What Are the Remedies for Real Estate Misrepresentation?

Real estate deals in India often involve life savings. A legal advisor has worked with many clients who were emotionally and financially devastated after falling for false promises, whether about project approvals, titles, or possession timelines.

Real estate misrepresentation may involve issues such as false claims about property title, encumbrances, structural integrity, project approvals, or any essential fact influencing the buyer’s or seller’s decision.

Fortunately, Indian law offers multiple remedies under the Indian Contract Act, Consumer Protection Act, RERA, Indian Penal Code (IPC), and the Specific Relief Act. This article explores these legal remedies, supported by key case laws.

What is Material Misrepresentation in Real Estate?

Material misrepresentation happens when one party provides false or misleading information that affects the decision of the other party in a property transaction such as misrepresentation of property title. Common examples include:

• Misleading statements about clear title or approvals
• False promises about project completion
• Concealing legal disputes or encumbrances

Under the Indian Contract Act, 1872, misrepresentation may be:

• Innocent: A false statement made without intent to deceive
• Negligent: A claim made without verifying facts
• Fraudulent: A deliberate act of deception

Even innocent misrepresentation can entitle the other party to cancel the agreement or seek compensation.

Cancel the Deal: Remedies Under the Indian Contract Act

Cancel the Agreement (Rescission):

Section 19 of the Indian Contract Act allows a party to cancel a contract if it was entered into due to misrepresentation or fraud.

• In Tarsem Singh v. Sukhminder Singh (1998), the Supreme Court allowed the buyer to rescind the contract after the seller misrepresented ownership.
• In our own practice, we recently helped a couple in Mumbai cancel a deal where the builder falsely claimed the property had no litigation.

Claim Damages for Financial Losses:

Section 73 allows parties to claim compensation for losses resulting from a misrepresented deal.

• In Kishan Lal v. Gajraj Singh (2000), the buyer was awarded damages after being misled about an encumbrance free property.
• We’ve successfully claimed damages for clients by preserving all communication and documentation as evidence.

File a Complaint in Consumer Court: Remedies under the Consumer Protection Act, 2019

If you’re a homebuyer, you’re also a consumer under the Consumer Protection Act, 2019. This law allows you to take action if you were misled by a developer, builder, or seller.

Misrepresentation as Deficiency in Service:

Complaints can be filed for false promises related to approvals, amenities, or specifications.

• In Lucknow Development Authority v. M.K. Gupta (1994), the court held that misrepresentation by real estate developers amounts to deficiency in service.
• In Jayantilal Investments v. Madhuvihar Society (2007), the Supreme Court confirmed that developers who mislead buyers about amenities or approvals can be held liable.

Refund, Interest, and Mental Agony Compensation:

Courts have awarded refunds along with interest and compensation for mental agony.

• In Pioneer Urban Land & Infrastructure v. Govindan Raghavan (2019), the Supreme Court ruled in favour of the buyer, who was promised approvals that never materialized.
• We’ve helped clients recover their booking amounts along with interest and mental harassment compensation by pursuing their cases in district and state consumer forums.

Use RERA for Focused, Fast Action: Remedies under the Real Estate (Regulation and Development) Act, 2016 (RERA)

If the misrepresentation relates to completion timelines, legal approvals, or apartment specifications, the Real Estate (Regulation and Development) Act, 2016 (RERA) offers an effective remedy.

File a Complaint with the RERA Authority:

• Section 12 of RERA allows buyers to file complaints for false information provided at the time of booking.
• In Imperia Structures Ltd. v. Anil Patni (2020), the Supreme Court allowed homebuyers to seek relief both under RERA and consumer law.

Refund and Compensation for Misrepresentation:

Under Section 18, buyers can seek compensation or a refund with interest if they suffer financial loss due to false statements.

• In Puneet Kaur v. Emmar MGF (2022), RERA ordered the developer to refund the payment with interest for misrepresented timelines.
• In a Gurgaon-based case, we helped our client get a refund with 12% annual interest due to delay and false assurances.

Consider Criminal Action for Fraudulent Acts: Remedies under the Indian Penal Code, 1860/ Bhartiya Nyaya Sanhita, 2023

When the misrepresentation is intentional and severe, you can pursue criminal charges under the Indian Penal Code (IPC)/ Bhartiya Nyaya Sanhita, 2023.

File a Complaint for Cheating (Section 415 IPC/Section 318 (1) BNS):

• Cheating involves deceiving someone intentionally for personal gain.
• In N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. (2021), the Supreme Court clarified that criminal and civil actions can proceed simultaneously.

Prosecute Forgery and Fraud (Sections 463-465 IPC/Section 335-336 BNS):

• If the seller used forged title deeds or fake approval documents, they can be prosecuted for forgery.
• In one of our firm’s cases, we filed a criminal complaint where the seller used a forged “No Objection Certificate” to mislead buyers. The police registered an FIR, and the builder was summoned.

Enforce or Stop the Deal with Civil Court Remedies: Remedies under the Specific Relief Act, 1963

The Specific Relief Act, 1963 offers remedies like specific performance or injunctions when financial compensation isn’t enough.

Seek Specific Performance:

• If the seller tries to back out after misrepresenting ownership or title, you can request the court to enforce the agreement.
• In Satyabrata Ghose v. Mugneeram Bangur (1954), the court ordered specific performance, recognizing the buyer’s rights despite delays.

Apply for an Injunction:

• If misrepresentation continues (e.g., false ads, fake listings), courts can issue an injunction to stop it.
• In a recent case, we secured an injunction against a developer who was continuing to advertise a project under legal dispute.

Conclusion

If you’ve been misled in a property deal, you are not helpless. Indian law offers multiple civil and criminal remedies to hold the wrongdoers accountable.

For Buyers:

• Cancel the contract under the Contract Act
• Seek compensation through consumer court
• File RERA complaints for refund and interest
• Pursue criminal prosecution in cases of fraud
• Enforce agreements through civil courts

For Sellers:

• Sellers misled by brokers or developers can also seek compensation or take criminal action.
• If you’re facing such a situation, consult a qualified real estate lawyer immediately. Legal remedies are powerful, but timely action is key.

One can talk to a lawyer from Lead India for any kind of legal support. In India, free legal advice online can be obtained at Lead India. Along with receiving free legal advice online, one can also ask questions to the experts online free through Lead India.

FAQs

1. May a purchaser initiate a complaint for misrepresentation in RERA and a consumer forum?

Yes, a buyer may seek redress from both RERA and consumer forums. The SC in Imperia Structures Ltd. v. Anil Patni (2020) ruled that even if remedies under RERA are availed, consumers may still file complaints under consumer protection laws for compensation and refund.

2. What penalties does RERA impose upon and which can be brought against a company for misrepresentation in real estate transactions? 

A seller or developer liable for misrepresentation will be penalized by:

• Cancellation of the contract, an order for a refund (as per contract law).
• Monetary compensation for loss and mental agony (Consumer Protection Act, 2019).
• A penalty imposed under RERA, including fines or cancellation of project registration.
• Criminal prosecution, leading to imprisonment or fines under IPC/BNS if malice or forgery exists.

3. Can a seller claim legal remedies as well if the buyer has misrepresented his financial capability or intent to purchase?

Yes, to the seller if a buyer makes misrepresentation of his financial position or intent. The seller may:

• Cancel the contract and retain the advance payment as per the terms of the agreement.
• File a suit for specific performance under the Specific Relief Act of 1963 to compel the buyer to consummate the purchase.
• Claim damages under the law of contracts for losses suffered by him due to the buyer’s misrepresentation.