BOMBAY HIGH COURT UPHOLDS THE VALIDITY OF REAL ESTATE (REGULATION AND DEVELOPMENT) ACT

The Bombay High Court ruled on Wednesday, 6^th December, 2017 in the matter of Neelkamal Realtors Suburban Pvt. Ltd. and Anr. vs. Union of India and Ors., that all provisions of the Real Estate (Regulation and Development) Act (RERA), 2016 are constitutional and valid.

RERA came into effect on 1^st May 2017, a year after both Houses of the Parliament passed it. In September, after several petitions challenging RERA were filed in High Courts across the country, the Supreme Court stayed the proceedings in other Courts. The Supreme Court said that other Courts should wait for the Bombay High Court’s decision before hearing RERA-related matters and also asked the Bombay High Court to expedite the hearings on pending matters.

A Bench comprising of Justice Naresh Patil and Justice Rajesh Ketkar, in their 330 page Judgement, upheld various provisions of the Act in ten petitions filed by real estate developers and individual plot owners, all challenging the constitutional validity of the Act.

The builders had challenged Section 18 of the Act, under which they will have to return monies received with interest, if they fail to hand over possession or complete the project in a time bound manner, if the allottee wishes to withdraw from a project. It also contemplates the payment of monthly interest for the period of the delay to those allottees who choose not to withdraw.

To this the Court said, “….  in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment with interest at such rate as may be prescribed in this behalf including compensation.

If the allottee does not intend to withdraw from the project he shall be paid by the promoter interest for every month’s delay till handing over of the possession. The requirement to pay interest is not a penalty as the payment of interest is compensatory in nature in the light of the delay suffered by the allottee who has paid for his apartment but has not received possession of it. The obligation imposed on the promoter to pay interest till such time as the apartment is handed over to him is not unreasonable. The interest is merely compensation for use of money.”

The Bench, however, also allowed a significant leeway for the developers in the Judgement by permitting the State-level RERA Authority and the Appellate Tribunal to consider delays on a case-to-case basis, and not to cancel such projects or developers’ registration in cases where the delay was caused due to ‘exceptional and compelling circumstances’.

The Court ruled that “In case the promoter establishes and the authority is convinced that there were compelling circumstances and reasons for the promoter in failing to complete the project during the stipulated time, the authority shall have to examine as to whether there were exceptional circumstances due to which the promoter failed to complete the project. Such an assessment has to be done by the authority on case to case basis and exercise its discretion to advance the purpose and object of RERA by balancing rights of both, the promoter and the allottee.”

The Court also ruled on the appointment of Judicial Members to RERA Tribunals. Section 46 of the Act, which deals with appointments, allows a bureaucrat, who has held the post of Additional Secretary, to hold the post of Judicial Member, however, the Court partially struck down Section 46 (1) (b). The Court has directed that the two-member bench of the Tribunal should always consist a judicial member and majority of the members shall always be judicial members, instead of bureaucrats, as is the formation now.

While the Bench concurred with the State and the Union Government’s arguments, it said that the Authorities must also closely monitor the implementation of the Act, “We are conscious of the fact that the actual implementation of RERA needs to be closely monitored in the years to come,”.

The Bench, while upholding the provisions of RERA said, “RERA is not a law relating to only regulating concerns of the promoters but its object is to develop the real estate sector, particularly the incomplete projects, across the country. The problems are enormous and it’s time to take a step forward to fulfill the dream of the ‘Father of the Nation- To wipe out tears from every eye.”

Finally, the Bench ruled that RERA is crucial to protect the interest of flat buyers across the country.

Taruna Verma

Senior Advocate