Open Access Research Article
Interplay Between Alternative Dispute Resolution & The Real Estate Industry(By- Yash Dadriwal)
Published Paper
Article Details
Interplay Between Alternative
Dispute Resolution & The Real Estate Industry[1]
Authored By- Yash Dadriwal
Designation: - Student
5th Year B.A.Ll.B (Hons.) Semester IX
Institution: Maharashtra National Law University Aurangabad,
Maharashtra
Introduction
Section 89 of the Code of Civil
Procedure provides for the duties of the civil courts to refer the parties when
they things fit that there exists an element of settlement that can be achieved
by and between the parties only without going into the lengthy procedure of
litigation the court is duty bound to send such parties to either of the four
listed Alternative Dispute Resolution methods:
?
Arbitration
?
Mediation
?
Conciliation
?
Lok Adalats
There are different rules and laws
governing these provisions and according to the said requirements the court
shall refer the parties to these ADR methods. In a similar way the RERA Act,
2016 should also be provided for such a mechanism. Under the said act there are
two adjudicating bodies i.e. the Real Estate Regulatory Authority and for some
specific kinds of matters there is the provision of Adjudicating Officer.
However, the said law has not provided for any kind of mechanism dealing with
how the disputes can be resolved amicably by referring the parties to the above
stated ADR methods.
The way in which an authority
resolves a dispute can sometimes be a tedious process and in that case it
becomes difficult for the parties to move on with their lives. To ease the
dispute resolution procedure between the parties the Maharashtra Government has
suggested to bring in newer mechanism such as appointment of Conciliators for
resolution of the disputes between the parties.
A panel of the conciliators shall be
appointed herein which shall help in mediating the disputes between the parties
and this shall be done even before the said dispute is referred to the RERA
Authority or the Adjudicating officer, however the same has not be complied
with yet and is still in the process of getting approvals[2].
The research paper focuses on the
similar aspects of Real Estate Dispute Resolution that can be settled through
various Alternative Dispute Resolution Methods and will also recommend possible
ways of implementation of all such
appropriate methods in the current legal scenario.
Current Dispute Resolution
Mechanisms In Real Estate Industry
After the RERA Act, 2016 was enacted
by the Indian Parliament, there were not many recourses available to the
participants in the real estate industry. Still, there were some remedies that
can be relied upon by those participants. The effectiveness of the same can
still be in question as there might be some difficulties that led to the
enactment of a new law for getting the interests of the real estate allottees
enforced[3]. Some of
the remedies that were indeed available before 2016 can be listed in the
following manner:
Consumer Protection Act, 1986
The Consumer Protection Act is one such
remedy is available to Home Buyers, there are the District Forum and the State
and National Commissions that help in redressal of disputes that might arise in
the real estate project. Since the Real Estate Allottees are also the Consumers
in the said project a right can be accrued that will entitle them to approach
the Consumer Forums.
A homebuyer in the instant case can
file a complaint in cases where there are any deficiencies in services that are
provided to them or if there is any delay on the part of the
developers/promoters of the said real estate projects.
The homebuyer, without any help from an
advocate or legal consultant, can approach the consumer forum and file such a
complaint along with the documents supporting the claims of the allottee, and
the said complaint shall be resolved by the forum within the stipulated period.
A single homebuyer or a group of homebuyers can approach the forum as and when
a breach occurs.
Flat Ownership Acts Of Different
States
Every state has enacted laws with
regard to the ownership of flats, and the rights and duties of the flat owners
have been listed by this act. Some of such acts are the Maharashtra Flat
Ownership Act, 1963; the J & K Apartment Ownership Act, 1989; the Rajasthan
Apartment Ownership Act, 2015; etc. All these legislations were actively
governing the promotion, construction, management and transfer of flats in the
respective states.
The acts also provided for some of
the other mechanisms through which the flat owners could get their rights
enforced. However, with new problems, the need was felt to enact better
redressal mechanisms and hence some of these laws were repealed.
CREDAI – Code Of Conduct, 2011
The Confederation of Real Estate
Developers’ Associations of India (CREDAI) is a body that was established by
and between various developers and promoters of the real estate industry and
all most all of the current promoters/developers follow the code of conduct as
given by the CREDAI. It aims to promote ethical practices in the industry and
to maintain honor and dignity for its members.
