RERA registration of project when Area is less than 500 sq mtr & flats are more than 8

Geetanjali Aman Constructions Vs Hrishikesh Ramesh Paranjpe (Maharashtra Real Estate Appellate Tribunal, Mumbai)

This appeal is directed against the order dated 10th December, 2018 of Ld. Member and Adjudicating Officer, MahaRERA as modified by order dated 11th March, 2019 pursuant to Review Application filed by Appellant in Complaint Nos. SC10000672 & SC10000691.

2. The short controversy that arises in this appeal revolves around Clause (a) of Section 3(2) of the Real Estate Regulations and Development Act, 2016 (for short, ‘the Act’). It is appropriate here to reproduce the relevant part of the said Section for better understanding and relating the same to the facts and circumstances of the case in further account of this order.

“Section 3(2). Notwithstanding anything contained in sub section 1, no registration of the Real Estate project shall be required:

(a) Where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases         “

3. The facts submitted on record reveal that Appellants are engaged in development and construction of real estate projects. According to Appellants, they had commenced the construction of project “Utkarsh Apartment” in Pune in the year 2013. On commencement of the RERA w.e.f. 1st May, 2017, Appellants sought guidance from MahaRERA (the Authority) on registrability of their project by email dated 8th February, since the said project had an area less than five hundred square meters but apartments more than eight. However, there was no written reply or response from the Authority despite persuasion. Appellants claim the officials in the Authority advised them that their project is not required to be registered .

4. On 6th December, 2018, Appellants received an email from the Authority for hearing in respect of the said project on 10th December, During the hearing they came to know that the hearing was pursuant to Complaints under caption by Respondents regarding registration of their project. Appellants made oral submissions and following order was passed by the Learned Member.

“The respondents shall pay penalty of Rs.30 Lacs under Section 59 of the RERA.”

5. According to Appellants, they received the above order on 8th January, 2019 by email. However, as there were errors in the above order with regard to the area, estimated cost of the project etc., Appellants preferred Review Application on 4th February, 2019 on following grounds:

(i) The Appellants were never served copy of complaints as falsely declared by Respondents. They became aware of allegations in the complaints for the first time during hearing on 10th December, 2018.

(ii) Appellants were not given any opportunity to file their reply to the complaints.

(iii) The area is wrongly mentioned in the order as 38259 sq. though the correct and duly certified area is 380.04 sq. mtrs. i.e. less than five hundred sq.mtrs. as orally stated during the hearing.

(iv) Duly certified estimated cost of the project is Rs, 3.35 crore contrary to the cost erroneously mentioned as 10 crore approximately in the order.

(v) The project is exempted from registration U/Sec. 3(2) of the Act since the area of the plot is 380 sq. mtrs and therefore penalty of Rs 30 lacs is required to be cancelled.

6. Based on above grounds, the Appellants prayed for following reliefs.

(i) To review the order dated 10th December, 2018 as the said project is exempted from registration under Sec. 3(2) of the Act being area under the project less than 500 sq. mtrs;

(ii) To hold that the project is not registrable under the Act.

(iii) To withdraw and cancel the penalty of Rs.30 lacs imposed by the said order;

(iv) To cancel/withdraw the directions requiring to register the project within three weeks from the date of order;

(v) To stay operation of the order pending hearing and final disposal of Review Application.

7. After reminders to the Authority to fix an early date for hearing, Review Application and the application filed by Respondents for taking action for non-compliance of the order dated 10th December, 2018 were heard together by Ld. Member on 11.3.2019.

8. After hearing the parties, Learned Member held that project is registrable and passed the following order on the same day.

“The Respondents shall register the project within two days from this order. The amount of penalty shall be Rs.30 lakhs only.

In case of the Respondent’s failure to register the project as directed, the Respondents are hereby restrained from selling/transferring any part of the project and collecting any money from the allottees till the project is registered.

In case, non-registration within the prescribed time limit, issue notice to the Respondents under Section 7 of RERA to show cause as to why MahaRERA should not take the project in its control. The matter be kept before the Authority on 08.04.2019.

The representative of the Respondents has been directed to remain present to collect the copy of the order. Hence, the copy of the order be given to the representative of the Respondents to act upon it.

The Respondents shall pay additional penalty of Rs.10,000/- per day after 14.03.2019 under Section 59 of RERA till project is registered. The order dated 10.12.2018 is rectified under Section 39 and the area of the plot is corrected to 382 sq.mtrs. and 22 flats and 9 shops”.

9. Being aggrieved by the aforementioned orders dated 10th December, 2018 as rectified by order dated 11th March, 2019, present appeal has been filed on the following grounds:

(1) misconstruing the provisions of Section 3(2) of the Act, the project is erroneously held registrable as it had more than 8 tenements even though land to be developed was less than five hundred sq. mtrs.;

(ii) Learned Member wrongly held the project liable for registration by interpreting that both the conditions U/Sec. 3(2) are to be met cumulatively and not alternatively for exempting the project from registration;

(iii) Learned Member erred in imposing a penalty of Rs.30 Lacs for non-registration and directing Appellants to register the project within 2 days failing which further penalty of Rs.10,000/- per day to be imposed until registration of the project;

(iv) Appellants have been restrained from selling/transferring any part of the project and collecting any monies from allottees;

(v) There is no rational for estimating the penalty of Rs.30 Lacs as 3% of the wrongly estimated project cost of Rs.10/- crore and for not reconsidering the same even after submitting duly certified project cost of Rs.3.35 crore in Review Application.

