Brief: A recurring conflict in Indian real estate disputes arises when a bank enforces a mortgage under the SARFAESI Act against a project whose homebuyers seek protection under RERA. This article, built around batch of appeals before a State Real Estate Appellate Tribunal, examines whether RERA can restrain a bank’s SARFAESI action, corrects a common misreading of the Union List/State List question, closely reads the actual propositions laid down in Union Bank of India v. Rajasthan RERA (rather than the single line usually quoted from it), and considers what happens to such an appeal once the underlying recovery dispute is itself settled.
Introduction:
Real estate financing in India routinely follows a familiar pattern: a developer mortgages project land to a bank to fund construction, later sells individual units to homebuyers by registered sale deed, and subsequently defaults on the loan. When the bank then proceeds under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) to take possession, the homebuyers caught in between, often holding registered sale deeds and no notice of any default, turn to the Real Estate (Regulation and Development) Act, 2016 (“RERA”) for protection.
A batch of connected appeals recently before a State Real Estate Appellate Tribunal, arising from a common order of the Real Estate Regulatory Authority concerning a residential township, illustrates this conflict with unusual clarity. This article uses that dispute to examine three questions that arise in almost every such case: whether the conflict is genuinely constitutional in nature; what the governing Supreme Court precedent actually says, once read in full rather than in its most commonly quoted single line; and what becomes of an appeal of this kind once the underlying bank-versus-promoter recovery dispute is itself compromised.
l. Facts:
The promoter of a residential project availed project loans from a nationalised bank, securing them by mortgage over open land forming part of the scheme. Row houses were subsequently sold to homebuyers by registered sale deed — in most cases after the mortgage was registered, though in a handful of instances before it, and in a smaller number of those instances, even before the mortgage was sanctioned. When the loan turned into a non-performing asset, the bank issued notices under Sections 13(2) and 13(4) of the SARFAESI Act and secured an order under Section 14 directing physical possession through a court commissioner. Dozens of allottees approached the State RERA Authority, which granted a possession-protecting injunction for units with credible documentation while declining relief for a few units where the paper trail did not hold up. The bank has appealed before State Real Estate Appellate Tribunal and after the appeal was filed, its recovery proceeding against the promoter before the Debts Recovery Tribunal was itself disposed of as settled at a Lok Adalat, on reduced terms with execution kept in abeyance pending payment. The Appellate Tribunal has nonetheless indicated it intends to decide the appeal on its merits.
II. Why this is not a Union List/State List issue:
A recurring misconception treats this dispute as one of legislative competence. SARFAESI traceable to Entry 45 of the Union List (Banking), and a state RERA Authority somehow the product of State legislation. This does not survive scrutiny. The RERA Act, 2016 is itself a Parliamentary enactment, drawing its competence from Entries 6 and 7 of the Concurrent List (Transfer of Property, and Contracts). A state Real Estate Regulatory Authority is not created by any State legislature; it is simply the implementing body constituted under Section 20 of the same Central Act. There is accordingly no question of repugnancy under Article 254, which applies only where a State legislature has enacted a law on a Concurrent List subject that conflicts with a Union law, no such State law exists here.
What is actually presented is a horizontal conflict between two Central statutes i.e. SARFAESI and RERA, each carrying its own non-obstante clause (Section 35 of SARFAESI; Section 89 of RERA). This calls for ordinary principles of statutory interpretation, particularly the rule that a later, special enactment prevails over an earlier, general one within its own field, rather than any exercise in constitutional federalism.
III. Union Bank of India Vs Rajasthan RERA: Five Proposition, not one
The reconciliation described above was substantially undertaken by the Rajasthan High Court in Union Bank of India v. Rajasthan Real Estate Regulatory Authority (judgment dated 14.12.2021), affirmed by the Supreme Court in February 2022. This judgment is almost always cited for a single line — that RERA has jurisdiction over a bank invoking Section 13(4) SARFAESI — but the judgment actually records five distinct propositions, decided together in a batch of connected writ petitions, and the isolated citation risks missing the framework the Court actually built.
The five propositions may be summarised as follows:
A. Regulation 9 of the Rajasthan RERA Regulations, 2017, permitting a single member of the state Authority to decide complaints, is not ultra vires the RERA Act.
B. That delegation of power independently flows from Section 81 of the RERA Act, and could validly have been made even without Regulation 9.
C. Where the RERA Act and the SARFAESI Act genuinely conflict, the provisions of the RERA Act prevail — a conclusion the Court expressly grounded in the Supreme Court’s earlier observations in Bikram Chatterji v. Union of India, (2019) 19 SCC 161, the Amrapali line of orders.
