One-sided contracts
Authorities
Class-action
suits, mediation set to give teeth to consumer laws
Consumers in India will be able to initiate
class-action lawsuits and also opt for mediation under the new Consumer
Protection Act 2019, which gives legal teeth to claims for damages over
defective products or poor services.
Class-action
suits, a legal tool widely used in western consumer markets such as the US,
enable one individual complaint of a faulty product or service to be treated as
an “interest group” of other people in similar circumstances.
This
type of legal suit can be invoked to recall an entire batch of faulty products
based on a single complaint. If one lot of a consumer item, such as mobile
phones or cars, has a common defect, a single complaint can trigger the recall
through “class action”.
consumer
affairs ministry is in the process of finalising an apex investigative
authority under an agency called the Central Consumer Protection Authority
(CPPA), which will take up class action suits exclusively.
“The agency will start functioning in first week of April. Most of
the set up is almost ready,” said a government official who asked not to be
named.
The Indian market has
seen mass product recalls of faulty products earlier, but such cases have been
voluntary rather than a legal necessity under consumer rights. For instance, in
April 2017, Toyota Kirloskar Motor announced it was recalling 23,157 units of
its sedan Corolla Altis in India, as part of the then ongoing recall of 2.9
million vehicles globally, for defective air bags.
“A faulty medicine causing damage to a large section of people is
a fit case for class-action suits. Instead of multiple of claims coming to
court, a single case can be a more efficient way of dealing with the problem,”
said Sriram Panchu, a Chennai-based lawyer, who specialises in mediation.
According to Panchu, the
much-needed provision of mediation under the new law is fit for cases where
damages are payable in monetary terms. It can cut prolonged legal battles, he
said.
The new law overrides
the older Consumer Protection Act 1986, which provided for national consumer
dispute redressal courts and commissions. Previously, consumers had to approach
such platforms, but there were no clear rules on product recalls, a legal
meaning of product liability, which confers post-purchase obligations for a
product-maker, as well as rules for mass recalls. Moreover, lack of any
provision for mediation meant long-drawn court battles were the only recourse
for dispute settlement.
According to the new law, the consumer protection authority has powers to first
initiate class action and then enforce recall, refund and return of products.
If such mass defects are proven, the manufacturer’s liability and onus of
product recall – whereby the maker replaces or fixes the fault – have also been
defined in the new law.
At the state level,
district collectors have been empowered to probe complaints that affect the
interests of consumers as a class.
The new law additionally
defines “unfair contract” between a manufacturer or trader or service provider
on the one hand and a consumer on the other. Legal recourse will now be
available in such cases where an “unfair contract” causes “significant change”
in the rights of a consumer. These include a manifestly excessive security
deposit or a penalty to be paid to a manufacturer or a service provider which is
disproportionate to the losses caused.
“The new law expands the scope of consumer protection by
introducing two new concepts, namely product liability and product recall.
Moreover, it defines the consumer and manufacturer for the first time. It also
covers online transactions,” said Maurice Fernandez of the Bangalore-based
Citizens’ Collective for a Safer Marketplace.
“We had a fruitful
meeting with the consumer affairs minister Ram Vilas Paswan on various aspects
of implementing the new Consumer Protection Act 2019 earlier this month,” said
Rajendra Singh of the All-India PET Products Manufacturers’ Association.
Feb 25, 2020, Zia Haq, Hindustan Times, New Delh
Industry specific Regulatory Authorities in India : RBI(Banking), CCI(Monopoly & Oligopoly), RERA( real estate), TRAI ( telecom rates)
REAL ESTATE REGULATORY AUTHORITY ( RERA)
Below are the major provisions of the new law which will rein in errant builders:
1. The RERA makes it mandatory for a state to establish a State Real Estate Regulatory Authority. This government body could be approached for redressal of grievances against any builder.
2. Every ongoing and underconstruction project is supposed to come under the regulator's ambit. Registration is mandatory for all commercial and residential real estate projects where the land is over 500 sq m or includes eight apartments. Failure to do so will attract a penalty which may be up to 10% of the project cost, and a repeat offence could land the developer in jail.
3. The developer will have to place 70% of the money collected from a buyer in a separate account to meet the construction cost of the project. This will put a check on the general practice by a majority of developers to divert the buyer's money to start a new project, instead of finishing the one for which money was collected. This will ensure that construction is completed on time.
4. Buyers of apartments which are typically offered for sale before the launch of the project often get ensnared. But not any more. Under the Act, every such phase will be considered a standalone real estate project, and the promoter will have to obtain registration under this Act for each phase separately.
5. The RERA makes it mandatory for developers to post all information on issues such as project plan, layout, government approvals, land title status, sub contractors to the project, schedule for completion with the State Real Estate Regulatory Authority (RERA) and then in effect pass this information on to the consumers.
6. The current practice of selling on the basis of ambiguous super builtup area for a real estate project will come to a stop as this law makes it illegal. Carpet area has been clearly defined in the law.
