The legislative intent of the statute and its application in practise by the judiciary has always been a race to perfection with one leading the other and the case of Real Estate (Regulation and Development) Act, 2016 is no different. The Act, 2016 came on the statute book with all its provisions in force on 1st of May, 2017 and the race hasn’t stopped since with the recent three judge bench judgement of the Hon’ble Supreme Court in M/s. Newtech Promotors and Developers Pvt. Ltd. Vs State of UP & Ors.[1], furthering the cause.
Introduction
The judgement written by Hon’ble Justice Ajay Rastogi, signed and approved by Hon’ble Justice Uday Umesh Lalit and Hon’ble Justice Aniruddha Bose as pronounced on 11.11.2021 appears to have served a great deal of help to the allottees in real estate projects all over the country who had been running from pillar to post seeking what was already intended to be provided to them vide the said Act, 2016. In what seems to be the landmark case for bringing numerous litigations pending before various forums and courts to rest by being the new ammunition for the allottees to claim their rights due under the provisions of the Act, 2016, this article aims at explaining the ‘what’ and ‘how’ of the case along with a brief inference on other important takeaways from the judgement.
Background
The matter before the Hon’ble Apex Court pertained to batch of appeals assailing common issues relating to provisions of Act, 2016 along with alleged anomalies within the Uttar Pradesh Real Estate (Regulation and Development) Rules, 2016. The Appellants therein had primarily approached the Apex Court against impugned orders passed by the Hon’ble Allahabad High Court whereby their writ Petition under Article 226 & 227 of Indian Constitution were dismissed upholding the decision of UP Real Estate Regulatory Authority directing the promotor/Appellant to refund the principal amount of consideration to the allottees along with interest (MCLR+1%) as prescribed by the State Government under the Act.
The Appellants had challenged the UP RERA order before the Hon’ble Allahabad High Court on grounds of lack of jurisdiction of the Authority to adjudicate upon matter of refund under Section 18(1)[2] and had also challenged the pre-deposit condition as envisaged under Section 43(5)[3] of the Act, 2016 rectifying its inability to approach the Real Estate Appellate Tribunal against the said order under statutory appeal provisions as per the Act, 2016. The Apex Court took a bird’s eye view of the scheme of Act, 2016 and framed the following five issues.
Issues for determination
1. Whether the Act 2016 is retrospective or retroactive in operation and what will be its legal consequence if tested on the anvil of the Constitution of India?
2. Whether the Authority has jurisdiction to direct return/refund of the amount to the allottee under sections 12, 14, 18 and 19 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 Condition of Pre-deposit under proviso to Section 43(5) of the Act for entertaining Substantive right of appeal is sustainable in law?
5. Whether the Authority has power to issue Recovery Certificate for recovery of the principal amount under section 40(1) of the Act?
Arguments and Decision
The first issue to begin with was dealt with appellants arguing for the operation to be retrospective with respect to section 13, 18(1) and 19(4) being applied on ongoing projects where agreement to sell was entered before enforcement of 2016 Act and claimed for it to be violative of Article 14 and 19(1)(g) of the Indian Constitution. The Respondents on the other hand turned towards the objects and reasons of the Act, 2016 to manifest that the provisions operate for protecting the interests of homebuyers in future and that the no distinction between existing and new projects is provided apart from the issuance of Completion certificate making the operation retroactive.
Held: The Apex court perused the difference between the terms ‘retrospective’ and ‘retroactive’ through precedents and negated the contentions of the appellant holding that the operation of Act, 2016 is retroactive as it does not affect completed projects with certificates and that the same further cannot be said to be violative of Articles 14 and 19(1)(g) for just being retroactive.
With respect to the second issue, reiteration and due consideration of the provisions under section 12, 14, 18(1), 19(4), 31, 71 and 72 of the Act, 2016 and supporting regulations thereto by the Apex Court was followed by contentions of the Appellants that the Authority and the Adjudicating Officer operate in different spheres and that jurisdiction for refund cases under Section 18(1) and 19(5) lies exclusively with the Adjudicating Officer under Section 71 of the Act, 2016.The Respondents relied upon the distinction in ‘refund’ and ‘compensation’ for their counter and contended for the authority to have the jurisdiction to adjudicate the matters pertaining to refund as adjudicating officer is conferred with compensation jurisdiction only.
Held: The counter by the Respondents was observed to be in accordance to the wisdom of the legislature and the three judge bench therefore held for the authority to have the power to examine and determine the outcome of complaints pertaining to refund, interest on refund, payment of interest for delayed delivery of possession or penalty and interest thereon.
