Newtech Promoters and Developers Pvt. Ltd. vs. State of U.P. and others.

Forum: Supreme Court of India.

Case No./Citation: Civil Appeal No(s). 6745-6749 of 2021, 2021 (11) ADJ 280.

Bench: Justices Uday Umesh Lalit, Ajay Rastogi, and Aniruddha Bose.

Homebuyers of numerous projects that are delayed around the nation would greatly benefit from the Supreme Court’s exceptional ruling in a dispute that was recently brought before it regarding the operation of the Real Estate Regulatory Authority (RERA).

Background of the case

Defaulting promoters and developers filed appeals contesting the orders of multiple High Courts, leading to the decision on a number of common legal concerns.

The purchasers who had made a sizeable financial investment from their hard-earned money with the expectation that real estate developers would give them possession of their designated apartment in accordance with the terms of their agreement formed the common thread connecting these appeals. Their sincere conviction was, however, dispelled when, even years after the stated time, they still hadn’t received the possession. Sent offended by this lack of action, they filed complaints under several RERA rules that provide reimbursement, interest, and payment to the intended recipient.

Some promoters/developers ultimately decided to challenge the RERA’s jurisdiction to issue a directive directing the issuance of a refund together with interest by filing Writ Petitions under Article 226 of the Constitution with the High Court. The condition of pre-deposit, as stipulated in the proviso to Section 43(5) of the RERA Act, 2016 (Act of 2016), for filing a statutory appeal before the Real Estate Appellate Tribunal was also contested by them. Additionally, they brought up a few related questions that the High Court should consider in its writ jurisdiction. Finally, the petitions were dismissed by the High Court, which maintained the jurisdiction of RERA, at the request of the promoters and real estate developers.

But the Hon’ble Supreme Court heard arguments challenging the High Court’s orders, and after hearing from all sides, and gave the verdict as following:

Verdict & Observations:

Retrospective application of the statute’s unequivocal and clear wording was noted. A retroactive statute was purposefully enacted by the government to guarantee the protection of consumers’ interests in the real estate industry. Sections 13, 18, (1), and 19(4) are helpful provisions that help to protect the consumers’ and allottees’ capital interests. Inside the bounds of the law, the Parliament always has the authority to pass any legislation that impacts the preceding events that are under its purview.

The Regulatory Authority and the adjudicating officer have been granted adjudicatory power, as the court noted, which is evident from the Act’s design. Ultimately, it becomes evident from a combined reading of Sections 18 and 19 that even though the Act uses specific terms like “refund,” “interest,” “penalty,” and “compensation,” the Regulatory Authority is ultimately responsible for investigating complaints and making decisions regarding refunds, interest on refunds, and penalties for delayed delivery of possession. Additionally, the adjudicating officer has the authority to make a determination about the request for relief from the requirement to assess compensation and interest under sections 12, 14, 18, and 19, while taking into account the Act’s sections 71 and 72. We believe that the extension of the adjudication under Sections 12, 14, 18, and 19 to the adjudicating officer as prayed could intend to broaden the adjudicating officer’s powers and responsibilities under Section 71, which would be against the Act 2016’s mandate. The adjudication under these sections could also involve compensation beyond what was originally imagined.

The court additionally pointed out that, provided the member meets the necessary requirements outlined in the Act, the jurisdiction may provide general or special jurisdiction to any member. The Act of 2016’s Section 81 makes this possible. The Court held that all further authority might be granted to any member of the authority by special or general order to swiftly address complaints. By special order dated December 5, 2018, one member was granted the competence to decide complaints under Section 31 in the present case.

In view of the remedial mechanism provided under the scheme of the Act 2016, in our considered view, the power of delegation under Section 81 of the Act by the authority to one of its members for deciding applications/complaints under Section 31 of the Act is not only well defined but expressly permissible and that cannot be said to be dehors the mandate of law.

The court observed that the promoter of pre-deposit under Section 43(5) of the Act, which is a class unto itself, and the promoters who are in receipt of money that is being claimed by the home buyers/allottees for refund and determined in the first instance by the competent authority, cannot in any case be deemed to be onerous as requested or in violation of Article 14 or 19(1)(g) of the Indian Constitution, if the legislature in its wisdom intended to ensure that money once determined by the authority be saved if an appeal is to be taken at the promoter’s request following due compliance of pre-deposit as envisaged under Section 43(5) of the Act.

According to the Honourable Court, there is a clear inconsistency between the legal provisions stated in Sections 18 and 40(1), which contain the terminology referring to that reimbursement, and the authority’s ability to return the money that the promoter received. It is clear that when the legislature constructed the Act’s scheme in line with the right of recovery as required by Section 40(1) of the Act, they meant to allow for a rapid recovery of the funds invested by the allottee along with the interest incurred thereon.