Critical analysis of Newtech Promoters and Developers Pvt. Ltd. v. State of UP and Others

Real estate (Regulation and Development) Act, 2016(RERA) was enacted to bring about standardization and transparency in the field of real estate. As new and dynamic as the law is, there are still lacunas and unanswered questions prevailing in the current regime. The Supreme Court through its judgment Newtech Promoters and Developers Pvt. Ltd. v.  State of UP and Others dated 11th November 2021, clarified crucial aspects of the legislation ranging from its application to key provisions of RERA such as Section 40 of the Act.

Issue 1: Whether RERA is retrospective or retroactive in its operation?

The court focused on Section 3 of RERA in relation to any “ongoing projects” that began prior to the Act and for which no completion certificates had been granted. The Act was intended to apply not just to projects that were yet to begin after the Act became effective, but also to current projects for which completion projects had not been obtained. The case of Jay Mahakali Rolling Mills v. Union of India and others clearly defined the difference between a retrospective and a retroactive law. The former occurred when a statute took into account rights that existed before it took effect, and the latter occurred when a statute imposed additional requirements on rights or weakened vested rights.

Applying the purposive interpretation rule of statutory construction, the Apex Court opined that the legislature enacted a retroactive statute to make the sure the sale of a real estate project is done in an efficient and transparent manner for the protection of consumer interests. In a situation where RERA was held to be prospective, the adjudicatory mechanism under Section 31 would not be available to any allottee for an ongoing project.

As a result, the act was retroactive. Projects that have already been finished or for which a completion certificate had been issued were not included in its fold, therefore any vested or accrued rights remained unaffected. Simultaneously, it would apply after registering current and future projects under Section 3 in order to proactively follow the statute’s objective.

Issue 2: Whether the regulatory authority has jurisdiction to direct return or refund of the amount to the allottee under Sections 12, 14, 18, and 19 of RERA or whether the jurisdiction exclusively stays with the adjudicating officer under Section 71 of the same?

If the promoter has not given over possession, the allottee is entitled to a “refund of the price” and “compensation.” The judgment explained that regulatory authority has jurisdiction over the claim for refund of amount on demand under Sections 18(1) and 19(4) of the Act. After holding an inquiry under Section 71, the adjudicating official has the authority to adjudicate compensation under Sections 12, 14, 18, and 19. (3).

In Imperia Structures v. Anil Patni, the court found that Section 18(1) gives the allottee an inalienable right to a refund if the promoter fails to transfer over possession in accordance with the agreement or fails to complete the project by the deadline. Similarly, the promoter’s rights were protected by Section 11 of the Act, which allowed the promoter to contact the regulatory authorities for contract termination if the allottee defaulted. The language of Section 71(1) of the Act makes it apparent that the adjudicating officer’s scope and powers are limited to “adjudicating remuneration” under Sections 12, 14, 18, and 19. There is a clear delineation of the regulating authorities and adjudicating officers’ respective jurisdictions.

The court’s decision was based on a combined reading of Sections 18 and 19, which states that the regulatory authority must evaluate the outcome of a complaint about a refund amount and interest thereon, or payment of interest for delayed handover of possession, fines, and so on. Simultaneously, when it comes to requesting adjudicating remuneration and interest under Sections 12, 14, 18, and 19, the adjudicating officer has sole authority to decide, based on the combined reading of Section 71 and Section 72 of the Act. If adjudication under Sections 12, 14, 18, and 19 is extended to the adjudicating officer for reasons other than remuneration, it may broaden the scope of the adjudicating officer’s powers and tasks under Section 71, which would be contrary to RERA’s mandate.

Issue 3: Whether Section 81 of the Act allows the authority to delegate its powers to a single member of the authority to hear complaints filed under Section 31 of the Act?

Saurashtra Kutch Stock Exchange Ltd. v. SEBI laid down that if the power has been delegated by the responsible authority under the statute, such action by a single member cannot be deemed to contravene the Act’s requirements. The SEBI Act’s express delegation of power provision was similar to Section 81 of RERA.

With the exception of making regulations under Section 85 of the act, Section 81 of RERA expressly empowers the authority to delegate its powers and tasks to any member by general or special order. As a result, other powers and functions of the authority, if delegated to a single member of the authority, are subject to Section 81 of the Act, with the exception of the right to establish rules under Section 85 of the Act. The authority’s power to decide complaints under Section 31 of the Act is quasi-judicial in nature and can be delegated.

Issue 4: Whether the condition of pre-deposit under proviso to Section 43(5) of the Act for the entertaining substantive right of appeal is sustainable in law?

The court emphasized that the distinction between customers and promoters is based on the discernible differences in the rights, duties, and obligations imposed on allottees and promoters. As a result, they were a distinct and distinct classe. The court went on to say that if the promoter wants to file an appeal with the tribunal, and the appeal is later dismissed, it will be difficult for the allottee to recover the amount assessed by the authority. The provision for pre-deposit is important to avoid the issue of recovering the amount that has been established by the authority in fact.

The promoter of pre-deposit is obligated under Section 43(5) of the Act, according to the explanation. These promoters are in a class of their own, and they are receiving the money that the allottees have claimed. If the legislature intended to ensure that money determined by the authority can be preserved if an appeal is chosen by the promoter and the pre-deposit is given, Section 43(5) cannot be argued to be in contravention of Articles 14 and 19 (1) (g) of the Constitution.

Issue 5:Whether the authority has the power to issue recovery certificates for recovery of the principal amount under Section 40(1) of the Act?

Section 18 expresses the authority to command the repayment of the principal amount, and the interest that is payable is on the principal amount; in other words, there is no interest if the competent authority has not decided a principal amount. Furthermore, the act is interpreted to suggest that the principle amount plus interest has formed a composite amount that can be recovered as land tax arrears under Section 40(1) of the Act.

The authority’s powers regarding repayment of the cash received by the promoter and the provision of law in Section 18 and the text of the provision by which such reimbursement might be referred under Section 40 were deemed to be incompatible, according to the judgement (1). The primary aim of the Act would be defeated if Section 40(1) is rigidly taken to suggest that only penalty and interest on the principal sum are recoverable as arrears of land revenue. The court emphasised that the sum that has been calculated and refundable to the allottees either by the authority or the adjudicating officer in terms of the order is recoverable within the ambit of Section 40(1) of the Act for the purpose of harmonising the law.

Critical analysis of Newtech Promoters and Developers Pvt. Ltd. vs. State of UP and Others

Conclusion:

All states were obliged to notify final rules within six months after the RERA Act was notified on May 1, 2016. The RERA Act’s primary goal was to make the commitments made by builders and developers legally enforceable. Most states, on the other hand, had relaxed the restrictions in favor of developers. Several state RERA authorities had changed their criteria to disqualify even active projects that had not yet acquired completion certificates by adding new conditions. For example, Telangana has exempted from RERA jurisdiction all active projects for which building approvals were granted before January 2017, essentially keeping all ongoing projects out of RERA.

This judgment has reinforced RERA’s jurisdiction over all active real estate developments at the time the statute was established. RERA regulations in states such as Uttar Pradesh, Haryana, Punjab, Karnataka, Telangana, and Tamil Nadu are now out of date and may need to be amended in order to ensure that all active projects are regulated by RERA.

Author Bio

Qualification: Student- Others
Company: N/A
Location: Ahmedabad, Gujarat, India
Member Since: 22 Jan 2022 | Total Posts: 1

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Telegram

taxguru on telegram GROUP LINK

Review us on Google

More Under Corporate Law

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

May 2022
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031