Whether any remedy available to the Promoter for units booked/sold after enactment of RERA Act till 30.11.2017?
As per RERA Regulations, registration is required to be obtained before advertising, marketing, booking, selling or inviting persons to purchase units of the Proposed or ongoing project. Guj RERA, after the enactment of the Act, had issued 3 orders related to Registration of Project. The “Order No. 1” was issued on 19.09.2017 wherein it was accentuated that “Promoter/Developer who does not apply for the registration of their on-going Project before 01.10.2017 will be required to pay the registration fee and penalty equal to registration fees for the applications made during the period 01.10.2017 to 31.10.2017. If the application is made during the period from 01.11.2017 to 30.11.2017, the amount to be paid at the time of registration will be registration fees + 2 times registration fees as a penalty”. Thereafter Order no.2 was issued on 19.09.2017 extending the deadline of 30.11.2017 to 31.12.2017 with same penalty i.e. registration fees + 2 times registration fees as a penalty. Further, Order no. 3 was issued on 30.12.2017 wherein penalty was made 2.5 times of registration fees if the application is made after 31.12.2017.
By virtue of above Orders, the following questions emerged: –
1. If the units are booked/sold after the enactment of the Act but before applying for RERA Registration, Whether, penal provision as mentioned in Section 59(1) of Real Estate Regulations and Development Act will trigger?
2. As mentioned above, the condonation for applying late registration was allowed with the penalty on registration fees by virtue of Order 1, 2 & 3 of Guj RERA. In such a scenario, if the units of a project are booked/sold before applying for registration but within the time limits mentioned in Order no. 1 & 2 i.e before 31.12.2017 – Whether Penal Provision i.e. 10% of Estimated Cost of Project (Section 59(1)) will trigger? The answer can be inferred from the decision given by GUJ RERA in the case of “Fortune Highstreet” located at Surat, under Soku developers Partnership firm, decision dated 02nd November 2021.
As per the said decision and various others issued till date, it is clear that if the units of a Project are sold/booked before applying for registration, the penal provision under Section 59(1) of Real Estate Regulation and Development Act, 2016 will trigger. So far as the fact of booking/selling units before applying for the registration and within the period of extension allowed under Order 1, 2 and 3 is concerned, the decision of GUJ RERA allowed the Promoter for exemption for a unit sold during period 01.05.2017 to 30.11.2017
Details of Decision given by GUJ RERA in case of “Fortune High Street” located at Surat, under Soku developers Partnership firm, decision dated 02nd November 2021.
RERA Registration was applied by the promoter as “New Project Launch”. As per Form 3 submitted at the time of registration, the Project contains 195 units out of which 13 units were already booked/sold before obtaining registration. The Authority had issued suo-moto notice to the promoter for violation of Section 3 of Real Estate Regulation and Development Act, 2016. The opportunity of being heard was granted to a promoter, and during the course of hearing, it was submitted by the Promoter that out of 13 units sold/booked in a project: –
1. 6 units were sold by the old promoter which was before the enactment of the RERA Act. The Project was purchased from the old promoter and by that time 6 units were already sold by the old promoter.
2. 4 units were sold after RERA Act was enacted but before 30.11.2017 i.e the time when conditions were relaxed for RERA registration.
3. The remaining 3 units out of 13 units were sold after 30.11.2017, privately, because of fund requirements to continue the Project Activities.
The promoter submitted all the evidence including bank statements to substantiate the submission made by him. Considering the evidence submitted by the promoter, GUJ RERA Authority highlighted the fact that 3 units were booked after 30.11.2017 violates Section 3 of the Real Estate Regulation and Development Act, 2016. The total amount collected for 3 units is Rs 58.70 Lakhs which constitute 1.49% of the Estimated Project Cost. Hence, Penalty of Rs 2 Lakh was levied on a promoter. Further directions were issued to a promoter that the amount of penalty cannot be withdrawn from RERA designated bank account, cannot be booked as expenses in the Project and further cannot be collected from the allottee. In nutshell, all the above directions were issued with the intention that the amount of penalty of Rs 2 Lakhs is paid by the promoter from his own funds and not from the project fund.
It can be inferred from the above decision that if the units of a project is booked/sold before applying for RERA registration but within the time period when registration condition for RERA were relaxed i.e till 30.11.2017, then remedy for penalty under Section 3(1) of Real Estate Regulation and Development Act, 2016 can be asked for, from the authority. However in personal opinion of the Author, the wording of the Order 1 clearly mentions that extra charge as penalty for delay in obtaining registration will not be granted as remedy for violation of other provisions of RERA Law. However, this decisions can be taken as base by promoter if the facts and circumstances of a case are similar to case mentioned above.