In the recent Judgment dated September 19, 2023 in the matter of NBCC (India) Limited formerly National Building Construction Corporation Limited & others vs Joshy Varghese in MSA No. 14 of 2023 before the Kerala High Court bench led by Justice Sri. A. Badharudeen. The Bench held that allottees who withdraw from a project must pay an interest rate in accordance with Rule 18 of the Kerala Real Estate (Regulation and Development) Rules, 2018.
Baseline of the case, The Kerala Real Estate (Regulation and Development) Act, 2018, appears to specifically involve disagreements between a promoter/developer and allottees over matters like flat possession, interest payments, and other obligations connected to a real estate project. The Kerala Real Estate (Regulation and Development) Act, 2018, as well as any related rules and regulations, are all central to the case's interpretation and application of various provisions.
Further, due to the promoter's failure in completing the construction within the stipulated timeframe, several allottees requested a refund of their fees plus interest, which led to the controversy. More interest than the allottees claimed was awarded by RERA, at the rate of 14.75 percent Benchmark Prime Lending Rate plus 2 percent. The appeals were brought in opposition to the decisions reached by the Kerala Real Estate Appellate Tribunal in Ernakulum and the Kerala Real Estate Regulatory Authority in Thiruvananthapuram. The issue was whether Rule 18's provisions which address the rate of interest due when an allottee wants to leave a project and get their money back had any bearing on RERA.
Moreover, the court subjected Section 18 and Rule 18 of the Kerala Real Estate (Regulation and Development) Act, 2018, and their corresponding regulations, to meticulous scrutiny. As per these regulatory enactments, the interest owed by the promoter to the allottee is computed as simple interest, calculated at the State Bank of India's Benchmark Prime Lending Rate, augmented by 2 percent
Further, Justice. Sir. A. Badharudeen has referred the Supreme Court's ruling in the matter of Newtech Promoters and Developers Private Limited. vs. State of Uttar Pradesh, which highlighted that RERA has no discretion in the statutory interest rate.
“When evaluating the legislative intent, it has to be held that a failure by a party to claim the entitled statutory interest shall not be a ground to hold that the party which claimed lesser interest is not entitled to it," the Court declared. Since the interest won't prevent the allottee from receiving the statutory interest, the Authority may grant the interest and demand a lower sum."
A reduction in the interest rate from the standard rate outlined in Rule 18 is possible, but it must be agreed upon by both the promoter and the allottee and cannot otherwise be imposed unilaterally.
In Conclusion, the Kerala Real Estate (Regulation and Development) Act, 2018's statutory interest rate and applicable regulations were maintained by the court. It was held that the allottee is entitled to statutory interest, even in the circumstance where a lesser interest rate was initially claimed by the allottee. Consequently, the Court endorsed the decision of the Appellate Authority, affirming the grant of interest at the prescribed legal rate of 14.75 percent, thereby dismissing the appeals lodged by the appellants.