LANDMARK JUDGEMENTS THE REAL ESTATE REGULATION AND DEVELOPMENT

LANDMARK JUDGEMENTS – THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 THE INSTITUTE OF COST ACCOUNTANTS OF INDIA WESTERN INDIA REGIONAL COUNCIL WEBINAR ON RERA FOURTH SESSION 29 TH MAY 2020 CA SUNIL D NAIK B. COM, FCA, ACS, Grad. CWA CA SUMIT C KAPURE B. COM, ACA

CASE LAWS - MAHARERA Landmark Judgement Given by Hon. Bombay High Court in the case of “Neelkamal Realtors Suburban Pvt. Ltd. (Writ Petition No. 2737 of 2017) Very vital observations and commentary given by Hon. Bombay High Court on many important Sections of the Act and its Constitutional Validity. Many landmark judgements passed by Hon. Maha. RERA Appellate Tribunal on various issues. SOME OF THE LANDMARK JUDGEMENTS DELIVERED BY MAHARERA APPELLATE TRIBUNAL ARE AS FOLLOWS-: Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) Sanvo Resorts Pvt Ltd Vs. Rahul Harish Ghole & Shruti Harish Ghole (AT 10658) M/s. Geetanjali Aman Construction Vs. Hrishikesh Paranjpe (SGI 0000672)

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors Ø ARGUMENTS OF PETITIONERS Ø In these petitions, questions with regard to the validity of Sections 3(1), Section 3(2)(a), explanation to Section 3, Section 4(2)(l)(C), Section 4(2)(l)(D), Section 5(3), first proviso to Section 6, Sections 7, 8, 18, 38, 40, 46(1)(b), 59, 60, 61, 63, 64 of RERA were raised. Contesting the validity of Section 3 of RERA which provides for the registration of projects, including current and ongoing projects, that commenced prior to the enforcement of RERA, it was argued by the Petitioners that the provision has retrospective application and hence is arbitrary. Further, the provision of interests payable for delay under Section 18 of RERA were understood as penal interest and in light of retrospective nature of RERA could not be validated

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors Section 6 of RERA provides for strict implication in cases of delay in delivery of possession by the Builders/Promoters, however, the Authority, in cases of Force Majeure, may extend the time period of delivery of project by way of extending the Registration up to one year only. On this aspect, the Petitioners argued that by interpreting the definition of “Force Majeure” in a narrow manner, RERA has completely disregarded the compelling socio-economic conditions that may also hinder the completion of a project and hence such rules are being applied strictly and arbitrarily. It was further argued that the maximum extension of one year under RERA is inadequate and longer extension should be provided. Section 8 of RERA, a provision underlining the obligations of the authority in situation of revocation was challenged on the grounds that it did not provide any yardsticks or procedure by which the remaining development was to be carried out post the revocation. the demand of reimbursement in case of withdrawal under Section 18 of RERA seemed highly unreasonable to the Petitioners.

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors HON. BOMBAY HIGH COURT COMMENTS AND OBSERVATIONS The High Court, in an attempt to reasonably approach the problem, appointed an amicus curiae to address the matter at hand with a wider perspective at the law. On the question of retrospective application, the High Court explained that the application of the RERA to all pre-RERA transactions, contracts and projects that are functional at the moment shall not be confused as being a retrospective application. In light of any developmental project that has not received its certificate of completion, an ongoing transaction between the allottee and Builder/ Promoter has been included within the ambit of RERA to protect and foster the interest of the consumers and regulate the real estate market, and hence, the High Court upheld the validity of Section 3 of RERA.

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors The High Court further upheld the validity of Section 4 of RERA which requires disclosure of the timeline at the time of registration and maintenance of 70 per cent of the amount, collected from the allottees for the purpose of funding development, in a separate bank account. This provision was upheld for the fair reason of protecting the rights of the consumers and restraining the misuse of the Builders’/Promoters’ powers. The High Court observed that in addition to controlling the misuse of power, if the Builder/Promoter utilized the funds fairly, with production of necessary certificates, the question of maintaining 70 per cent funds does not arise. As such, it actually provided relaxation to genuine promoters. Deciding on the validity of Section 6 of RERA, the High Court held that the Builders/Promoters, while registering their projects under Section 4 have the liberty to extend the date of completion even if it does not conform to the contractual term. This liberty is granted to allow reasonable time to the Builders/Promoters to complete their projects and thereby promoting timely handing over of the possession. In light of extension of one year, the High Court held that in case the Authority is satisfied that there are exceptional and compelling circumstances due to which the Builder/ Promoter could not complete the project in spite of the extension granted under Section 6 of RERA, then the Authority would be entitled to continue the registration of the project on case to case basis.

