Legally Speaking: Recent Court Rulings Homebuyers Should Know Of

To stay off trouble and make the most of their investments, homebuyers, as a rule, must keep themselves abreast with all recent legal, financial and general developments. As we speak of new developments, we list for you certain recent court rulings that will have a direct or indirect impact on homebuyers in India.

Let us have a look at them.

• Did you buy a property at a bank auction, and found that the previous owner had not cleared the utility bills? Now, will you be liable to pay the dues? Not anymore.

In a recent order, the Supreme Court (referred to as SC hereupon) has ruled that the buyer of an auctioned property will not be liable to pay off the outstanding dues of the previous owner. The judgment pertained to a Southern Power Distribution Co vs Gopal Agarwal case. In this case, Agarwal bought a property from the City Union Bank which was previously owned by a company that defaulted on its loan to the bank. As a result of which, the property was re-possessed and auctioned. However, when Agarwal applied for a power connection, the distribution company refused to provide a connection, claiming the previous owner had not cleared the dues of Rs 2 crore. Agarwal then moved the Andhra Pradesh High Court which told the discom to provide him with the power connection. Later, the SC also held that the buyer went by the “as-is-where-is" condition, and he had not undertaken to clear the dues of the previous owner.

Landmark Court Decisions That Shaped Real Estate In India

• Did you buy a property close to a Metro Line, expecting great returns? What if your property is damaged while construction for the project is on?

According to a recent ruling by the Calcutta High Court (HC), if you bought a property from someone who was owner during the "relevant time", you cannot claim the compensation in case your property undergoes any damage owing to the construction work. It is the person having "subsisting interest" in such land or building at the relevant time who can claim compensation. In the Union of India vs SAF Builders Ltd case, the HC ruled that a claim for damages cannot be assigned to another party. A multi-storey building at Chittaranjan Avenue was damaged while constructing was on for the Metro line. The original owner filed a claim for damages. While the decision was still pending, this owner sold the property to another company. The Metro Railway moved the HC, appealing against the new owner claiming the damages. The HC ruled in favour of the Metro authority.

• Who has the first right to claim the money earned through the auction of a property, the lender or the government?

According to a recent ruling by the Himachal Pradesh High Court, it is the latter and not the former. The Himachal HC has ruled that a lender may facilitate the auction of a property if the borrower fails to pay the debt, and the property has to be re-possessed to recover the dues. However, the first right on this earning would be of the government ─ this means government taxes that will be deducted first; the remaining amount could be claimed by the lender. In the case of HP State Cooperative Bank vs the State of HP, the government had attached the property of the borrower to recover excise duty. However, the bank moved the district court and then the HC to claim its dues first. Both the courts rejected the lender's plea.

Planning To Buy Property Via Bank Auction? Keep These In Mind

• Your property has been repossessed by a bank. You think that there have been irregularities in the auction process. Is there a way for you to stop the auction of this property?

The SC has recently ruled that a former owner can take the legal route to stop the auction citing fraud or irregularities in the auction proceedings. However, that alone will not be enough to stop the auctioning. A borrower will also have to prove that they suffered substantial financial losses owing to the fraud or the irregularities in auction proceedings. In the case of Chilamkurti Bala vs Samanthapudi Vijaya, State Bank of India auctioned the property of the borrower. After the sale was executed, the borrower moved the executing court, asking it to set aside the sale, alleging irregularities. After the executing court rejected the appeal, the borrower moved the Andhra Pradesh High Court, which allowed her to offer a higher price for the property. However, when the purchaser of the appealed to the SC, it quashed the HC ruling, saying the borrower could not prove she suffered substantial loss suffered owing to the proceedings.

• There has been a cheque bounce issue between you and your developer, and you have settled it out of the court. Do you still run the risk of inviting legal wrath?

A recent ruling by the SC shows that you certainly do. Giving its ruling in a case where the drawer and the payee of a dishonoured cheque settled their 16-year-old discontent out of court, the apex court imposed a fine of Rs 1 lakh on the drawer as “exemplary cost” for “wasting public time”.  One P Chandrakala had borrowed money from a K Narender, but the cheque for repayment bounced because of an insufficient fund in the account. After the matter reached the magistrate's court in Hyderabad, the drawer was sentenced to a six-month imprisonment and a fine of Rs 7 lakh. While the case was pending in the SC, the two parties decided to settle the matter out of court. For wasting the time of the court, the drawer was “burdened with an exemplary cost”.