10. In relief, the Appellants sought to quash and set aside the impugned order dated 10th December, 2018 as modified by order dated 11th March, 2019.

11. Heard the Learned Counsel of the parties at length.

12. In oral arguments, the learned Counsel of Appellants reiterated the facts as mentioned hereinabove. He drew our attention to the twin ingredients of Section 3(2)(a) on satisfaction either of which a project shall be exempted from registration. At the cost of repetition, the relevant provisions are again reproduced for the sake of convenience as under:

” Section 3(2)(a) – Where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases.”

13. The learned counsel for Appellants submitted that on plain reading of the aforesaid provisions it is clear that the two ingredients/conditions prescribed in the clause (a) for exempting exemption to the projects from registration are mutually exclusive due to the word “or” used therein. Therefore they are to be read and considered alternatively and not conjunctively as is done by the learned member while passing the impugned orders. He further submitted that satisfaction of either of the conditions or ingredients is only necessary for such exemption from registration.

14. Further, the learned counsel referred to the conclusions drawn by learned member in Para 3 of the order dated 11th March, 2019 reproduced as under:

“3. The learned advocate of the Respondents submits that since the area of the plot is less than five hundred sq. mtrs. Project does not require registration because the exemption is given to the project having less than five hundred sq. mtrs or number of apartments is below 8. Hence he submits that when one ingredient regarding the area is satisfied, the project does not require registration. I do not agree with him because it becomes clear on plain reading of section that if the land below five hundred sq. mtrs is to be developed, then it requires no registration. Similarly, if the apartments not exceeding 8 are being constructed, inclusive of all phases, then registration is not required. The learned advocate admits that in approved plan the number of tenements is 22 and there are nine shops. Therefore, I do not accept the submissions of the learned advocate of the Respondents that the project is exempted from the registration.”

15. The Learned Counsel pointed out that in third and fourth sentences of the above para of the impugned order the learned member appears to have actually agreed with the view of Appellants for disjunctive reading and application of individual conditions provided in Clause (a). Accordingly he also seems opining by stating separately that a project requires no registration if it falls under either of the two conditions. Impliedly therefore the project of Appellants satisfying the condition of having less than 500 sq. mtrs. area was not required to be registered. Yet a moment later, without assigning any plausible reason he comes to a totally different and erroneous conclusion by applying the said individual conditions conjunctively and holds that the project of Appellants is liable to be registered as it had 22 tenements and nine shops.

16. To support and substantiate his contention, Learned Counsel for Appellants relied on judgments in the cases of (i) Lavasa Corporation Limited Vs Jitendra Jagdish Tulsiani [(2018 SCC Online Born 2074];[(2018) 5 AIR Born R 553]: [(2018) 6 Born CR 172)] and (ii) Babu Manmohan Das Shah vs. Bishun Das [(1967 AIR 643, 1967 SCR (1)836)]. He also submitted certain Reports of Committees of the Lok Sabha, the Rajya Sabha and Draft Bills prepared for processing the enactment of the Act to demonstrate the legislative intent for exempting certain projects from registration on fulfillment of either of the conditions laid down in Clause (a) U/Sec. 3(2) of the Act. By reiterating his contentions as above, the learned Counsel vehemently claimed that project of Appellants was not required to be registered and the directions to registering the same and imposition of penalties by learned member in the impugned orders for non registration deserve to be quashed and set aside.

17. The Learned Counsel for Appellants also contended that the penalty @ 3% that appears to have been imposed assuming erroneously the project cost as Rs.10 crore in the order dated 10th December, 2018 is not rational and the same is unreasonable and arbitrary too. He also argued that learned Member took no cognizance of duly certified project cost of Rs.3.35 crore submitted in Review Application and passed an erroneous order 11th March, 2019 that needs to be set aside.

18. On behalf of the Respondents, Learned Counsel supported the impugned orders. She contended that both the conditions mentioned in Clause (a) of Sec. 3(2) of the Act are required to be jointly complied with to qualify for exemption from the registration. To buttress her view, she submitted clarification at FAQ No.5 as downloaded from MahaRERA website suggesting thereby that the Appellants’ projects requires registration. She also relied on the judgment of the Authority of 17th October, 2018. She therefore emphasized that since there are more than 8 flats in the Appellants’ project, the same is required to be registered U/Sec. 3 of RERA, 2016 and deserves no exemption.

19. After hearing the parties and considering the documents on record, two points that arise for our consideration and adjudication are

(i) Whether the project being executed by Appellants is liable to be registered in terms of Clause (a) of 3(2) of the Act?

(ii) Whether Appellants are liable to comply with directions for registration of the project and to pay penalties imposed as per the impugned orders?

We answer both the points in the negative for the reasons discussed in the ensuing account.