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors Further, while addressing the issue with regard to revocation under Section 7 & 8 of RERA, Hon’ble Mr. Justice Naresh Patil stated as under: “We are of the view that a proper construction of the provisions would mean that even in case of lapsing of or on revocation of registration, the authority shall not mechanically terminate the registration of the promoter or injunct him to act as a promoter, but in the facts of a case would take necessary steps in the interest of allottees permitting the promoter to carry on the remaining development work It shall not be interpreted to mean that in every case a promoter who fails to complete the project under the extended time under Section 6 would get further extension as of right. In that sense, there is no divesting of rights in the property from the promoter to the authority. ” with regard to the interest payable on default and delay under Section 18 of RERA, the High Court clarified that the rate of interest as mentioned under RERA is of a compensatory nature for the investment made by the people and shall not be perceived as a penal provision.

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors Further, Sections 59 to 64 of RERA, dealing with punishment with regards to various contravention under the law including non-registration, failure to comply with the directions of the Authority and Appellate Tribunal etc, were challenged on grounds of retrospective application. However, the Court, clarifying the point of retrospective application, mentioned that RERA was enacted in the larger public interest and did not retrospectively penalize the act done by a person prior to registration under RERA. Therefore, the High Court held that these provisions were not contrary to Articles 14, 19(1) (g) and 20 of the Constitution of India.

Neelkamal Realtors Suburban Pvt. . vs The Union Of India And 2 Ors The Bench, while upholding the provisions of RERA said, “RERA is not a law relating to only regulating concerns of the promoters but its object is to develop the real estate sector, particularly the incomplete projects, across the country. The problems are enormous and it’s time to take a step forward to fulfill the dream of the ‘Father of the Nation- To wipe out tears from every eye. ” Full order is available at https: //indiankanoon. org/doc/82600930/

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) CASE FILED UNDER SECTION 12 OF THE ACT COMPLINT FILED BY ALLOTTEES TO SEEK REFUND OF MONEY ALONG WITH INTEREST FOR THE REASON OF NON DELIVERY OF THE HOMES AS PER THE MODEL FLAT AND OTHER AMENITIES AS SHOWN IN PROJECT BROCHURE. Maha. RERA AUTHORITY DENIED THE RELIEF SAYING SECTION 12 CANNOT BE APPLIED RETROSPECTIVELY. AGGRIVED BY THE ORDER ALLOTTEES FILED APPEAL WITH MAHARERA TRIBUNAL UPHELD RELIEFS CLAIMED BY ALLOTTEE AND REVERSED THE DECISION OF THE AUTHORITY.

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) The Real Estate (Regulation and Development) Act, 2016 (RERA) were introduced on May 1, 2016, but it came into force in its entirety on May 1, 2017. Various sections of the act came into force from time to time. By Notification No. S. O. 1544 (E), dated 26 -42016, the Central Government appointed 1 st day of May 2016 as a date on which provisions of Sections 2, 20 to 39, 41 to 58, 17 to 78 and 81 to 92 of RERA came into force. By Notification No. S. O. 1216, dated 19 -4 -2017 provisions of Sections 3 to 19, 40, 59 to 70 and 79, 80 of the RERA came into force, w. e. f. 1 st May, 2017. In the recent case of "Island City Centre" Project of Bombay Dyeing & Mfg. Co. Ltd, Maha. RERA Appellate Tribunal has given ruling in respect of obligation of the promoter for veracity of the advertisement or prospectus, issue before the Hon'ble Tribunal was to decide that whether the obligations of the promoter regarding veracity applies prospectively or retroactively?

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) Apart from the above issue the another point was to decide that whether allottees are entitled for refund along with interest and compensation from the promoter, if the allottee has sustained any loss due to incorrect and false information contained in the advertisement or prospectus and promoter has failed to give the possession of flat as per terms and condition of agreement for sale. It is very important to understand the provision of Section 12 and Section 18 of RERA On the basis of the assurance given in broacher, advertisement and prospectus, the allottees has applied for booking of the apartment i year 2012 -13, the said booking was confirmed with by issuing the allotment letter, along with the terms and condition, by the promoter. The said booking was done under the 20: 80 scheme and according to this the 80% of the payment is required to be paid at the time of possession so after confirmation of Booking, the allottees paid approx. 19% i. e. Rs. 2 Crore plus service tax/VAT along with the premium @ Rs. 5000 sq mtr in the Year 2012 -13, against the apartment price.

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) Maha. RERA Order : - The complaint filed by the allottees was disposed of by the Hon'ble Chairman Maha. RERA on ground that obligation of the promoter regarding veracity of the advertisement or broachers does not apply retrospectively and the provision of RERA do not apply to the present transaction as which took place in year 2012 -13 i. e. much prior to the enactment of RERA on 01. 05. 2017. further Maha. RERA ordered by advising the allottees to execute and register the agreement to sale as per RERA and rules and regulations there under and in the alternatively, if the allottees intend to withdraw from the project then such withdrawal would be guided by the terms and conditions of the allotment letter.

