RERA: Emerging as a Powerful Law in Real Estate
The news of 101 builders facing arrest warrants due to their failure to comply with RERA- Real Estate (Regulation and Development) Act orders has sparked significant discussions. Among them, Superteck builders are included and have been arrested for not adhering to the recovery order outlined in Section 40 of the RERA Act 2016. This event serves as a powerful message to the real estate industry, highlighting the growing authority of RERA.
Dr Prem Lata, Legal Head VOICE
A notable incident in the realm of builder affairs has attracted attention, as the developer failed to repay the loan obtained for the entire project, leading the bank to obtain an order for the property’s auction. However, on the complaint of registered homebuyers to RERA, the auction order issued under the SARFAESI Act was halted by the RERA Rajasthan High Court. This unconventional development resulted in a conflict between the stay orders of RERA and the recovery proceedings initiated by the bank under SARFAESI. The matter eventually reached the Supreme Court, which ruled that the bank had assumed the role of the promoter and therefore, as an assignee, the bank cannot compromise the interests of homebuyers by executing an order that goes against their best interests.
In this landmark judgment, the divisional bench of the Rajasthan High Court also established that complaints against banks can be filed with the Real Estate Regulatory Authority (RERA) in cases where lending banks have taken possession of a project as a secured creditor following the promoter’s default in loan repayment.
Important Case Law
- M/S. Newtech Promoters and Developers Pvt. Ltd.Versus State Of Up & Ors.
- Civil Appeal No(S). 6753 Of 2021 (Arising Out of SLP (Civil) No(S). 3426 of 2021)
- Judgment Date 11 Nov 2021
Following this thought-provoking ruling, numerous questions emerged that sparked debates. To address these inquiries pertaining to the real estate industry, it is necessary to examine the case of M/S. Newtech Promoters and Developers Pvt. Ltd. v. State of UP & Ors., Civil Appeal No(S). 6753 Of 2021 (Arising out of SLP (Civil) No(S). 3426 of 2021), Judgment Date 11 Nov 2021. This case extensively delves into every aspect of the RERA Act and the CP Act 2019, providing intricate details for further clarification.
- Whether the Act 2016 is retrospective or retroactive in its nature?
- Whether the authority has jurisdiction to direct return/refund of the amount to the allottee under section 18 of the Act or the jurisdiction exclusively lies with the adjudicating officer under Section 71 of the Act?
- Whether Section 81 of the Act authorizes the authority to delegate its powers to a single member of the authority to hear complaints instituted under Section 31 of the Act?
- Whether the authority has power to issue recovery certificate for recovery of the principal amount under Section 40(1) of the Act?
Issue -1 Retrospective application of the Act
Concerning the retroactive application of the provisions of the Act 2016 in relation to ongoing projects, the Court determined that the Parliament, after thorough deliberation, deemed it essential to enact a central legislation in the best interest of effective consumer protection, uniformity, and standardization of business practices and transactions in the real estate sector. This legislation aims to ensure heightened accountability towards all stakeholders involved.
Issue -2 Jurisdiction of authority to direct return/refund of the amount to the allottee under Sections 12, 14, 18 and 19 of the Act
In terms of Section 18 of the RERA Act, if a promoter fails to complete or is unable to give possession of an apartment duly completed by the date specified in the agreement, the promoter would be liable, on demand, to return the amount received by him in respect of that apartment if the allottee wishes to withdraw from the Project. Such right of an allottee is specifically made “without prejudice to any other remedy available to him”. The right so given to the allottee is unqualified and if availed, the money deposited by the allottee has to be refunded with interest at such rate as may be prescribed. However, question of compensation is to be determined by judicial tribunal.
Referred case Imperia Structures Ltd. Vs. Anil Patni and Another held that Section 18 confers an unqualified right upon an allottee to get refund of the amount deposited with the promoter and interest at the prescribed rate, if the promoter fails to complete or is unable to give possession of an apartment as per the date specified in the home buyer’s agreement
Issue-3 Regarding delegation of power to single Member
- The Authority shall consist of a Chairperson and not less than two whole time members to be appointed by the appropriate Government.
- The Authority shall meet at such places and times, and shall follow such rules of procedure in regard to the transaction of business at its meetings (including quorum at such meetings), as may be specified by the regulations made by the Authority.
- If the Chairperson for any reason, is unable to attend a meeting of the Authority, any other member chosen by the members present amongst themselves at the meeting, shall preside at the meeting.
In the present case, the authority made a special order on 5th December 2018, delegating its power to a single member for addressing complaints filed under Section 31 of the Act. As for the refund of the amount with interest, it should not be regarded as a strictly mechanical procedure. If the authority has delegated its power to the chairperson, who in turn delegates it to a single member under Section 81 of the Act, such delegation cannot be deemed contrary to the provisions of the Act.
Issue 4– Whether the authority has the power to issue recovery certificates for recovery of the principal amount under Section 40(1) of the Act?
Recovery of interest or penalty or compensation and enforcement of order, etc.—
- If a promoter, allottee, or real estate agent fails to make payment of any interest, penalty, or compensation imposed on them by the adjudicating officer, the Regulatory Authority, or the Appellate Authority under this Act or the associated rules and regulations, such amounts shall be recoverable from the respective promoter, allottee, or real estate agent. The recovery process shall be carried out in accordance with the prescribed procedure, treating the outstanding amounts as arrears of land revenue.
- If an adjudicating officer, the Regulatory Authority, or the Appellate Tribunal issues an order or instructs an individual to perform a certain action or refrain from doing so, as empowered by this Act or the associated rules and regulations, any failure to comply with such order or direction by any person shall be enforced according to the prescribed procedure.
Under Section 40(1) of the Act, the principal sum along with the accrued interest has been consolidated into a single amount that is to be recovered as arrears of land revenue. This case, which represents a landmark judgment of the year 2021, has effectively resolved all the pertinent issues concerning the real estate act, as determined by the Supreme Court.
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