20. As may be noted from above account, the principal question that needs to be addressed in this appeal revolves around the interpretation of word “or” used in clause (a) of Section 3(2) of RERA and its application to the facts and circumstances of this case already detailed comprehensively hereinabove. The crux is whether “or” has to be read conjunctively or disjunctively. Needless to state that need to interpret the provisions of law would arise only when there is ambiguity left or a doubt is created in understanding the provisions. In our view in understanding the provision of law what should be done when the words are clear and unambiguous is to give the words that meaning which they convey plainly, irrespective of the consequence. It is well settled law that while interpreting a statute, efforts should be to give effect to each and every word used by the Legislature keeping in view the legislative There cannot be two opinion that interpretative function of the Court is to discover the true legislative intent. It is trite that in interpreting the statute if the words are clear, plain, unambiguous and reasonably susceptible to only one meaning, the Court must give to the words that meaning and no question of construction of statute would arise in such a case.

21. In the light of above observations and with a view to gauge the legislative intent for using the word ‘or’ in the said clause we have also perused the material submitted by the Appellants. It is seen –

(i) that in the Bill XLVI of 2013 relating to enactment of the Act introduced by Rajya Sabha, the word ‘or’ was used in the then Sec. 3(a) though the area and number of flats proposed therein were different from today’s enactment.

(ii) the 30th Report of Standing Committee of the Lok Sabha on the Bill for the Act was submitted in February 2014. It is seen from pages 24-25 of the Report that based on suggestions from National Housing Bank (NHB) the Committee after prolonged deliberations with Nodal Ministry, had strongly recommended amendment to Clause 3 for extending applicability of the Bill “for residential construction upto 100 sq. mtrs. and/or number of apartments to be developed (not exceeding 3) (emphasis supplied) instead of 1000 sq. mtrs (apartments not exceeding 12 in number) as proposed in the Bill.”

(iii) On July 30, 2015, the Select Committee of the Rajya Sabha after good discussion on this issue submitted its Report recommending no changes relating to the word ‘or’ except the area and number of flats to be reduced for exemption.

(iv) Though there were recommendations, as noted above, to use the words ‘and/or’ in the clause 3, it is seen that the Bill introduced in 2015 in the Rajya Sabha retained the word ‘or’ in Section 3(2)(a) of the Bill. Ultimately the Bill No. XLVI-C of 2016 was passed by the Rajya Sabha in the form of the Act as it exists today with the word ‘or’ in Section 3(2)(a).

22. From the above proceedings, it is clearly discernible that by retaining the word ‘or’ in the relevant clause, the legislature always intended to provide two contingencies where if either of the two is satisfied, the project is to be held eligible for exemption from registration. Had the legislature intended to apply both the conditions collectively or conjunctively, the simple use of the word(s) ‘and’ or ‘and/or’ would have achieved the objective.

23. Coming to the present controversy, it is not in dispute that appellants commenced the construction of project ‘Utkarsh Apartments’ in Pune in the year 2013. The area of plot is 382 sq.mtrs. and project consists of twenty two flats and nine shops. Allottees filed the complaint against the appellants with MahaRERA alleging that promoters have not registered the project though number of flats exceeds eight and thereby violated the provisions of Section 3 of RER Act, 2016. Keeping in view the settled law on interpretation of a statute and language of clause (a) of Section 3(2) of the Act of 2016, we are of the firm view that on the happening of any of the two contingencies i] the area of land proposed to be developed does not exceed 500 sq.mtrs or ii] the number of apartments proposed to be developed does not exceed eight inclusive of all phases, project needs no registration under sub section (1) of Section 3 of RER Act. The unambiguous language of clause (a) of Section 3(2) of the Act of 2016 makes it clear that “or” is to be read disjunctively and not conjunctively as conjunctive reading would make legislative intent redundant and would amount to changing the texture of the fabric which is not permissible in law.

24. The disjunctive reading of “or” in clause (a) of Section 3(2) of the Act if applied to the facts of the present case, it is inevitable that the total area of the plot being 382 sq.mtrs., project in question is out of the purview of registration under the Act of 2016. Analysed from this view point, it appears from his observations in 3rd and 4th sentences of Para 3 of the order dated 11th March 2019, that the learned member understood and interpreted the law position correctly with regards to use of the word ‘or’ between the two conditions for exemption of the project from registration if area is less than 500 mtrs. or if there are less than 8 apartments. However while concluding that the project of Appellants is registrable on the basis of apartments more than 8, it is obvious that he gave a total miss to the word ‘or as he failed to assign any context or meaning to the word ‘or’ used in the said clause. This appears to have led him to take a view contrary to what was intended to by the legislature.

25. In view of the above discussion, we are in complete agreement with interpretation by Appellants meaning thereby that once the project meets one of the conditions that precedes or succeeds the word ‘or’ in the said clause, their project is not registrable. However we do find any merit in the view advanced by learned Counsel for Also her references to the FAQ published on the website of MahaRERA and the orders passed by the Authority relating to the controversy have no evidentiary value for giving any consideration thereto. In conclusion, we find it difficult to accept the view taken by learned Member while holding the Appellants’ project as registrable based on the erroneous interpretation of the provisions of Clause (a) of Section 3(2) of the Act in the impugned orders. The said orders dated 10th December, 2018 and 11th March, 2019 therefore deserve to be quashed and set aside along with other directions relating to requirement of registration of the project by Appellants and penalties imposed for failure to do so.

