bhagtani.

What does Transfer Of Property Act say?
Section 25 (Conditional Transfer) states: "An interest created on a transfer of property and dependent upon a condition fails if the fulfillment of the condition is impossible, or is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent, or involves or implies injury to the person or property of another, or the court regards it as immoral or opposed to public policy."
Example 1: In the case of Riyo, the condition for transfer of property (i.e. the flat) was that necessary building permissions would be received within a specified period. However, in reality, it was impossible to receive such permissions by virtue of the project land being "gurcharan land" and therefore not available for building purposes.
Example 2: In the case of Savannah, the transfer of property may possibly "defeat the provisions of any law, or is fraudulent, or involves or implies injury to the person or property of another". This may be so because because the development rights to the land are reported to have been dishonestly acquired despite an ongoing family dispute in court concerning the land ownership.

What does Indian Contract Act say?

Bhagtani's allotment letter is not explicitly a contract, because it is not written in the language of a contract and also because it is full of ifs-and-buts, extraneous conditions, and alternative pathways.

However, the allotment letter can be said to be implicitly an "agreement" as defined under 2(e) and (f), because it contains a set of promises and reciprocal promises.

But crucially, the Act specifies that not every agreement is enforceable by law, and such agreements cannot be said to be contracts. The Act says, 
"(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable." 

So the question arises whether the "agreement" implicit in your allotment letter can be said to be a contract? Or is it something that cannot be said to be a contract?

Section 16. 17, 18 and 19 relate to "undue influence", "misrepresentation" and "fraud", and their effect on the contract. It goes without saying that all these three elements were present in the flat-buyers' dealings with Bhagtani. Section 19 speaks of the "voidability" of the contract.

Section 19-A hints at the possibility of seeking a court order for setting aside the contract by proving that it was "induced by undue influence".

The big question is: If the contract (assuming it is one) is set aside by a court for reasons mentioned above, will it legally enable the Bhagtani assets to be sold by the court and the people's lost wealth to be recovered, and restored to the people? 

Conclusion

What is written above is only indicative, it is neither exhaustive nor conclusive. Currently, a simplistic, willfully ignorant approach is widespread -- possibly the result of a penny-wise effort to save money. The tendency of victims to be willfully ignorant makes them easy to lead astray by various kinds of predators and parasites, especially Bhagtani stooges. To clearly understand where they stand, people will have to seek expert legal opinion for a deep analysis of relevant laws.

ISSUED IN PUBLIC INTEREST BY
Krishnaraj Rao
9821588114
krish.kkphoto@gmail.com


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