However, the code of conduct is not a
binding document that can get the rights of the promoters and homebuyers
enforced, and the other available remedies are also not very efficient in
dealing with the issues that arise in the industry. Hence, the need to develop
an entirely new law that can effectively and efficiently deal with such issues
was felt. The Real Estate (Regulation and Development) Act, 2016 was enacted to
fulfil these purposes[4].
Real Estate (Regulation And
Development) Act, 2016
The Act has been brought into force
to safeguard the interests of promoters as well as the real estate allottees.
Under the Act, there are provisions enumerating the rights and duties of the Promoters
as well as the rights and duties of the Allottees. However, unlike any other
law, the
rights and duties that have been
mentioned are enforceable using the mechanisms as provided by the Act.
Under the Act, there is one
regulatory authority that has been set up that governs each and every real
estate project that will be taken up by any promoter throughout the country.
The name of the said authority is the Real Estate Regulatory Authority, or the
RERA. This authority does not only have a regulatory role but also plays a
quasi-judicial role in RERA, adjudicating the disputes between the promoters
and the allottees. The Act has also set up an appellate authority in case the
parties are not satisfied by the decision of the RERA, namely the Real Estate Appellate
Authority (REAT).
Apart from the above authorities, the
act has also provided for the formation of adjudicating officers who will have
powers only in relation to certain sections of the act. All the above stated
mechanisms are however adjudicating measures and party autonomy is not followed
herein and for this reason a need for effective Alternative Dispute Resolution
Method was felt which will be further discussed in the study[5].
Alternative Dispute Resolution And
Real Estate Industry
The abovementioned means of dispute
resolution in the real estate industry have not been very effective for the
buyers and the promoters. The cost involved in such projects is huge, and the
need for faster dispute resolution is felt by the stakeholders when they are in
a dispute. The burden of solving the disputes is not only on the Real Estate
Regulatory Authority but also on civil courts and consumer forums that are
already overburdened with other matters.
Here the Alternative Dispute Resolution methods like Arbitration,
Conciliation, Mediation and Lok Adalats can play a crucial role[6].
The ADR method generally tries to
enforce various contracts that are entered into between the parties and such a
contract generally has a dispute resolution clause in the form of either an
Arbitration clause or a dispute resolution clause itself lists various ADR
methods that can help in the resolution of the said disputes between the
parties. Dispute resolution is a sign that
there is a chance of a dispute
between the parties and hence such a clause is present. In such a case, it will
always be better to knock on the doors of an Alternative Dispute Resolution
forum instead of the RERA or a court.
Furthermore, it is also to be noted
that the types of disputes we are talking about in the instant case are on the
basis of a construction contract and have a lot of technicalities that need to
be resolved. When a dispute arises in this
there is always a chance that parties would want an expert to hear these
disputes and give a solution as soon as possible. However, when we talk about
the RERA, there is always a chance that the person who is going to adjudicate
might be a retired justice or someone with no real expertise in the field. For
these reasons, it is always better to approach an arbitration tribunal or
appoint an expert mediator. These people can be expert lawyers or judges who
deal in the matters of construction have good knowledge of the market and can
even be civil engineers as per the discretion of the party and the need of the dispute[7].
Along with the abovementioned
aspects, it is also to be kept in mind that while in dispute, if the said
dispute is not resolved quickly, the project will be at a standstill and that
will keep increasing various kinds of costs that the promoter might be paying,
like the cost of storage of material available at the site, the cost of the
watchman, interest on the payments as made by the allottees to the promoter for
the project, and many other costs as well. If an ADR method is applied in the
instant case then these disputes will be acted comparatively faster than
adjudication by the Real Estate Regulatory Authority or the adjudicating
officer under the act[8].
Under the Real Estate (Regulation
& Development) Act, 2016, along with the dispute resolution by the
authorities and the adjudicating officers, there are also provisions for a
conciliation forum. This can be said to be the first step in resolving the
dispute in the form of an out-of-court settlement. The RERA has to adjudicate
disputes within 60 days of the filing of the complaint. However, this takes
more time due to the overload of cases in the court. However, the conciliation
authority will solve the aforementioned disputes faster.
Conciliation is a method in which the
conciliator plays the role of a mediator between the parties.
However, the said role is more interventionist
as he plays a comparatively vital role in settling the dispute in comparison to
the mediator. Once a settlement is arrived at between the parties the project
can continue without the interference of the court and shall move on swiftly[9].