26. Accordingly, we pass the following order:

-:ORDER:-

i] The impugned orders dated 10^th December, 2018 and 11^th March, 2019 are quashed and set aside;

ii] The consequential effects of the said orders in terms of directions to register the project, penalties etc. are also set aside;

iii] No costs;

iv] In view of the provisions of Section 44(4) of the Act of 2016, copy of the order shall be sent to the parties and to the Learned Member and Adjudicating Officer.

(S.S. SANDHU)

(INDIRA JAIN J)

PER : SUMANT KOLHE MEMBER (J)

27. I have perused the draft judgment prepared by my learned sister and brother. I am unable to agree with the conclusion and reasons assigned for in the judgment. Important issue of interpretation and meaning of Section 3(2)(a) of RER Act 2016 is I hold divergent view on the crucial point involved in the matter. I consider it necessary to arrive at my conclusion with reasons by expressing my views as the issue has far reaching impact.

Admitted facts

28. Appellants are the promoters. Respondents are the Allottees. “Utkarsha Apartment” is the project launched by the Promoters on the plot located at Sadashiv Peth, Pune. Area of the plot is 382 sq. Project consists of 22 flats and 9 shops. Allottees lodged the complaints against the Promoters with MahaRERA Authority. They alleged that the Promoters have not registered the project with MahaRERA Authority though number of flats exceed eight and they have violated Section 3 of RER Act 2016.

Decision of MahaRERA

29. The Ld. Member of MahaRERA Authority heard both sides in complaint No. SC 10000672 and 10000691 filed by Allottees on allegation of non-registration of the project and passed order on 10.12.2018 and directed the Promoters to register the project within three weeks and to pay penalty of Rs.30,00,000/- under Section 59 of RER Act.

32. Allottees made grievance of non-execution of the said order. Promoters preferred Review Petition on 04.02.2019 against the said order. The Ld. Member of MahaRERA Authority heard both sides and passed the order on 11.03.2019 as under :-

ORDER

The respondents shall register the project within two days from date of this order. The amount of penalty shall be R5.30 lakhs only.

In case of the respondent’s failure to register the project as directed the respondents are hereby restrained from selling/transferring any part of the project and collecting any money from the allottees till the project is registered.

In case, non-registration within the prescribed time limit, issue notice to the respondents under Section 7 of RERA to show cause as to why MahaRERA should not take the project in its control. The matter be kept before the authority on 08.04.2019.

The representative of the respondents has been directed to remain present to collect the copy of the order. Hence, the copy of the order be given to the representative of the respondents to act upon it.

The respondents shall pay additional penalty of Rs. 10,000/- per day after 14.03.2019 under Section 59 of RERA till project is registered. The order dated 10.12.2018 is rectified under Section 39 and the area of the plot is corrected to 382 sq. mtrs., and 22 flats and 9 shops.”

30. In the order dated 10.12.2018, area of the plot was wrongly mentioned as 38259 sq. ft. and number of flats and shops were wrongly mentioned as 30 and 10 respectively. This typographical mistake was brought to the notice of Ld. Member of MahRERA Authority by Promoters. The Ld. Member of MahaRERA Authority rectified the said typographical mistake by showing correct area of the plot as 382 sq. meters and correct number of flats and shops as 22 and 9 respectively by passing order to that effect on 03.2019.

31. Order dated 10.12.2018 with modification as per order dt. 03.2019 directing Promoters to register project and to pay penalty and to face consequences on failure to obey the order, is assailed by Promoters in this Appeal.

Rival Claims

32. Promoters have challenged propriety, correctness and legality of the impugned order on the ground that project stands on the plot of area of 382 sq. meters which does not exceed 500 sq. meters and project falls within ambit of Section 3(2)(a) of RER Act, 2016 for exemption from registration. Allottees have made counter attack that project consists of 22 flats and 9 shops which exceeds limit of 8 flats prescribed for exemption from registration under Section 3(2)(a) of RER Act 2016. According to the Promoters, any one of the conditions if satisfied, the project is not required to be registered. According to Allottees both conditions must be satisfied by the project to get exempted from registration. Thus, whether condition of area of plot not exceeding 500 sq. meters and condition of number of Plots not exceeding 8 are mutually exclusive to each other and only one can be satisfied for exemption or both conditions must be satisfied is the main controversy.

33. Now, I proceed to discuss the controversy.

Nature of development

Real Estate project is defined under Section 2(zn) of RER Act. It means development of a building or building consisting of apartments or conversion of existing building or part thereof into apartments.

It also means development of land into plots or apartments as the case may be, for purpose of selling all or some of the said apartments or plots or building as case may be. As a result, project consists of development of Building or land.

Whenever building is to be developed then condition of number of flats not exceeding 8 will have to be observed for getting exemption from registration.