7. Currently, if a project is delayed, then the developer does not suffer in any way. Now, the law ensures that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer.
8. The maximum jail term for a developer who violates the order of the appellate tribunal of the RERA is three years with or without a fine.
9. The buyer can contact the developer in writing within one year of taking possession to demand after sales service if any deficiency in the project is noticed.
10. The developer cannot make any changes to the plan that had been sold without the written consent of the buyer. This puts paid to a common and unpopular practice by developers to increase the cost of projects.
Regulation of airfares through CCI
The ministry, which will soon make operational an economic cell to monitor domestic airlines' pricing mechanism, is looking at forwarding reports to CCI to take corrective action in the event of discrepancies in airfares.
Civil Aviation Minister Ajit Singh said: "The airfare monitoring cell is ready and will soon be commissioned under the aegis of the ministry. The economic cell would analyse data on tickets sold by airlines under different price buckets and make the information public to bring in transparency in airfare pricing. In case there are discrepancies, it would be referred to CCI."
He clarified the ministry would not attempt to regulate fares and would continue to allow airlines to determine fares based on market dynamics. However, if discrepancies surface in ticket prices from an analysis of data by the economic cell, it would be reported to CCI for commensurate evaluation and action.
The ministry would access data on all the tickets sold by different carriers under various price brackets and then analyse the data to give an indication of exactly how many tickets were sold under each price slab. The airfare monitoring cell will help keep in check random increases in fares and predatory pricing in the aviation industry by making it mandatory for airlines to disclose data on fuel charge and taxes being levied on tickets. This will help the government keep a tab on the correlation between seats available, prices offered, taxes levied and the final pricing of air tickets to consumers.
Available data would be made public to inform consumers of how airlines arrived at the final pricing of an air ticket.
Senior ministry officials said, though airlines claimed to follow a dynamic pricing model at present, there was no mechanism to know whether the tickets in the lower price band had been sold or not. Besides, there were no set criteria to determine the price bands under which tickets were sold. The economic regulator would closely monitor the parameters in ticket pricing, they added.
Currently, there is no regulatory mechanism to monitor pricing mechanism of airlines. The Directorate General of Civil Aviation asks airlines to disclose the components in airfare structure on receiving complaints of predatory pricing but does not have the power to take corrective action.
Consumer Protection in Real Estate
Buying a house? You might come across a builder who conveniently advertises one rate but quotes a different one when you go to see the flat or apartment. If questioned, the answer often is that the advertised rate was an offer that is over now. That's not all. Most builders and brokers heckle you to decide immediately, saying there are many buyers waiting to lap up the property. But once you have paid, they seldom live up to their promises. If the flat is to be delivered one year later, you would be lucky to get it after 18 months. In addition, builders keep demanding extra money for parking, extra floor space or under some other head. The worst part: Buyer-builder agreements never favour the buyer.
There are legal remedies and in recent times, the courts have aggressively penalised some leading builders for changing rates or delaying project completion. However, too long-drawn a process puts off litigants.
The Real Estate Regulatory Bill, to be tabled in Parliament in the monsoon session, is expected to have some answers for such worries.
So, does the Bill offer a smoother process of buying your dream home? Does it have a better grievance redressal mechanism? According to credit rating agency CRISIL, the Bill will improve buyers' confidence and boost demand for residential real estate. It will incorporate mandatory disclosure clauses for builders, providing greater clarity on the project standards and time-lines for completion. The current form of the Bill is diluted from the draft published in 2012.
Get detailed plans
Prior to any construction activity, developers have to mandatorily register the project with the proposed regulator. This will be compulsory for all projects with a land area of 4,000 square metres or more. This stage comes after the developer has obtained all necessary clearances for the project.
Real estate experts say this clause is expected to impact developers in all major cities, except Mumbai, where the Bill will have limited impact due to smaller plot areas.
After registration, the developer will have to disclose details such as the carpet areas of all flats, layout plans, development phases, proforma of agreement, list of bookings, project architect(s) or structural engineer and so on. All this information has to be updated on the regulator's website, which will ensure transparency. This will increase consumers' confidence in buying homes, as projects will be under the regulator's purview.
"Since only bigger projects can be registered, the smaller ones will continue to remain outside this ambit," says Anil Harish of Mumbai-based DM Harish & Co. "This will widen the gap between small and big developers, leaving room for the smaller ones to indulge in wrongdoing."
No more false promises
Developers, small and big, will not be allowed to market or advertise projects without getting the necessary approvals. Similarly, no invitation or pre-launches will be allowed prior to obtaining a registration certificate.
Usually, in a pre-launch or soft launch of residential projects, a select group of buyers are given a discount of 5-15 per cent on the launch prices. "These investments carry a substantial risk, as projects at that stage might not have received all required approvals. Hence, this will restrict developers from raising cash from high net worth individuals who are willing to take the exposure," says Sanjay Dutt, executive managing director (South Asia) at Cushman and Wakefield.
