If a buyer cancels his flat booking due to delay in project completion, what is the likely scenario that would unfold? Will he get all his money back? If yes, what about the loan that he took from the bank for this purchase? The latest ruling by the Karnataka High Court provides answers to some of these questions.
While giving its order in a loan recovery case, the high court restrained PNB Housing Finance from taking any coercive steps to recover the loan from homebuyers, who had purchased flats from Mantri Developers under tripartite agreements.
Case study
All the petitioners in the case had booked flats in a housing project of Mantri Developers under a pre-EMI scheme through a tripartite agreement among the buyers, the developer and the bank. Dissatisfied with the progress of the construction, all the petitioners withdrew their booking, and a intimation in this regard was also sent to the bank. Later it was found that the bank has already disbursed the entire loan amount without keeping in view the construction stage of the project as against the prevailing norms.
When the buyers approached the RERA against the builder, the authority ruled the developers retuned the advances given by buyers within 30 days, and also ordered to “discharge the loan raised in the name of the complainant with all its EMI and interest”.
Since the builder failed to comply with the RERA order, PNB Housing finance approached the HC for loan recovery.
Stating that the tripartite agreement that the developer will be responsible the entire loan amount disbursed by the bank when the borrower decides to withdraw or fail to pay, the high court rejected PNB’s argument that the buyers as well as the developer were liable to pay the loan.
“If a bank has erred in the course of its business and suffers loss, the poor borrowers who wanted to have a shelter of their own, cannot be put to peril,” it said while
directing the respondents, including the RBI, the National Housing Bank, Punjab National Bank Housing Finance and TransUnion CIBIL Limited, to process the buyers’ claim for reaffirming CIBIL score, and issue no-dues certificate within 60 days.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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