Whenever land is to be developed, it may be plotted development i.e. land is divided into number of plots for selling them in project. If such plotted development is there in project, then condition of area of land not exceeding 500 sq. meters (10 Gunthas) will have to be observed for getting exemption from registration. Now, land may be developed by making construction of building thereon. So, project consists of development of land by construction of building. In this case, since construction of building is involved in the project, the number of apartments should not exceed 8 for getting exemption from registration.

Due care is also taken to see that if project is developed into phases then construction of building in all phases will be considered together for ascertaining maximum limit of 8 flats in project for obtaining exemption from registration.

Thus, exemption under Section 3(2)(a) will depend upon nature of development. If it is development of land by dividing into plots first condition of minimum area of 500 sq. meters of land shall apply for seeking exemption from registration and similarly if project consists of development of building or land by construction of building on land then second condition of number of flats less than 8 shall apply for getting exemption from registration. So, every project involving construction of number of flats not exceeding 8 shall be exempted irrespective of area of the land. Every project involving development of land having area not exceeding 500 sq. meters into plots for sale shall be exempted.

Legal interpretation and meaning

34. In view of this interpretation, both conditions as per Section 3(2)(a) are not mutually exclusive but both shall be satisfied for seeking exemption of the project from registration.

Section 3(2)(a) of RER Act 2016 reads as under :-

“3(2): Notwithstanding anything contained in sub-section (1) no registration of the real estate project shall be required : –

(a) : where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases:”

35. Member held that project must satisfy both conditions i.e. area of plot not exceeding 500 sq. meters and number of flats not exceeding 8 for getting exemption from registration as per Section 3(2)(a) of RER Act. Satisfaction of one condition is not sufficient to exempt the project from registration.

Principles and guidelines

36. Let us see what is the legal interpretation and true meaning of Section 3(2)(a) of RER Act for exemption of project from the registration. In view of word “OR” used in Section 3(2)(a) between both conditions we have to see whether meaning of word “OR” in Section 3(2)(a) is to be gathered from grammatical sense or statutory sense. Section 3(2)(a) is statutory provision and meaning of the word “OR” in this provision is to be gathered from statutory sense. Some principles and guidelines required to be followed for ascertaining correct meaning of the provision are referred by their Lordships of Hon’ble Bombay High Court in Case law of Neelkamal Realtors Suburban Pvt. Ltd and Ors. (Writ Petition No. 2737 of 2017) decided on 06.12.2017 (Hon’ble Chief Justice N.H. Patil and R. G. Ketkar J. Bombay High Court).

I refer to para 158, 159 and 160 of the said Case Law.

“158. When the question arises as to the meaning of a certain provision in a statute, it is not only legitimate but proper to read that provision in its context. The context here means, the statute as a whole, the previous state of the law, other statutes in pari materia, the general scope of the statute and the mischief that it was intended to remedy [as held in R.S. Raghunath v. State of Karnataka, AIR 1992 SC 81]. This statement of the rule was later fully adopted by the Constitution Bench of the Apex Court in Union of India v. Elphinstone Spinning and Weaving Co. Ltd., (2001) 4 SCC 139.

159. It is a rule now firmly established, [as held in Philips India Ltd. v. Labour Court, (1985) 3 SCC 103], that the intention of the Legislature must be found by reading the statute as a whole. “The Court must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law, and the setting in which the clause to be interpreted occurs.”[as held in State of W.B. v. Union of India, AIR 1963 SC 11241].

160. “One must have regard to the scheme of the fasciculus of the relevant rules or sections in order to determine the true meaning of any one or more of them. An isolated consideration of a provision leads to the risk of some other interrelated provision becoming otiose or devoid of meaning.” [as held in O.P. Singla v. Union of India, (1984) 4 SCC 450.]”

Background of RER ACT

37. Now let us consider background of enacting RER Act, 2016. Maharashtra Ownership Flat (Regulation of promotion of construction, sale, management and transfer) Act, 1963 was in force. However, there was no regulatory Authority and there was no mandate to register the project. There was no statutory protection to the Allottees and their interest was not safeguarded by statutory provisions. Hence, in order to overcome short falls and lacunas in MOFA and for development as well as regularisation of real estate sector, new uniform RER Act in addition to MOFA is enacted after long deliberations, discussions and after considering suggestions and views of all Stake holders of Real Estate Sector.

Objects

38. Objects spelt out from preamble of RERA are as under:-

i) To establish Real Estate Regulatory Authority for regulation and promotion of Real Estate Sector.

ii) To ensure efficiency and transparency in sale of plot, apartment, building or Real Estate Sector.

iii) To safeguard the interest of the customers.

iv) To provide speedy adjudicating mechanism.

v) To complete the on-going project. [Neelkamal Realtors]

39. As per Section 3(1) of RER Act, without registration of project Promoters shall not advertise, market, book, sale or offer for sale or invite persons to purchase any plot, apartment or building in the

Mandate of Registration

40. As per Section 3(2) notwithstanding anything contained in sub-clause 1. no registration of the project shall be required.

a) Where area of the land proposed to be developed does not exceed 500 sq. meters or number of apartments proposed to be developed do not exceed 8 inclusive of all phases.