Similarly, parties can also approach
the consumer forum with their complaints in certain cases. Generally, these
complaints are adjudicated by the officer of the forum/commission. However,
with the enactment of the new Consumer Protection Act, 2019, it has been
mandated that in all disputes, the parties are first required to be sent to
mediation and only in the event that the dispute is not resolved in the said
mediation shall the forum/commission adjudicate on the disputes that have
arisen between the real estate allottees and the promoters.
Arbitrability Of Real Estate
Disputes
Construction arbitration is gaining
importance with each passing day and has been growing at a substantial rate.
There are dedicated lawyers or legal practitioners working in the field of
construction arbitration both at the national and international levels.
However, the question that is pertinent to answer here is whether each and
every construction dispute or real estate dispute is arbitrable before the
Arbitral tribunal or it is just those disputes in which the parties had
expressly in the contract mentioned in the dispute resolution clause that the
disputes if any shall be referred to Arbitration.
Generally speaking, the best way for
the party to refer itself to arbitration in case of any dispute is to either
mention the same in the contract or if both the parties deem it fit they can
enter into a separate arbitration agreement referring to the dispute that has
already arisen to the Arbitration. However, can the parties by themselves in
all real estate disputes refer the matter to arbitration or does the
authority/court have the power to refer the case to arbitration if the need so
arises due to the complex nature of the case?
For answering the abovementioned
questions, it is pertinent to refer to the test of arbitrability as stipulated
by the Supreme Court in the case of Booz Allen & Hamilton, Inc. v. S.B.I.
Home Finance Ltd[10].
The Supreme Court has given three questions that need to be answered before a
matter can be referred to arbitration. The following are the said questions:
?
Whether the dispute is an action in rem or action in personam?
This means that the said matter should be between two or more parties that not
affecting the people at large and the remedies that are prayed for against
private persons and not act against the rem.
?
Whether there is an arbitration agreement for the resolution
of disputes? The disputes in hand should be covered by the arbitration
agreement between the parties and the said disputes should not be expressly excluded from the purview of arbitration.
?
Whether the parties indeed have approached the dispute to
arbitration? Meaning thereby that the disputes that are in question indeed fall
under the purview of the
Statement of claim or counterclaim filed by the
parties and if not that dispute shall not be arbitrated[11].
The courts, however, in a variety of
case laws, such as Natraj Studios (P.) Ltd. v. Navrang Studios[12]; A.
Ayyasamy v. A. Paramasivam[13]; Vimal
Kishore Shah v. Jayesh Dinesh Shah[14];
have held that if an act provides for a special forum for the resolution of a
dispute, then the said dispute shall not
be arbitrable.
From all the above-mentioned points,
it can be said that those disputes that satisfy the test as laid down above
shall be arbitrable until and unless the authority has specific powers to
resolve the said disputes or the parties are not in favor of referring the said
dispute to arbitration.
Conclusion
The goal of this study was to
disseminate the role that is played by the Alternative Dispute Resolution
methods or will be played by them in the real estate industry. The study has
dealt with various aspects of the real industry, including the current dispute resolution
methods such as the consumer forums/commissions, the Real Estate Regulatory
Authority, adjudicating officers under RERA and other methods that are not as
such adjudicating but advisory. The methods mentioned herein above can be
time-consuming and might not be completely efficient in the resolution of
disputes.
Since the current methods of dispute
resolution can be termed as a bit non-effective, that is why ADR methods are to
be relied upon so that the disputes are resolved in a manner that is not
detrimental to the interests of the parties. Along with that, since an expert
in the said field will be resolving the dispute, the parties get a sense of
security about their interests. The methods are faster as well as cheaper. The
role of conciliation forums was also discussed in the said part of the study.
The final part dealt with the
arbitrability of real estate, stating
the test of arbitrability as propounded by the case of Booz Allen. Furthermore
as stated that the role of party autonomy is supreme and disputes can be
referred to arbitration in case there is some or arbitration agreement between
the parties and the said dispute is a dispute in personam.
From all the above-mentioned points,
it can be safely concluded that the study was successful in understanding the
role played by various ADR methods when it comes to the real estate industry.
It is however suggested that the government should take prompt steps to
implement all the ways of resolution of the dispute as mentioned in the study
without which the sufferings of the parties shall continue.
Article Information
Interplay Between Alternative Dispute Resolution & The Real Estate Industry(By- Yash Dadriwal)
Authors: Yash Dadriwal
- Journal IJLRA
- ISSN 2582-6433
- Published 2022/10/13
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
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