M & Z Legal – Advocates & Solicitors
Introduction
The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to protect homebuyers, promote transparency and impose statutory accountability upon real estate promoters.
Among its important protections is Section 18(2), which provides for compensation to allottees for losses caused by defective title.
An important legal question arises when an allottee discovers that the title conveyed by the promoter is disputed, particularly where a third party institutes a civil suit seeking declaration of ownership or cancellation of the allottee’s sale deed.
Must the allottee await a final decree from the civil court before approaching RERA for compensation? Or can the adjudicating authority independently examine whether defective title has caused compensable loss?
I. Section 18(2): The Statutory Protection
Section 18(2) of RERA provides: “The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.”
The provision contains three essential elements: the existence of defective title relating to the project land; loss suffered by the allottee; and a causal connection between the defective title and the loss.
The statute does not expressly prescribe that the allottee must first obtain a declaratory decree from a civil court before claiming compensation.
However, the absence of such an express requirement does not mean that every allegation or pending title dispute automatically establishes defective title.
II. A Pending Civil Suit and a Defect in Title Are Not Necessarily the Same
Consider a situation in which a purchaser has obtained a registered sale deed from a promoter, but a third party subsequently institutes proceedings seeking a declaration that the conveyance is invalid.
The purchaser may face uncertainty regarding ownership, difficulty selling or mortgaging the property, and expenditure in defending the litigation.
Nevertheless, a pending civil suit remains an assertion of rights by the plaintiff. The mere institution of proceedings does not establish that the plaintiff’s claim is legally correct.
The adjudicating authority must therefore distinguish between an allegation of defective title and legally sufficient evidence demonstrating an actual defect.
The nature of the third party’s claim, underlying title documents, encumbrances, representations made by the promoter and the loss suffered by the allottee would be relevant considerations.
III. Can RERA Examine Questions Relating to Title?
Sections 71 and 72 of RERA establish the framework for adjudication of compensation.
Section 79 restricts the jurisdiction of civil courts in matters which the regulatory authority, adjudicating officer or appellate tribunal is empowered to determine.
At the same time, RERA does not confer upon its authorities an unrestricted jurisdiction to pronounce binding declarations of ownership between all competing title claimants.
A distinction must therefore be maintained between determining title as the principal relief and examining title-related evidence incidentally for deciding a statutory compensation claim.
Where the dispute requires a comprehensive adjudication of rival ownership claims involving third parties, the jurisdictional limitations of RERA become especially important.
However, the mere existence of a title dispute should not automatically be treated as eliminating every statutory remedy available to an allottee.
IV. Must the Allottee Wait for a Civil Court Decree?
Section 18(2) does not expressly impose such a precondition.
A requirement that every allottee must first secure a civil court declaration could substantially delay the compensatory remedy contemplated by the legislation.
Equally, awarding compensation merely because a title suit has been filed could expose promoters to liability based on unproven allegations.
A principled approach would require the adjudicating authority to examine whether the evidence before it sufficiently establishes defective title and consequential loss, without exceeding its statutory jurisdiction.
In an appropriate case, the nature and complexity of the title dispute may justify awaiting a competent civil court’s determination. In another, the relevant defect may be established from undisputed documents or existing judicial findings.
The answer must therefore depend upon the evidence, the relief claimed and the nature of the competing rights.
V. What Constitutes Compensable Loss?
The language of Section 18(2) requires loss caused by defective title.
Potential heads of loss may include expenses incurred in defending title litigation, diminution in property value, financing difficulties and other demonstrable financial consequences.
However, the availability and quantum of compensation must be established through evidence and assessed under the statutory framework, including the relevant considerations under Section 72.
A speculative apprehension of future loss cannot automatically be equated with an established compensable injury.
VI. Conclusion
Section 18(2) of RERA creates a significant statutory remedy against promoters for losses arising from defective title.
The provision does not expressly make a prior civil court decree a mandatory condition for compensation.
Nevertheless, the existence of a pending title suit does not, by itself, prove defective title or compensable loss.
The proper approach is to distinguish the authority’s power to adjudicate statutory compensation from the civil court’s jurisdiction to conclusively determine competing proprietary rights.
This distinction is essential to ensuring that RERA remains an effective consumer-protection mechanism without becoming a substitute for comprehensive civil title adjudication.