Provided that if the appropriate Government considers it necessary, it may reduce the threshold below five hundred square meters or eight apartment, as the case may be inclusive of all phases, for exemption from registration under this Act,

b) Where the promoter has received completion certificate for a real estate project prior to commencement of this Act;

c) For the purpose of renovation or repair or re­development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be, under the real estate project.

Explanation — For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered a stand alone real estate project, and the promoter shall obtain registration under this Act for each phase separately.

Exception

41. On careful perusal of Section 3 of RER Act, it is revealed that every new project or ongoing project on the date of application of RER Act, 2016 i.e. 01.05.2017 shall be registered with MahaRERA There are three exceptions to this rule as given under Section 3(2) of RER Act.

42. Exception (a) regarding minimum area of the plot or minimum number of apartments; (b) regarding receiving of completion certificate prior to commencement of the Act. Exception (c ) regarding renovation or redevelopment or repair which does not involve market, advertising, selling or new allotment of any plot, apartment or building.

43. Whenever legal interpretation and true meaning of Section 3(2)(a) is to be gathered it must be borne in mind that it is an exception to the rule. Therefore, scope of exception granting exemption from registration cannot be widened and stretched to the extent that such scope may defeat the very purpose of the Rule of registration of the project. Consequently, legal interpretation and true meaning of the exception contemplated under Section 3(2)(a) must be in spirit of and in support of Rule of registration and not in derogation thereof.

44. The entire provision will have to be read in context of other provisions of the Act. For ascertaining true meaning of the provision, whole Act must be read and not only that provision in isolation.

45. The intention of legislature in making registration mandatory and compulsory for the new and ongoing projects clearly shows that as far as possible all the projects are made compulsorily registrable as per Section 3 of RER Act. However, every rule is having exception. So, exception is carved out to exempt the small project from registration. In order to determine concept of small project, it is provided that if area of land to be developed is not exceeding 500 sq. meters or number of flats not exceeding 8 including all phases, then such project is exempted from

46. In the explanation as provided under Section 3 of RER Act, where the project is to be developed in phases every such phase shall be considered as stand alone real estate project and the promoter shall obtain registration in each phase separately. Unless the project is registered with MahaRERA Authority, Regulatory Authority under RER Act may not be in a position to supervise, monitor and control the project for achieving the objects of RER Act. So, intention of legislature in framing exception as per clause (a) for exemption of the project from registration on the point of area of the plot or number of apartments must be construed to satisfy both the conditions for obtaining the exemption from the registration.

Mandate of Section 4 for Registration

47. Registration of project with Authority by making compliance of mandatory requirement as per Section 4(a) to Section 4(m) by promoter is the basic and fundamental stage for commencing the project by making advertisement in public domain and soliciting response from Allottees to purchase the flats. From this stage, on due registration of project, Regulatory Authority starts monitoring the project and Promoter is under obligation to carry out the development by adhering to the statutory provisions of RER Act The object of protecting interest of home buyers is required to be checked from stage of booking of flat in registered project till the project gets completion certificate from competent Authority. The period between date of booking the flat and the date of getting completion certificate of project is crucial and project is required to be regulated by observing and following respective obligations and rights by Promoters and Allottees as per provisions of RER Act under control and supervision of Regulatory Authority in order to complete the project successfully without diverting it into limbo.

Power of government to reduce threshold

48. Appropriate Government is statutorily empowered to reduce the threshold below 500 sq. meters or eight apartments as the case may be inclusive of all phases for exemption from registration of project as per proviso of Section 3(2)(a) of RER Act.

49. This proviso empowers the Government to reduce the threshold and not to increase the threshold. It shows the intention of legislature to bring maximum projects even below the above mentioned threshold under mandate of registration so as to regulate such projects and to protect the interest of the Allottees and also to help Promoters in completing the project. Appropriate government is armed with such power to reduce the threshold only with object of bringing maximum projects under purview of MahaRERA Authority without exempting them from registration.

Amendment of Rules of Registration fees

50. Recently Government of Maharashtra amended some of the Rules framed under RER Act 2016 by reducing the registration fees of the projects of plot development and building development. Mandate of payment of minimum registration fees of Rs.50,000/- is also amended by removing such mandate and making payment of registration fees on basis of area of land and the rate of land per square meter. It is pertinent to note that the action initiated by Government of Maharashtra in reducing the registration fees of the projects is with a view to get registered their maximum projects with Authority and to encourage the Promoters of projects particularly in rural area to get governed by the provisions of RER Act, 2016.

Relevant information of Bill, recommendations of Committees

51. It we consider sailent features of RER Act Bill and suggestions made by various stake holders as well as observations and recommendations of the Standing Committee of the Lok Sabha and Select Committee of the Rajya Sabha it is revealed that though the word “or” is used in between two conditions as per Section 3(2)(a) of RER Act for exemption from registration, the Standing Committee has used the word and/or whereas Select Committee has used the word “and” while making recommendations on this point.