The Bill seeks to protect buyers' interests by asking projects to be launched only after securing statutory clearances from the relevant authorities. The authorities will have to approve or reject projects within 15 days from the date on which the developer submits documents, which otherwise can take forever.
If a developer makes any false promises or runs misleading advertisements, it will attract a penalty. Buyers affected by misleading advertisements will get a full refund of the money deposited, along with interest, in case they wish to withdraw from the project.
The Bill suggests 10 per cent of the project cost as penalty for first-time offenders. Repeat offenders could get a jail term of up to three years.
Once builders start marketing (after receiving all approvals), they will only be allowed to use real pictures of the projects and not computer-generated visuals, which could mislead buyers.
While quick approvals are required, the Bill doesn't elaborate on the process to get these and which authorities to approach. This could be a problem area, with developers passing the buck to the authorities, saying they take time in giving approval.
"The law should be comprehensive and give role clarity to the authorities as well," adds Harish.
According to Samantak Das, chief economist and director (research), Knight Frank India, if the builder takes too long to launch projects due to delay in approvals, it could push up property prices as escalation costs are passed on to the home buyer.
Ask for clearly defined areas
The Bill directs developers to sell their properties only on the basis of the 'carpet area' of the property. Concepts like 'super area' and 'super built-up area' are not allowed.
Carpet area is the net usable floor area of a residential unit. Developers try to sell flats based on the 'super built-up area', which also takes into account common areas such as the lobby, lift shaft and stairs.
With this, buyers will get clarity on the actual livable area they will get on receiving possession of the flat. Also, buyers will know the actual usable area.
Most developers show the property construction plan with all dimensions but don't give the usable floor space. Experts say there still could be ambiguity over the actual definition and measurement standards for carpet area. Definitions in laws can be subjective and different developers can interpret the definition differently and calculate based on their own assumption.
The Bill mandates 70 per cent or less, as notified by the appropriate state government, of the funds raised for a project be deposited in a separate account. Till now, builders were supposed to put at least 70 per cent of buyers' advances in a bank account earmarked for a particular project. With this amendment, the minimum threshold of 70 per cent is gone and no new minimum threshold is given.
Developers are also required to keep 70 per cent of the money realised from sales into an escrow account towards construction costs, which cannot be used for anything else.
This will ensure developers do not divert funds meant for a particular project to other projects. The Bill also protects buyers' interest against project delays by asking developers to refund the amount paid, along with interest, in the event of a delay. Both factors are expected to ensure timely completion of projects and handover of units to buyers.
"Given the intention behind this provision (addressing project delays), the 70 per cent threshold might not be appropriate in all cases. Hence, a lower limit which considers the cost of construction till completion would serve the purpose," says Das of Knight Frank.
Usually, developers need 30-40 per cent of the cash collected for construction. So, if a lower limit than 70 per cent is not set, it will hit the viability and feasibility of the project," says Dutt of Cushman & Wakefield.
And, if a developer maintains a lower amount, it means it will have that much less money to finish the project, thus impacting the buyers. "Diluting from 70 per cent to 70 per cent and less has given decision power in the hands of the state regulator. This could lead to higher red tape in the sector," says Tejas Sheth of Emkay Global Financial Services.
And more benefits
The Bill has also proposed agents and brokers be registered. This might be difficult to implement, considering the number of brokers operating. It could be implemented in the metros but will be quite a task in smaller towns.
The Bill says the developer should repair any defects that might show up within a year of house possession. It also prohibits builders from taking any deposit or advance prior to entering into a sale agreement.
Sheth of Emkay Global Financial Services says the current Bill requires a lot more clarity and doesn't address many loopholes. It doesn't say which law the state regulator is to follow when the State and the Centre's respective Bills are at crossroads.
The Bill doesn't clarify the difference in definition of a project and its phases, as well as the time frame within which common amenities should be assigned to customers.
No official pre-launches, registration of agents would curb investor money in the sector when combined with the one per cent tax deduction at source clause introduced in Union Budget, Sheth adds.
On the whole, the Bill seeks to make the entire builder-buyer transaction more transparent. Now, implementation will be key.
Free CIBIL Report, yearly once wef.,01/01/2017 - RBI Directive issued:
to a financial institution. At times, credit facilities were either denied or rejected quoting lower #credit #scores. #CIBIL
Individuals never knew what their credit scores were as the same were maintained by a Credit Information Company (CIC) with inputs from financial institutions and bank only. If one wanted to have their credit reports; a fee was required to be paid to the #CIC by the individual. This added to the cost of the same though the individual was accessing his/her own credit database.
Reserve Bank of India #RBI vide its directive(s) RBI/2016-17/58
This is a good initiative on the part of RBI as by this directive, every individual can assess its own credit score and also send rectifications to the same if the data has any updations which are not actioned.
Moody's to pay $864 mn fine to US authorities for pre-2008 crisis ratings