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) Appeal by the Allottees : - The allottees filed the appeal before the Hon'ble tribunal on the ground that, the Hon'ble Chairman-Maha. RERA has considered only one point that whether the promoter is obliged to compensate the allottee and refund the amount due to incorrect or false information contained in the broachers and advertisement while the failure on the part of promoter to give the possession as promised was not considered before deciding the case. The Hon'ble Bombay High Court held that Section 18 of RERA i. e. provision related to refund of amount, on account of failure of promoter to give the possession on time, to allottee RERA is retroactively applicable.

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) Conclusion: q As per the provision of Section-3 of RERA, every project which are ongoing, on the date of commencement of RERA, and for which completion certificate is not received, is required to make application for registration. It means that RERA is applicable for all ongoing project therefore all other provisions of RERA including the obligation of promoter for incorrect/false information in the advertisement, refund of money due to delay in possession of is also applicable for the ongoing project. q Provision of RERA enables the promoter to decide the timeline to complete the project and revise the timeline for completion of the project this shall not absolve the liability of the promoter as enshrined in agreement to sale. It is the duty of promoter to deliver the possession of flat as per the timeline given in agreement for sale. Extension of timeline to complete the project is necessary to avoid the penal consequences not to delay the possession as per agreement for sale. Further, provisions of RERA do not rewrite the clause of the agreement for sale.

Rohit Chawla Vs. Bombay Dyeing & Mfg Private Limited (AT 11016) q Interest payable due to delay in possession of flat as per time line given in agreement for sale and due to discontinuation of business by revocation of registration is not penalty as the payment of interest is compensatory in nature. Due to delay in possession of apartment as the allottee is deprived of the use of fund paid by him to the promoter and promoter is liable to pay the interest for utilisation of fund paid by allottee. q The liability of promoter to compensate the allottee and refund of the amount along with interest due to incorrect/false information in the brochure (provision of section- 12) and delay or failure to give the possession as per agreement for sale (provision of section-18) are not retrospective in nature and the same are compensatory in nature, therefore it is retroactively applicable.

Sanvo Resorts Pvt Ltd Vs. Rahul Harish Ghole & Shruti Harish Ghole (AT 10658) COMPLAINT WAS FILED UNDER SECTION 18 FOR DELAYED POSSESSION. COMPLAINANT CLAIMED REFUND ALONG WITH INTEREST UNDER SECTION 18 OF THE ACT. DEVELOPER CITED THE REASON OF CHANGE IN COMPETENT AUTHORITY AND DELAY IN PERMISSIONS FROM VARIOUS AUTHORITIES LIKE NHAI, AAI, MJP AND TECHNICAL POINT THAT COMPLAINT WAS PREMATURE. AUTHORITY FAVORED COMPLAINANT AND GRANTED RELIEF. AGGRIVED DEVELOPER FILED APPEAL WITH APPELLATE TRIBUNAL. DIVISION BENCH OF TRIBUNAL GRANTED REFUND ALONG WITH INTEREST WITH DETAILED ORDER.

M/s. Geetanjali Aman Construction Vs. Hrishikesh Paranjpe (SGI 0000672) LANDMARK CASE LAW TO DECIDE APPLICABILITY OF SECTION 3(2)(a) OF THE RER ACT, 2016. 1. DEVELOPER HAD A PROJECT OF THE PLOT AREA ADMEASURING 382 SQ MTRS AND UNITS TO BE DEVELOPED WEREE 29. DEVELOPER DIDN’T REGISTER PROJECT SAYINH HIS AREA OF THE PLOT IS LESS THAN 500 SQ MTRS. HENCE PROJECT WAS NOT REGISTERED. SOURCE COMPLAINT WAS FILED FOR NON REGISTRTION BY COMPLAINANT. AUTHORITY DIRECTED TO REGISTER PROJECT WITHIN 30 DAYS. DIRECTED TO PAY PENALTY OF RS. 30, 000/- FOR NON REGISTRATION. FURTHER PENALTY OF RS. 10, 000/- PER DAY FOR FURTHER DELAY. FULL BENCH CONSIDERED THE CASE AND DELIVERED JUDGEMENT WITH 2 -1 MAJORITY. TRIBUNAL REVERSED THE DECISION OF THE AUTRHORITY NOTING SATISFACTION OF ANY ONE OF THE CONDITIONS OF SECTION 3(2)(a) SHALL EXEMPT PROJECT FROM REGISTRATION. HON. MEMBER SUMANT KOLHE SUBMITTED DISSENT NOTE TO THE JUDGEMENT. MATTER IS NOW SUBJUDICED AT HON. BOMBAY HIGH COURT.

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