Protection Of Homebuyers Under RERA

Brief Facts[1]

Recently, the Supreme Court of India clarified its legal position on various provisions of the Real Estate (Regulation and Development) Act, 2016^[2], and upheld the scope of the Act i.e., to protect the interest of home buyers.

The petition was filed by the promoters before the Hon’ble Supreme Court challenging the impugned order of the High Court of Allahabad. The brief background of the case runs as follows:

Uttar Pradesh Real Estate Regulatory Authority on receiving a complaint u/s 31 of the Act on behalf of the home buyers, ordered the promoters to refund back their investment amount along with interest (MCLR+1%). Aggrieved by this, the promoters filed an appeal before the High Court of Allahabad challenging the jurisdiction of the authority, which was dismissed by the Court.

Analysis

The court dealt with the issue of applicability of provisions of RERA which are either retroactive or retrospective in nature. The Court observed that the legislature aims to make the act retroactive to ensure transparency and efficiency in real estate projects. If the application of RERA is prospective in nature, the adjudicatory mechanisms implied that u/s 31 of the Act would not be useful for allottees for an “ongoing project.” Therefore, the intent was to bring all “ongoing projects” (though commenced prior to the enactment of the Act) within the ambit of the Act.

Another issue that came to light was that the authority has vested power to direct the builders to refund the amount to allottees under the provisions of the Act. It was observed that the authority has the power to handle matters relating to the refund of the investment amount or interest on such a refund in light of the legislative objective of the Act. Therefore, the authority has jurisdiction over the claim pertaining to compensation u/s 12, 14, 18, and 19 of the Act after holding inquiry u/s 71 of the Act.

The SC also dealt with the issue on whether Section 81 of the Act permits the authority to delegate its function of hearing complaints to a single member under Section 31 of the Act. Therefore, other powers and duties – if assigned to a single authority member – are governed by Section 81 of the Act, except for the body’s power to make rules under Section 85 of the Act.

The SC concerning the validity of the pre-condition of the pre-deposit under Section 43(5) of the Act observed that such provision safeguards the interest of the allottee and also helps in avoidance of litigation at the appellate stage. Further, depositing 30% of the penalty amount portrays bonafide intentions on the part of promoters.

The appellant also challenged the requisite powers of the authority to issue a recovery certificate u/s 40(1) of the Act. The Court held that S. 40(1) must be read in conjunction with the object of the Act and therefore the amount refundable to the allottees can be recovered u/s 40(1) of the Act.

Conclusion

This judgment proved to be very effective in the speedy disposal of cases and provided adequate protection against utilizing legal action as a stalling strategy. Additionally, it gives the regulatory body more obligation to decide any disagreement concerning the payment of penalties while keeping in mind the overall goals of the project. The retrospective effect of the Act will help allottees who signed contracts (before the Act went into effect) to apply for relief under the Act. The current case might serve as a benchmark for the protection of homebuyers, from describing the history to the overall scheme of the statute.

^[1]M/s. Newtech Promoters and Developers Pvt. Ltd. Vs. State of UP &Ors. 2021 SCC Online SC 1044.

[2] Real Estate (Regulation and Development) Act, Act No. 16 of 2016.