D. RERA does not apply to a transaction between a borrower and a bank or financial institution where the security interest was created by mortgaging the property before RERA’s introduction — unless the creation of that mortgage, or the underlying transaction, is shown to be fraudulent or collusive.
E. A RERA Authority has jurisdiction to entertain a complaint by an aggrieved allottee against a bank, in its capacity as a secured creditor, where the bank takes recourse to Section 13(4) of the SARFAESI Act.
The fifth of these propositions is the one almost invariably quoted on its own — including, notably, within RERA Authority orders that rely on it. But it is the last in a sequence, and it operates within limits the earlier propositions have already set. The fourth proposition deserves particular attention, since it establishes that RERA’s reach over a mortgage is not automatic merely because a bank later invokes Section 13(4). Where the mortgage predates RERA’s introduction, an allottee must additionally show that its creation, or the surrounding transaction, was fraudulent or collusive — a materially higher bar than simply pointing to a pending SARFAESI action.
This raises a genuinely open question that deserves closer attention than it usually receives. Project financing is rarely a single, static mortgage; it typically involves an original facility later extended, enhanced, or re-secured through fresh instruments as construction proceeds over several years. Where an original mortgage predates RERA but is subsequently extended by an instrument executed well after the Act came into force, does the pre-Act origin of the facility carry the later extension outside RERA’s reach, or does each extension amount to a fresh act of mortgage creation, assessed on its own date? Neither the judgment nor the commentary that followed it appears to answer this squarely, and it is exactly the kind of question that ought to be argued on its facts rather than assumed either way.
The fourth proposition also has a further consequence: a tribunal cannot simply defer questions of NOC authenticity or disclosure compliance to a parallel recovery proceeding without engaging with them at all, at least where an allottee invokes the fraud-or-collusion route to bring a pre-Act mortgage within RERA’s reach. Where a bank’s own case is that NOCs relied upon by allottees were never genuinely issued, that assertion — whichever way it ultimately cuts on culpability — squarely engages the very gateway the fourth proposition has fixed.
Read together, the five propositions support a more calibrated rule than the single sentence usually in circulation: where a bank invokes Section 13(4) against a RERA-registered project, RERA has jurisdiction to entertain an allottee’s complaint and its provisions will prevail over SARFAESI in genuine conflict — but where the mortgage predates RERA’s introduction, that jurisdiction is conditioned on establishing fraud or collusion in its creation. Sections 88 and 89 of RERA reinforce that this is not wholesale supersession: Section 88 makes RERA’s remedies additional to, not in derogation of, other law, leaving the recovery tribunal’s jurisdiction over the mortgage’s validity and the fact of default fully intact; Section 89’s overriding effect applies only to the extent of this now judicially delineated inconsistency.
IV. The disclosure duty often overlooked: Section 11(4)
Independent of the SARFAESI-jurisdiction question altogether, Section 11(4) of RERA casts an obligation on the promoter to be responsible for all obligations under the agreement for sale, including disclosure of any encumbrance, and bars a promoter from transferring an interest in the project without informing the allottee of any subsisting charge. Where a registered sale deed makes no mention whatsoever of a charge in the bank’s favour, the grievance is not a general “buyer beware” question governed by the Transfer of Property Act — it is a breach of a promoter-specific statutory duty RERA was enacted to enforce, and it gives a tribunal an independent basis to act even where the mortgage-timing analysis above is decided against the allottee on a particular unit.
V. A proportionate middle path
The temptation in disputes of this kind is to frame the outcome as binary: either the bank’s SARFAESI rights prevail entirely, or the allottees’ possession is fully insulated and the bank is left without recourse. Neither extreme reflects how courts have actually approached comparable mass-homebuyer disputes. In the Bikram Chatterji line of orders, the Supreme Court directed secured creditors to recover first against a defaulting developer’s unsold and undeveloped inventory before disturbing the possession of allottees who had already paid for and occupied completed units. Where a bank’s own security includes substantial vacant land distinct from the constructed and sold units, a proportionate order along these lines — protecting occupied units while leaving the bank free to pursue unsold inventory and the promoter personally — achieves the purpose of both statutes without displacing families or extinguishing the bank’s recovery rights.
VI. When the underlying recovery dispute itself settles
A further complication often arises once such appeals reach the appellate stage: the bank’s own recovery proceeding against the promoter may itself be settled, typically through a Lok Adalat, on reduced terms with execution of any recovery certificate kept in abeyance pending payment. Indian courts have long recognised, under the description of a proceeding having become “infructuous” (from the Latin infructuosus, meaning ineffective or unproductive), that an appeal loses its purpose once the underlying controversy it protects has been resolved by subsequent events.