52. The Bill excludes projects smaller than 1000 sq. meters area or 12 apartments from its purview. The Standing Committee observed that large number of small housing projects will escape the purview of this law and therefore, the middle class allottees will The Standing Committee strongly recommend that Clause 3 should be suitably amended thereby ensuring applicability of the Bill on area of land proposed for residential construction up to 100 sq. meters and/or number of apartments to be developed (not exceeding 3 numbers) instead of 1000 sq. meters and apartments not exceeding 12 in number as proposed in the Bill.

53. Consumers and Resident Welfare Association suggested that there should not be any exemption to any project from the registration as per provisions of this Bill in respect of area and number of flats.

54. The Select Committee recommends that the area of the land and number of flats to be exempted from registration should be reduced and adequate powers in this regard may be provided to the appropriate government. Thus, Standing Committee has specifically used word ‘and/or’ in its recommendations whereas Select Committee has used the word “and” in its recommendations in respect of lowering the limit of area and number of apartments for getting exemption from the registration.

55. Thus, it can be easily said from observations and recommendations of various stake holders and Select Committee and Standing Committee report that condition of area and condition of number of flats for getting exemption from registration are not mutually exclusive to each other but both must exist and not only one to get the concession of exemption from the registration.

Meaning of Section 3(2)(a) in context of other provisions
and statute as a whole.

56. I revert back to para 158 of Neelkamal Case Law. As per ratio laid down in S. Raghunath Vs. State of Karnataka.

“When the question arises as to the meaning of a certain provision in a statute, it is not only legitimate but proper to read that provision in its context. The context here means, the statute as a whole, the previous state of the law, other statutes in pan matena, the general scope of the statute and the mischief that it was intended to remedy.”

57. Considering context of provision of Section 3(2)(a) for exemption from registering the project on basis of minimum area of land and minimum number of flats read together with other provisions such as Section 3 of mandate for registration of the project and mandatory requirements to be submitted in detail for registration of the project as per Section 4 by the Promoter and power of appropriate government to reduce minimum threshold of area and number of flats and move of the Maharashtra Government in reducing registration fees of project in order to cover maximum number of projects for registration by encouraging the promoters, I am of candid view that conditions of minimum area of land and minimum number of flats are not exclusive of each other but both must be observed together is the intention of legislation and such interpretation is helpful to achieve the objects of RER Act 2016. If Section 3(2)(a) is interpreted to mean that only one condition if satisfied is sufficient to get exemption from registration then Promoter may commit mischief by making construction of large number of flats on area of land below the requirement for exemption from registration by launching separate and independent project at different time having huge number of floors consisting of large number of flats on the plot of land having area less than 500 sq. meter in order to escape from clutches of compulsory registration of project under Section 4 of RER Act 2016.

Conclusion

58. In view of the above discussion, I am of the opinion that you cannot read proviso of Section 3(2)(a) in isolation but it must be read with other clauses and provisions laid down under RER Act in order to determine the true meaning of the said clause i.e. 3(2)(a) of RER Act. Though, provisions of section 3(2)(a) appears simple for the purpose of reading the same, the true meaning of it cannot be correctly gathered by ignoring the intention of legislature in framing this clause which is to be read with context of other provisions of the Act and with objects of the Act. Thus, considering the object of RER Act to regulate and develop real estate sector, to protect the interest of customers in respect of transactions of sale of flats in Real Estate Sector and to monitor the activities of Promoters and Allottees in respect of such transactions and to encourage Promoters to complete the projects in agreed time and to fulfil the dream of home buyers to get their home, the clause of exception i.e. Section 3(2)(a) must be interpreted and meaning of the said clause must be gathered in such a manner that the objects of RER Act should not be defeated and intention of legislature in bringing maximum number of projects in Real Estate Sector under registration with RERA Authority should not be ignored. Condition of area of the plot and condition of number of flats for getting exemption from the project are not mutually exclusive to each other and both conditions must be satisfied at once for obtaining the exemption from the registration.

Clarification sought by Promoters

59. I would like to refer mail dated 08.02.2018 which was sent by Promoters to MahaRERA Authority for seeking the clarification as to whether the project is registrable under provisions of RER Act in view of exception as per Section 3(2)(a) of RER Act. Copy of E­mail is produced on record by the Promoter. It shows that the project is redevelopment scheme launched by the Promoter. However, the project is not exempted from registration as per clause 3(2)(c) as it involves marketing, advertising selling or new allotment of any flat or project. In the copy of mail it is seen that Promoter has mentioned total area of flat as 382 sq. meters and total number of tenements 29. I would like to note down the clarification sought in the said mail by the Promoters from RER Authority. It is as under :- ‘Do we have to register for RERA in the above given case? Because as per MahaRERA laws if plot is under 500 sq. meters or 8 units or less for sale RERA Registration is not compulsory so for clarification do I have to register or not ?”