The third issue pertained to delegation of powers by authority under Section 81 to another authority for adjudication of refund cases which comprised of only one member and the appellants presented for it to be abuse of power as the same stands in violation to section 21 which provides for authority to consist of one chairperson and not less than two whole time members and relied upon various precedents claiming delegation to be bad in law. Per contra, Counsel for the Respondent apprised the bench that the delegation pertained to only adjudicating specific matters and it did not include empowerment of all functions to the said authority. Reliance was further placed on the intent of Section 81 presenting, that if the delegation was termed illegal, the provision of section 81 would not sustain any value which was expressly provided to allow the said delegation.
Held: The court examined the limited question and observed for the delegation under section 81 of Act, 2016 by authority to one of its member for deciding applications/complaints under section 31 to be well defined and expressly permissible which does not dehors the mandate of law.
The fourth issue with respect to pre-deposit condition being discriminative and unconstitutional for standing in path of Article 14 of Indian Constitution was argued by the Appellants in affirmative, the bench however considering the scheme of the act observed the arguments to be attractive but not sustainable in law.
Held: The Hon’ble court distinguished ‘promotors’ and ‘allottees’ as separate class of persons and observed for them to have also been differently and separately dealt with under the various provisions of the Act, negating the question of discrimination. The aim behind section 43(5) pre deposit condition was further held to be in accordance with the objective of the act as the same ensures for speedy recovery of the money once the appeal is dismissed and to further ensure that the appeal is not used as delay tactic. The decision was further supported by citing precedents upholding the presence of similar clauses and provisions in other statutes including Sec.18 of SARFAESI Act 2002, Section 19 of Consumer Protection Act, 1986, and Section 19 of MSME Act, 2006 upheld the decision in Saurashtra Kutch Stock Exchange Ltd. (Supra)[4]. The court further observed for the intention of the legislative for keeping pre deposit appears to be for the promotors to show bona fides and held for the said condition to constitutional.
The fifth issue pertained to the understanding of ambit of application of section 40(1) of the Act, 2016 which provides for the allottee to receive a recovery certificate for execution of order decided in its favour. The Appellants contended for the language of the provision to expressly provide interest, penalty and compensation and that the said provision does not empower the authority to issue recovery certificate to the allottee in case of refund orders.
Held: The Hon’ble bench however observed that ‘It is a well settled principle of law that if the plain interpretation does not fulfil the mandate and object of the Act, this Court has to interpret the law in consonance with the spirit and purpose of the statute’[5], and went on to decide for the refund amount to be recoverable within the ambit of Section 40(1) of the Act, 2016.
Other Relevant Noting
The Hon’ble Supreme Court, apart from the framed issues also made an express observation about the mandate of Section 18(1) whereby the allottees were observed to be entitled to refund, provided conditions of the provisions are fulfilled. The court noted :
“25. The unqualified right of the allottee to seek refund referred under section 18(1)(a) and section 19(4) of the Act is not dependant on any contingencies or stipulations thereof…..
…..
26. The expression “on demand” which follows the right to “return of amount” is indicative of the priority, immediacy and expediency which is accorded to the right of refund….
….
27. ….Section 18(1) is an indefeasible right of the allottee to get a return of the amount on demand if the promotor if unable to handover possession in terms of the agreement for sale or failed to complete the project by the date specified …….”
Conclusion:
The Apex court no doubt brought forward a precedent, which may be termed as a grave victory for the allottees, however one thing that might still haunt the allottees is the delay in the procedure of refund as the same at places like Haryana are being adjudicated by the Adjudicating officer, which may now been shifted to the authority vide the present judgement and it shall cause delay and trouble to both the adjudicating authority and the allottees.
Points to Ponder
- Effect of New tech on refund matters already decided by adjudicating officer.
- The refund matters pending before adjudicating authority may be transferred to authority for further adjudication.
- The delegation of power of authority under section 81 could validate delegation to a non-member by authority.
[1] (SLP (C) No.3711-3715/2021)
[2] Section 18(1) provides for return of amount and compensation to the allottee if the promoter fails to complete or is unable to give possession of an apartment, plot or building.
[3] Section 45(3) provides that where a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited with the Appellate Tribunal atleast thirty per cent. of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.
[4] Suarasthtra Kutch Stock Exchange Ltd. Vs Securities and Exchange Board of India and Another (2012 (13) SCC 501)
[5] Para 140, M/s. Newtech Promotors & Developers Pvt. Ltd. Vs State of UP & Ors. Etc.
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