This principle should not, however, be overstated. The recovery proceeding lies between the bank and the promoter; the allottees whose possession is at stake were not parties to it and never consented to it. Their complaint asserted an independent statutory right under RERA, distinct from the bank’s claim against the promoter. A settlement operates only between its own parties and cannot, without the participation of a third party, extinguish that party’s separately accrued right. A tribunal that insists on deciding such an appeal on its merits despite the settlement is, on this view, correctly recognising that the settlement was never capable of resolving a claim to which the allottees were strangers. The settlement remains highly relevant, though, to how the tribunal weighs the bank’s own equities — a secured creditor that has, by its own consent, reduced its claim and deferred execution is considerably hard-pressed to simultaneously claim the urgent, irreparable prejudice it may have pleaded as grounds for disturbing a settled possession order.
It is also worth asking, candidly, why an appeal continues at all once the underlying debt is compromised. Plausible reasons include the precedent value a favourable ruling would carry across a bank’s wider loan book; the insurance such a ruling provides against a future default reviving the settled claim; the fact that a settlement of the debt amount does not, without a formal release of charge, necessarily discharge the mortgage itself; and, more mundanely, the institutional caution that often makes withdrawing litigation harder to justify internally than continuing it. None of these reasons compel a tribunal to decide the appeal on full merits regardless of the settlement, but they explain why an appeal may persist once its most visible justification has fallen away.
VII. What outcome do these arguments point to?
Drawing the analysis together, a differentiated outcome is more likely than any uniform, all-or-nothing result. For units where the registered sale deed predates the mortgage’s creation entirely, ordinary property law should dispose of the bank’s claim without even reaching the RERA-SARFAESI question — a promoter cannot mortgage what it has already conveyed. For units where the mortgage predates the sale deed, the outcome turns on whether the original, pre-Act mortgage or a later extension is treated as the operative instrument, and on whether fraud or collusion in the mortgage’s creation is made out — a case considerably strengthened wherever the bank’s own pleadings allege that NOCs were fabricated by the promoter. Even where the SARFAESI-jurisdiction question is not resolved in the allottees’ favour, Section 11(4)’s independent disclosure-based ground may still apply. On relief, a proportionate order is more probable than a wholesale result either way. And on the settlement, tribunals are likely to proceed on the merits while treating the settlement as materially weakening the bank’s claimed urgency.
Conclusion:
Disputes of this kind are a useful microcosm of a wider tension in Indian real estate law, and they show that the apparent conflict between RERA and SARFAESI is narrower, and more carefully calibrated, than either a “RERA always wins” or “SARFAESI always wins” reading suggests. RERA does not displace SARFAESI or the recovery tribunal’s jurisdiction wholesale; it operates alongside these regimes, addressing a distinct question — protection of allottees as consumers — through its own statutory machinery, subject to genuine limits where the underlying security predates the Act. The task before appellate tribunals confronting this question is not to choose between the two statutes, or to rely on whichever single proposition from governing precedent is most convenient, but to apply the full, carefully balanced precedent that already exists, testing each disputed unit and each disputed instrument against it on its own facts.
References:
a. Union Bank of India v. Rajasthan Real Estate Regulatory Authority, Rajasthan High Court, judgment dated 14.12.2021, affirmed by the Supreme Court of India (order dated 14.02.2022).
b. Bikram Chatterji v. Union of India, (2019) 19 SCC 161.
c. Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India, (2018) 1 AIR Bom R 1.
d. Real Estate (Regulation and Development) Act, 2016 — Sections 11(4), 20, 81, 88, 89.
e. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Sections 13, 14, 35.
f. Constitution of India — Article 254; Seventh Schedule, List I Entry 45, List III Entries 6 and 7.
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Disclaimer: This article discusses a genre of dispute currently before real estate appellate tribunals in India and is intended for academic and professional discussion of the underlying legal questions. Identifying details of any specific pending matter have been omitted, and it does not purport to comment on the merits of any particular case. Readers are advised to independently verify all statutory provisions and case citations before relying on them.
Author Profile: Mihirkumar V. Patel is an independent Advocate practicing before the High Court of Gujarat, Debts Recovery Tribunal- 1 and 2 at Ahmedabad, Debts Recovery Appellate Tribunal at Mumbai, City Civil Court at Ahmedabad. He specializes in Writ Petitions (Article 226-227), Appeals, Direct and Indirect Tax Litigation, Commercial Litigation, Land matters, RERA, Banking, SARFAESI Act, RDB Act, Recovery Disputes. Author can be reached at vlmihir@gmail.com