60. The above mentioned clarification sought by the Promoter clearly shows that the Promoter was aware about the clause of exemption from registration of the project on the basis of minimum area and minimum number of flats in such project. In fact Promoter was doubtful as to whether project should be registered or not as the area of the plot was only 382 sq. meters but number of flats were 29 i.e. more than 8. First order came to be passed by learned member of MahaRERA Authority on 10.12.2018 in the complaints filed by present two Allottees and directed the Promoters to register the project within three weeks and also pay the penalty. Thereafter, while deciding Review Petition filed on 04.02.2019 by the Promoters and grievance of non-compliance of first order as made by Allottees order came to be passed by MahaRERA Authority directing the Promoter to register the project within 2 days. In para 5 of impugned order, the Ld. Member has observed that the Promoters are ready to register the project within 2 days if so directed. It appears that Promoters agreed to register the project and accordingly the Ld. Member passed the order to register the project within 2 days. Once, the Promoters agreed to register the project within 2 days as revealed from para 5 of the impugned order dated 11.03.2019, the Promoters cannot again challenge such order. It is settled position of law that the observations made by Ld. Member in impugned order on the point of consent of Promoters to register the project within 2 days cannot be doubted for any reason. The Hon’ble Apex Court laid down in (2004) 10 S.C.C. 598 Ram Bali Vs. State of U.P. that whatever happened in court and what transpired at the hearing in Court the statement recorded in Judgment in respect of that, held as conclusive and cannot be contradicted on affidavit or otherwise by other evidence. Party believing them to be erroneously recorded should promptly approach the Judge who made the record while a matter is still fresh in their mind for necessary rectification that being remedy it cannot be challenged in appeal. In view of the above discussion, I am of the opinion that the word “or” as used in Section 3(2)(a) of RER Act is to be treated as “and”. Both conditions must be satisfied together at once by the Promoters for seeking exemption from the registration of the project.

Order of Penalty

61. As per impugned order Promoter is directed to pay the penalty of Rs.30,00,000/- and failure to register project as directed, promoter to pay additional penalty of Rs.10,000/- per day under Section 59 of RER Act till the project is registered and Promoter is restrained from selling and transferring any part of the project and collecting money from the Allottees till the project is registered and Promoter to show cause as to why MahaRERA should not take the project under its control on failure of Promoter to register the same as per order.

62. Order of penalty of Rs. 30 Lacs is passed in view of Section 59 of RER Act, 2016. Such a penalty may extend up to 10% of estimated cost of real estate project as determined by the There is no iota of evidence to show that estimated cost of the Real Estate Project was determined by the Authority. In fact the certificate issued by authorised CA of the project reveals that estimated cost of the project is about 3 Crores 30 Lacs. The Ld. Member awarded penalty of 30 Lacs on basis of submission of the Promoters of estimated cost of Rs.10 Crores by imposing penalty to the extent of 3% of the cost. If we consider extent of penalty up to 10% of the estimated costs of the project as per Section 59 of RER Act 2016 and estimated cost of Rs.3 Crores 35 Lakhs as certified by C.A. then Promoters are liable to pay penalty of Rs.30.10 Lacs for not complying the order of registration of the project. The Ld. Member has also imposed additional penalty of Rs.10,000/- per day till the project is registered by the Promoter. As per Section 59 (2) of RER Act, 2016 if the Promoter fails to comply the order or continues to violate provision of Section 3, then he shall be punishable with imprisonment for a term which may extend up to 3 years or fine which may extend further up to 10% of estimated cost of real estate project or both. Thus, there is no concept of awarding additional penalty under Section 59(2) of RER Act.

Final decision

63. The impugned order directing promoter to register the project and to pay penalty is legal, proper and correct. However, determination of the penalty of Rs. 30,00,000/- is not correct. Certificate of C.A. shows estimated cost of project approximately Rs.3 Crores 34 Lacs. So, penalty of Rs.30.10 Lacs will be 10% of estimated cost of the project. Now, additional penalty of Rs.10,000/- per day is not contemplated under Section 59 of RER Act and not proper legal and correct. So to the extent of awarding additional penalty to the promoter, the impugned order is not proper, legal and correct.

64. In the result following order is passed:

ORDER

Appeal No. U-6 in Complaint No. SC 10000672 along with Complaint No.SC 10000691 is partly allowed as under :‑

a) Impugned order dated 11.03.2019 passed by Ld. Member of MahaRERA Authority in Complaint No. SC 10000672 along with Complaint No.SC 10000691 is confirmed to the extent of directing the Promoters to register the project and to pay penalty.

b) Promoters shall register the project with MahaRERA Authority in accordance with law within one month from the date of this order.

c) Promoters shall pay penalty of Rs.30,10,000/- i.e. 10% of total estimated costs of the project as per certificate of C.A. i.e. Rs.3 Crores and 35 Lakhs approximately within one month from date of this

d) Failure to register the project as directed above may result in further action as contemplated under the law against the promoters.

e) Part of impugned order to the extent of imposing additional penalty of Rs.10,000/- per day till the project is registered is set aside.

f) Part of impugned order restraining the Promoters from selling, transferring any part of the project and collecting money from the Allottees till the project is registered is confirmed.

g) Part of the impugned order pertaining to issuance of notice under Section 7 of RER Act to show cause as to why MahaRERA should not take the project in its control is confirmed.

h) No order as to costs.

i) Copy of the judgment be sent to the parties and the Authority and the Adjudicating Officer as per Section 44(4) of RER Act 2016.