‘RERA’ emerging as a powerful law in builders matters

Arrest Warrants Issued Against 3 Known Builders of Noida - Greater Noida including Superteck builders for non-compliance of RERA orders is a news Dated May 11, 2023 in discussion. Issue was non-compliance of recovery order issued under section 40 of RERA Act 2016. The district administration detained RK Arora, chairman of the Supertech Group, one of the biggest defaulters of UP RERA. A signal went out among the builders that when strong action can be taken against big builders like Supertech, smaller ones will not be spared either. The Chairman of Supertech Group, RK Arora was interrogated in custody by the district administration for not paying the dues. He was later released after his company signed an agreement with the flat buyers for Rs 5 crore, gave a draft of Rs 2 crore, and promised to clear the entire dues of Rs 26 crore within this month. A day after cracking down on the Supertech group, arrest warrants have been issued against Mukesh Khurana owner of Rudra Buildwell, Mayank Chawla owner of Jatsya Builder, and Rajesh Yadav owner of Antriksh Builder. At the same time, orders have been issued to seal the offices of Jaypee Associates, Logix, and Mahagun. This action has caused a stir in the builders’ lobby. Four Tehsil teams are conducting raids at various places to arrest them.

This has given a loud message to the Real Estate industry about the increasing powers of RERA.The question has been raised by the legal luminaries as to under what rule this arrest has been made and do the RERA has got the power to issue such arrest warrants?. To understand the legal proposition we need to understand Section 18 read with section 40 of RERA Act 2016

Dr Prem Lata ,Legal Head VOICE

A unique case in builder matters had raised eyebrows when Developer failed to pay loan taken on the entire project & Bank got order for auction of property. On the complaint of registered Homebuyers to RERA auction order made under SARFAESI Act was stayed by RERA Rajasthan High court which was unusual and that became an event of conflict between the RERA Act Stay orders by RERA prevailed over recovery proceedings of bank under SARFAESI. Matter went to SC also and it was held that bank has stepped into the shoe of promoter, it is now an assignee of the promoter and hence interest of home buyers cannot be compromised by allowing bank to execute the order which will be against the interest of home buyers. .

In this Landmark judgment, divisional bench of Rajasthan High Court also held that complaints against banks can be filed before the Real Estate Regulatory Authority (RERA) if lending banks has taken the possession of a project as a secured creditor, pursuant to the default of the promoter in paying the loan.

 

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 Dt 11 Nov 2021

After this eye opener order many questions came on surface for debate. We need to check with a case of  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 Dt 11 Nov 2021.for reply to all queries related to Real estate industry

In this case every aspect of RERA Act and CP ACT 2019 had been discussed in minute details

Legal points

1.     Whether the Act 2016 is retrospective or retroactive in its nature?

2.     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?

3.      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?

4.      Whether the authority has power to issue recovery certificate for recovery of the principal amount under Section 40(1) of the Act?

SC holds

Issue -1. Retrospective application of the Act

 Regarding the retrospective application of the provisions of the Act 2016 with reference to the ongoing projects, Court held   that the Parliament in its wisdom after holding extensive deliberation on the subject thought it necessary to have a central legislation in the paramount interest for effective consumer protection, uniformity and standardisation of business practices and transactions in the real estate sector, to ensure greater accountability towards co.

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

“21. The Authority shall consist of a Chairperson and not less than two whole time Members to be appointed by the appropriate Government.

29. (1) 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.

(2)  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 instant case, the authority by a special order dated 5^th December, 2018 has delegated its power to the single member for disposal of complaints filed under Section 31 of the Act.  So far as refund of the amount with interest is concerned, it may not be considered strictly to be mechanical in process. If power has been delegated by the authority, to be exercised by the chairperson to single member in exercise of its power under Section 81 of the Act that cannot be said to be against 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.—

(1)   If a promoter or an allottee or a real estate agent, as the case may be, fails to pay any interest or penalty or compensation imposed on him, by the adjudicating officer or the Regulatory Authority or the Appellate Authority, as the case may be, under this Act or the rules and regulations made thereunder, it shall be recoverable from such promoter or allottee or real estate agent, in such manner as may be prescribed as an arrears of land revenue.

(2) If any adjudicating officer or the Regulatory Authority or the Appellate Tribunal, as the case may be, issues any order or directs any person to do any act, or refrain from doing any act, which it is empowered to do under this Act or the rules or regulations made thereunder, then in case of failure by any person to comply with such order or direction, the same shall be enforced, in such manner as may be prescribed.”

The principal sum with interest has become a composite amount to be recovered as arrears of land revenue under Section 40(1) of the Act.

 

Previous

Next